How Canadian exports with a strong dollar
-
Upload
karl-miville-de-chene-emba-paci -
Category
Education
-
view
167 -
download
1
description
Transcript of How Canadian exports with a strong dollar
How Canadian ExportersAre Adapting to a StrongCanadian Dollar
Now that global demand is finally showing signs of recovery, these exporters are well positioned to increase their international sales despite the Canadian dollar’s high value relative to many major currencies, not least the U.S. greenback
EDC currently expects Canadian goods and services exports to grow by 12% in 2011 and by 7%in 2012.2 Part of this growth will be due to export levels continuing to recover from their 24%collapse in 2009.
Strategies for adapting to a strong canadian dollar
• diversify into new markets;• establish a physical presence abroad;• use imported inputs in significant quantities; and• increase productivity by boosting efficiency and
innovation.
Numerous Canadian exporters began using some of these strategies in 2003, as soon as the dollar’s value began to rise. Since then, and particularly after the global crisis of 2008–2009, even larger numbers of our exporters have put one or more of these strategies to use.
Diversifying Export Markets
More than 4,000 companies began to export to countries other than the U.S. during this period. Partly as a result, the share of Canadian goods and services exports to the United States fell from close to 83% in 2002 to less than 71% in 2010
Establishing a Physical Presence Abroad
Between 2002 and 2008, the sales of these Canadian foreign affiliates rose twice as fast as export sales originating from Canada, at 6.2% per annum versus 2.8% per annum respectively
It can reduce the negative impact of the strong Canadian dollar in two fundamental ways:
• First, as an exporter’s foreign exchange exposure diminishes, so does the Canadian dollar’s influence on profit margins and export price competitiveness. Accordingly when an exporter increases its foreign currency expenditures (especially in U.S. dollars), it will automatically reduce the sensitivity of its international sales and profits to shifts in the value of the loonie.
• Second, the greater purchasing power provided by a strong Canadian dollar can help cut expenses by reducing the cost of imported raw materials, parts and components, which in turn increases profit margins.
Purchasing More Foreign Goods and Services
• Operational efficiency• investing in new technology• Improve processes and mobilize workers• innovation and differentiation• creating unique products• upgrading quality • improving service levels
Improving Productivity