1. What Canadian companies are exporting to the US?
There are six sectors where Canadian companies are having the most impact south of the border: aerospace, agriculture and processed goods, health care, clean technology, IT and advanced technologies. The last one I’d suggest is automotive. I think there are capabilities in other sectors, too. Extractive and oil and gas are just going through a bit of a tough time because of commodity prices.
2. What is drawing these companies to the U.S.?
There’s a few things. Obviously, the U.S. is a natural trading partner, whether it’s trade agreements or just geography. If you’re going to sell beyond Canada’s borders, the first natural move is to look south. There are all kinds of reasons why that is: familiarity, logistics, and transportation.
The strength of the U.S. economy is also a huge factor. The U.S. economy has been growing in the last couple of years and looks as though it will keep on in the future, so that could really have a draw.
And then I think there’s the dollar. The U.S. dollar is strong so if you can generate revenues in U.S. dollars, then there’s an advantage to doing so from an earnings perspective.
3. Looking broadly, what are the characteristics of Canadian companies that do well in the U.S.?
I think preparation is key. A lot of the feedback I get is about asking yourself the tough questions with respect to your product — is this something, based on our own market research, something that will sell.
Companies that take the time to understand the unique tax and regulatory environments in different states — just being aware that there are different tax regimes and regulatory situations from state to state – tend to do well.
I asked some colleagues about this and one suggested the smart ones reach out to experts that can help you make the transition on the tax and regulatory side. An example could be that maybe there’s a specific packaging requirement for one state or to go nationally. That sort of information is helpful.
It’s also wise to reach out to other companies. There are people within your own chamber of commerce and your own networks that may be exporting now, that you can reach out to and learn from. It’s seems a bit simple but I think it’s a worthwhile piece of advice.
The other key thing I would say is that the nice thing the about selling into the U.S. is that a lot of those companies may have operations around the world. If you think about the original equipment manufacturer (OEM) stage, these are global companies, so if you sell to a company in Dearborn, that company may be selling around the world, so that’s one way of getting access to global supply chains.
4. Which sectors aren’t exporting to the U.S., and why?
My observation is that as the Canadian economy heats up in certain sectors, our companies tend to look inward instead of creating an export platform to ride out the good and bad times. They tend to be a bit more reactive and at that point, it’s much more challenging to export if you’ve been relying on the domestic economy. Oil and gas is a really good example of that, where there was so much business in Canada and what was going on in Alberta, there wasn’t as much incentive to look south. Companies were doing that to some degree — some had diversified sales.
The good times are a nice time to start exporting because it prepares you well for the eventual downturns. That’s across all sectors as they get hot and cool. IT companies are doing a really good job — you hear a lot of stories about how Canadian companies are plugged into Silicon Valley and elsewhere. That sector is ahead of the curve with understanding that you need to have a presence in some of those markets to succeed.
5. Where are the opportunities for Canadian companies in the U.S.?
The U.S. is currently growing in consumer goods. There’s a lot of opportunity there. If you think about it in terms of what an economy needs as it comes out of a no-growth period, the consumer leads the way. Savings rates went way up post-crisis in the U.S. And now consumers are ready to spend. The first thing I think of is consumer goods.
But the economy taking off ultimately impacts all the sectors. Clearly, investments that are happening in automotive capacity — Canadian parts suppliers are seeing an upswing and a rebound in opportunity.
Oil and gas, as challenging as it is, now is the time to start opening some relationships that will position them well for the eventual rebound in that sector.
Supply chains throughout the economy— whether it’s rail, automotive, aerospace – are running up against capacity constraints. The supply chains run pretty deep back to Canada and these present real growth opportunities for Canadian manufacturers.
From a state level perspective, we’re seeing growth and upswing in states such as California, Indiana, and Massachusetts. A lot of that is manufacturing and some cases it’s the on-shoring that’s been happening. We are seeing American companies adding capacity domestically, rather than taking their work to China. The growth that’s happening in manufacturing in the US, creates opportunities for Canadian companies to feed into that.
As far as states that kind of lead the way, Michigan has been the No. 1 state for Canadian exports for a number of years. That’s the auto sector but it’s a number of others as well. Proximity is part of that. Also, there’s opportunity in New York State and Ohio. With the trend of on-shoring and capacity demand in the U.S., there are opportunities for Canadian suppliers and manufacturers to play a part.
6. How long does it take a Canadian company to succeed in exporting to the U.S.?
If it’s a company that has won a specific contract, it happens right away. But more realistically, it’s probably a matter of taking a bit of time up front to do some homework and understand what markets make the most sense and then it’s finding the right network and assessing the level of competition and how they position themselves. With the right amount of homework and the right amount of advice provided — given the proximity and the state of the economy right now in the U.S., I would say it’s probably a lot quicker than it was four or five years ago.
7. What is the biggest mistake Canadians make when exporting to the U.S.?
It’s probably a lack of clarity around statewide regulations or taxes. Or maybe it’s seeing the U.S. as a whole and not breaking it down into regions. I think that’s true for a lot of places.
8. How does EDC help Canadian companies succeed in the U.S.?
We can help across the board. We have multiple ways to help both sides — the buyer and the seller. From the Canadian exporter or seller’s perspective, there’s a full suite of insurance products, our full suite of working capital solutions, working with their bank to provide them the capital they need to export, insuring those receivables, growing the net borrowing base. On the financing side, for the buyers, we can provide them with capital they may need as they grow.
One of the big things we do is working with the Canadian Trade Commissioner’s Service to match-make and seek out those opportunities. The one dynamic we should really stress and the one advantage to having us in the game for a Canadian company is we have the time and the resources to gain a foothold and influence and understanding of large foreign buyers, whether in the U.S. or elsewhere. A sole proprietor in a small company just can’t invest that kind of time. We can assess who the major buyers are we may have the ability through our financing product suite to make those introductions. That’s a huge advantage for Canada. That positions Canadian SMEs in a really good position with other SMEs or, in a lot of cases, large foreign companies.
The other thing we are good at is our network of banking contacts throughout the United States. We’ve developed a pretty sophisticated Rolodex of banks — local banks, regional banks, international and U.S. banks — that can help provide capital as well. It might not just be an EDC solution; it could be paired with something or someone else. If you have EDC in your corner, you’ve got the global banking, trade commissioners and other organizations that we can reach out to and leverage to help you.
I Would also recommend Select USA as a great source for advice and guidance. They were created at the federal level to showcase the United States as the world’s premier business location and to provide easy access to federal-level programs and services related to business investment.