Trade has increasingly become global in scope in the recent years following such factors as technological developments that have enhanced communication and transportation opportunities. However, the globalization of trade has led to countries and business organizations facing higher levels of competition since they no longer compete locally but with established players in the international marketplace. In response to the modern global market, countries are increasingly implementing measures that seek to overcome the growing barriers to trade. One of the most common measures that countries implement is the establishment of trading organizations and trading agreements, where member countries benefit from minimal trade restrictions, thus making it easier to penetrate and sell or buy items from other countries. Popular trade organizations include the European Union (EU), the North American Free Trade Agreement (NAFTA), and the World Trade Organization (WTO). Canada is one of the economies that are largely dependent on trade; although the economy has many opportunities in the international market, it still faces extensive challenges in achieving its goals concerning international trade. Hence, this paper examines Canada’s global trade strategy, the challenges that the country faces in the international marketplace, the available opportunities, and the strategies that Canada should implement to be better positioned in the global market.
2.0 Canada in the International Marketplace
An international marketplace refers to a geographical market beyond the international borders of a country. Operating on a global scale has become crucial for countries that seek to remain competitive in the modern business environment. Operating in the international marketplace plays a crucial role in accelerating a country’s economic growth as well as broadening opportunities to access new consumer bases. Accessing a new consumer base creates new revenue streams for countries and gives economies a competitive advantage over their key competitors. According to the Advisory Council on Economic Growth (2017), countries that countries that are highly engaged in exports generate more revenue, grow faster, create more jobs, and have higher standards of living. Moreover, engaging in the international marketplace protects countries from regional economic instabilities, which may translate to serious economic effects in the countries.
International trade of services and goods has been a key driver of the world economic growth for many decades. Canada’s performance in the global economy has attracted significant attention in the recent years since the economy is still recovering from the recession in addition to facing emerging challenges in the global market scene (Global Affairs Canada, 2012). A growing perception in Canada is that given the changing business environment, it is crucial for the country to start focusing on the overseas markets and restructure their business strategies to match the needs of the new global environment. The key factors that are pushing Canada towards globalization include declining demand from the traditional markets that Canada exported t, growing competition from new entrants into the international marketplace, and the fact that the new and emerging markets account for approximately over half of the growth in the global trade.
Canada is among the most committed economies to international trade; however, Canada is presently facing significant challenges in trade as more countries towards embracing protectionism. The major risk that Canada faces in the context of protectionism is that the country’s access to the international marketplace will decline with time as more countries focus on protecting their domestic economies (Global Affairs Canada, 2012). Canada is a small economy; therefore, the costs associated with the loss of her market share in the international marketplace are significant. Hence, it is crucial for Canada to establish her position as a major trading hub in the increasingly global economy to facilitate continued growth and prosperity of the economy.
International trade is particularly essential for Canada, being a small economy since it accounts for the largest source of growth, unlike other more diversified and larger economies that have other alternative sources of growth. For instance, 65% of Canada’s GDP comes from international trade, while in the United States only 30% of the GDP comes from international trade (Boothe " Smith, 2017). Apart from the necessity to continuously enhance her position in the international marketplace, Canada possesses all the necessary characteristics to become a link for the global supply chains as well as a global trading hub. These features include several Pacific and Atlantic ports that are crucial in accessing the international markets as well as the fact that Canada is located next to the largest economy in the world. Moreover, Canada possesses a multicultural and highly educated population that connects the country both culturally and economically to the rest of the world. Further, Canada is well-endowed with a robust agricultural sector and advanced manufacturing industries as well as a wide variety of natural resources.
Canada has managed to remain among the most prosperous and successful economies globally through the capacity to recognize and harness the power of global investment and trade, which is among the most effective strategies for driving economic prosperity and growth. Presently, trade in Canada accounts for more than 60% of the country’s annual GDP, with Advisory Council on Economic Growth (2017) noting that one in every five jobs in the country are directly connected to exports. Trade plays a crucial role in defining Canada’s prosperity and economic geography; with the changing global economy, it has become important for the country to change its trading practices, objectives, and vision to effectively adapt to the changes. The changes emanate from such aspects technological advancements, which have transformed the manner in which countries do business, and the mature and growth of the global emerging markets.
3.0 Canada’s Global Trade Strategy
Canada’s strategy on global trade focuses on aligning the needs of the Canadian businesses to the needs of the international marketplace. The strategy largely focuses on the markets that have the greatest potential for the Canadian business, as well as the markets that demonstrate potential to create new opportunities for families and workers at home as well as generating new jobs (Advisory Council on Economic Growth, 2017). The global trade strategy targets several markets including established markets that demonstrate broad interests in Canada, emerging markets that illustrate specific opportunities for the Canadian businesses, and emerging markets that demonstrate broad interests in Canada.
The strategy defines emerging markets with the greatest potential for the wide Canadian commercial interests as those that form part of the regional trading program and indicate high economic growth potential. Moreover, the strategy targets markets where the Canadian capabilities have the greatest potential for success and where the support of the Canadian government would lead to the greatest positive impact in trade (Advisory Council on Economic Growth, 2017). In addition, the strategy is interested in markers that are a priority for talent, technology, and foreign direct investment. Canada’s key target markets presently include North America, Asia Pacific, Latin America, and the Caribbean, Europe, Africa, and the Middle East.
On the other hand, the emerging markets that demonstrate specific opportunities for Canada include markets where Canada can have the first-mover advantage, markets where Canada possesses investment links, and markets where Canada can develop talent, infrastructure. Moreover, these markets include those that have the potential to become treaty partners with Canada and markets where Canada’s corporate social responsibility grants them an advantage (Global Affairs Canada, 2012). The strategy identifies these markets like Europe, Africa, Middle East, the Caribbean and Latin America, and the Asia Pacific. Further, the strategy aims to deepen Canada’s competitive edge in its key established markets, including Asia Pacific, Europe, and North America. Emerging markets are essential in enhancing Canada’s position in the international marketplace; however, it is also important for Canada to continue enhancing its relationship with its existing trading partners in the global scene. According to Boothe and Smith (2017), deepening trade with such partners as the European Union and India is capable of providing businesses in Canada with greater access to markets with a GDP of over $20 trillion and high populations, therefore creating thousands of employment opportunities for Canadians.
Canada’s international trade strategy utilizes several strategies to enhance the country’s position in the international market place. The first strategy is economic diplomacy, where the government uses its diplomatic network to promote trade levels in Canada. The second strategy involves the attraction of foreign direct investment using the foreign trade zone (FTZ). The strategy is essential for increasing Canada’s exports, supporting innovation, and creating job opportunities for Canadians. The FTZ programs and policies in Canada facilitate such activities as warehousing for exporters, processing, and manufacturing (Boothe " Smith, 2017). The third strategy focuses on the promotion of the Canadian innovation advantage. The global economy has become more competitive; a factor that demonstrates the need for Canada to generate new ideas and highly skilled individuals to help local businesses to create well-paying jobs, secure new markets, and innovate. In this context, the strategy promotes international research, enhances connections to the international trading partners, and helping high-potential businesses in Canada to maximize their access to the available opportunities.
Moreover, the strategy promotes the performance of Canadian businesses in the international market by helping the businesses to adopt innovative and new technologies that seek to increase productivity and enable the firms to effectively compete in the international marketplace while promoting growth and creating jobs at home. Further, Canada is increasingly prioritizing trade-related and trade agreements to promote higher engagement in international trade by eliminating trading barriers (Advisory Council on Economic Growth, 2017). The agreements are also essential in promoting access to foreign markets, which is crucial for creating opportunities for businesses and workers as well as creating jobs. In addition, Canada is presently focusing on deeper investment and trade ties with many of the fastest growing, most dynamic, and largest markets in the world in a bid to improve the country’s competitive edge in the fiercely competitive global economy.
4.0 Global Risks facing Canada in International Marketplace
The major risks that Canada faces in relation to international trade include increasing competition, legal, regulatory, and contract risks, failure to retain and attract talent, failure to address productivity and innovate, business interruptions, and third party liability. Economic risks pertain to the fluctuations in demand for Canada’s products. Overcoming economic risks requires the country to have several alternative markets, especially if the decline in demand is regional (Mansfield " Reinhardt, 2015). On the other hand, legal, regulatory, and contract risks such events as cancellation of contracts, failure to abide by the contract clauses, as well as the lack of strong legal approaches for contract reinforcement, which expose exporters to risks. Other risks include legal uncertainty, which pertains to complex laws whose application is difficult to predictability, unexpected changes in legislation, and the imposition of trade barriers.
Moreover, the growing competition in the global marketplace is a key risk for Canada. The country’s competitive edge is significantly threatened with the entry of new exporters, who may offer better products at more competitive prices. The competitive edge is more threatened in Canada’s major niche export markets. Further, globalization increases the risk of losing one’s intellectual property, where competitors may steal or reengineer another producer’s technology to produce a similar product at a lower price, therefore benefitting from the original producer by taking the producer’s existing market. Retaining and attracting talent is increasingly becoming difficult for Canada with the growing competition in the global economy (Global Affairs Canada, 2012). Talent poaching has become common as competing firms want to have the best talents to ensure that they remain ahead of competitors. Hence, Canada faces a higher cost in attracting and retaining talent as there is a growing global demand for highly trained employees, who often leave their country and move to better-paying multinationals. Talent poaching exposes Canada to risks of intellectual property losses since the poached employees possess the full knowledge of the technology that Canada utilizes in production.
Canada is also facing the risk of failing to create new products or adapt products to the changing global markets. The risk emanates from such events as countries introduce radically new technologies to the global market and rendering the competitors’ products obsolete immediately. Moreover, the current global market requires countries to embrace continuous innovation strategies; the lack of innovating exposes countries to the risk of their products becoming obsolete and losing their share market in the global economy. Additionally, Canada faces the risk of business interruptions in the international marketplace due to such factors as computer system failures that emanate from malware or hacker attacks and sabotage threats among others (Global Affairs Canada, 2012). Finally, increased engagement in the global trading activities exposes Canada to third-party liability. According to Mansfield and Reinhardt (2015), it has become easier for third parties to pursue collective legal action against corporations in most parts of the world, including the EU and the U.S. markets, which comprise Canada’s largest markets, increasing the risk of facing charges relating to third-party liability.
5.0 Canada’s Strengths in the International Marketplace
Canada possesses several strengths, which place the country at a desirable position within the global marketplace, including a strong financial sector, large service sector, the oil sector, and closeness to the United States. Canada has stable and secure financial institutions as illustrated during the 2008 financial crisis (Global Affairs Canada, 2012). During the period, while other countries faced housing and credit crises, Canada’s economy remained relatively protected following the country’s strong capitalization and practices of conservative spending. Moreover, Canada possesses a large services sector, estimated to comprise approximately 76% of the country’s total workforce (Boothe " Smith, 2017). Most businesses in the country also comprise of small enterprises that often have fewer than 50 employees, which indicates that the largest employer in Canada is the small and service-oriented businesses. Presently, the service sector contributes approximately two-thirds of Canada’s GDP, illustrating that the country can enhance its growth in the international marketplace by leveraging its service focused small business establishments in the global trade.
Further, Canada is highly endowed with natural resources, with the most significant resource being the country’s domestic oil supply. Canada is the largest supplier of oil to the United States, and it is ranked third in oil supply after Saudi Arabia and Venezuela. The high domestic oil supply gives Canada a significant competitive edge in the global marketplace since oil is a scarce resource and nearly all the world’s economies rely on oil for production (Advisory Council on Economic Growth, 2017). Moreover, Canada and NAFTA’s proximity to the U.S. is a crucial strength that can help Canada to achieve a better position in the global trade, given that the U.S. economy is ranked the most powerful in the globe. In addition, the U.S. presently absorbs approximately three-fourths of Canada’s exports each year, particularly with the creation of NAFTA.
6.0 Canada’s Weaknesses in the International Marketplace
The major weaknesses that Canada demonstrates in relation to international trade include poor transportation infrastructure and excessive reliance on the U.S. Although proximity to the U.S. is a crucial asset for Canada, excessive reliance on the economy as a trading partner is a weakness to a great extent, since it exposes Canada to the effects of the economic problems that may arise in the U.S. For instance, during the 2008 financial crisis, Canada’s exports to the U.S. were largely affected, an aspect that demonstrated the need to diversify Canada’s export markets. According to Boothe and Smith (2017), approximately 74.5% of Canada’s exports go to the U.S. However, the Canadian products that the U.S. imports comprise only 14.1% of their total imports; the U.S. gets the larger proportion of their imports from China, approximately 19% of the total imports (Boothe " Smith, 2017).
On the other hand, the transportation infrastructure in Canada is poorly developed and faces such problems as collapse among others. Transportation infrastructure is a crucial element in international trade since it facilitates smooth movements of products and ensures that they reach their target destinations within the outlined time. Hence, with poor transportation infrastructure, Canada faces the risk of losing its global market share as more efficient and effective players emerge.
7.0 Opportunities in the International Marketplace
There are several opportunities available for Canada to improve their position in the global market. The first opportunity emanates from Canada’s service sector, which accounts for approximately 69.9% of the country’s total GDP (Boothe " Smith, 2017). Canada’s large service sector illustrates that the country possesses great potential with regard to the exportation of services. The second opportunity relates to the emerging global markets, especially such developing economies as Africa and Asia. Some of the major commodities that are in high demand in the emerging markets include technology, medical services, medications, and education. Given that Canada is capable of providing these commodities, the country should consider minimizing their reliance on the U.S. market and diversifying their export markets by creating products and services that match the needs of the emerging markets (Boothe " Smith, 2017). Entering new foreign markets presents such benefits as diversifying business risk, since the international marketplace is characterized by economies with different characteristics, strengths, and weaknesses, therefore minimizing events of failure as compared to when a country is dependent on only one region or economy for trade.
Another opportunity that is available for Canada in the global market is the capacity to lower operating costs through such strategies as offshoring. The approach involves relocating business activities to regions where the cost of labor and overall production is low (Mansfield " Reinhardt, 2015). Saving on labor and other operating or production costs gives firms a cost advantage, which allows them to offer their commodities at lower prices compared to those of the competitors. The opportunity is particularly crucial for Canada since the economy is heavily reliant on trade, which demonstrates the need to implement measures that ensure that the economy remains competitive in the global market.
8.0 Major Threats facing Canada in the International Marketplace
One of the greatest threats that Canada faces in the international market is the appreciation of the Canadian dollar, a factor that makes the country’s expensive to purchase compared to those from other regions, such as China. Canada also faces the threat of climate change; the threat is a key concern in the country since it derives a significant amount of revenue from the agricultural and manufacturing sectors (Mansfield " Reinhardt, 2015). These sectors are largely affected by aspects of climate change since they extensively rely on natural resources, which are prone to the adverse climatic changes. Another threat that Canada faces in the context of international trade relates to political, economic, and cultural risks, which Canadian exporters often encounter when venturing into the international markets.
9.0 Strategies for enhancing Canada’s Position in the Global Marketplace
There are several strategies that Canada can implement to enhance their position in the global market, including improving and nurturing their trade relationships with North America. NAFTA has demonstrated its potential in improving trade relations between Mexico, Canada, and the United States, therefore illustrating that further integration in the region would present greater trade benefits to Canada (Advisory Council on Economic Growth, 2017). Some of the initiatives that Canada should adopt to deepen their trading relationships with Mexico and the U.S. include eliminating regulatory barriers, promoting integration strategies that are sector-specific, harmonizing regulations and standards to facilitate the integration of the value chain, and improving border-crossing processes as well as the country’s physical infrastructure.
The second strategy that Canada should adopt involves strengthening ties with the fast-growing and large economies. Some of the initiatives that Canada should implement under this strategy include creating better trade agreements with the economies, enhancing greater participation in the international trade by training small business about the most effective methods for venturing into the global marketplace (Advisory Council on Economic Growth, 2017). Some of the world economies that have great potential and are best suited for Canada’s growth strategy include China, Japan, and India.
The third strategy involves investing in infrastructure that is trade-enhancing. Canada can only excel in the global marketplace if proper infrastructure is developed. The ideal infrastructure includes digital systems that enhance information flow and modern transportation systems that serve the needs of the modern supply chains. Finally, Canada should consider addressing the disruptions that may emanate from the future trade flows. The disruptions are mainly linked to the negative effects associated with globalization (Advisory Council on Economic Growth, 2017). Canadian policymakers can adequately help in addressing the problem brought about by globalization by implementing policies that support inclusive growth that promotes opportunities for all Canadians.
10.0 Conclusion
Canada is heavily reliant on trade, which demonstrates that the country’s ability to remain ahead of the competition in the global market is crucial for wealth creation and sustaining high living standards for the future generations. However, the highly competitive global marketplace has led to several challenges for Canada, including the emergence of new players in the global trading scene, increased economic and political risks, and challenges of product innovation, where it has become essential for firms to innovate to remain relevant in the highly competitive markets continuously. Despite the growing challenges in the global market scene, Canada possesses diverse strengths and opportunities that are crucial to becoming a global trading hub. These include a strong financial sector, high natural resource endowments, emergence of new markets, and proximity to the U.S. among others. Using these strengths and opportunities, Canada can enhance its position in the global marketplace by improving and nurturing their trading relationships with other North American economies, deepening and improving trading connections with fast-growing and large economies, especially Asia, investing in trade infrastructure to improve the country’s access to the global markets, and addressing disruptions that may emerge from the future trade flows.
References
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Mansfield, E. D., " Reinhardt, E. (2015). International institutions and the volatility of international trade. In the political economy of international trade (pp. 65-96).
