When the North American Free Trade Agreement (NAFTA) was officially launched on January 1, 1994, the governments of the three countries involved–Canada, Mexico and the United States–promoted the program as a sound method of facilitating and increasing trade and investment within the continent. The agreement came into effect after Canada and the U.S. had signed the controversial Free Trade Agreement (FTA), which eliminated almost all tariffs on Canada-U.S. trade in originating goods by 1998.
For Canadian companies, the FTA and NAFTA may have stamped out a number of the hassles associated with international trade, but not all. And, while the U.S. may be a friendly next-door neighbor to Canadians, business people in the Great White North, including many of whom are in the consumer electronics industry, still find that it’s quite a different world.
“The business cultures between the two countries are very different,” said Israel Blume, president of Coincident Speaker Technology in Richmond Hill, Ontario. “Canadians are so ultra-conservative that if it’s not something exceptionally established, they’re not interested in trying it. That’s why we do 80 percent of our business in the U.S. They are more receptive to new ideas, especially if there is something good and novel and innovative. They are ready to try it.” According to Blume’s observations, Canadians–consumers and business people–direct their attention elsewhere for confirmation on the validity of a product. “Canadians look to others to establish trends,” he said. “They, themselves, are always very hesitant to start a trend. If something is successful in the U.S. especially, then they get on it because they figure: ‘if it’s good for the U.S., it’s definitely going to be good for us.’ Americans are much more centrally-oriented. They don’t look to anybody else to see if something is good or not. There is a difference in mentality and confidence level. When you’re not confident, you usually pass on things until somebody tells you: ‘It is good.’”
Dan Saso at Matrix Audio Designs in Barrie, Ontario, has had a similar experience. “Perhaps because of the relative scales between the U.S. and Canada, we find that Americans more readily purchase and use the equipment to determine its viability,” he explained. “In the Canadian case, we tend to spend more time on research, and ascertaining others’ experiences. Then, and only then, will they experiment with our sales samples and finally make a purchase. Because of the infancy of our business, Canadians generally follow the lead of their American counterparts.”
The differences between the markets in Canada and the U.S. isn’t just an intangible cultural phenomenon, according to Rosemary Pefhany, manager of the home theater division of the Irwin Seating Company in Toronto, Ontario. “Canadians, in general, live in urban centers within 100 miles of the U.S. border. Those centers have much higher real estate costs than centers in the U.S.,” she pointed out. “Bottom line, density in urban development and real estate costs don’t leave room for home theaters. Recreational toys are much more affordable for the middle class in the U.S. than they are in Canada. In the Canadian market, we are dealing with upper middle class people with higher disposable income, and those folks tend to be much more discriminating in the products they buy. Generally, Canadians that can afford these toys tend to buy high end, but in a much smaller quantity.”
For Michel Jacques, president of D-Box in Longueuil, Quebec, exporting goods to the U.S. is, in a way, no different than dealing with his partners in Europe. “The U.S., for me, is an export market, not just another Canadian province. I have the same problems when dealing with the U.S. that I have with, for example, France. Everything is different,” he said. Besides, according to Jacques, it’s almost mandatory for any Canadian manufacturer to export to other countries, for the sake of survival. “We are forced to export–we have no choice,” he maintains. “A Canadian manufacturer that wants to expand his business has no choice except to export.”
James Tanner, vice president of marketing at Bryston in Peterborough, Ontario, agreed. “When you’re in Canada and you decide that you are going to go into business as a manufacturer, you cannot ever think in terms of surviving in your own market, because you’ll never grow,” he said. “You have to think globally, and the U.S. is obviously a very large part of that.”
That isn’t necessarily a negative scenario these days, Tanner pointed out, noting that the weak Canadian dollar presents companies up north with some advantages that are currently unavailable to U.S. businesses. “The U.S. dollar is so strong relative to the Canadian dollar that our ability to sell export at a price that is reasonable to our exporters in other countries is better than it is as a U.S. company,” he said. “I would say that the pendulum has swung the other way, in terms of Canadian manufacturers being able to compete worldwide including in the U.S.”
Many of the challenges that Canadian manufacturers face in getting their wares south of the border are mechanical. Despite the FTA’s and NAFTA’s minimization of tariff-related headaches, there are still a number of administrative requirements to be met when selling to the U.S., including brokerage papers, NAFTA documentation and various other certificates necessary before goods can cross the border. Israel Blume points out that there is more paperwork and preparation required than if you were dealing on a national level only, “but it’s not that big of a hassle,” he added. “It’s just one of those things that you have to take care of.”
Whether Canadian manufacturers feel their job is harder than it is for those in the U.S. or not, most recognize that Canada has become a breeding ground for well-respected, innovative technology. “Canadian goods are generally regarded as being of high quality and good value,” Saso observed. “Canadian manufacturers are well known for their quality components. Coupled with a favorable currency exchange market, Canadians bring significant competition to their American counterparts.”
John Russell, who is charged with North American sales for Class Audio in Lachine, Quebec, backed up Saso’s point. “I think that these days a lot of Americans think of Canadian products as being of a bit higher quality than normal. I also think that the work ethic in Canada is recognized in the States as being very high,” he said. “I don’t see that there is any real marketing disadvantage in going to the States with our products because we’re Canadian. In fact, I think we have a lot of strength.”