Prime Minister Justin Trudeau will be in Toronto on Thursday to speak at the Rotman School of Management on Canada-U.S. trade relations.
The renegotiation of the North American free-trade agreement might be the most attention-grabbing trade headline right now, but it is not the only item on the government’s trade agenda. Unlocking the economic benefits of the Comprehensive Economic and Trade Agreement (CETA), salvaging the Trans-Pacific Partnership (TPP) and facilitating exploratory conversations with China are just a few of the other top “to dos” currently within its double-downed trade portfolio.
However, success for the Canadian economy is not about how many trade deals the government is able to secure or salvage; real success is about the quality of such deals, and particularly their ability to meaningfully affect all parts of the Canadian economy. Global trade agreements have the potential to play a critical role in bringing “inclusive trade” to life.
Leading part of a global online marketplace that exemplifies inclusive trade – where businesses of any size, from anywhere, can reach buyers around the world – I see first-hand the benefits of exporting for small and medium-sized businesses (SMBs).
On eBay, Canadian exporting SMBs derive more than 50 per cent of their sales from foreign markets. And, eBay Canada’s Small Business Optimism Index, which surveyed retail SMBs across the country, found a direct correlation between exporting and entrepreneurs’ assessment of their business prospects: Leaders of SMBs that exported were more favourable about all business performance indicators versus their non-exporting peers, including future business growth.
Further, exporters reported an average of nearly 60 per cent more in sales. It is encouraging to see how many small Canadian businesses are ardently embracing global trade and reaping the benefits. These “micro-multinationals” are going beyond borders to tap into new markets, which is imperative for any Canadian business looking to scale up, given the size of Canada’s market.
On the flip side, I also see key barriers that are holding these micro-multinationals from reaching their full potential. Virtually all Canadian SMBs who sell on eBay (99.9 per cent) export, and to an average of nearly 20 countries. When I connect with these sellers, the top issue they consistently raise is the border frictions that impede their business performance. Canada’s low de minimis threshold is a particular area of concern. This threshold, which sets the level above which duties and taxes are assessed, puts Canadian sellers at a competitive disadvantage to their global peers, as it adds considerable costs to importing business inputs or accepting international returns, for example.
At $20, Canada’s threshold is out of step with global peers – the U.S. equivalent is set at $800 (U.S.). Not only does the Canadian threshold dampen SMB trade, it also costs taxpayers: In his latest report, the auditor-general confirmed concerns that the threshold costs more to enforce than it generates in revenue.
The Liberal government is rightly focused on including SMBs in its trade policy as a way of unlocking their potential and supporting their growth; after all, these businesses represent 90 per cent of private-sector employment and are key in diversifying our economy.
International Trade Minister François-Philippe Champagne has stated that our future success depends on more Canadian companies, especially SMBs, making bold moves and engaging in the global economy. His engagement in the issue was clear last month, when he participated in a roundtable event with Canadian eBay small businesses. After hearing how these companies are using the Internet to reach customers in foreign markets, Mr. Champagne agreed that there is no better mechanism for first-time exporters than e-commerce.
Truly, e-commerce is the modern form of trade. It is both highly democratic and effective, but it looks very different from traditional trade – it uses public infrastructure (e.g., Canada Post), and many commercial trading programs simply do not apply. As such, Internet-enabled trade needs to be specifically considered by modern trade agreements. The TPP was the first trade deal to address e-commerce as we know it today, and it promised to improve access to global markets for small and medium-sized businesses. However, it could have gone further in terms of clear, direct policies that would remove de minimis barriers – including here at home – to Canadian SMB’s participation in the global economy.
According to the Department of Global Affairs, Canada lags on small-business exports and we need to build more of a global entrepreneurial mindset. Meaningfully inclusive trade agreements are critical to this effort. So as Canadian trade officials engage in negotiations, measures that directly support inclusive trade for Canadian SMBs should be at the top of their list of objectives.
Published in Daily Times, June 26th, 2017.