TOPIC #6 Importing and Exporting Goods and Services

Flow of Goods And Services Imports Goods and services flowing/coming into Canada Goods and services flowing/coming into CanadaExports Goods and services flowing/going out of Canada Goods and services flowing/going out of Canada Imports may include: Raw materials Raw materials Processed materials Processed 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 they create for Canadians.

Canadian Imports 2008 Data Source: “Imports of goods on a balance-of-payments basis, by product” Statistics Canada, September 10, 2009, [Online]. Available: “Imports of goods on a balance-of-payments basis, by product” Statistics Canada, September 10, 2009, [Online]. Available:

Canadian Exports 2008 Data Source: “Export of Goods on a Balance-of-Payment Basis” Statistics Canada. September 10, [Online] Available:

Balance of Trade Relationship between a country’s total imports and total exports. Relationship between a country’s total imports and total exports. Trade Surplus = E > I Export$ are greater than Import$. Export$ are greater than Import$. Canadians are selling more products to other countries than they are importing. Canadians are selling more products to other countries than they are importing. If surplus is made up of primarily manufactured goods, then more jobs are created for Canadians. If surplus is made up of primarily manufactured goods, then more jobs are created for Canadians. Trade Deficit = E < I Canadians are spending more money on importing goods from other countries than selling/exporting goods to other countries. Canadians are spending more money on importing goods from other countries than selling/exporting goods to other countries. Usually means that fewer Canadian jobs are being provided Usually means that fewer Canadian jobs are being provided

Increasing Your Chances of Success When Importing Goods for Resale 1. Before placing your international order, conduct your research to determine an 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 pay off your bill. 2. 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 International Trade Canada can help you find the best foreign suppliers. 3. Make an effort to learn about the culture you will be dealing with. Cultural knowledge and sensitivity can help you establish positive working relationships with your suppliers. 4. 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 have to be paid for? What happens if goods are damaged during shipping. 5. 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 goods, quantity or weight.

Export Business Two ways a business may export goods: Two ways a business may export goods: 1. Through direct exporting 1. Through direct exporting 2. Through indirect exporting 2. Through indirect exporting

Exporting Business Direct Exporting The exporting company deals directly with the company that will wishes to import the goods into his/her country. The exporting company deals directly with the company that will wishes to import the goods into his/her country. Conducted usually by established companies who have the experience and resources to set up offices and sales staff in foreign countries. Conducted usually by established companies who have the experience and resources to set up offices and sales staff in foreign countries. More risky as the exporting company assumes all risk. More risky as the exporting company assumes all risk. Canadian Company China Company

Exporting Business Indirect Exporting Goods move from the exporter to an intermediary, who is often from the foreign country, and then on to the importing business. Goods move from the exporter to an intermediary, who is often from the foreign country, and then on to the importing business.Intermediary Someone or another company who helps the exporter find a company who wants to purchase and import your goods) Someone or another company who helps the exporter find a company who wants to purchase and import your goods) Canadian Company China Company Intermediary Business or Individual

Exporting Business Indirect Exporting Usually conducted by new businesses which don’t have the resources, or global reputation Usually conducted by new businesses which don’t have the resources, or global reputation Business share financial risks with the intermediary Business share financial risks with the intermediary Some countries prohibit direct exporting, likely to create jobs for local intermediaries. (i.e. in the Middle East, Central America and Asia) Some countries prohibit direct exporting, likely to create jobs for local intermediaries. (i.e. in the Middle East, Central America and Asia)

Increasing Your Chances of Success When Exporting Goods and Services Conduct your research to determine if there are potential consumers in foreign markets and to familiarize yourself with foreign cultures, customs and laws. Conduct your research to determine if there are potential consumers in foreign markets and to familiarize yourself with foreign cultures, customs and laws. Research Resources may include: Research Resources may include: Foreign Affairs and International Trade Canada Foreign Affairs and International Trade Canada Contact foreign agencies through the internet, such as the Asia Pacific Foundation of Canada, Canadian Manufacturers and Exporters, and the Canadian Association of Importers and Exporters. Contact foreign agencies through the internet, such as the Asia Pacific Foundation of Canada, Canadian Manufacturers and Exporters, and the Canadian Association of Importers and Exporters. Canadian embassies in foreign countries Canadian embassies in foreign countries

Questions Asked By Potential Export Buyers 1. What is unique or special about your company, product, or service. 2. How do you market or sell your product? 3. Who uses your product or service? To whom do you sell in Canada and abroad? 4. Which countries or regional markets are you targeting, and why? What do you know about these markets? 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 venture with another business? Invest in a venture that already serves the market? 6. How would you describe the typical buyer, distributor, agent, or partner you want to work with in this market? 7. When do you plan to visit the market? How will you adapt your product-related literature to suit the needs of this market?

Canada’s Major Trading Partners Canada’s Top 10 Export Markets Country U.S U.S84.4%83.8%81.5%78.9%77.64% U.K U.K1.88%1.89%2.3%2.84%2.7% Japan2.08%2.10%2.14%2.05%2.29% China1.64%1.65%1.77%2.11%2.17% Mexico0.75%0.77%0.99%1.10%1.21% Germany0.65%.074%0.90%0.86%0.93% South Korea 0.55%0.65%0.75%0.67%0.79% Netherlands0.47%0.50%0.70%0.90%0.77% Belgium0.55%0.52%0.55%0.66%0.70% France0.58%0.58%0.65%0.69%0.67% Source: Statistics Canada:

Canada’s Major Trading Partners Canada’s Top 10 Import Markets Country U.S.58.7%56.5%54.8%54.2%52.4% China6.77%7.75%8.70%9.41%9.83% Mexico3.78%3.83%4.04%4.22%4.13% Japan3.80%3.89%3.86%3.80%3.53% Germany2.65%2.70%2.82%2.83%2.93% U.K.2.71%2.74%2.74%2.82%2.91% Algeria0.87%1.10%1.25%1.25%1.78% Norway1.39%1.59%1.38%1.32%1.43% South Korea 1.64%1.41%1.45%1.32%1.39% France1.50%1.31%1.31%1.25%1.37% Source: Statistics Canada:

Canada and US Trade Relationship Why does it make sense to establish a solid trading relationship with the US? 1. Shipping costs are cheaper (proximity factor) 2. Similar culture and interests so same types of products and services will appeal to citizens 3. Speak the same language, watch same TV programs, movies, sports and similar fashion styles 4. Population of the states is 10x that of Canada’s