Canadian Businesses Expect Growth in U.S. Trade

New Study Looks at Challenges and Opportunities with Canada's Largest Trading Partner

TORONTO, Sept. 27, 2016 /CNW/ - Canadian firms continue to see the U.S. as an intimate trading partner and its market a source of growth, according to a new report from the Economist Intelligence Unit (EIU), in partnership with American Express. Although there are some issues to be tackled as regulatory and compliance challenges cause costs to rise, a majority of firms anticipate their trade with the U.S. to increase, in part thanks to the Trans-Pacific Partnership.

The research, which includes a survey of 531 companies worldwide, explores the relationships companies have with the U.S., looking at how they trade, the challenges they face, and how they expect international trade with the U.S. to change based on upcoming regulatory shifts. 

"U.S.-Canadian trade is among the most valuable in the world," says Paul Roman, Vice President & General Manager, Global Commercial Payments, American Express Canada. "The results show there are some issues to be looked at, including access to trade finance and infrastructure, but it is positive to see optimism among a majority of Canadian firms that their trade with the U.S. will increase."

Opportunity for U.S. Trade Improving

The research found that the U.S. is, unsurprisingly, a top trading partner for three-in-four (76%) Canadian businesses. Furthermore, a huge majority (94%) of Canadian companies surveyed derive up to 30% of their current global annual revenue from the U.S. market – the same as the U.S.'s other continental neighbour and NAFTA co-signatory, Mexico.

The reliance on trade with the U.S. is expected to rise, as 58% of Canadian companies surveyed expect their trade with the U.S. to increase in the next five years with around one-in-five (18%) seeing it grow by more than 10%. A majority of Canadian firms surveyed think that the Trans-Pacific Partnership (in addition to NAFTA) will improve opportunities for them in the U.S. market.

Canada/U.S. Trade Challenges

Despite the strong trade relationship between the two countries, there are specific challenges Canadian companies find when trading with the U.S. The top two challenges for Canadian businesses trading with the U.S. include access to trade finance (46%) and trade-related infrastructure (46%). Other top concerns when trading with the U.S. include exchange rate volatility (44%), trade-related regulation and harmonization between countries (40%), and making payments (38%).

  • Access to Finance: The two main impediments to accessing finance for trading with the U.S. are limited credit insurance options (cited by 30% of respondents) and lack of dollar liquidity (26%).
  • Infrastructure: Over a third of (36%) Canadian firms surveyed say they rely heavily on the rail network in order to trade with the U.S., with 28% mentioning a reliance on port facilities and 24% on air links.
  • Exchange Rate Volatility: Despite being listed among the top challenges to Canadian-U.S. trade, changes in the exchange rate with the U.S. dollar positively affected a majority (54%) of Canadian companies' profitability in 2015.
  • Trade Regulation: Nearly three-in-four (72%) Canadian companies surveyed have seen an increase in the cost of doing business with the U.S. due to trade-related regulatory and compliance issues over the last 12 months – 42% have seen increases of over 10%.
  • Making Payments: Canadian businesses surveyed cite top issues with making payments to the U.S. as currency fluctuation (78%), banking hours (68%), bank fees (68%), limited or no terms (66%), limited payment visibility (56%), and process inefficiencies (52%).

 

Outside of the U.S., international trade presents a unique set of challenges for Canadian businesses. These include making payments (50%), transportation costs & delivery (46%), insufficient market knowledge (42%), and communication challenges and cultural hurdles (40%).

Insight on International Payments

Over a quarter (28%) of businesses surveyed spend more than 10 per cent of their annual costs in purchases from the U.S., while the majority (82%) derive up to 10 per cent of their annual revenue from U.S.-based customers.

Payment challenges (currency fluctuations, bank fees, process inefficiencies, etc.) have impacted Canadian businesses, resulting in limited response to emergency payments (32%), unbalanced cash flows (20%), increased foreign exchange exposure (20%), shipment delays (18%), and increased processing and payment costs (10%).

"Navigating cross-border payments efficiently can be challenging" says Roman. "Our Global Currency Solutions solve many of the inefficiencies and hidden costs that come with traditional payment methods. We want to help our customers thrive when it comes to cross-border trade with their continental neighbour."

American Express Global Currency Solutions help business control, manage, and simplify their cross-border payments, giving them full spend visibility, improving cash flow, minimizing foreign exchange impact and reducing transaction costs.

Study Methodology

The "Terms of trade: Understanding trade dynamics in the U.S." report, in partnership with American Express, was carried out between March and May 2016, by The Economist Intelligence Unit. The findings are based on desk research, an executive survey of 531 companies that trade with the U.S. and interviews with experts conducted by The Economist Intelligence Unit. Companies surveyed had revenues of between USD $250 million and $1 billion and it was carried out across 35 markets.

About American Express Global Commercial Payments

Through its Global Commercial Payments division, American Express offers a suite of payment and lending products that help businesses and organizations of all sizes gain financial savings, control and efficiency. Global Commercial Payments provides solutions for travel and everyday business spending, cross border payments, global currency solutions, and business financing.

To learn more about Global Commercial Payments, visit business.americanexpress.com/ca.

About American Express in Canada

American Express in Canada operates as Amex Bank of Canada and Amex Canada Inc. Both are wholly owned subsidiaries of the New York based American Express Travel Related Services Company, Inc., the largest operating unit of the American Express Company. Amex Bank of Canada is the issuer of American Express charge and credit cards, with outstanding products like The SimplyCash™ Card from American Express ©, The American Express® Gold Rewards Card, and the American Express® AeroplanPlus® Gold Card. American Express opened its first offices in Toronto and Hamilton in 1853. For more information, visit AmericanExpress.ca or connect with us at Facebook.com/AmericanExpressCanada and YouTube.com/AmericanExpressCAD.

SOURCE American Express Canada

Image with caption: "Cross-Border Payments: New Study Looks at Challenges and Opportunities with Canada’s Largest Trading Partner (CNW Group/American Express Canada)". Image available at: http://photos.newswire.ca/images/download/20160927_C8662_PHOTO_EN_781662.jpg

For further information: Kate Sexton, On behalf of American Express Canada, Kate.Sexton@highroad.com, 416-644-2280

RELATED LINKS
http://www.americanexpress.com/canada

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