Sunday, September 23, 2018Canada's Leading Online Business Magazine

Canada's Ceta Export Challenge

CETA_194964798
Good Deal or Not?

The ink has hardly dried on a regional CETA agreement that is more ambitious than anything on the table at the WTO today(1) and yet many Canadians are already “yeah- butting” it. While everyone has an opinion, it is important to recognize that whatever happens, whatever the final details, whatever the spin that supporters or critics provide, CETA will become a reality… an exporting opportunity like no other, providing Canadians with open access to the world’s largest single market of 28 countries.

Surprising collaboration

In spite of the different territorial and political interests of the parties involved, it has taken four years of low-key collaborative negotiations between all of Canada’s provincial governments, territories, municipalities (and even the general public) to reach an agreement that will give a mere 35 million Canadians the ability to export freely to more than 500 million consumers. Even those who belittle the agreement are being forced to admit that this is a big deal.

For and Against

While Canadian trade officials and most business leaders seem to be generally positive and optimistic about this opportunity, legitimate concerns are being voiced by specific industry sectors. They worry that a resulting influx of competitive brand-name European products may affect established Canadian domestic markets. However, CETA must have some  potential  because  detractors  with  political  agendas  and  arm-chair  critics  are already sniping at it, two long years before they even know all the details.

Comments that CETA will provide “little economic impact for Canada short term”, that “there will be a minimal difference in trade volumes” and that “the benefit to Canada will be very small,”(2) are already being made across the country.

These concerns, and the discussions needed to resolve them, are normal and critics are free to speak their minds and show their displeasure. Eventually opposing views may well bring some adjustments to the agreement, on both sides of the negotiating table. But the fact remains that the Canadian Government’s joint announcement with the European Union on October 18, 2013 means that in two years CETA will give us access to a single market representing 20% of global production and $17 trillion in annual economic activity, statistics that are difficult to sneer at.

Sales and Competition

So what’s next? If we wait and argue about what changes can be made to the agreement, we should not be surprised if the Europeans suddenly appear on our doorstep to sell us their goods around 2015. It is true that some Canadian sectors may suffer from this influx of foreign duty-free products and services, but we cannot overlook the fact that in return, CETA will ALSO open the door for us to 500 million new consumers, many of whom are looking forward to the opportunity of buying Canadian goods and services.

Canada’s main asset in Europe is our reputation.   Any Canadian who has travelled throughout  Europe  knows  that  when  we  identify  ourselves  as  “Canadian”,  we  are invariably welcomed with a smile. We have a long and well-established reputation for fairness and a “win-win” attitude, and many Canadian exporters overlook the fact that simply being “Canadian” often opens doors that would otherwise be more difficult for other nationalities. In addition, many European countries are currently experiencing economic challenges so Canada’s reputation as a stable economy, the reliability of our banking sector, our reputation as a fair partner and the millions of immigrants who have become Canadians, greatly assist the positive image that Canada enjoys in Europe.

While many might scoff at these “soft” attributes, arguing that competitive pricing, just-in- time delivery, distance, transportation costs and other factors will affect our competitiveness in Europe, there is no denying that the Maple Leaf opens doors overseas. That ability to “get our foot in the door” is vital to the beginning of any new relationship.

And so, while most of our lives were concentrated on selling more than three-quarters of our products and services to one neighbouring customer, Canada’s reputation has always stood us in good stead in other markets. We don’t have to “sell ourselves” in Europe – they like us – and our products and services therefore already have a foot in the door.

Tough Questions

When CETA is implemented in 2015 and most tariff barriers automatically fall, will Canadian exporters be ready to penetrate some of the 28 countries of the European Union?  Will we already have identified specific European markets for our products and services? Will we have established our network of relationships and will we be ready to move forward quickly when the time comes?

We Canadians are excellent negotiators: the FTA, NAFTA, several other agreements and now CETA prove this. But our long-standing and comfortable relationship with the USA has dulled our competitive skills. If this were not true, Mexico’s 115 million consumers would have become our No. 2 export market after we signed NAFTA almost 20 years ago.  Instead, we flexed our exporting muscles by making China, the UK and Japan the next three export markets (see chart below), but did not take full advantage of our duty-free relationship with Mexico.

Let’s be Practical

While CETA’s fine tuning is underway, Canadian exporters need to lay the groundwork NOW and prepare for the inevitable opening up of the European markets.

We should immediately start picking which top two or three European markets to focus on. We should visit those chosen markets now and establish personal contacts (join Chambers of Commerce and local business clubs, visit trade shows, get to know the Canadian Trade Commissioners in the target countries, use Canadian bank representatives’ foreign networks, etc.) We should start gathering information now about potential agents, distributors and importers and begin negotiations. We should learn the local language and hire staff in Canada that originates from Europe and is multilingual. In short, regardless of whether CETA is approved “as is” or undergoes any changes, exporters need to lay the groundwork now, rather than wait until CETA is implemented.

Games within Games

The reality in all business and social relationships is everyone has a “game plan”. The Americans are probably considering our CETA deal as a prototype, waiting to see what Canada and the Europeans do with it. A few months ago the US began negotiating its own Transatlantic Trade and Investment Partnership (TTIP) with Europe and will probably watch as Canada gets all the kinks out of CETA. Then they will sign their own agreement and the American political system will use TTIP’s mighty potential to help whoever is in the White House at the time.

The 28 European countries who agreed to CETA are no doubt looking much further than the next few years. They probably signed with Canada hoping that an agreement between their 500 million and our 35 million consumers will provide them with an eventual springboard into NAFTA’s market of 450 million new customers.

So what’s our strategy?  Are we going to be proactive?  Are  we  as  “sexy”  as  The Economist thinks and ready to fulfill its description that Canada is “a global leader in free trade in an exciting way”?(3)   Does Canada want to be seen as a truly “international free trader” or simply as an experienced negotiator that waits for opportunities? Time will tell

By Ennio Vita-Finzi

Ennio Vita-Finzi is a Certified International Trade Professional (CITP) and was Ontario’s trade commissioner in Europe, Latin America and the US, and also President of the Canadian Council for the Americas during NAFTA negotiations. He is an entrepreneur, college lecturer and keynote speaker in Montreal. (e.vita-finzi@sympatico.ca)

Sources:

(1) The Canada-EU Trade Deal, Atlantic Accord, The Economist, October 26, 2013.

(2) Trade deal over-hyped, reports say, Montreal Gazette, Business Section, November 7, 2013.

(3) Trade liberalisation, Canada doesn’t get any sexier than this, The Economist, October 26, 2013.

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