August 5, 2009 / 4:09 PM / 8 years ago

Canadian manufacturers find new markets to replace U.S

OTTAWA (Reuters) - The global economic crisis may be the best thing that ever happened to Canadian businessman Lorne Janes.

Sales in his top market, the United States, disappeared almost overnight, forcing him to seek new buyers for his machinery to make marble and granite countertops for homes, hotels and restaurants.

“We closed down the U.S. office and training center ... It’s probably one of the better things we’ve done. We’re doing better,” he said from his Paris, Newfoundland headquarters.

With inquiries coming in from Nigeria, Vietnam, Egypt and Vietnam, business is thriving and Janes said he saw no need to reenter the U.S. market until the economy there rebounded.

Canada, with its small domestic market and vast resource base has long been heavily dependent on exports to its giant neighbor to the south.

Some 87 percent of all Canadian exports went to the United States in 2000. Last year, that figure dropped to 78 percent and the May 2009 figure was 71 percent.

Instead, exporters are focusing on the Persian Gulf, still experiencing a construction boom, or India for telecoms and manufacturing. Kazakhstan, with vast tracts of unused arable land, is fertile ground for farm equipment manufacturers.

“There’s nothing that gets the juices flowing more than a good old-fashioned crisis, and we’ve got two years under our belt right now where we’ve seen significant diversification,” said Peter Hall, chief economist at Canada’s export credit agency, Export Development Canada.

The agency supported C$22 billion ($20 billion) in sales and investment to emerging markets in 2008, from C$15 billion in 2006.

Hall said the United States will always be Canada’s dominant trade partner. But emerging markets, which economists say will fuel the global economic recovery, will absorb a growing chunk of exports.


Politicians have long advocated that Canada should diversify its trade relations to protect the domestic economy from shocks south of the border. But it took the worst recession since World War Two to turn that aim into reality.

“I don’t think its a pipe dream,” said Hall. “I think it’s well under way at this point and it’s something that will continue.”

Conservative Prime Minister Stephen Harper is courting the coveted Chinese market, sending a series of high-level envoys there to lay the groundwork for his own planned visit later this year, his first since taking office in early 2006.

His government is also trying to negotiate a trade deal with the European Union.

Still, skeptics wonder if the drive to diversify will persist once the U.S. economic recovery gathers steam. After all, it’s cheaper to transport oil and other commodities to the U.S. than elsewhere.

Some analysts believe the trend will continue because it is driven by basic economic survival rather than politics.

Even traditional players like auto parts manufacturers, accustomed to supplying the highly-integrated North American industry, realize they must secure new buyers and develop new products, or die.

“It’s the nature of the recovery and it affects all types of products,” said Jay Myers, head of the Canadian Manufacturers and Exporters.

Companies that see the U.S. playing a big role in their future also acknowledge that forays into new markets are paying off and will continue to do so.

Dragonware Inc, which provides wireless telecommunications equipment, did all of its business within North America four years ago. It now gets half of its revenue outside the continent, with Pakistan the second-largest revenue source after the United States.

“We were still able to grow our business by about 10 percent last year and that’s largely because of growth in places like Pakistan, Burkina Faso, Nigeria and places that you wouldn’t normally think of as telecom hotbeds,” said Alan Solheim, vice president of product management for Dragonwave’s business development department.

($1 = $1.08 Canadian)

Graphic by Jasmin Melvin; Editing by Alan Elsner

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