Quebec is lucky to be aligned with the United States. But it is also an obstacle to exporting, even though it is often the only international market for Quebec SMEs.
“The lack of market diversification is still the main export challenge today, even if we invest a lot of effort in Europe and Asia,” says Marie-Eve Jean, vice-president Exports at Investissement Québec.
Why is this a problem? “It’s certain that in a sense, the United States is interesting for Quebec SMEs because they are neighbors and we have a free trade agreement with them,” she adds. But this means that Quebec SMEs are very dependent on the American market. »
So, if there is an economic slowdown, they suffer.
“But also, the expected GDP growth in the United States next year is 1%,” illustrates Marie-Eve Jean. However, in emerging countries, for example in the Middle East and Asia, it is closer to 3%. In sub-Saharan Africa, for example in Ivory Coast, it is 4 or 5%. This is an untapped potential for Quebec companies which, with their limited resources to devote to exports, will often hesitate to invest in other markets. »
Special effects company Rodeo FX, started 17 years ago with three people working in a basement, has grown with exports. So many that today it has 1000 employees. No less than 98% of its revenues come from abroad, mainly from the United States, more specifically from California, where its main clients are located, such as Warner, Paramount, HBO, Netflix, Amazon and Apple. To be close to them, the company has had an office in Los Angeles since its beginnings.
“I worked in the United States for a long time before starting Rodeo FX, notably with George Lucas, so I knew the market well and I was really launching the company in Canada to serve American productions,” explains Sébastien Moreau, president and director. general of Rodeo FX, who recently worked on Disney’s The Little Mermaid, among others.
“Munich was a challenge,” says the entrepreneur. However, we had analyzed the market well, with its skilled workforce in the field of special effects. Then we found a trusted studio director, which is very important. But still, the language barrier was difficult: we had to have all the contracts we signed translated. Then we lost our director. And it must also be said that there are very few tax credits in Munich that our clients can benefit from. »
When Emmanuel Macron presented the France 2030 plan in 2021, which includes the introduction of tax credits for the creative industry, Rodeo FX was tempted to take the plunge.
“It’s very important for our customers,” says Sébastien Moreau. Then we are a French-speaking company and we have several employees from France, so it is certain that it is a very interesting country for us. We still did research for two years on the country and the different cities where we could set up before finally opening our office in Paris. »
Rodeo FX does not do this work alone: in addition to being supported by government authorities such as Investissement Québec, it will seek out local professionals, such as lawyers and accountants, who are familiar with the particularities of the market.
In addition to Europe, she emphasizes that among other markets that can be interesting for Quebec companies, there is South Korea, for example for the creative industries. Then closer to us, Mexico, with which we have a free trade agreement, and which is particularly interesting for the transport industry.
“SMEs must be aware that breaking into a new market takes time,” explains Marie-Eve Jean. But once you have managed to create solid relationships, they generally last over time, especially if your product or service is distinctive. But it is certain that at a given moment, it is also good to have a local office to take the pulse of the market and adapt accordingly. »
The biggest challenge in exporting, in the eyes of Véronique Proulx, CEO of Manufacturiers et Exportateurs du Québec (MEQ), is the labor shortage. She points out that there were nearly 32,000 vacant positions in the manufacturing industry in Quebec in 2022, compared to 24,000 currently. “The pressure has lessened because international demand has decreased and the number of temporary workers has increased,” she says. But large companies benefit more from the situation than SMEs, which do not have as many resources to attract and retain their workforce. So the lack of personnel continues to limit their ability to export. »
Véronique Proulx is also concerned about the low productivity of Quebec SMEs. “The growth in investment in manufacturing equipment/machinery over the last five years was around 30% in the United Kingdom and 23% in the United States, compared to 8% in Canada,” she explains. There was already a productivity gap, it continues to increase. And when we arrive internationally, less productive means less competitive. » In addition, she adds that there are nearly 13,000 manufacturing SMEs in Quebec with fewer than 100 employees and approximately half of them have not yet started their digital transition. “One tip is to start with a small project which will allow a quick return on the investment and the mobilization of the teams,” advises Véronique Proulx. There is help in Quebec to do this. »
Challenges in terms of transport infrastructure are also a barrier to exports for Quebec SMEs, notes Véronique Proulx. “There was a strike at the port of Vancouver in August and we saw a decrease in exports during that month,” she explains. Then, there are negotiations to renew the collective agreement currently at the port of Montreal and if that is not resolved, there could be a strike in January. Disruptions in the supply chain have a significant negative impact on businesses that export and import. And it’s not everywhere that we see this kind of conflict in work relations. »