Canadian Treasurer

September 27, 2016

Canadian businesses expect growth in U.S. trade

New study looks at challenges and opportunities with Canada’s largest trading partner

TORONTO --  Canadian firms continue to see the U.S. as an intimate trading partner and its market a source of growth, according to a new report from the Economist Intelligence Unit (EIU), in partnership with American Express. Although there are some issues to be tackled as regulatory and compliance challenges cause costs to rise, a majority of firms anticipate their trade with the U.S. to increase, in part thanks to the Trans-Pacific Partnership.

The research, which includes a survey of 531 companies worldwide, explores the relationships companies have with the U.S., looking at how they trade, the challenges they face and how they expect international trade with the U.S. to change based on upcoming regulatory shifts. 

“U.S.-Canadian trade is among the most valuable in the world,” says Paul Roman, vice president & general manager, global commercial payments, American Express Canada. “The results show there are some issues to be looked at, including access to trade finance and infrastructure, but it is positive to see optimism among a majority of Canadian firms that their trade with the U.S. will increase.”

Opportunity for U.S. trade improving

The research found that the U.S. is, unsurprisingly, a top trading partner for three-in-four (76 per cent) Canadian businesses. Furthermore, a huge majority (94 per cent) of Canadian companies surveyed derive up to 30 per cent of their current global annual revenue from the U.S. market – the same as the U.S.’s other continental neighbour and NAFTA co-signatory, Mexico.

The reliance on trade with the U.S. is expected to rise, as 58 per cent of Canadian companies surveyed expect their trade with the U.S. to increase in the next five years with around one-in-five (18 per cent) seeing it grow by more than 10 per cent. A majority of Canadian firms surveyed think that the Trans-Pacific Partnership (in addition to NAFTA) will improve opportunities for them in the U.S. market.

Canada/U.S. trade challenges

Despite the strong trade relationship between the two countries, there are specific challenges Canadian companies find when trading with the U.S. The top two challenges for Canadian businesses trading with the U.S. include access to trade finance (46 per cent) and trade-related infrastructure (46 per cent). Other top concerns when trading with the U.S. include exchange rate volatility (44 per cent), trade-related regulation and harmonization between countries (40%), and making payments (38 per cent).

  • Access to finance: The two main impediments to accessing finance for trading with the U.S. are limited credit insurance options (cited by 30 per cent of respondents) and lack of dollar liquidity (26 per cent).

  • Infrastructure: Over a third of (36 per cent) Canadian firms surveyed say they rely heavily on the rail network in order to trade with the U.S., with 28 per cent mentioning a reliance on port facilities and 24 per cent on air links.

  • Exchange rate volatility: Despite being listed among the top challenges to Canadian-U.S. trade, changes in the exchange rate with the U.S. dollar positively affected a majority (54 per cent) of Canadian companies’ profitability in 2015.

  • Trade regulation: Nearly three-in-four (72 per cent) Canadian companies surveyed have seen an increase in the cost of doing business with the U.S. due to trade-related regulatory and compliance issues over the last 12 months – 42 per cent have seen increases of over 10 per cent.

  • Making payments: Canadian businesses surveyed cite top issues with making payments to the U.S. as currency fluctuation (78%), banking hours (68 per cent), bank fees (68 per cent), limited or no terms (66 per cent), limited payment visibility (56 per cent), and process inefficiencies (52 per cent).

Outside of the U.S., international trade presents a unique set of challenges for Canadian businesses. These include making payments (50 per cent), transportation costs & delivery (46 per cent), insufficient market knowledge (42 per cent), and communication challenges and cultural hurdles (40 per cent).

Insight on international payments

Over a quarter (28% per cent) of businesses surveyed spend more than 10 per cent of their annual costs in purchases from the U.S., while the majority (82 per cent) derive up to 10 per cent of their annual revenue from U.S.-based customers.

Payment challenges (currency fluctuations, bank fees, process inefficiencies, etc.) have impacted Canadian businesses, resulting in limited response to emergency payments (32 per cent), unbalanced cash flows (20 per cent), increased foreign exchange exposure (20 per cent), shipment delays (18 per cent), and increased processing and payment costs (10 per cent).

“Navigating cross-border payments efficiently can be challenging” says Roman. “Our Global Currency Solutions solve many of the inefficiencies and hidden costs that come with traditional payment methods. We want to help our customers thrive when it comes to cross-border trade with their continental neighbour.”

American Express Global Currency Solutions help business control, manage, and simplify their cross-border payments, giving them full spend visibility, improving cash flow, minimizing foreign exchange impact and reducing transaction costs.



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