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Companies need mentoring in the ways of exporting, report says

Canadian dollars.

Jonathan Hayward/The Canadian Press

Exports are supposed to propel Canada's economic growth this year, but it may take more than a slightly softer currency to spark a revival in the country's main provincial manufacturing base.

In Ontario, just 6 per cent of smaller businesses export at all. Export levels in Canada's most populous province remain well below pre-recession levels, and less than 2 per cent of exports are bound for the fast-growing markets of India and China, says a report on Ontario's economic future to be released Tuesday.

A pickup in trade is crucial to economic activity this year as some domestic drivers of growth, such as housing, fade. Exports account for a third of the country's national income, according to the Bank of Canada, and they have been disappointingly weak in the past year. Global competition, a still-elevated currency and an over-reliance on the U.S. market are some reasons for the weakness, while this week's study also cites an aversion to risk in branching out to new markets.

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"If we're to emerge stronger as an economy, we're going to have to teach and enable small to medium-sized enterprises how to export into the world," said Allan O'Dette, president and chief executive officer of the Ontario Chamber of Commerce, which co-produced the paper. "We don't want to rely on a weaker loonie … in fact, many of the exporters have actually hedged against that, so there's probably not going to be a whole lot of advantage there."

Success in some sectors, such as mining, has given firms little urgency to look beyond Canada's borders for opportunities. However, "the world has changed a little bit, and culturally we've just not taught ourselves fundamentally to be entrepreneurs and go out into the world," Mr. O'Dette said.

Exports have long been expected to lift growth, yet to date "there have been few signs of the anticipated rebalancing towards exports and business investment," the central bank's monetary policy report noted last week. Stronger U.S. demand and a weaker currency should help, although underperformance in Canadian exports are one of the most important risks to the economy, it added.

Canada's share of world exports has been shrinking for a decade, with its loss of share in global trade the second largest in the G20, deputy governor of the Bank of Canada Tiff Macklem noted in an October speech.

In Ontario, nearly 80 per cent of the province's exports are destined for the United States, the Ontario report noted, which leaves its economy "highly exposed to the ebbs and flows of the American economy." The average value of Ontario's small and medium-sized enterprise exports ranks below that of 47 of 50 U.S. states, it said.

The paper makes several suggestions on how to bolster exports. Larger businesses should mentor smaller ones on how to go global, while the government could better support immigrants in the workplace, who in turn could use their global networks to spur trade. Visa barriers that make it tough to lure talent and do business should be eased.

The report also recommends "championing" some industries that it sees as having potential for growth, such as agrifood, life sciences and tourism.

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This is the third of five such annual reports on Ontario's economy. This year's report, titled "Emerging Stronger 2014" is produced by the Ontario Chamber of Commerce, the Mowat Centre and Leger Marketing and based on consultations with business, government and non-profit leaders.

The Canadian dollar has weakened about 9 per cent against its U.S. counterpart in the past year, although the central bank noted last week that it remains strong by historic comparisons, and will continue to pose challenges for some exporters.

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About the Author

Tavia Grant has worked at The Globe and Mail since early 2005, covering topics from employment and currency markets to trade, microfinance and Latin American economies. She previously worked for Bloomberg News in Toronto and Zurich, writing on mining, stocks, currencies and secret Swiss bank accounts. More


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