NAFTA uncertainty affecting a quarter of Canadian exporters, says EDC

OTTAWA—Export Development Canada says nearly one-quarter of Canadian exporters surveyed for the agency said the on-going NAFTA renegotiation is having a negative impact on their Canadian operations.

The Ottawa-based Crown corporation says its semi-annual survey revealed a significant drop in the number of Canadian exporters planning to export to the U.S. market in the next two years.

Some are contemplating a move of their operation to the United States to avoid potential border disruptions while others are seeking to diversify their operations away from the U.S. market.

Some are taking a more cautious approach and delaying decisions.

EDC said companies are paying more attention to the European market, given a new trade agreement between Canada and the European Union.

Here are some highlights of the report:

NAFTA
Almost one quarter of Canadian exporters reported that the on-going NAFTA renegotiation is having a negative impact on their Canadian operations. Negatively-affected firms say they are responding using the following strategies:

• Contemplating moving their operations inside the United States to avoid potential border disruptions;
• Proactively seeking to diversify their operations away from the U.S. market;
• Taking a more conservative “wait and see approach” by doing nothing, or delaying investment or hiring.

Europe
With a new trade agreement now in force between Canada and the EU, and Europe’s economy continuing to improve, Canadian companies are paying more attention to the European market. They are planning to expand their existing exports to Europe, and/or are developing new products and services for the European market, as well as taking advantage of cheaper European imports due to tariff reductions.

China
At a time when Canada and China are engaged in exploratory discussions towards a possible bilateral trade negotiation, we asked Canadian exporters to China about the challenges they are facing in that market. The most common responses were: conforming with local regulations or standards; protecting intellectual property rights; language and cultural differences; building relationships; obtaining market information; securing payment; and competition from state-owned enterprises.

Interest Rates
Rising interest rates could become a bigger issue for Canadian exporters in the future. Nearly one-quarter of respondents reported that higher interest rates were having a negative impact on export sales.

Regionally
Sentiment fell marginally in all regions of the country with the largest decline in the Atlantic Canada, which fell from 73.5 to 70.8, and continued to have the weakest showing among the regions.

Click here to read Export Development Canada’s Fall 2017 Trade Confidence Index