Trading beyond U.S. not so easy

CALGARY — From Chinese bank notes to Israeli high-tech, Chad Wasilenkoff has tried to break into markets around the world to diversify the Vancouver-based business he founded.

Paper products-maker Fortress Global Enterprises is primarily focused on selling dissolved wood pulp from its Quebec mill and company chair Wasilenkoff is constantly on the lookout for new opportunities to stay competitive in an increasingly globalized economy.

More Canadian companies are looking to follow the route toward diversification as the increasingly tense trade relations with the United States, including its hardline approach to NAFTA talks, tariffs on steel and aluminum, and threatened tariffs on the auto industry, has emphasized the need to compete globally.

An Export Development Canada (EDC) survey of 1,000 exporters conducted before the tariff war took hold, but released last week, suggested 64 per cent plan to export to new countries. That’s up from the below 50 per cent proportion it has generally hovered at for the past five years.

But experts say the road to diversification can be slow and rocky, and the benefits of an integrated North American market means domestic industries have been slower than others to break into growth regions like Asia and Africa.

Companies like Fortress that do venture out meet a wide variety of challenges, including running up against tariffs, stiff competition and failed ventures.

But Wasilenkoff believes that’s just part of the challenge in developing new markets.

“The ease and accessibility and the logistics that are going on in the world, it’s just too easy for someone to make the product better, cheaper, and more efficiently somewhere else.”

The shift to new markets is not easy, especially given the extent to which supply chains for Canadian companies are integrated with the U.S., according to Daniel Schwanen, vice president of research at the C.D. Howe Institute.

“If we were serious about diversification, we would have started a long time ago,” he said.

The current trade uncertainty isn’t helping long-term planning and efforts to diversify, Mairead Lavery, senior vice president of business development at EDC said, adding “there’s an investment hesitation,”

Pushing into new markets is also a challenge because many companies don’t have the management capacity, and are running a full tilt with the humming economy, Lavery said.

EDC estimates there are about 120,000 Canadian exporters, with 20,000 more ready to export.

But about 100,000 of those are smaller operations with revenue of about a million dollars, leaving few resources to devote to capacity building or market expansion.

“They’re starting to learn that they’re going to have to deal, and grow their business in an uncertain world that doesn’t just include the U.S.,” said Lavery.

Entering new markets presents the challenges of language, laws, geography, and customs, as well as actually finding gaps to fill in supply chains, all of which takes time, said Dennis Darby, president and CEO of Canadian Manufacturers and Exporters.

About 86 per cent of the goods Canada produces are unfinished and so need to be part of a greater manufacturing process, which is often tied up in long-term contracts and require longer-term time horizons to integrate.