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New approaches to trade promotion can help business succeed

We must help businesses overcome the risks and obstacles that may prevent them from seizing new opportunities.

The Senate's foreign affairs and international trade committee spent much of the past five years exploring Canadian foreign affairs and commercial opportunities in emerging markets around the world.

In our interactions with Canadian entrepreneurs, business associations, think tanks and academics, we have been repeatedly told that trade agreements are necessary to open up new markets to Canadian businesses, but effective trade promotion services are critical in helping companies-especially small and medium enterprisesmanage the risks involved in doing business abroad.

The importance of trade to our economy cannot be overstated. Some 60 per cent of our gross domestic product and one in five jobs in Canada are connected to our exports. As a small population spread out across a vast country rich in natural resources, international trade underpins our ability to attain the economies of scale and to sustain our high standards of living.

Businesses setting out to enter new markets are, however, confronted with numerous obstacles that can discourage them from expanding into foreign markets. These can include a lack of information about opportunities abroad, difficulties in obtaining financing for new equipment and personnel, financial risks associated with shipping and doing business in foreign jurisdictions, and language and cultural barriers.

As Lorna Wright, executive director of the Centre for Global Enterprise at York University's Schulich School of Business, told our committee, "SMEs need to overcome the fear factor, if they are to succeed internationally."

Helping Canadian entrepreneurs, and especially small and medium-sized enterprises, overcome obstacles and succeed abroad is the preoccupation of Canada's trade promotion services. Broadly speaking, these include resources such as the Trade Commissioner Service in Canadian embassies and consulates around the world, as well as Canadian crown corporations such as Export Development Canada and the Business Development Bank of Canada.

By and large, companies that avail themselves of these services, as well as those who support and study Canadian trade, hold them in high regard. Yet there is also a sense that those services can be strengthened, and that new approaches to trade promotion could better meet the needs of Canadian business.

Embedding trade commissioners within business associations, for example, can help make them more relevant and responsive to the needs of business. Trade missions and trade shows can help introduce businesses to foreign markets, clients, partners and opportunities. Branding is critical for conveying signals about Canadian companies and their capacity to do business in a new market, especially when it focuses on projecting an identity for Canada as a source of high-quality products, expertise and innovation.

Federal trade promotion services could also do more to support supply chain integration. According to the Canadian Chamber of Commerce, about one-fifth of all goods and services exported by Canadian businesses in 2009 originated abroad. Yet trade promotion services tend to favour exports over imports. A greater focus on domestic entry points to global supply chains could help rebalance this dynamic. Helping SMEs pair with multinationals within Canada, for example, can open new opportunities for small suppliers to tap into demand throughout the larger corporations' international operations.

Canada can also do more to reduce obstacles facing businesses in our domestic policies. The requirement that businesses pay GST and HST on goods imported for the purpose of re-export, for example, can create cashflow challenges for some small businesses. Businesses are entitled to a tax refund on goods not intended for domestic use, but they remain out-of-pocket until such time as those refunds can be processed.

Another impediment raised by businesses concerns the length of time they have to wait to complete a Labour Market Impact Assessment, allowing them to bring in skilled labour under the Temporary Foreign Worker Program. Confronted with often long and uncertain waiting times, good candidates can be lost to other employers. Such burdens add up, and they can make big differences for SMEs considering increasing their participation in international trade.

Appropriate financing is another area that frequently determines the viability of trade deals. Export Development Canada and the Business Development Bank of Canada are often less risk-averse than traditional banks. This makes them instrumental in helping companies hedge against foreign currency fluctuations, and to acquire the additional staff, equipment and insurance such deals often require. Efforts should be made to ensure these corporations are able to retain the most informed staff, and to develop new types of financial products that respond to a wider variety of scenarios.

More can be done to raise awareness about Canada's trade promotion services among Canadian entrepreneurs. There is evidence that exporters who make use of Canada's trade promotion services export an average of 17.9 per cent more. Yet only 20 per cent of Canadian exporters are even aware of these services. Philip Turi, of Canadian Manufacturers & Exporters, referred to the Trade Commissioner Service as one of Canada's "best-kept secrets."

Accordingly, businesses and industry associations have been calling for a single window or concierge service to facilitate companies' access to relevant information about programs from different federal departments that respond to their needs.

Finally, trade promotion services could perform a matchmaker function, to help prospective exporters to connect with other Canadian businesses already active in a given market. Businesses calling for this type of peer mentorship say it could help entrepreneurs gain confidence and avoid repeating the mistakes of their predecessors.

As a trading nation, Canada needs to continue to open new markets for our businesses. But we must also help them overcome the initial risks and obstacles that may prevent them from seizing new opportunities abroad. For SME's in particular, appropriate knowledge, appropriate financing, helpful contacts and other supportive resources can help minimize the risks of entering a foreign market, and maximize success.

The federal government and others continue to be instrumental in making such resources available. But more can be done to make them more accessible and responsive to the changing needs of business. The more Canadian enterprises are able to compete and succeed in markets abroad, the more all Canadians will share in their prosperity.

Raynell Andreychuk is a Conservative senator from Saskatchewan.