Protectionism Proliferates Among Canadians

Mississagua, March 04, 2009

Studies show Canadian SMEs want trade barriers in place; SMEs on both sides of border prefer to remain within continental comfort zone

The majority of Canada’s small and medium-size enterprises (SMEs) would prefer to see trade barriers remain in place, while most SMEs on both sides of the border plan to limit their import/export activity to only North America

According to the UPS Business Monitor Canada, 53 per cent of Canadian SMEs would prefer to maintain current trade restrictions, with the sentiment highest among SMEs in the construction, manufacturing and retail sectors. The numbers were gathered in December 2008, prior to the “Buy America” clause controversy that recently swept through both Capitol Hill and Parliament Hill.

The data is in direct contrast to the Canadian federal government’s support of open borders to trade, which U.S. President Barack Obama also has committed to support. It additionally runs against Ottawa’s ongoing efforts to engage Columbia, Japan, India and the European Union on the possibility of entering into free trade agreements with Canada in the near future.

“There has been a lot of hand wringing recently in the Canadian media in response to the ‘Buy America’ clause, but the truth is that the protectionist sentiment is just as prevalent among the grassroots here in Canada,” said Steve Flowers, President of Americas, UPS. “These views are not unexpected given the current recession. The natural instinct among SMEs and business in general is to shelter the market from outside forces over which we have little control. Yet historical data shows that market diversification through international commerce will serve to strengthen profitability and competitive advantage much more than putting up more restrictions and barriers to trade.”

The UPS Business Monitor Canada study revealed 65 per cent of SMEs intend to target the U.S.’s shrinking consumer market, compared with only 19 per cent who intend to take advantage of Asia’s new middle class and 38 per cent who intend to target Europe. In the U.S., 42 per cent of SMEs predict growth in trade between Canada and the US over the next three years. In comparison, 48 per cent predict similar growth between the US and Asia Pacific and 42 per cent predict future trade growth between the U.S. and Latin America.

Canadian and American SMEs’ focus on North American-oriented trade stands in stark contrast to the study’s findings that most SMEs also predict the U.S. economy will remain in recession until 2010 or later — a sign that traditional trading habits are hard to break, even in the face of declining continental business opportunities.

In Canada, SMEs’ reluctance to engage in international trade stems from an ongoing and widespread state of inertia with 49 per cent of respondents claiming they have enough business to deal with in Canada. U.S. respondents on the other hand, cite a limited knowledge of the global marketplace as their biggest stumbling block.

“In these trying times we understand what our SMEs are going through and we want to help, which is why we think it’s imperative that businesses expand their horizons in order to weather the economic storm,” said Geoff Light, Vice President, International Marketing, UPS. “It doesn’t have to be difficult or involve a huge investment if companies rely on existing infrastructure and expertise. UPS already helps hundreds of SMEs overcome obstacles and take advantage of global opportunities.”

SMEs can take advantage of services such as UPS World Ease®, which allows multiple shipments to be consolidated into one movement across borders, reducing costs and paperwork and streamlining the distribution process.

Sentiments against globalization are much more rampant south of the 49th parallel where one-third of U.S. respondents said the shrinking global village is detrimental to business, while an equal number described it as beneficial. Conversely, in Canada 45 per cent of businesses viewed global trade as a positive development for their business and only nine per cent saw it as detrimental.

Steve Flowers joined UPS colleagues in discussing the Business Monitor Canada survey and the impact of the results in a webinar that is now available at http://events.snwebcastcenter.com/ups/20090304/ for 12 months.

The UPS Business Monitor Canada survey was conducted by TNS Canadian Facts between November 12 and December 3, 2008, and surveyed a total of 505 SMEs across the country. The study has a margin of error +/- 4.4 per cent.