It’s hard to argue with the experts who say the U.S. market is the place to be for Canadian exporters. Its $8-trillion economy accounts for about a fifth of worldwide economic activity; it’s the world’s largest consumer economy and its second-largest manufacturing economy. Not enough? It’s next door, with a culture Canadians understand.
The United States is also import-friendly. It imports $2.4 trillion in goods and services, and Canadians now capture $450 billion of that. So why not go for more? A panel of experts gathered for a Nov. 24 webinar to discuss why and how to get into this dynamic market.
“We have a fairly slow-growing domestic economy; it’s taken a hit as a result of lower energy prices.” said Jayson Myers, CEO of Canadian Manufacturers & Exporters. “The U.S. has taken a hit, too, but not nearly as much as Canada. EDC is forecasting the U.S. economy will grow at 2.5 per cent for 2015 and will ramp up to 2.9 to 3 per cent next year. Those numbers are pretty much double what can be expected in Canada.”
Driving the growth are the housing and construction sectors, along with stronger manufacturing activity, a combination that is beginning to create capacity constraints domestically.
“On top of all of that, the Canadian dollar is now around 75 cents and that’s also a positive factor for exporters,” Myers said. “It will make our goods and services much more competitive.”
Myers noted that there’s double-digit growth in industrial products, aerospace, building materials and consumer products.
For all his bullishness on the U.S. market, he offered some precautions for companies thinking about the business opportunities south of the boarder. For example, no Canadian company should decide to treat the U.S., with its vast regional differences, as a single market. Fellow panellists Gary Brown, EDC’s U.S. market specialist, and Bill Macheras, of Canada’s Trade Commissioner Service, concurred. All three also stressed that the U.S. is a highly competitive market.
“It’s a very highly innovative and R&D-intensive market,” Macheras said. “If you think your product has some advantage, make sure it does because more than likely there’s already a company that produces it better, at a lower cost.”
Myers agreed: “You’re not going to be competitive if you are trying to sell standardized products and services. Look at how you can specialize and provide a solution. That means good manufacturing, good design, good service and more integrated technology.”
Macheras said those considering heading south should access the Canadian Trade Commissioner Service, which has 16 offices across the U.S.
“Our offices provide a qualified list of U.S. contacts [of reps, agents and distributors] and that’s probably the most valuable service we provide,” Macheras said.
“We also help Canadians solve problems,” he said. “This can be as simple as ‘my goods are stuck in a warehouse, can you help get them released,’ all the way up to trade policy issues such as Buy American.”
Macheras also advised being careful in choosing representatives (those sell your products for you, for a fee) and distributors (those who take title of and sell your product as their own).
“This is where Canadian companies fall flat,” he said. “Fly down and meet people you’re hiring. It will pay off in the future.”
Isaac Langleben, a Canadian exporter with Open Farm Inc. and Canada Pooch, said his best advice is similar. “Our key to success has been finding great on-the-ground representatives and retailers.”
Also important is making sure your company has the capacity to take on orders that will inevitably come. “Most are much larger than you’re used to filling in Canada,” Macheras said. “I’ve heard of companies being financially ruined because they’ve accepted a huge U.S. order [they couldn’t afford to meet.]”
It’s also important to understand tax rules. U.S. states, for example, aren’t party to NAFTA so they can apply taxes directly to Canadian companies. It’s important to figure out those tax rates and whether working in high-tax states is feasible.
Macheras’ final piece of advice was taking part in trade missions sponsored by the Ontario government. “There’s a mission called the New Exporters to Border States,” he said. “It’s one every company should [consider]. The next one is to Buffalo in February 18-19. It’s well worthwhile.”