Back in May, the Trump administration agreed to lift tariffs on steel and aluminium, a key hurdle to jump in approving the US-Mexico-Canada agreement (USMCA), which was signed in 2018.
USMCA could be close to crossing the finishing line, which could open up a new era of trade expansion for Canada. With services and goods exports growing, Canadian businesses have a great opportunity to sell abroad, diversify their markets and push the economy forward.
Yet as the saga with US tariffs showed, trade tensions can certainly impact businesses, with import and export conditions changing at speed. But there are also other factors at play which could force you to adjust your short and long-term decision making.
To help, here are some of the factors you need to think about as an international importer or exporter:
Across the world, tariffs are imposed by countries to protect local businesses. However, these taxes or tariffs on imported goods makes them more expensive and less competitive than domestic goods.
This results in foreign trade being reduced – exporters won’t be able to compete with domestic producers and service providers. This is why international trade agreements become important – as it lowers these trade barriers.
This is why knowing and understanding what changes in trade regulations and agreements is vital. If you’re trading internationally, you need to understand the how these changes can affect the efficiency of your global business operations.
You should make use of trading data to discover trends which can give you an advantage – whether it’s business and market opportunities, new suppliers, or minimizing risk. Today, you can make use of business intelligence to better analyze the flow of goods across borders, make sourcing decisions, keep track of commodities and trace your supply chain relationships.
As import and export conditions change, you’ll need software which helps you understand the cost and profitability of your products, whether your pricing is working, and crucially – visualize your inventory.
For instance, cost tracking could give you visibility of goods through shipment tracking, helping you track all associated costs. If importing, you’ll already understand that true costs will be higher than what you pay a vendor – you need to handle freight, customs and duty costs for instance. Software could also help you track import tariffs that global policy may affect.
Another important software feature you will be looking for is multi-currency support – which supports you accounting and allows customers to pay in their own currency.
In certain industries like food and beverage and pharmaceutical manufacturing, having a handle on changing regulations is vitally important. Canadian businesses exporting to Europe and the US will need to meet their standards and laws.
Your business will need to understand the formal standards and laws in any country you export to. These could change, and you will need to manage this efficiently and effectively. This can be complex and overwhelming, but there are certain ways to make this process easier.
For example, you can use technology and external support to get timely and accurate information on the regulatory environment. This could mean having a single source of information which notifies your business on developments depending on relevancy. You could also make use of a central repository to mine data, provide evidence and help with remediation.
You should also make use of analytics and reporting to ensure compliance, which can give you information support with regulatory change management, providing key insights on what you need to be doing and how to connect the dots.
You might be looking at different countries to export to as an international trader, but so might your competitors. For example, if a competitor in your target market receives investment, your export sales may decline because they have the advantage of having home advantage – not needing to deal with international expenses, freight and other duties.
However, if your own business gets the opportunity for foreign investment, you might be able to increase your own exports, which means you’ll have considerations around capacity and financing to think about. Whatever the case, you should keep an eye on the trends and keep up to date about what’s going on in your target market.
Advances in technology can allow your business to reach more customers and make you more efficient. Even in the business to business world, there is an increasing expectation by customers for features such as search options, online reviews and real-time inventory tracking, not to mention mobile and tablet-ready apps.
Technology also makes it easier for competitors to enter your target markets, which can access systems only bigger companies could afford in the past. This gives them the ability to work in an agile way, establishing themselves with less of a physical presence and upfront spend. This could make them a threat to your own import and export strategy, and is something else you need to keep tabs on and make plans for.
Technologies you should be aware of as an international trader include:
Blockchain – This could have a massive effect on the global supply chain, improving the efficiency of trade processes and moving towards a paperless future. You can see it as a means to digitize and automate trade finance processes, such as letters of credit.
Artificial intelligence – In the future, you could well see AI improving your business by automating tasks and performing actions such as optimizing trade routes, managing vehicle traffic and automatically translating queries from one language to another, all which could be hugely beneficial to an international trader.
3D printing – When mass production with 3D printing becomes viable, trade may well be affected as could reduce the need for countries to import intermediate and final goods, as they could just create it themselves digitally. If US businesses print more goods locally, they won’t need as many imports from Canada.
The cost of manufacturing
You aim to maximize profits, which means keeping your costs as low as possible. To do this, you may have chosen to outsource by moving your production out of Canada, cutting costs in terms of labor and in the overheads of owning your own manufacturing facility.
However, changes in import and export conditions may make offshoring more difficult as overseas economies develop and tax conditions change. With changes in your supply chain, it may become more cost efficient for you to manufacture goods closer to home. Your export strategy would then have to change to take this into account.