The Global Markets Action plan is a welcome policy development, argues Danielle Goldfarb, but the federal government will need to help Canadian companies leverage it to their advantage.
The federal government’s new Global Markets Action Plan sounds many of the right notes and is a modern restatement of Canada’s foreign trade and investment policy ambitions.
For one thing, it recognizes the vital importance of trade to Canada’s economy, which is further illustrated in The Conference Board of Canada’s latest Canadian Outlook forecast. Export growth is the major reason why Canada’s economy is forecast to grow by an average of 2.5 per cent in 2014 and 2015, an increase from the tepid growth of 2012 (1.6 per cent) and 2013 (1.8 per cent).
The plan recognizes and responds to the dramatic and rapid changes that have taken place in the global economy. It focuses on priority fast-growth markets that align with Canadian commercial interests, such as Southeast Asia. It appreciates the importance of Canada’s traditional markets that are still Canada’s major trading partners.
It also has mechanisms to make it flexible and responsive as global economic circumstances change. And it puts in place a more aggressive economic diplomacy strategy in recognition of the intensely competitive landscape.
The Conference Board’s research confirms this approach is both evidence-based and sound.
The plan pays special attention to helping smaller players and sets an objective to almost double the number of small businesses active in emerging markets. To be sure, the government is right to focus on smaller businesses, which are leading the charge in diversifying to many fast-growth markets—more so, in many cases, than larger players. Smaller players need help navigating and making connections in new markets. Forthcoming Conference Board research on Canada’s small and medium-sized businesses shows that exporting boosts their profits and sales on average.
But our research on small business and trade also shows that the best performers do extremely well, boosting their performances dramatically, while the weakest fare very badly and take large losses. The gap between the best and the worst is extremely pronounced in fast-growth markets. And the characteristics of the most successful are clear—they are experienced, leveraged, productive, and innovative.
The government might wish to nuance this aspect of the plan, focusing on factors that increase the success rates of our small businesses in global markets, rather than targeting an increase in the number of small business exporters. This shift in strategy might mean that fewer companies go global, but the ones that do sell a lot more. It might also mean that some of our small businesses will have to beef up their operating capabilities before they go global.
In addition, trade policy and operations, foreign policy, and development policy can work hand in hand to reinforce Canada’s broader interests. It doesn’t have to be all or nothing. While Canada’s economic interests are a critical part of foreign policy, we should be careful not to put all our eggs in one policy basket by marshaling all of Canada’s diplomatic resources to an economic purpose, as the plan proposes. Canada has interests that go beyond economic ones.
Moreover, by focusing strictly on economic interests, we may be putting our longer-term economic interests at risk. By bringing developed and developing countries together in international forums, for example, or providing global leadership on poverty reduction or security, we could advance both Canada’s political and commercial interests. With its relatively small economic weight, Canada needs to be creative about getting attention in other countries, and this should include offering leadership on issues economic and beyond. Our trade partners want to talk about more than just trade.
This new plan is a welcome and important recognition that the global economic landscape has changed. But Ottawa needs to ensure that companies are truly ready to go global before they enter the game, while also keeping Canada’s broader global interests in mind.
This piece was first published by the Conference Board of Canada.