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Canadian Business Eyeing Asia, Mexico, Brazil Like Never BeforeThursday, May 24, 2012 > 09:41:24
Yet mood for expansion rests on stable economic growth at home
Federal Finance Minister Jim Flaherty's persistent coaxing of Canadian business to diversify international trade beyond the United States may be gaining traction as 71% of large, medium and small businesses in Canada project China or India to represent the largest increase in trade this year. Only eight per cent of businesses project the U.S. to be the fastest growing source of exports and imports in 2012.
According to a quarterly survey of Canadian business commissioned by UPS Canada and conducted by Leger Marketing, the business community's positive outlook on growth is contingent on the continued stability of the Canadian economy. This optimism is also fuelling a boost in innovation, as nearly three quarters of respondents (71%) plan to launch a new product or upgrade an existing one in 2012. Canadian business is particularly bullish about global expansion with 62% of medium-to-large businesses identifying exporting as a competitive necessity.
"It's very reassuring to see such a groundswell of optimism and ambition regarding global expansion among Canadian businesses as we move into the latter part of Q2," said UPS Canada Director of Small Business Paul Gaspar. "But as we saw in February when the GDP numbers were released, the shift to go global is still somewhat tenuous."
According to the survey, the strength of the Canadian economy is the single biggest influence on business goals and direction at 33%. The next three influences are rising oil prices at 13% and the sluggish global economy and anemic U.S. market at 12% respectively. Given the renewed appetite for global trade with an emphasis on Asia, the strength of the Loonie influences the goals and decisions of only nine per cent of respondents.
Looking more closely at the export data, a majority of businesses foresee China (56%) as the country that is the most likely to see increased trade with Canadian business. Its growing consumer base, coupled with the Federal Government's renewed diplomatic efforts at the beginning of the year, should help the nearly one-third of businesses (32%) who are interested in expanding to China turn their plans into tangible results. Next (but significantly lower) on the list of countries expected to see a growth in trade with Canada is India at 15%, followed by Mexico (10%) and Brazil (8%). The U.S., Canada's conventional go-to trading partner, is a distant fifth at only 5%.
"The Canadian business sector has been somewhat spooked by the economic volatility south of the border and now that it's showing signs of greater stability – even more so than in Canada – I expect business will give it more attention in subsequent quarters. But I can't emphasize how important it is that the business community is also grabbing hold of the potential in Asia and other emerging markets. Diversified trade will only help our long term prospects," said Gaspar.
While China is the preferred trade partner amongst business leaders who plan international expansion within the next five years, it was a close race between the next four countries. Twenty-nine per cent chose Mexico as the second-most favourable partner, followed by India at 26%, Brazil at 25% and the U.S. at 23%.
The theme of growth extends to recruitment as well. The majority of business leaders say they will increase staff over the coming year, with 32% of the increase expected to be in sales, followed by 20% in marketing and promotion. Companies in Eastern Canada are particularly interested in growing staff, as 25% plan on aggressive recruitment tactics. This East Coast desire for growth relates to the fact that over a third of those business leaders (36%) are confident in the growth of the professional services sector.