You also can’t assume that a market you wish to enter wants your product. Plus, there are advantages with exporting to the U.S.
Kermode Forest Products has been shipping custom-cut wood products to Asia for three decades, including to Japan, China, South Korea and Taiwan.
“If we were 100 per cent U.S. right now, we wouldn’t be having a whole lot of fun. There would be sleepless nights for sure,” said Robert Tsumura, one of the company’s two partners.
But that is not necessarily an easy undertaking, says Tsumura.
He noted there was a time when Canada and the U.S. had Japan’s wood products market to themselves, but globalization and increased international trade has meant more competition.
About half of Japan’s wood now comes from Europe, he said.
You also can’t assume that a market you wish to enter wants your product, said Tsumura, noting that the current Japanese housing market is soft, and in China, the economy is faltering.
There are also relationships that need to be built, he said.
“I think for companies that all of a sudden say, ‘Well, we can’t ship to the U.S.,’ for them to turn on a dime and sell to Japan or some of these other countries, it is probably not that easy to get in,” said Tsumura.
Industry observers and trade experts also note there are obvious advantages with exporting to the U.S., given its proximity and the fact it is the largest economy in the world.
Jairo Yunis, director of policy for the Business Council of B.C., says the province has actually done a good job of diversifying markets in the past two decades. He noted that while the U.S. remains by far the biggest destination for B.C. products, at 54 per cent of exports, two decades ago the American market accounted for two-thirds of export shipments.
During that 20-year period, B.C.’s exports to China rose to 14 per cent from four per cent, and exports to South Korea doubled to six per cent.
Yunis said if you want to improve B.C.’s ability to diversify its markets the key is to ensure that the province is competitive globally.
That means a competitive tax regime, said Yunis, noting that B.C. has the highest marginal effective tax rate on new investments in Canada because of its business tax environment, and the fourth-highest marginal personal tax rate in Canada and the U.S.
Increased competitiveness also means streamlining the province’s regulatory system so that major projects can get off the ground more expeditiously, he said.
He pointed to natural gas, where he said B.C. has a rich resource that can help lower emissions in Asia from coal.
“We need B.C. to have regulatory excellence. High standards, but with minimum burden,” said Yunis.
The country also needs to remove barriers to interprovincial trade, he added.
Nicolas Schmitt, an economics professor at Simon Fraser University, said it is always a good idea to diversify export trade markets, as the recent tariff dispute underscores.
But he noted that when you have a large market like the U.S. close by, the incentive to diversify can be tough.
Still, Schmitt said he believes the Canadian government has done quite a lot over the past 15 years to improve access to markets beyond the U.S. by signing free trade agreements with other countries.
Those include agreements with more than four dozen countries represented by the European Union and others such as the United Kingdom, Australia, New Zealand, Japan, South Korea, Singapore, Vietnam, Chile and Peru.
“So there is no problem of access due to tariff barriers with these countries anymore,” said Schmitt. “The issue is how you match firms here and buyers across long distances. That’s a big issue, especially for Canadian firms, which on average, are fairly small. It’s tough for smaller firms to find customers.”
Schmitt noted that when trading with a country such as Japan, for example, there can also be cultural, language and contractual barriers of the kind you wouldn’t see with the U.S.
That is where the province can help by having trade missions and by having offices in those countries to help match buyers and sellers, he said.