Protectionist Sentiment Among Canadian SMEs Highest in Quebec

Mississagua, May 05, 2009

Study shows drop in trade activity coincides with gloomy view of globalization

Protectionist sentiment among small- and medium-sized enterprises (SMEs) in Canada is highest in the country’s francophone province, reveals a recent UPS study.

According to the UPS Business Monitor^SM Canada, a study conducted by TNS Canadian Facts, 58 per cent of SMEs in Quebec would prefer to see current trade restrictions remain in place as a means of protecting Canadian business and jobs.

The number exceeds the national average of 53 per cent and coincides with gloomy predictions for business growth in the province. The study shows 14 per cent of SMEs polled in Quebec predict the economic position of their business will decline in 2009, up from only one per cent that made the same prediction in 2007. In addition, the number of businesses predicting a decline in their workforce stands at five per cent, up from zero in 2007.

In addition, global trade among Quebec SMEs has dropped, with only 22 per cent currently sourcing materials from abroad, down from 36 per cent in 2007.

“It seems Quebec’s small- and medium-sized businesses are reacting to the economic downturn by retreating into domestic-focused business activity, which can be dangerous,” said UPS Canada President Mike Tierney. “We understand the fears that many Canadian business owners have about the declining economy and competition from abroad, but to maintain competitive businesses they must continue to seek opportunities globally in good times and bad. By doing so, they will realize greater stability in their business development even during times of economic volatility.”

Conversely, sourcing goods from outside of Canada among Ontario SMEs has increased from 30 per cent in 2007 to 40 per cent. Meanwhile, Alberta — where SMEs had the lowest level of global trade in Canada in 2007 — saw an increase in sourcing from abroad from six per cent in 2007 to 39 per cent in 2008, and an increase from eight to 23 per cent in selling abroad.

“Entrepreneurs in Ontario and Alberta have clearly seen the benefits of conducting overseas trade and are using it to their advantage during these difficult economic times,” said Tierney. “SMEs in Quebec can realize the same benefits and UPS can help them by providing the infrastructure and technological resources they need to make global trade easy and profitable.”

The surge in global trade may be fuelling optimism among Ontario SMEs where only six per cent of respondents predicted a decline in business despite the faltering economy, while almost half (47 per cent) predict growth in their near future. Optimism in Alberta is similarly high with only nine per cent of SMEs predicting a worsening of their economic position and 49 per cent predicting an improvement. However, Alberta’s numbers have changed significantly since 2007 when zero SMEs foresaw a worsening of their economic position and 79 per cent predicted an improvement.

In addition to the high protectionist sentiment, SMEs in Quebec remain leery of global trade with 10 per cent citing it as being detrimental and 49 per cent believing it is neither detrimental nor beneficial.

The United States remains the primary target for sourcing and selling goods outside of Canada among all businesses.  However, the study shows Canadian SMEs conducting global trade have begun to diversify geographically with targets in Asia, Europe and South America.

“We’re beginning to see the impact of the economic downturn in the U.S. in global trade trends,” said Tierney. “Businesses here are beginning to realize the wealth of opportunities outside of the NAFTA comfort zone and are taking advantage of them as a means of weathering the economic storm.”

Despite the recent economic decline in Alberta fuelled by the drop in the energy sector, the Rocky Mountain province remains the top choice for SMEs in Canada to establish a new location for their business outside of their home province, followed by B.C. and the Prairies.

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 entire study has a margin of error +/- 4.4 per cent.