Market update: Canada
Since the global financial crisis, Canada has been one of the world’s most resilient economies, so how can Australian exporters make the most of our existing links to seek out new opportunities?
Canada has long been considered the younger sibling of the USA, adapting some of its ways and relying heavily on bilateral trade. However, Canada’s star as a destination investment market is on the rise, and there has never been a better time for Australia to strengthen its strong relationship with its first cousin. Both large, geographically dispersed countries with Commonwealth roots, a Westminster system of government, and a comparable standard of living, Australian-Canadian trade has been quite straightforward, thanks to the similarities.
Australia and Canada have an extensive trading history, and grant each other preferential tariff rates on a limited range of products agreed under the Canada-Australia Trade Agreement (CANATA), established in 1960 and amended in 1973. As CANATA pre-dates the multilateral trading system, most of its provisions have been superseded by World Trade Organisation tariff reductions. With merchandise trade at $3.81 billion, Canada is Australia’s 22nd-largest trading partner.
Around 3,000 Australian businesses either export to, or operate in, Canada every year, with top performing exports in wine, medicaments (including veterinary) and passenger motor vehicles. Companies exporting to Canada include food processors and retailers, consumer product retailers, packaging, software, tourism, financial services, and mining technology and services.
Eyes on investment
In contrast to the USA, their closest neighbour and ally, Canada has been a closer mirror of Australia in terms of weathering the global financial crisis, only briefly slipping into recession before bouncing back to experience strong growth. Austrade’s senior trade commissioner and consular general, Stefan Trofimovs, predicts that Canada will “get back to three percent growth levels, or even higher, by the end of the year”.
Australia’s investment in Canada, which was $3 billion in 2005, increased dramatically to hit $27 billion in 2009, thanks to our strong economy and Canada’s diversification of opportunities for foreign entities. Canadian investment in Australia has increased from $9 billion to $10 billion during the same period.
Throughout this period, the USA has slipped into a deep recession, affecting trade relations between the North American nations and forcing Canada to seek out new trading partners. “The focus is now on forging new partnerships with the more resilient economies of South America, especially Brazil, while continuing to use Australia as a launching pad into the Asian markets,” Trofimovs explains.
Back to the mine
The enormous Australian investment increase in Canadian interests is in part due to Rio Tinto Canada’s friendly takeover of Canadian company Alcan, resulting in Rio Tinto Alcan, of which Australia has a sizeable share because of parent company Rio Tinto’s Anglo-Australian origins. Since then, the Montreal-based mining giant has acted as a magnet for drawing new businesses and services into the country.
Mining has become a dominant import sector for Canada. Sydney-based WorleyParsons acquired the privately held Colt Companies based in Calgary, Alberta for $1.13 billion, to gain increased access to Canada’s oil sands industry.
Transfield Services is another mining services organisation making waves in Canada. An Australian company providing operations, maintenance and asset management services in the mining, transport and utility sectors; clients include major national and international companies, as well as all levels of government, creating opportunities for new mining services exporters who may be looking to capitalise on the groundwork already done by these larger firms.
In a similar vein to mining, engineering has become a dominant industry that Australian exporters are keen to invest in. Local engineering firms Coffey Geotechnics and GHD have both set up substantial presences in Canada; Coffey Geotechnics with an office in Alberta and three across Ontario and GHD setting up office just north of Toronto. Trofimovs believes the key to enduring international success is relationships. “Many companies from across all sectors are realising the importance of establishing a presence in the country they are exporting goods and services to, giving weight to nurturing long-term relationships between manufacturer, exporter and consumer,” he says.
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