Canada: A trade gateway to North and South America
How to approach them for businesses from Ukraine
Canada actively supports Ukraine in countering the adversary through sanctions, as well as with tanks and training for our soldiers. Additionally, the country collaborates with Ukraine in the field of trade, as a Free Trade Agreement has been signed between our nations. Moreover, recently, Canada has opened a new market for Ukraine – for milk and dairy products. So, what else makes this North American country appealing for Ukraine, and how should one prepare to enter this market? Dmytro Shvets, director of Start Global, author of the Start Global Insights podcast, and founder of n.cubator, revealed this to Mind.
In the previous article, I wrote about how despite the large size and potential of the USA, it might not be the most suitable choice for beginning the export of your goods or services.
However, there is a workaround that can lead you to this market. Everyone knows that Columbus discovered America, but it's more accurate to say that he discovered South America, because about a thousand years ago, Vikings landed on the island of Newfoundland in North America and established a small settlement. Today, this island is part of one of Canada's provinces.
In 2019, I travelled to Canada as part of a delegation of representatives from the Chamber of Commerce and business schools from Ukraine. There, we underwent trade training with this country, and it was a real eye-opener for me. The market turned out to be very attractive for our products and very transparent for trade.
Main Facts about Canada
Canada is the second-largest country in the world, with a population of just 39 million people. It is one of the economies of the G7, which, according to the OECD in 2022, is growing the fastest and has the best performance in the first quarter of 2023 among these countries.
Canadians have a relatively high income level with an average monthly salary of $3,100 and a life expectancy of almost 84 years.
The country is very diverse, starting from its multicultural population that preserves the cultures of their respective origins, to its climate – from mild in the south to subarctic and arctic in the north. In 2022, according to trademap.org, Canada imported high-value-added goods worth $415 billion.
According to the data from the website, Canada's main imports include:
- nuclear reactors, boilers, machinery, mechanical appliances, and their parts;
- electrical machinery and equipment;
- plastics, polymers, and products made from them;
- mineral fuels;
- land vehicles, excluding railway or tram rolling stock, their parts, and equipment.
Why Canada can be an attractive partner for Ukraine
In my interview with Canadian expert in international trade, Maria Guzman, who works with the Canadian government and assists businesses in entering and exporting from the country, we discussed how Canada is heavily reliant on trade with the outside world, and today, more than ever, Ukraine has significant opportunities for success in this country. Against the backdrop of the war, Canada's trade with russia has significantly decreased and continues to decline. Goods from China are also losing popularity.
Since the signing of the Free Trade Agreement in 2016, Ukraine's overall exports to Canada have more than doubled. Importantly, this growth persisted even in 2022 (mostly in the first quarter of 2022). What's encouraging is that this growth is not limited to raw materials. In 2022, Canada imported high-value-added goods from Ukraine worth $98 million (slightly over $102 million in 2021).
Furthermore, in April 2023, the prime ministers of Canada and Ukraine signed a declaration to renew the Free Trade Agreement between the countries. This indicates that this flow will only continue to increase.
Top 5 imports to Canada from Ukraine among high-value-added goods:
1. Electrical machinery, equipment, and their parts; sound recorders and reproducers, television image and sound recorders and reproducers, as well as parts and accessories.
2. Processed products of vegetables, fruits, nuts, or other plant parts.
3. Land vehicles, excluding railway or tram rolling stock, and their parts and equipment.
4. Nuclear reactors, boilers, machinery, equipment, and mechanical devices; their parts.
5. Railway locomotives or motorised tram vehicles, rolling stock and their parts; track fixtures and fittings for railways or tramways and their parts; mechanical (including electromechanical) signalling, safety, or traffic control equipment of all kinds.
In Canada, one of the largest Ukrainian diasporas in the world resides, comprising around 1.3 million people. Like most other ethnic groups in Canada, Ukrainian Canadians maintain and support their culture and connections with their homeland. While this is positive news, it is important to note, based on experts' opinions and experiences, that Ukrainian Canadians will equally choose products based on price and quality. Therefore, it is not advisable to expect that the diaspora will solely purchase goods just because of their country of origin.
Moreover, English remains the primary language for communication, both internally and internationally. Although French is also used officially alongside English, it's crucial to consider this in documents and packaging when entering the market.
According to the Business Development Bank of Canada, over 90% of businesses in Canada are small and medium-sized enterprises (SMEs), presenting a vast pool of potential clients, but also intense competition. As for the availability of information for market research, Canada is a marketing paradise, and I have not seen such a variety of open statistics and descriptions of product requirements even in the EU.
For instance, you can freely access the list of importers in Canada and choose a potential partner for collaboration in the Canadian Importers Database (CID).
Or you can even obtain a step-by-step export guide to Canada on the country's Border Services Agency page.
If you are interested in learning more about approaches and insights for entering this intriguing market, you can listen to an episode of the Start Global Insights podcast about Canada. It's available on podcast platforms such as Spotify and Google Podcasts, among others.
Here are some interesting insights about Canada from the interview:
- Consider regional specificity. Different cultural nuances and consumer needs exist across regions.
- 50% of Canadians' expenses go towards taxes and housing.
- Long winters require long-term planning.
- Online commerce is highly popular.
- Diverse climatic zones necessitate various goods and services.
- 80% of products are imported.
Canada as a gateway to the US
Despite its vast size, the majority of Canada's population lives within a 300-kilometre strip along the border with the United States. Therefore, it is not surprising that the business ties between these two countries are strong.
The US is Canada's main trading partner. In 2022, the export of high-value-added goods to the US reached $213 billion (out of a total of $262 billion to the world), with the overall export totalling $459 billion (out of a total of $597 billion from Canada to the world).
In 1987, Canada and the US entered into a free trade agreement that removed many tariff and non-tariff restrictions between the countries. In 2018, this agreement was expanded to include Mexico.
So, circling back to the beginning of the article, Canada can serve as an excellent starting platform for trade within North America, with the US being the next step in the process.
…And not only the US
In addition to free trade agreements with the US and Mexico, Canada also has agreements with several countries in South America, Asia, and Europe. This means that the next expansion after Canada opens up options in nearly half of the world. You can find a comprehensive list of agreements on the Canadian government's website here: Trade and investment agreements (international.gc.ca)
In conclusion
Canada is an attractive market for Ukrainian exporters. It boasts a large and multicultural population with high incomes and a transparent trade system. The country has a multitude of free trade agreements, which grants access to the vast US market and markets of other countries worldwide.
The free trade relationship with Ukraine and the strong support of Ukrainians make Canada one of the most appealing routes for international trade.
It is high time to take this opportunity and consider exploring the Canadian market as part of your export strategy development.
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