Why Mexicans Don't Drink Molson. Andrea Mandel-Campbell
United States are shipped to buyers on an open account, without a contract. “We’ve had it easy. We’ve got lots of resources that we could sell easily to a market that spoke English and was close by,” says Carin Holroyd, senior research analyst at the Asia Pacific Foundation of Canada in Vancouver. “We haven’t had to work very hard.”
What makes it even easier is that Americans and other foreigners are doing most of the heavy lifting for us. Historically Canada has one of the highest levels of foreign ownership in the developed world,12 with more than half of its manufacturing base and 42 per cent of its oil, gas and coal mining industry currently in foreign hands.13 According to a Statistics Canada study, foreign affiliates represent just 2 per cent of all Canadian-based exporters yet account for an incredible 44 per cent of all exports. Of that, some 70 per cent is intra-industry trade — goods of a similar nature that are being imported and exported.14
What does that mean? That Canada’s three leading “exporters” are the Big Three American car manufacturers — General Motors, Chrysler and Ford — which manufacture cars in southern Ontario and ferry them across the border. In Ontario, Canada’s most export-oriented province, 53 per cent of exports are generated by foreign affiliates.15 The automotive industry represents nearly a quarter of the country’s total merchandise exports. “If you take out automotive,” says Bob Armstrong, the former president of the Canadian Association of Importers and Exporters, “what are we really selling?”
In a word — commodities. While more sophisticated Canadian exports of things like software and airplane parts have grown over the past two decades, more than half of the nation’s foreign sales still come from oil and gas, lumber, chemicals, fertilizer, grains and potash. Unlike value-added manufactured goods, which must be actively peddled and pushed into new markets, commodity prices are largely set by world markets, and the buyers, more often than not, come to you. Take Canadian exports to Japan, for example: an estimated 75 per cent of this trade is controlled by Japanese trading houses with offices in Vancouver and Toronto. Those same trading companies are also behind much of Canada’s trade with China — and even China’s state grain trader has an office in Vancouver. “There aren’t many Canadians actively seeking a market,” says John Wiebe. “Commodities are so hot, you don’t have to sell. If you’ve got pulp, there’s a buyer at your door. Our companies don’t have to go out and spend a lot of time in China. You don’t see the commodity guys out there very much peddling product, and we don’t sell a lot of other stuff.”
As a result, between cars, commodities and the U.S. market, Canada not only never has to go the extra mile to sell its goods, but is caught in a strange paradox, wherein, as Carleton University trade guru Michael Hart points out, “Canada has become a trade-dependent economy without a deep-seated trading culture.”16 With the rest of the world knocking on their door, says one government trade promoter, Canadians could afford to remain “nice and kinda dozy,” eschewing the hardscrabble edge of hungrier, less-endowed countries while never being forced to develop a homegrown global trading base.
“We are major traders, but not really. We are really sellers into the global marketplace,” says Jayson Myers, senior vice-president and chief economist of Canadian Manufacturers & Exporters. “What’s the difference? Sellers are just told how much to produce and the market is made for you. A major trader is out there developing his own market. We don’t have a lot of companies doing that in Canada.”
Myers estimates that with 60 per cent of Canada’s trade being intracorporate and 30 per cent taken up by energy, raw materials and commodities, only 10 per cent of the economy is made up of companies with the impetus to actively develop markets. The problem is, they are overwhelming small and medium-sized enterprises (SMES), which lack the financial stamina to withstand expensive international forays and the motivation or mindset to manoeuvre in more complicated foreign markets.
In fact, most smes do not even think about exporting. According to a poll taken by the Canadian Federation of Independent Business in 2004, an astounding 51 per cent of respondents didn’t sell abroad because their products or services were “not exportable.” A report by the Toronto-Dominion Bank quickly jumped on the finding, asking: “In this day and age, what isn’t a global product?”
All told, less than a fifth of small businesses, which account for 99 per cent of all Canadian companies, actually export. Even fewer do so regularly. Myers calculates just 3 per cent of smes are “active exporters,” engaged in producing and servicing goods in and for foreign markets. According to Statistics Canada, a meagre 1.5 per cent of small business exporters account for 75 per cent of all exports by smes.17 In other words, the vast majority of sme “exports” are one-off, opportunistic and usually unsolicited sales, worth a few thousand dollars at most. For many companies, concedes one business owner, exports are just “extra gravy.”
In the absence of a sustained and focused export strategy, companies tend to take a haphazard, scattershot approach to international business that rarely hits the bull’s eye. Two key challenges seem to particularly plague Canadian firms: a failure to follow up on new business leads, and an almost debilitating aversion to risk. Both are anathema to operating in globally competitive markets. Canadian companies, says Michel Charland, director of Industry Canada’s International Trade Centre in Montreal, “lack the preparation, the vision and the commitment” to venture into the choppy seas of international business.18
When they do venture forth, the results tend to be disappointing, both for Canadian companies and for many foreigners who, given the choice, would prefer to do business with Canadians. Instead, the tepid and at times amateurish approach has left many perplexed and even irked by Canadians’ stubborn insistence on being the wallflowers of international business. “At home they are as efficient as Americans, but when they go abroad and are doing international business, they are shy, withdrawn and inward looking,” says Boris Rousseff, who as executive director of the Canada Europe Round Table for Business has worked for two decades trying to better familiarize Canadian companies with Europe.
But while some foreigners interpret this indolent attitude as laziness or even arrogance, others insist it is a mask to deflect the colonial mindset that still pervades Canadian thinking and colours the nation’s ambitions. Weaned on the British Empire and then overshadowed by the United States, Canada has spent most of its young existence trying to convince a vast and disparate Dominion that it too has a manifest destiny. Still ill at ease in the makeshift union and too preoccupied with its own reflection, the country seems to lose its conviction when it strays too far from home. “We are timid about nationality, and [therefore] we are timid about trade,” says Michael Novak of SNC –Lavalin, the country’s only global engineering and construction firm.
Many people involved in international business pin at least part of the blame on an overweening government that has often been the only common connection in the country’s bid to become more than an expression of geography. Like an overprotective parent, the state has nurtured dependence and sheltered business from risk, often throwing up obstacles that discourage companies from spreading their wings, either by weighing them down with burdensome regulation or by protecting them from competition.
When companies do fly the coop — often at government urging — their path has been paved with government funding to pay for everything from plane tickets to hotels. In many cases the money was ostensibly a loan, but both parent and child knew it did not have to be repaid. In recent years, the federal government has become stricter with the purse strings, but behavioural patterns and expectations, ingrained over decades — sometimes centuries— remain largely unchanged.
At Ontario Exports, the export promotion arm of the provincial government, potential exporters are shepherded across the border on trade missions to Buffalo. While on these exotic trips, companies expect the government to find contacts, set up meetings for them and even pick up the tab. “We call it handholding,” said one official, recalling a junket to the southern United States to attend a trade fair. A month later, the provincial official received an angry call from an American distributor who had been trying to contact two Canadian companies that attended the fair. Frustrated after they did not return his repeated calls and emails, the American phoned the provincial government