Over the past several years, Canada has put a focus on fostering trade relations with Asia as both Justin Trudeau and Stephen Harper have worked to promote and increase trade with the region. Even with that push, Canada’s trade relationships with Asia are far behind that of Australia’s, the Asia Pacific Foundation of Canada says.
“Australia has a lot more of what we call trade architecture in terms of trade agreements and bilateral investment treaties,” said Justin Elavathil, the foundation’s program manager in charge of trade, investment and innovation. “We are kind of on par when it comes to the amount of trade commissioners.”
Canada only has one free trade agreement with the region, the Canada-Korea Free Trade Agreement, while Australia has eight, including deals with China and Japan. Canada is working to play catch-up and is negotiating three agreements in the region with India, Singapore and Japan. Australia however, is negotiating four new trade agreements with the region including ones with India and Indonesia.
One of the main reasons for the disparity in trade architecture between the two countries is geographical. Canada has not felt the same pressure as Australia to diversify its trade portfolio into Asian markets because of the luxury of being located next to the United States. Partly as a result, Australia’s average market share of 3.73% in key Asian economies is more than triple the size of Canada’s average market share of 1.1%.
“Australia has benefited from realizing what they call a ‘national imperative to engage with Asia,’” said Elavathil. “We’ve been very lucky in that our biggest trading partner, the U.S., is right next door whereas Australia has realized early on that they need to be more linked with Asia for their economic prosperity.”
While Canada receives a large benefit from our trade and economic relationship with the U.S., it may also pay a price for being too dependent on its southern neighbour.
“Our foundation has been trying to send the message that for Canadian prosperity, diversification is in our interest,” said Eva Busza, the foundation’s vice-president of research and programs. “We don’t want to be putting all of our eggs in the U.S. basket.”
Official trade agreements and government channels are not the only way Australia is fostering its business relationship with China. Australia has placed a focus on educating its youth about Asia with a campaign to promote “Asian competency.” Busza said Australia has been doing this for at least 10 years and it is now starting to receive dividends as a whole new generation is speaking Mandarin and knows how to navigate Asian business culture.
Busza says recent actions taken by both Liberal and Conservative governments are positive steps towards fostering Canada’s trade relationship with the region. In September, the prime minister travelled to China to sign $1.2 billion in trade deals with the region and, in the last parliamentary session, Harper also went to China to sign several agreements.
Elavathil said Canada has been proactive in setting up trade offices abroad in recent years. According to Elavathil, Canada has doubled efforts in key Asian markets including China, India and Japan to equal that of Australian representation. Canada has 48 trade commissioner offices in Asia including 14 in China, eight in India and five in Japan. This is comparable to Australia’s 45 trade offices with 10 in both China and India and four in Japan.
While improving trade architecture is important for supporting economic cooperation with the region, Busza said a change in Canadian business culture is also needed.
“Ultimately it’s about a cultural shift because businesses have to take advantage of that architecture,” she said.
Busza said companies that have already had success with Asian trade are important to facilitating this attitude shift. While the provincial government and business groups like the Asia Pacific Foundation are pushing to boost Asian business relationships, Busza said efforts need to be increased if Canada is to better compete for Asian markets.
While many of Canada’s largest companies have very comprehensive Asian strategies, the real challenge is with small and medium-sized enterprises (SMEs), she said.
The rise of technology and ecommerce has made it easier for foreign SMEs to conduct business across the world. Elavathil says 10% of Canadian SMEs export and 10% of those that export send their goods to Asia. According to Elavathil, the proportion (1% to 3%) of Canadian small businesses exporting to Asia is low when compared to other countries. •
