The Canadian dollar has fallen below $0.70 US. Oil prices have dropped below $30, negatively impacting government revenues.
Lately, much of the headlines have been focused on using infrastructure investments to jump-start the Canadian economy. Minister of Infrastructure and Communities, Amarjeet Sohi is now tasked with finding the right projects that can deliver jobs and growth in Canada.
While infrastructure investment does play a vital role in stimulating an economy, there is another area where we need to focus more attention on: international trade. By leveraging an aggressive trade policy combined with sound government policy Canadian firms can improve their standing worldwide, which in turn should create well-paying jobs at home. While the Trans-Pacific Partner agreement is being debated in Canada, there are other agreements that can be leveraged to boost exports now.
Canadian firms have to venture out into new markets outside of North America to grow. And Canada needs more Canadian firms to be successful abroad. This is particularly true for Black run Canadian businesses. The Canadian Government needs to seek out new trade agreements and continue to strengthen our ability to leverage the ones we have in place today.
There are many markets that Canadian companies should explore. Canada has a series of agreements known as FIPA (Foreign Investment Promotion and Protection Agreement) with numerous countries around the world. FIPA is a bilateral agreement aimed at protecting and promoting foreign investment through legally-binding rights and obligations. Currently, there are about 45 FIPAs that are in place, signed or being negotiated by the Government of Canada. This means, that Canadian firms have the opportunity to explore investment options with these nations with some degree of protection.
Combine these agreements with various services offered by Export Development Canada and various Canadian Trade Commission officers – a small business can seek out new markets for their products and services while lowering their risk profile.
Let’s take the FIPA agreement with Nigeria (now Africa’s largest economy) as an example to illustrate how Canadian firms can boost market share and create new jobs at home. Nigeria has been struggling with power issues across the country. To build additional power capacity, Nigeria will need to purchase state of the art equipment that can fuel new power grids. From traditional power sources such as hydroelectric, clean coal to new power sources such as solar and wind- the opportunity for Canadian firms are endless. If we assume that a Canadian firm won contracts to design, build, install and maintain these new power sources, how many jobs could be created? The firm would have to sell, design, install and manage these green energy projects. Canadian firm, Endurance Wind Power, embraced a similar thought pattern for markets in Italy and the UK. These resulted in the company growing from 10 employees to 150.
While Canadian firms will experience increased revenues and employment, there is also additional benefit: Social Responsibility. The opportunity for additional knowledge sharing, skills development and creating sub-contractor relationships with companies within a particular market also benefits the people on the ground. If we follow the Nigerian example, the Canadian power company could create a sub-contracting agreement with a local firm where they would manage the support calls. The local firm could operate as a franchise, subsidiary or independent firm with a structured contract. Thus not only are Canadian firms creating Canadian jobs, they are helping to create jobs abroad.
What can our governments do to help Canadian firms market more assertively in foreign markets? First, increase trade missions to various countries outside of the USA. Former Prime Minister Chretien was famous for “Team Canada” trips. Second, the government needs to create an SME flow through when conducting trade missions. For instance, if a large firm such as Ellis Don wins a contract in China, they must subcontract a certain amount of that contract to smaller Canadian firms. This should be the case for any domestic infrastructure investment; it should also be in place for export deals.
An example: suppose a Canadian IT Services firm wins a $3 million contract in the Philippines. The Philippine government is facing increased public pressure to address a youth unemployment rate of 15.8% and may insist that the Canadian firm invest in youth development activities. The Canadian IT Firm could partner with a Canadian organization focused on training to meet the needs of the client. It is difficult to enforce this type of business arrangement but the Canadian government should at least be encouraging it. The IT Firm would hire salespeople, technical, support and customer staff. The partner firm would hire trainers and customer service staff. And the youth in the Philippines would obtain skills that would help them obtain a job or start their own business.
Canada is a beautiful, diverse nation and the envy of the world. However, we are small in comparison to many of our allies. With a population of 35 million, Canada has to export its goods and services to address our economic challenges.