FOCUS ON: EUROPE – October 2021

As 2021 comes to an end and we enter a new state of global working relationships, Canada continues to maintain and build a strong relationship with the EU, especially as supply chains continue to pivot and demand diversified portfolios. Canada’s pre-existing relationships with the EU in innovation and research, B2B, customer supply chain, and peace and security remain strong.

There are currently several areas of concerns that significantly impact trade and investment in Europe. Rising geo-political tensions and global supply chain disruptions have clearly exposed the risks & weaknesses of current supply chain logistics. Disputes, such as the recent UK-France fishery feud, can result in increased protectionism and spill into other sectors, such as supply chains and labour mobility. The climate change debate on warming is over, as we see increased investment and urgency to build a greener and more resilient Europe. The European energy crisis demands energy transition plans, and a possible overhaul of the EU energy market. The significant rise in government spending to support pandemic recovery will challenge the spending capacity of some countries, and economic policy and investment choices will need to be made.

The green economy and clean energy currently present the largest economic and trade opportunities for companies interested in the European market. The EU pandemic economic recovery plan, a €750bn stimulus package, and the largest ever in Europe, has earmarked more than 30% to fight climate change. The focus will lean towards clean tech, batteries, chips, cloud computing, renewables and transition plans. An additional 20% of the fund is dedicated to foster digital transition (i.e. the EU is the top importer of IT services in the world).

Various analyses show that Canada’s exports are underperforming in the EU, with as much as $7bn of unused tariff savings left for the taking. While companies need patience to reap the true benefits of CETA, Canada does have an inherent trade advantage in Europe. Springboarding from the US market into the EU is a natural transition, and Canada is in good standing relative to the US given carbon price and lack of climate change policy in the US. The UK will remain one of Canada’s top 5 export and investment destinations, and other promising European markets include France, the Netherlands, Germany and Belgium. There is also high potential in Eastern Europe, where risks can be mitigated by working with Western European companies that have deeper experience and successful track records in target markets. In addition, Eastern Europe and countries just over the EU border offer viable solutions to Canada’s skilled labour shortages

As travel restrictions decrease and in-person trade shows ramp up, Europe is open for business and is expected to remain a safe and stable bet for Canadian businesses for many years to come.