Canadian Business Leery of Euro Trade

Mississagua, Prefer Trade with China and U.S. Despite Federal Trade Efforts with EU

A substantial majority of Canadian executives at small- to medium-sized enterprises (SMEs) say they would not closely tie Canada’s economy to Europe despite ongoing efforts by the federal government to establish a Canada-European Union (EU) free trade agreement by 2011.

The numbers were released today in a Leger Marketing survey commissioned by UPS Canada and arrive on the heels of provincial approvals across Canada to move forward with an EU trade agreement that is projected to boost Canada’s GDP a full percentage point.

The survey shows only seven per cent of businesses would closely tie Canada’s economy to Western Europe, and one per cent to Eastern Europe. Conversely, one in five SMEs say they would prefer Canada to closely tie its economy to rising economic star China, with which Canada has had increasingly cool relations in recent years due to disagreements in the political arena.

UPS Canada President Mike Tierney said that while the interest in China was a positive sign, SMEs shouldn’t discount the European market in an effort to help grow their businesses.

“There is a reason the federal government is putting so much effort into the establishment of a trade agreement with the EU,” said Tierney. “There is a wealth of short- and long-term opportunity for Canadian businesses looking to expand internationally to do so within the European market. The disparity in currency value between the loonie and euro provides Canadian exporters the opportunity to garner much more interest in Europe than in the United States.”

Yet more than 50 per cent of SMEs believe the U.S. should remain Canada’s closest trading partner despite their own predictions the battle-scarred U.S. economy is unlikely to emerge from recession any time soon.

Today, only 10 per cent of Canadian SMEs claim to do business with countries in the EU while almost 30 per cent say they conduct trade with the U.S. Yet, one in five respondents said they believe the U.S. is on the path to long-term decline that will result in its loss of status as an economic superpower. In addition, almost 50 per cent said it will be at least five years before the U.S. emerges from recession.

“The numbers don’t add up,” said Tierney. “Business owners themselves are making gloomy predictions about the U.S. economy and yet more than half suggest Canada’s economy should be most closely tied to our southern neighbours. The reality is that Canadian SMEs will need to have more diversity in their trading practices if they are to remain internationally competitive, and Europe presents a strategic opportunity.”

Tierney adds that the consolidation of multiple air, sea, railroad and road links within a tight geographic area, combined with a highly affluent market of more than 300 million people, not only makes Europe a convenient market to penetrate, but a lucrative one as well. Moreover, several countries, such as Poland, are experiencing strong year-over-year economic growth, demonstrating that strong economies do exist in Europe despite the recent debt crises affecting some of the EU’s member states.

Most SMEs believe Canada’s intimate and long-term trading relationship with the U.S. is undeviating - with 37 per cent stating the North American neighbours are guaranteed to have common economic destinies due to their existing degree of economic, cultural and geographic integration. In fact, almost 40 per cent believe Canada should share a common currency with the U.S.

The Leger study was conducted from June 1-10, 2010, polling more than 300 SMEs across Canada with a minimum of 10 employees and in a variety of industries. The study has a margin of error of +/-5.7 per cent, 19 times out of 20. The survey will soon be available to view on the UPS Pressroom website.

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