TOPIC #6

Importing and Exporting Goods and Services

Flow of Goods And Services Flow of Goods And Services

ImportsImports Goods and services flowing/coming into CanadaGoods and services flowing/coming into Canada

ExportsExports Goods and services flowing/going out of CanadaGoods and services flowing/going out of Canada

Imports may include:Imports may include: Raw materialsRaw materials Processed materialsProcessed materials Simi-finished goods,Simi-finished goods, Manufactured goods ready for sale.Manufactured goods ready for sale.

The less finished the imported goods, the more jobs The less finished the imported goods, the more jobs they create for Canadians.they create for Canadians.

Canadian Imports 2008Canadian Imports 2008

Data Source:Data Source:

“ “Imports of goods on a balance-of-payments basis, by product” Statistics Canada, September 10, 2009, Imports of goods on a balance-of-payments basis, by product” Statistics Canada, September 10, 2009, [Online]. Available: [Online]. Available: http://www40.statcan.gc.ca/l01/cst01/gblec05-eng.htmhttp://www40.statcan.gc.ca/l01/cst01/gblec05-eng.htm

28%

21%

16%

14.50%

12%

6%

0.64%

0% 10% 20% 30%

ForestryProducts

Agricultureand Fishing

Energy

Other

Automotiveproducts

IndustrialGoods andMaterialsMachineryandEquipment

Canadian Exports 2008Canadian Exports 2008

Data Source:Data Source:““Export of Goods on a Balance-of-Payment Basis” Statistics Canada. September 10, 2009. [Online] Export of Goods on a Balance-of-Payment Basis” Statistics Canada. September 10, 2009. [Online]

Available:http://www40.statcan.gc.ca/l01/cst01/gblec04-eng.htmAvailable:http://www40.statcan.gc.ca/l01/cst01/gblec04-eng.htm

26%

23%

19%

12%

8%

6%

0% 10% 20% 30%

Foresty

Other

Agriculture and Fishing

Automotive Products

Machinery andEquipment

Industrial Goods andMaterials

Energy

Balance of TradeBalance of Trade

Balance of TradeBalance of Trade Relationship between a country’s total imports and total Relationship between a country’s total imports and total

exports.exports.

Trade Surplus = E > ITrade Surplus = E > I Export$ are greater than Import$.Export$ are greater than Import$. Canadians are selling more products to other countries than Canadians are selling more products to other countries than

they are importing.they are importing. If surplus is made up of primarily manufactured goods, then If surplus is made up of primarily manufactured goods, then

more jobs are created for Canadians.more jobs are created for Canadians.

Trade Deficit = E < ITrade Deficit = E < I Canadians are spending more money on importing goods Canadians are spending more money on importing goods

from other countries than selling/exporting goods to other from other countries than selling/exporting goods to other countries.countries.

Usually means that fewer Canadian jobs are being providedUsually means that fewer Canadian jobs are being provided

Increasing Your Chances of Success When Importing Increasing Your Chances of Success When Importing Goods for ResaleGoods for Resale

1.1. Before placing your international order, conduct your research to determine an Before placing your international order, conduct your research to determine an approximate interest and demand for your imported goods, otherwise, you may approximate interest and demand for your imported goods, otherwise, you may have a full warehouse, and big bill to pay with insufficient revenues coming in to have a full warehouse, and big bill to pay with insufficient revenues coming in to pay off your bill.pay off your bill.

2.2. Select your foreign supplier(s) with care. You want the one who can supply the Select your foreign supplier(s) with care. You want the one who can supply the right product(s) for the right price at the right time. Foreign Affairs and right product(s) for the right price at the right time. Foreign Affairs and International Trade Canada can help you find the best foreign suppliers.International Trade Canada can help you find the best foreign suppliers.

3.3. Make an effort to learn about the culture you will be dealing with. Cultural Make an effort to learn about the culture you will be dealing with. Cultural knowledge and sensitivity can help you establish positive working relationships knowledge and sensitivity can help you establish positive working relationships with your suppliers.with your suppliers.

4.4. Take time to go through a purchase agreement and ensure it covers all important Take time to go through a purchase agreement and ensure it covers all important and necesssary areas such as: Who pays the shipping costs? When do the goods and necesssary areas such as: Who pays the shipping costs? When do the goods have to be paid for? What happens if goods are damaged during shipping.have to be paid for? What happens if goods are damaged during shipping.

5.5. When the goods arrive, make sure everything you ordered is there and in good When the goods arrive, make sure everything you ordered is there and in good condition. Expect to pay import or custom duties based on either the value of condition. Expect to pay import or custom duties based on either the value of goods, quantity or weight.goods, quantity or weight.

Export BusinessExport Business

Two ways a business may export goods:Two ways a business may export goods:

1. Through 1. Through directdirect exporting exporting

2. Through 2. Through indirectindirect exporting exporting

Exporting BusinessExporting Business

Direct ExportingDirect Exporting The exporting company deals directly with the The exporting company deals directly with the

company that will wishes to import the goods into company that will wishes to import the goods into his/her country.his/her country.

Conducted usually by established companies who Conducted usually by established companies who have the experience and resources to set up have the experience and resources to set up offices and sales staff in foreign countries.offices and sales staff in foreign countries.

More risky as the exporting company assumes all More risky as the exporting company assumes all risk.risk.

Canadian Company

China Company

Exporting BusinessExporting Business

Indirect ExportingIndirect Exporting Goods move from the exporter to an Goods move from the exporter to an

intermediary, who is often from the foreign intermediary, who is often from the foreign country, and then on to the importing business.country, and then on to the importing business.

IntermediaryIntermediary Someone or another company who helps the Someone or another company who helps the

exporter find a company who wants to purchase exporter find a company who wants to purchase and import your goods)and import your goods)

Canadian Company

China Company

Intermediary Business or Individual

Exporting BusinessExporting Business

Indirect ExportingIndirect Exporting Usually conducted by new businesses which don’t Usually conducted by new businesses which don’t

have the resources, or global reputationhave the resources, or global reputation

Business share financial risks with the Business share financial risks with the intermediaryintermediary

Some countries prohibit direct exporting, likely to Some countries prohibit direct exporting, likely to create jobs for local intermediaries. (i.e. in the create jobs for local intermediaries. (i.e. in the Middle East, Central America and Asia)Middle East, Central America and Asia)

Increasing Your Chances of Success When Increasing Your Chances of Success When Exporting Goods and ServicesExporting Goods and Services

Conduct your research to determine if thereConduct your research to determine if there are potential consumers in foreign markets are potential consumers in foreign markets and to familiarize yourself with foreign and to familiarize yourself with foreign cultures, customs and laws. cultures, customs and laws.

Research Resources may include:Research Resources may include: Foreign Affairs and International Trade CanadaForeign Affairs and International Trade Canada Contact foreign agencies through the internet, such as the Contact foreign agencies through the internet, such as the

Asia Pacific Foundation of Canada, Canadian Manufacturers Asia Pacific Foundation of Canada, Canadian Manufacturers and Exporters, and the Canadian Association of Importers and Exporters, and the Canadian Association of Importers and Exporters.and Exporters.

Canadian embassies in foreign countriesCanadian embassies in foreign countries

Questions Asked By Potential Export BuyersQuestions Asked By Potential Export Buyers

1. What is unique or special about your company, product, or 1. What is unique or special about your company, product, or service.service.

2. How do you market or sell your product?2. How do you market or sell your product?

3. Who uses your product or service? To whom do you sell in 3. Who uses your product or service? To whom do you sell in Canada and abroad?Canada and abroad?

4. Which countries or regional markets are you targeting, and 4. Which countries or regional markets are you targeting, and why? What do you know about these markets?why? What do you know about these markets?

5. How do you plan to enter the market? Will you sell the products 5. How do you plan to enter the market? Will you sell the products directly? License people to sell your products? Set up a joint directly? License people to sell your products? Set up a joint venture with another business? Invest in a venture that already venture with another business? Invest in a venture that already serves the market?serves the market?

6. How would you describe the typical buyer, distributor, agent, or 6. How would you describe the typical buyer, distributor, agent, or partner you want to work with in this market?partner you want to work with in this market?

7. When do you plan to visit the market? How will you adapt your 7. When do you plan to visit the market? How will you adapt your product-related literature to suit the needs of this market?product-related literature to suit the needs of this market?

Canada’s Major Trading PartnersCanada’s Major Trading PartnersCanada’s Top 10 Export MarketsCanada’s Top 10 Export Markets

CountryCountry 20042004 20052005 20062006 20072007 20082008 U.SU.S 84.4%84.4% 83.8%83.8% 81.5%81.5% 78.9%78.9% 77.64%77.64%

U.KU.K 1.88%1.88% 1.89%1.89% 2.3%2.3% 2.84%2.84% 2.7%2.7%

JapanJapan 2.08%2.08% 2.10%2.10% 2.14%2.14% 2.05%2.05% 2.29%2.29%

ChinaChina 1.64%1.64% 1.65%1.65% 1.77%1.77% 2.11%2.11% 2.17%2.17%

MexicoMexico 0.75%0.75% 0.77%0.77% 0.99%0.99% 1.10%1.10% 1.21%1.21%

GermanyGermany 0.65%0.65% .074%.074% 0.90%0.90% 0.86%0.86% 0.93%0.93%

South South KoreaKorea

0.55%0.55% 0.65%0.65% 0.75%0.75% 0.67%0.67% 0.79%0.79%

NetherlandsNetherlands 0.47%0.47% 0.50%0.50% 0.70%0.70% 0.90%0.90% 0.77%0.77%

BelgiumBelgium 0.55%0.55% 0.52%0.52% 0.55%0.55% 0.66%0.66% 0.70%0.70%

FranceFrance 0.58%0.58% 0.58%0.58% 0.65%0.65% 0.69%0.69% 0.67%0.67%

Source: Statistics Canada: http://www.ic.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag

Canada’s Major Trading PartnersCanada’s Major Trading PartnersCanada’s Top 10 Import MarketsCanada’s Top 10 Import Markets

CountryCountry 20042004 20052005 20062006 20072007 20082008U.S.U.S. 58.7%58.7% 56.5%56.5% 54.8%54.8% 54.2%54.2% 52.4%52.4%

ChinaChina 6.77%6.77% 7.75%7.75% 8.70%8.70% 9.41%9.41% 9.83%9.83%

MexicoMexico 3.78%3.78% 3.83%3.83% 4.04%4.04% 4.22%4.22% 4.13%4.13%

JapanJapan 3.80%3.80% 3.89%3.89% 3.86%3.86% 3.80%3.80% 3.53%3.53%

GermanyGermany 2.65%2.65% 2.70%2.70% 2.82%2.82% 2.83%2.83% 2.93%2.93%

U.K.U.K. 2.71%2.71% 2.74%2.74% 2.74%2.74% 2.82%2.82% 2.91%2.91%

AlgeriaAlgeria 0.87%0.87% 1.10%1.10% 1.25%1.25% 1.25%1.25% 1.78%1.78%

NorwayNorway 1.39%1.39% 1.59%1.59% 1.38%1.38% 1.32%1.32% 1.43%1.43%

South South KoreaKorea

1.64%1.64% 1.41%1.41% 1.45%1.45% 1.32%1.32% 1.39%1.39%

FranceFrance 1.50%1.50% 1.31%1.31% 1.31%1.31% 1.25%1.25% 1.37%1.37%

Source: Statistics Canada: http://www.ic.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag

Canada and US Trade RelationshipCanada and US Trade Relationship

Why does it make sense to establish a solid trading Why does it make sense to establish a solid trading relationship with the US?relationship with the US?

1. Shipping costs are cheaper (proximity factor)1. Shipping costs are cheaper (proximity factor)2. Similar culture and interests so same types of 2. Similar culture and interests so same types of

products and services will appeal to citizensproducts and services will appeal to citizens3. Speak the same language, watch same TV 3. Speak the same language, watch same TV

programs, movies, sports and similar fashion programs, movies, sports and similar fashion stylesstyles

4. Population of the states is 10x that of Canada’s4. Population of the states is 10x that of Canada’s