Europe is the biggest economy in the world. With 500 million potential customers living within the borders of the 28-country European Union (EU) and a free-trade agreement about to be ratified, now is the time for Canadian businesses to explore the opportunities.
“It’s a region that should not be ignored,” says Emmanuelle Ganne, Vice-President, Europe, Allam Advisory Group. “It hasn’t been ignored by Canadians entirely, but they’ve mainly focused on the more mature markets — the U.K., Germany, France — and not so much on other interesting markets.”
Ganne used Poland as an example. A member of the EU since 2004, it was in the same place as Ukraine 25 years ago. But since then, it has doubled its GDP and it’s the only European country that didn’t go into recession in 2009.
“Poland is booming,” Ganne says. “They’re the biggest recipients of EU funds and they’re using them wisely. That presents interesting opportunities.”
One of those, she says, is in mining, where Poland is seeking to close its productivity gap. There are also opportunities in energy. Business services are also strong in Poland, as is aviation. Amazon just moved its logistics centres from Germany to Poland.
Such interesting and little-known opportunities dot lesser-known markets across Europe. And investing in the continent is simple for Canadians, because the business culture, while not identical, is far more similar to Canada’s than, say, India’s, China’s or Russia’s culture. Ten European countries appear on the top 20 of the World Bank’s 2015 Ease of Doing Business Index while Canada sits comfortably in the 16th spot.
Europe has strong pockets of excellence in cutting-edge industries that are seen as the future drivers of growth, including life sciences, pharmaceuticals, automotive, aerospace, defence, ICT, nanotechnology and energy.
We can expect to hear more and more about exporting to Europe, as the ratification of Canada’s most ambitious free-trade agreement — the Comprehensive Economic and Trade Agreement with the EU — takes force.
“This agreement will create tremendous opportunities,” Ganne says. “It’s much more ambitious [than the North American Free Trade Agreement]. Once it’s in force, 93 per cent of tariff lines will be free of duties. In NAFTA, it was 23 or 29 per cent. Eventually, it will be 98 per cent for certain sectors.” CETA also gives Canada the most preferential access ever granted in terms of services and when it comes to procurement, it’s ambitious on both sides.
Exporting to Europe also allows Canadians to penetrate neighbouring markets such as North Africa and the Middle East. And the continent itself boasts developed economies such as Germany, and developing economies like Croatia.
We asked Ganne to give us some advice for Canadian companies looking to get into the European market. We also asked her to identify the challenges Canadians might face.
Five ways to conquer Europe through exports
Giddy up: Ganne’s first piece of advice is to get ready for the European market now. “If you wait for CETA to come into force, you’ll be left behind,” she says. If you’re ready to go now (before the agreement is in force), she says to study the agreement to see if there are advantages to waiting. There may be as the tariff situation stands to improve dramatically. The agreement includes a protocol that makes it possible for exporters to get product certification where they are located. This means that a Canadian exporter can get certified in Canada. That, she says, will save them time and money.
Get grounded: It’s important to find local representation. Locals will know the language and the culture and should also know the regulatory hoops. The Trade Commissioner Service is a good place to start. Canada has diplomatic missions abroad with commercial attachés who can also help. The Canadian Manufacturers and Exporters trade association is another place to consult.
Set down roots: Think about establishing a business base in Europe. It’s important to be seen as producing locally as much as possible. Studies have shown that those who don’t set up some kind of bricks and mortar in Europe have a harder time in the export game.
Innovate, innovate, innovate: Europe’s consumers are sophisticated and seek innovative and high-value products. They put a high value on innovation and they’re very interested in research and development. Research has shown that regardless of size, companies that introduce new products relatively frequently have a greater chance of succeeding in Europe.
Be patient: Breaking into the European market requires time and effort. Plan well to have the best chance of success.
Five potential pitfalls in your European quest
Avoid cultural generalities: The No. 1 challenge in a multi-country economy is understanding the local culture. In short, Europe is not a unified cultural bloc. Germans are culturally different from Spaniards and Italians, for example. You must know the culture of the market you’re in. Again, local representation will help.
Mind the currency: There are 11 currencies in the EU and 28 in the 50 countries in Europe. Your costs will be in their currencies so be mindful of exchanges. Only 19 EU countries belong to the Eurozone (the currency bloc.)
Master your market: It’s important to adjust your product for your specific market. Germans, for example, emphasize quality and are willing to pay for it. Other countries emphasize price. Given those differences, the sales pitches will also have to be adjusted for the market.
Don’t get lost in translation: There are 24 official languages in the EU so package your products accordingly. Poles, for example, will want your packaging for their market to be written in Polish. And make sure the quality of the translation is good: a campaign for Schweppes tonic water translated it to “toilet water,” which didn’t have much appeal!
Learn the rules: There are rules at the European level but there are also many at other levels of government. Taxes, minimum wages, business registration requirements, hiring and firing are regulated at the national or sub-national level and differ from one country to another.