When situations evolve on the trade front, agile small to medium-sized businesses must adapt and even reimagine their export strategies to align with new cross-border business realities. That could be due to a recession or macro-economic shift, new trade policies or the emergence of exciting new markets. Whatever the reason, developments such as these present both challenges and opportunities for export-oriented businesses looking to diversify their trade markets.
While some companies will sell to a multitude of markets, the vast majority will rely on a concentration of trade partners for the bulk of their export-related revenue. For instance, Statistics Canada data shows that 85 per cent of exporting enterprises in Canada sold goods to the U.S. in 2024. Thirty-four per cent sold goods to non-U.S. destinations. And for the fifth consecutive year, fewer Canadian companies are exporting to non-U.S. destinations. That heavy cross-border trade dependence is the norm across the globe.
Indeed, many economies are reliant on commerce with a relative handful of countries—typically those with which they share a border or stable shipping routes—for trade. When global dynamics change, organizations must at least consider their export options and weigh the costs and benefits of looking abroad for new business. And while the growth potential of a more globally oriented approach to business can be transformative, there are hurdles to success.
Tax compliance is one. Even if your country maintains tax treaties across several jurisdictions, tax laws are different in every country and can often be layered at the federal, provincial/state and municipal levels. Many globally minded entrepreneurs have been flummoxed by a web of complex tax regulations when they try to expand abroad, while also finding their companies subject to costly penalties and interest charges when they run afoul of local regulations. Language and cultural differences are another barrier to entry—from the challenges faced by female entrepreneurs in some markets to the fundamental differences in how negotiations are managed from one culture to the next. Then there are foreign ownership and immigration rules that may require a local business partner as a pre-requisite for entering a market.
But none of these issues are insurmountable. In fact, most countries have government agencies in place to help companies develop new export markets. Clients of AGN International member firms—such as Adams + Miles—have the advantage of being able to leverage the experience and expertise of a global network of tax, accounting and advisory firms to support their international expansion.
Those support options aside, it takes an effective approach to grow beyond your borders. Here are five strategies that companies can employ to diversify exports beyond their core markets and expand across the globe:
Consider markets where your country maintains free trade agreements—Canada, for example, has many free trade agreements in place beyond the US-Mexico-Canada Agreement, including the Comprehensive Economic and Trade Agreement (CETA) with the European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with Asia-Pacific countries. Other countries maintain their own range of trade treaties. By leveraging tariff reductions and improved market access afforded by free trade agreements, companies can become more competitive and strengthen their bottom-line performance.
Look to emerging markets—Rapidly growing economies in Asia, Africa, and Latin America (e.g., India, Vietnam, Indonesia, Nigeria and Brazil), where rising middle classes and infrastructure investments create strong demand for goods and services, are prime target markets for export-oriented companies. A first step is to conduct market research to identify demand for products and services before navigating local regulations, tax laws and business customs, then potentially developing a strategy to enter one or more of those regions.
Be prepared to adapt products and services—Adapting products to meet foreign consumer preferences, legal standards and certifications (e.g., CE certification in Europe or ISO standards in North America) can open doors to previously inaccessible markets. Work with export consultants or local advisors to tailor your offerings and ensure regulatory compliance in new markets.
Partner with local representatives—It typically pays to establish relationships with trusted local partners in target markets to help navigate cultural differences, logistics and regulatory requirements. Organizations can attend international trade missions or use government-supported programs like their local trade commissioner or export development agencies to identify potential partners.
Think digital first—Digital platforms offer a low-cost, scalable way to reach global customers without needing a robust (or any) physical presence abroad. Investing in e-commerce and digital export channels using platforms such as Alibaba, Amazon Global or Shopify to sell directly to international consumers, supported by a targeted digital marketing strategy, can help power global expansion without the same level of capital expenditures.
Not sure if market diversification makes sense for your organization? Read our recent blog on conducting a trade impact analysis to know more.
Tony Sokic, Managing Partner
For assistance with your business or personal tax compliance needs, contact us today.
