Why venture overseas when you can find a trading partner next door? See how collaboration with canada is enhancing U.S. business.

by Amanda Joyce
November 2005

Pop quiz: With which country does America do the most foreign trade? Japan, China and even Mexico are likely answers. All three nations-along with their economic strengths and weaknesses-feature prominently in the news on a regular basis, and it’s simple to rattle off the names of at least half a dozen products from each nation. Yet America’s largest trade partner is actually Canada, a country rarely considered foreign to Americans and seldom thought of as an economic giant.

America and Canada are crucial economic partners, however, and both nations know it. During the past decade, American companies have invested more than $190 billion in the Canadian economy. The money flows both ways, of course, and because the Canadian government relies more heavily on foreign investment than does the U.S., the government works hard to attract international investors. Ken Sunquist, the assistant deputy minister of world markets for the Canadian government, points to a simple statistic: For 39 of the 50 states in America, Canada is the largest market.

“The Americans don’t look at the international sphere as much as we do,” Sunquist says. “It’s just not as important for them. For Canada, prosperity is driven by the international side [of the economy]. It is terribly important.” So important, in fact, that the Canadian government has created an extremely friendly environment for foreign companies, including a well-educated labor force, a high standard of living at a low cost, and the legal and governmental infrastructure to move it all along smoothly. If you run an automobile manufacturing plant, take part in oil exploration or engage in high-tech research, Canada-even more than Uncle Sam-wants YOU.

There are many advantages to doing business with our neighbor to the north-a country that feels more like a close cousin than a foreign relation to many Americans. For one, the border is incredibly porous. (Border controls used today are focused on homeland security issues and preventing drug trafficking.) The legal system, along with the cultural practices and main language, are extremely similar in both countries. Plus, getting to Canada is not much different than flying to Los Angeles or Chicago. Business executives need only jump on a flight for a few hours to find themselves in Toronto, Montreal, Ottawa or Vancouver. No transatlantic journey-nor the accompanying jetlag-is a factor.

For Rich Friedman, a Boston area management consultant who works with environmental design and engineering consulting firms, finding clients in Canada happened like so many connections do in the business world: He made a new contact at a trade show. While attending the Build Boston conference in November 2001, where he presented a workshop, Friedman met a Canadian trade executive with Business New Brunswick. “She came up to me after I spoke, and we exchanged business cards,” Friedman says. “I believe strongly in proactive business development. So, I followed up with her and nurtured the lead.” It turned out that the executive was looking for someone with Friedman’s expertise, which led to his first project with a Canadian client.

Four years later, Friedman continues to connect with various Canadian contacts. His persistence and diligence have led to several strong business contacts, which in turn led to professional referrals and more work as a consultant. Friedman notes that for Canadians, personal and professional relationships play an even bigger role in getting ahead. “While doing business in Canada, especially in the engineering and design industries, I’ve noticed that it is even more relationship-based than in the United States,” he explains. “If you can develop a strong relationship with individuals and organizations, they will be very loyal to you.”

A sense of loyalty and a familiarity with Canadian culture make it comfortable for American executives to do business there as well. Sunquist, whose role with the Canadian government has taken him across the globe and back, has seen foreign investment shift in Canada during the past 20 years. “Twenty years ago, it was a lot of U.S. subsidiaries,” he says. “Today, what you find is a multitude of small- and medium-sized enterprises that are looking for foreign partners.” Globalization may be a more common buzzword in international business, but Sunquist prefers the term “nationalization.” For example, the Canadian company Bombardier is Canada’s largest aerospace enterprise, manufacturing Learjets and the subway cars used in New York City. Bombardier recently started a large-scale transit project in China. “When we talk about a company like that, where the subway cars are made in New Jersey, but it is a Canadian company, is it a Canadian company exporting to China?” Sunquist muses. Or is it simply a U.S. manufacturer owned by a Canadian company, who exports its goods to China? “It’s not buy and sell any more,” Sunquist adds. “It could be foreign partnerships or investments.”

While international trade is no longer black and white, foreign partnerships or investments can give a company a competitive boost. From his vantage point as a consultant who sometimes pairs up Canadian and American firms, Friedman certainly sees partnership with Canadian companies as having its advantages. Such relationships provide access to new target geographies. New geography equals a new talent pool and new business opportunities-regardless of field or business sector. In addition, second- and third-degree business connections can be made. Friedman points out that the Atlantic Canada region-including Prince Edward Island, Nova Scotia, New Brunswick and Newfoundland-has very strong relationships in the Caribbean and Europe. “So, by teaming up with Canadian companies, that then opens up access to other markets,” Friedman says. “Atlantic Canada is, comparatively, a sparsely populated area. They traditionally have had to look far beyond their borders for work, which is not true in the U.S.” As a result, many Canadian companies have become adept at exporting their own goods and services. American executives could also tap into this area of expertise.

Increasingly, investors and business executives have begun to look at international investment in the same way they look at buying any other product. They study the nation as if it were a brand. In other words: What comes to mind when you think of Canada? Friendly mounted police and maple syrup, perhaps? Marketing is key, as is a nation’s brand position. In a study released in August 2005, the Seattle-based research company Global Market Insight, Inc. (GMI) joined forces with nation branding expert Simon Anholt to study how the brands of 25 nations are perceived. Canada received top marks, coming in a close second just behind Australia. Overall, a reputation for excellence in the six areas of study-tourism, people, culture, exports, governance and investment-means that having your product “branded” as Canadian is perceived positively as well.

Anholt, who authored the study, says that Canada’s brand position is “virtually immaculate.” He adds: “Its main attribute appears to be purity, and it certainly benefits from being perceived as a ‘good America.’” While Canada received weaker ratings in the culture and heritage area of the study, its positive brand image, as viewed by the rest of the world, could point to a rise in position. While America’s brand esteem is on the decline, Canada’s seems to be on the rise. Ken Pick, director of GMI, says that some large American companies have begun to acknowledge that America’s unpopular foreign actions have actually hurt the country’s business. “Canadian companies are starting to understand that they can use this positive image of their country to influence their own brand,” he says. “Being an American brand is not so cool [anymore]. We’re seeing a lot of groups downplay the fact that they’re American.”

So, if an executive is interested in doing business in Canada, the first step is to make contact with the right people who can help. Canada’s network of consulates in various American cities is a great place to start. “We have people who could sit down with them and go through the business planning process,” Sunquist says. The consulate has experts familiar with all sectors and industries, as well as the advantages and disadvantages of various regions. “We can take a look at their products and figure out how they can be more efficient,” he adds. The process is actually quite simple. Anyone, from top-level executives at large companies to small-business owners, needs to study what makes sense for them and their company. Are you looking for increased market share? A skilled labor force? Affordable property with good tax incentives? Canada’s low cost of living, coupled with universal health care, can make a company incredibly efficient financially, which is always a competitive advantage.

The second step is to find good legal counsel, both domestically and in Canada. There are law firms who specialize in this area. New York-based lawyer Chris Hilbert works for Sidley Austin Brown & Wood LLP, whose clients include Bombardier. “There are a number of Canadian law firms who are very user-friendly and very adept at helping U.S. businesses invest in Canada,” Hilbert says. He adds that the Canadian legal system makes it easy for a U.S. company to understand the legal differences. “The bottom line: Going into Canada is no more difficult [legally] than going into another U.S. state,” he says.

While Canada sometimes serves as the punch line for water cooler jokes and the subject of mock ire (as demonstrated by the Academy Award-nominated parody song, “Blame Canada”), investing in the country is a promising option for executives interested in expansion. The nation’s human capital, along with its infrastructure and sheer eagerness to attract investment, suggests a collaborative spirit that could produce extraordinary results.

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amanda joyce is a freelance writer based in New York. Email Amanda at editor@executivetravelmag.com.

Required reading

• Canadian business etiquette by Nancy Branka