Thanks for the opportunity to be here today to share CFIB's perspective on exporting among SMEs and recent announcements that aim to assist them in that process.
First, though, CFIB is a not-for-profit, non-partisan organization representing more than 109,000 small and medium-sized businesses right across Canada that collectively employ more than 1.25 million Canadians and account for $75 billion in GDP. Our members represent all sectors of the economy and they're found in every region of the country.
Canada's small and medium-sized enterprises collectively employ over 60% of Canadians in the private sector. They're responsible for the bulk of new job creation and they represent about half of Canada's overall GDP, so if you start addressing issues of importance to them, this can have a widespread impact on job creation and the economy.
Let me start by saying that while we're optimistic about the intent of the recent announcements to assist SMEs with exporting, we're unsure of how it will be delivered and ultimately how effective it will be. Our focus here will be to share with you some of the challenges that smaller exporters face and how these announcements could be designed to best assist them with that.
We regularly ask our members about whether or not they're involved in trade. We last asked in 2012 and what we found was that about one in five, or 21%, are telling us that they had sold goods or services to other countries in the previous three years. About half had actually purchased from other countries. What's also interesting is that another 6% had planned to get more involved in trade in the future but weren't currently doing it.
Now these results have been fairly consistent over time. We've seen some similar results from a survey done in 2009. I would note that these are quite different from what you're getting from Statistics Canada, for example, that say that only about 10.4% of small and medium-sized enterprises are actually involved in exporting.
This is likely due to a number of reasons, including the fact that Stats Canada data comes from the exporter register database, which only includes exporting of commodities, not services, and those establishments whose merchandise exports exceed $30,000 a year, whereas our data has no such limits. Our data includes businesses that may not trade as frequently and in lower volumes, and may also include services only. For example, in a previous survey done in 2009 that was focused on trade with the United States, we found that 4% of our members were actually exclusively involved in exporting services only. So that just gives you a sense of what's not included in some of the data you are hearing and reading about.
Many of those included in our data may not be captured, necessarily, in the national data from Statistics Canada. But for us, we need to know more about this particular group and capture their experiences, as it may influence whether they plan to continue to export or move into new markets. One bad experience could make a potential exporter feel that it may not be worth it, simply because it did not have the support, financing, or information that could have made all the difference.
Where do those that trade go for their business? The U.S.A. does remain by far the most likely place that Canadian small businesses export to, followed by the EU, Mexico, Australia, New Zealand, and China.
While still a very small proportion—and you can see from my slide presentation that it gets fairly small as we get into some of the other emerging markets—I would suggest that it's actually the smaller firms that often enter new emerging markets first. Finding ways to support and encourage to help minimize the challenges they will inevitably face is an important area of focus for these types of programs, because, should those smaller exporters experience one or two difficult challenges along the way, it may discourage them from even continuing to export to that market or potentially exporting to new markets in the future.
Of those that are not currently involved in any kind of trade, a good proportion of them do not see their business as one that would be involved in exporting, as they believe their particular product is not exportable. However, that still leaves about 38% of those that are not exporting that could potentially get involved in it, so finding ways to address the barriers they face and highlighting what the benefits of exporting can bring to their business and to their communities may result in more small businesses taking the plunge into new markets.
Other reasons they've identified for not exporting include those who feel the domestic market is sufficient. Now, this particular group may benefit from a better understanding of how export markets may help them grow and expand their businesses. We see this as something the department of international trade, the trade commissioner service, and even groups like us and those of us around the table could certainly help focus on a little bit more.
In addition, though, about 1 in 10 said they lacked the resources, expertise, and contacts to expand into new markets, and about 1 in 20 said they lack information on trade opportunities and appropriate financing, all of which can and should be addressed to some degree by the recent announcements to create an export market development program and enhancements to the trade commissioner service.
Even among those who do already trade into other markets, such as the European Union, there are challenges associated with cost, complexity, and paperwork. These recent announcements could assist with some of these issues as well, in particular, through the trade commissioner service, which could provide the information and advice on how best to deal with the various rules and standards, and assist with the paperwork, and even help interpret certain requirements, if needed, which I think is quite similar to some of the things Joy was saying as well.
We certainly welcome the recent government announcements to provide further support for export among SMEs, as that could help relieve some of the constraints small businesses face, if these supports are properly designed and properly invested.
CFIB would recommend first and foremost that the export market development program be focused on small and medium-sized companies by somehow limiting the size of the businesses that can actually access the program. We would suggest keeping the program simple and accessible, which means that there should be a limited number of restrictions to access the program and it should be made available to both new and existing exporters looking to expand into new markets.
It also should be as open-ended as possible so as not to limit users to specific markets, such as emerging markets only, and should also focus on those markets where potentially recent trade deals have been signed, at the very least.
We would also suggest that the government refrain from being too limiting in what costs could qualify for the program. As long as the cost is clearly associated with efforts to expand into a new market, it should be considered. We also ask that red tape associated with this program be minimized by making sure the forms are easy to understand and that there are resources available to provide support to the SMEs applying for the program. In other words, they shouldn't have to actually get a consultant to help them apply for this program.
It's essential that the program be thoroughly evaluated on a regular basis to determine how effective it has been in helping small and medium-sized enterprises get into new markets, and there should be a willingness to make changes along the way to ensure that it's actually assisting the intended SME market and that it is doing what it was intended to do in the first place.
Finally, as part of the March announcement, the government also committed to additional funding for the trade commissioner service to support SMEs. Unfortunately, I have to say that most SMEs are unaware of the trade commissioner service and when they do know about it, they often feel they're too small for the trade commissioner service to assist them. There's a perception out there that the service is reserved for larger firms only who conduct higher volumes of exports. We encourage the government to do a better job of promoting these services generally, and especially, that they be willing and able to help support smaller companies.
There has also be an issue of some SMEs, which may come from more traditional sectors of the economy, not being able to get as much assistance from the trade commissioner service as there has been a tendency in recent years to have trade commissioners focus on key sectors of the economy only, which can sometimes limit their ability to assist a business that might not fit into one of these predetermined sectors. We would continue to encourage the department of international trade to ensure that there are some trade commissioners who are able to have a broader mandate and properly assist the smaller types of firms.
Thank you for the opportunity to present here today and share our views, and I'll be happy to answer any questions when the time comes.