More than a gateway to the USA, the Canadian market is great in itself. Discover how easily Australian exporters can translate products and services into exports to Canada.
If exporting to Canada, you’ll find the similarities between Canada and Australia can be startling. Both countries host a relatively small population on a large landmass, and both boast a wealth of natural resources in the form of minerals in the ground and wilderness on the surface. Beyond physical similarities, however, Canada and Australia also share comparable social and political values and both, as sparsely populated developed countries, have entered global supply chains with the knowledge that the domestic market alone isn’t big enough for growing exporters.
“Our markets are small in themselves. The company that wants to get to a certain scale in Australia or Canada has to look at exporting or it’s going to stay small; you can in the US but you can’t in our two countries,” remarks Rick McElrea, consul and senior investment advisor at the Sydney Canadian Consulate. “I’ve been all over the world and I don’t think there are two countries more like each other than Australia and Canada. The United States and Canada are not as similar as Australia and Canada.”
McElrea believes Australia is a good connection for Canadian companies to expand into Asia and Australian companies should look at Canada as a gateway to the United States. Once rivals for resource exports, the two now share a global market. “The demand is so big that neither one of our countries can satisfy it so that cuts down on competition,” he says. “And the same companies that are big here own assets in Canada and vice versa.”
Exporting to Canada
Businesses that haven’t examined Canada as an export destination should note that although Canada is divided into provinces the way Australia is divided into states and territories, Canadian provinces are more independent than Australian states.
“You can set up a business in Canada with a federal business licence registration or you could set up with a provincial one but find you can’t easily do business in the other provinces,” says McElrea. There’s also separate taxation. “You pay provincial and federal income tax both as a corporation and as an individual.”
Kevin Lamb Austrade’s Vancouver post manager and honorary consul for Western Canada, agrees:
“The challenge is not selling into Canada, it’s selling from province to province.”
Generally speaking however, Canada is an open market and tariff rates and taxes are quite low for a developed nation. “Canada is a major exporter but it’s also a major importer, they’re not skittish about importing products,” says Lamb. “The Canadian market is a third larger than the Australian market, so offers a natural step up for exporters.”
Another consideration is that Canada is officially bilingual. While all provinces but New Brunswick is unilingual, federally, everything must be in both English and French. Quebec is the only unilingual French province, but even if you’re not selling there directly, labels such as ingredients and warnings must be in both languages. Exporters would also do well to note that Quebec’s legal system is based on the Napoleonic Code rather than Westminster system found in the rest of the country.
“It’s not that people speak French in Quebec. The issue is that Quebec is French. It’s a significant market, and you can sell into France and Europe because you already have the French covered,” says McElrea. “If you establish yourself in Quebec you have to be prepared to do all your business in French, including speaking to your employees.”
Existing Export to Canada
“If you’re exporting to Canada and you’re not visiting, you have to visit! The more often you go there, the better,” suggests McElrea.
Lamb agrees. “Relationships still count in Canada. Given the size of the market, it’s very important for Canadian companies that are taking on Australian products to get it right. In this market those business and personal relationships are still important to long term success and that’s what we’ve seen with Australian companies that come here because they take time to understand the market and develop those close relationships.”
Both note the increase of Australian offices opening in Canada, so if you’re currently just sending product over, opening an office seems to be a natural progression. “If you’re selling a small volume in relation to what you produce, use agents and distributors, but at some point you want your own footprint. A business should establish a subsidiary or a branch rather than a company to begin with,” says McElrea. “If you’re exporting a service, once you get to like the market, the best way to establish a footprint is to acquire somebody. That’s what engineering companies will do—it might take ten years to get that visibility, or they’ll just buy someone.”
There are a number of events that allow existing exporters to push their brands. The annual Discover Australia event run by Austrade is one that food and beverage exporters shouldn’t miss. “The winemakers really look forward to it because it’s a way of showcasing smaller regional wineries and identifying local partners,” says Lamb. Other initiatives include sending delegates to the Global Petroleum Show and having a presence at consumer events like Ecosmart.
“Consumers here are looking for ecologically friendly products and there are Australian companies that do have products—from healthcare and personal care products to clothing—that are more environmentally friendly. There’s a perception that Australia is clean and green and therefore things that are developed in Australia—whether that’s natural sunscreen protection or naturally-based cosmetics or organic foods—do well,” explains Lamb. “Exporters should look to sell energy-saving and climate change technology over the next couple of years.”
Advanced Export to Canada
You may already have a presence in Canada, but if you haven’t sold across more than one or two provinces, target at least the major areas, particularly the provinces of British Columbia, Ontario and Quebec where the bulk of the Canadian population reside.
Joint ventures and acquisition are two viable methods of increasing market share that are options for advanced SME exporters, particularly in the biotechnology sector. “Australia and Canada are similar in bio, we tend to have lots of small companies who need partners. To be partnered by the big guys is to be gobbled up,” says McElrea.
He also points out that although Canadian-Australian bilateral trade is roughly equal, Canada has about $9 billion worth of investment into Australia, but Australia only has about $3 billion in Canada. “Whereas our trade is balanced, our investment is not. There’s lots of scope for growth,” he says.
Then there’s the giant market across the border—the United States. “If you look at the logistics, if you’re in Vancouver, it’s going to be easier to sell into LA than it is to Halifax [in the east]. If you were sitting in Winnipeg, you’d service the Chicago market. The north-south links are very significant,” says McElrea. “I would do a US and Canadian approach. We are a softer landing into the US.”
Canada is part of the North American Free Trade Agreement (NAFTA) with the USA and Mexico, a total market of 440 million. “When Australian companies look at North America, the attraction of the US market is huge,” says Lamb. “NAFTA gives Australian companies an opportunity to base themselves in Canada and sell into the US market. All of North America has a 10-digit phone number so as long as it is 10 digits, they’re not calling internationally.”
If you’re an exporter involved in the construction or infrastructure industry, Lamb further notes that there are increasing opportunities to enter public-private partnerships with all levels of Canadian government.
The provincial differences will cause some problems for some exporters, particularly for service providers, and those who set up a branch in one province and then spread across the nation. Law firms need to remember that while most provinces are on the Westminster system with legal systems almost identical to Australia’s, Quebec practises the Napoleonic Code.
Despite having lower taxes than the US, Canada is still a developed country, hence the set-up costs for business can be significant. “The Canadian market is not a cheap market to come into—every market requires an investment,” says Lamb. “But a lot of people find it easier because of the similarities.”
He also mentions that although tariffs are generally low, there are still protected sectors. “Canada is an open market but it still protects is its dairy industry, so that’s one area where it is a hurdle.”
And, due to the threat of terrorism, there are some drawbacks to using Canada as a gateway to the USA if you are neither a Canadian nor US citizen. “There are all kinds of [bureaucratic] processes since there became a security issue that businesses should sign up to, and perhaps certain individuals if they do business back and forth,” suggests McElrea.
Lastly, because of the similarities between Canada and Australia, exporters need to be particularly aware of Canadian competitors already in the market. This may be a problem for some, such as B2C exporters, if there is market saturation of a product, and yet this similarity presents opportunities for others. “In areas such as mining, both Australia and Canada have significant mining industries, so something developed for the mining industry in Australia—say software— automatically has opportunities in the Canadian market,” observes Lamb.
Future Exports to Canada
There have already been some success stories for Australian companies in Canada. Lamb says wine has been a strong seller, as has food because Australia is an off-season supplier. He also predicts growth in technology exports across several industries. “We’ve seen mining technology come in and we’re starting to see more success in life sciences. Also emerging is the area of clean technology.”
In the last five years, the number of offices opening at Lamb’s post in Vancouver has tripled, which has been mirrored in other cities such as Toronto and Calgary. “We’re seeing a lot of companies going from exporting to having a presence in the market, which shows these companies have what it takes to market long term. Not every company can do that, but there are those that see that you have to get into the market to protect your brand,” he says.
McElrea says having a presence in Canada can be the foundation for a good marketing strategy. “If you can look local and exotic at the same time, you have a marketing advantage. I would brag that I was Australian because that’s a novelty, but I would say that I’m an Australian company in Canada.”
Final advice for exporters who want to do well in Canada? Be dedicated to the market, says Lamb. “Do your own marketing and use lots of different services, not just Austrade, and network with other companies to understand the market. Commitment to the market is another thing: visiting the market regularly, working on relationships. The tyranny of distance disappears after you build a rapport. Prepare to invest longer term and you can succeed in this market.”
Asia Pacific Business: www.asiapacificbusiness.ca
Austrade Canada: www.australiantrade.ca
Australian High Commission: www.ahc-ottawa.org
Canada, Australia & New Zealand Business Association: www.canzba.org
Canadian Australian Chamber of Commerce: www.canauscham.org.au
Government: Parliamentary democracy and constitutional monarchy
Language: English and French
Currency: Canadian Dollar (CAD); AUD 1 = CAD 0.972 at time of printing
Tips: Restaurants = 10 to 15 percent of the pre-tax total; barbers, hairdressers and taxi drivers = 10 to 15 percent; porters, doormen and bellhops = CAD 1 for each item of luggage carried
Visas: Australians do not require a visa to visit Canada, however permits are required for work and study purposes
Religion: Predominantly Catholic and Christian
Seasons: Winter starts in January; summer starts June 21
—Source: Flight Centre