Seven ways you can benefit from the opening of the European market

September 5th, 2017

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Once the Comprehensive Economic Trade Agreement (CETA) between Canada and the European Union is provisionally implemented on September 21, 99.2% of tariffs will fall to zero, opening a huge market. In this article, Me Didier Culat, legal counsel, explains seven ways you can benefit.

1-Tell your European prospects about this new competitive advantage

The disappearance of tariffs under CETA gives Canadian exporters a new competitive edge over China and the United States. In some cases, the landing cost of our products, normally absorbed by the buyer, may be lower than those of US or Chinese competitors. Canadian factories can manufacture high quality products at a lower cost than European factories. By opting for a Canadian product, European buyers concerned about the price of merchandise should also know that they will save on transportation and customs costs. This is an excellent selling point you should mention to prospects.

2-Consider using a European distributor

A distribution agreement with a European business offers you access to an existing network, so you don’t have to solicit retailers or clients one by one. This solution, however, can have certain disadvantages, such as not controlling the sales price to clients, or the distributor’s practices and the quality of its after-sales services on the territory. Therefore, make sure that you inquire into any distributor’s practices and reputation before making your decision.

3-Consider hiring an employee in Europe

Another way of penetrating the European market is to hire a sales representative in Europe to develop your clientele. This approach is not without tax consequences. Moreover, hiring an employee means that you have to deduct payroll taxes, which are higher in Europe than in Canada.

4-Consider buying a business

In some cases, buying one or more European businesses could be a good way to enter the target local market. The main advantages to this strategy are that you obtain an established company with an existing clientele, a distribution network, employees, a brand and a reputation. You won’t have to start from zero. However, be prepared to follow the game rules in the country in question, including tax laws, sector or industry regulations, and any necessary permits. Ensure that any new European subsidiary also adopts the Canadian company values.

5-Consider establishing a new business in Europe

Depending on your marketing strategy, if you manufacture products in Canada intended directly for consumers, another way to sell them in Europe could be to open stores on site. You will have to find premises, hire employees, abide by existing legislation, and obtain operating permits. Under CETA, your business will be protected from any provisions that, in some jurisdictions, discriminate administratively in favour of domestic businesses. Your business will be treated the same as local businesses. You will still have to comply with tax treaties between Canada and the country, but the Canadian production heading to your European store will enter the country duty-free. If you manufacture clothing, for example, the 6.5% tariff on textiles and the 11.4% tariff on clothing falls to zero.

6-Take advantage of the mobility of Europe’s skilled labour

Quebec businesses suffer from a labour shortage. CETA makes it easier to hire highly skilled workers for one-off projects. Certain criteria make it easier to hire employees for short-term mandates ranging from three to eighteen months. This provision covers employees in about thirty occupational categories, mainly white collar, such as management, research and development, and engineering. The agreement’s calendar also calls for negotiations to simplify access to occupations subject to professional orders. This update, however, could take another five years, due to its complexity and the many different professional orders in each province.

7-Benefit from local and regional calls for tender

CETA makes it easier to compete in tenders issued by local and regional governments for contracts overs $200,000, such as tenders by hospitals. Foreign businesses will be considered on an equal footing with local ones for tenders over the $200,000 threshold. This is a great opportunity for Canadian businesses. For example, Canada only has 1% of the market share for medical products, while the US has 43.3% and China, 14.4%. Removing the tariff on medical products should increase the competitiveness of Canadian medical product manufacturers.

Our specialists at BCF will be pleased to advise you concerning the opportunities offered by the new markets made available with the implementation of CETA. Notably at BCF we can assist you as your business prepares its entry in the European market with your: intellectual property plan, be it:

  • patents, trademarks, copyright or industrial designs;

  • tax plan;

  • rules of origin plan;

  • labour mobility plan; or

  • commercial business implementation plan, be it: simply hiring an employee, establishing a distribution network, acquiring an established business in Europe, establishing a new business in Europe or transacting with Europeans by e-commerce.