Trade diversification: 3 strategic markets to consider

Wondering where in the world you should expand your business? Read what three market experts have to say about the potential for Canadian exporters in the Indo-Pacific, European Union and Latin America, with key insights on each region.

Most successful companies share a common strategy: They diversify. Regardless of their different product lines, suppliers, customers, or distribution channels, they avoid depending on one source, which makes their business more resilient. 

The same holds true for the global markets in which you do business. In the current unpredictable trade environment, it’s more important than ever to broaden your international footprint. 

Many business owners regard geographic diversification as a way to generate greater revenue. While this is likely the most compelling motivation, there are several additional advantages reaped by sowing seeds in multiple markets. 

In fact, research shows that exporters outperform their non-exporting counterparts because they: 

• specialize their production and enjoy economies of scale;  
• interact with, and learn from, foreign consumers and suppliers; and, 
• face stronger competitive pressure that prompts them to make investments and improve their business practices. 

Recently, advisors at the Export Help Hub, a free question-and-answer service from Export Development Canada (EDC), have seen a significant rise in inquiries from Canadian companies.  

Three of the questions that routinely top the list are:  

1. Where do I go?  
2. Which markets are the most promising?  
3. Can EDC help me get there? 

The Key markets for strategic trade diversification webinar responds to these questions. It covers three promising export markets for Canadian products and services, including sectors with the highest potential for growth. The panelists also discuss some of the challenges inherent to doing business abroad, as well as risk mitigation strategies. 

It’s difficult to imagine three more different regional markets than the Indo-Pacific, Europe and Latin America. Each are highly diverse within their own trading bloc, let alone compared to each other. Still, they have one thing in common: Key markets in each region have free trade agreements (FTA) with Canada. These agreements give Canadian companies an edge over their competitors in countries that don’t have the benefit of operating under a preferential trade regime. 

In short, if you’re asking, “Where do I go,” a good place to start is by examining countries with which Canada has either a bilateral or regional FTA. The next step is gathering market intelligence and insights from experts in those strategic geographic markets.  

Here’s a quick primer on each region, with facts and observations from EDC’s in-market representatives.
 

Market size and characteristics 

The Indo-Pacific refers to more than 40 countries that, collectively, represent half of the world’s population. Highly diverse, the region contains some of the world’s largest economies, including India and China, along with the highly developed economies of Japan, South Korea, Australia and Singapore. The region also boasts some of the most promising emerging markets: Indonesia, Vietnam, Thailand and the Philippines. 

According to Ran Carter, EDC’s chief representative for Greater China, the exponential growth of the middle class within the region is of particular interest. By 2030, it’s estimated that two-thirds of the global middle class will live in the Indo-Pacific. The region’s economy is expected to more than double the size of the United States by 2040 and will account for 40% of total global consumption. 

Trade relationship with Canada 

The Indo-Pacific represents Canada’s second-largest trading bloc, with China, Japan and South Korea ranking among Canada’s Top 10 export destinations. 

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is the regional FTA that governs Canada’s trade relationship with seven Indo-Pacific member states: Japan, Malaysia, Vietnam, Singapore, Australia, New Zealand and Brunei. 

In the five years following the inception of the CPTPP in 2018, Canada’s merchandise trade to the Indo-Pacific countries included in the agreement grew by 38%. “This is a considerable chunk of growth,” says Carter, and she’s confident the numbers will continue to rise. 

Canada also has a bilateral FTA with Korea and has recently signed a comprehensive economic partnership agreement with Indonesia. The Government of Canada is also looking to conclude negotiations in 2025 that will result in an FTA between Canada and the 10 nations represented in the Association of Southeast Asian Nations (ASEAN), which will formalize our ties with Indonesia, the Philippines and Thailand, among others.   

Sectors of opportunity 

Carter says that the sectors with the greatest growth potential in the Indo-Pacific are well-matched to Canadian capabilities.  

“Demand for agri-food is steadily rising side-by-side with the region’s growing middle class. With more money to spend, they’re looking for higher quality food and that’s where Canada can play an important role.” 

In addition to agriculture, other growth sectors for Canadian businesses in this region include: 

• Infrastructure  

• Cleantech

• Advanced manufacturing  

Regional market challenges 

Competition is heavy in the Indo-Pacific, with local, regional and multinational players vying for their slice. Language is a common barrier, and differing cultural and business practices, challenging regulatory regimes, and environmental, social and governance (ESG) concerns prevail in several markets. Issues like corruption, human rights and environmental regulations can create barriers and are a source of concern for many Canadian companies.  

Carter speaks candidly about the rising geopolitical tensions in the region, especially as they relate to the growing rivalry between the U.S. and China. Still, she urges Canadian businesses to look to the Indo-Pacific as a critical long-term regional market to diversify to and within. 

Market size and characteristics 

As a trading bloc, the 27 member states of the European Union (EU), combined with the United Kingdom (U.K.), total 518 million people. Like most developed economies, the western segment of the EU is home to an aging population. Total gross domestic product (GDP) for this region is close to $33 trillion, with consumer spending accounting for 51% of the total. 

“Although the regulatory framework is consistent at the EU level, make no mistake—28 different countries, cultures and languages translate into a considerably diverse marketplace,” says Klaus Houben, EDC’s business development director for Europe, who’s stationed in Düsseldorf, Germany.  

The region includes the highly developed and industrialized markets of Germany, U.K., France, Denmark, Norway, Sweden, Finland, Belgium, the Netherlands and Luxembourg.  

Central Europe has become a production hub, with considerable capacity being built in Poland, Czech Republic and Hungary.  

Trade relationship with Canada 

Canada signed an FTA with the EU in 2016. The Canada-European Union Comprehensive Economic and Trade agreement (CETA) resulted in 98% of EU tariffs being removed from Canadian goods. Since then, bilateral trade in goods has increased 65%, demonstrating the benefits of free trade agreements. 

After the U.K. left the EU, the Canada-United Kingdom Trade Continuity Agreement came into effect in 2021, preserving the main benefits of CETA, as well as Canada’s competitive advantage in the U.K. market. The U.K. is Canada’s third-largest trading partner, with annual trade between the two countries topping $47 billion. 

Sectors of opportunity 

Under the European Green Deal, the EU is committed to becoming the first climate-neutral continent by 2050. The commission is also looking to become more energy independent in the wake of Russia’s full-scale invasion of Ukraine. To support these goals, they’re investing an estimated €275 billion (C$423 billion) of NextGenerationEU and REPowerEU funds to support clean investments. Another €118 billion (C$182 billion) in Cohesion Policy funds are earmarked for the clean transition until 2027. Canadian cleantech companies, especially in nuclear and renewable energies, would do well to explore opportunities in this region. 

As Europe seeks more independence from China, opportunities are opening up for raw materials, critical minerals and pharmaceuticals. 

Europe is a principal destination for trade fairs. Focused on industrial development, the Hannover Messe, hosted in Hanover, Germany, is one of the world’s largest trade fairs. The region also boasts the largest food and medical device fairs, as well. 

Houben notes that several conglomerates located in Germany have extensive trade with the Indo-Pacific, making it an important gateway to other regional markets of interest beyond the EU.  

Regional market challenges 

In addition to the cultural and linguistic challenges inherent in such a multi-ethnic region, regulations and certifications can be a sticking point for companies looking to export into the EU. Houben cautions Canadian companies to ensure that your certifications are aligned with EU standards, and to make the necessary changes if they aren’t, to ensure long-term success in the region. 

He also advises having a physical presence in market, particularly in the case of advanced manufacturing companies that need to be able to comply with maintenance and service agreements. 

Market size and characteristics 

Latin America and the Caribbean include 33 countries with a total population of nearly 660 million. Like the Indo-Pacific, this region is seeing a rapid expansion of their middle class.  

According to Jorge Rave, EDC’s vice-president for the region, the middle class has grown from 15% in 2000 to 41% in 2025. “Clearly, this is having a significant impact on spending power, adding to the attractiveness of many of these markets for Canadian exporters,” Rave says. 

Compared to Europe, there’s a high proportion of young people, with roughly 33% under the age of 25. While ethnically diverse, the predominant languages spoken are Spanish and Portuguese. 

Trade relationship with Canada 

By far, Canada’s biggest trade partner in Latin America is Mexico, with annual two-way merchandise trade approaching $60 billion. The Canada-United States-Mexico Agreement (CUSMA) remains in force, with no tariffs being levied between Canada and Mexico. 

In addition to the Indo-Pacific nations, the CPTPP gives Canadian companies preferential access to Chile and Peru. 

Canada also has bilateral free trade agreements with Chile, Colombia, Costa Rica, Honduras, Panama and Peru, and successfully completed negotiations for a new FTA with Ecuador on Feb. 4, 2025.

Sectors of opportunity 

Agriculture remains the cornerstone of Latin American economies, encompassing everything from growth production to processed foods. Beverages are popular in Argentina, Brazil, Chile, Mexico and Peru, offering tremendous opportunities for Canadian companies in this sector.  

Interest in renewable energy is on the rise, with investments being made in solar, wind and hydro power. This is, in large part, due to favourable government policies and the abundant natural resources available to many countries in Latin America. 

The region is rich in both forest products and critical minerals, providing ample opportunities for Canadian companies specializing in sustainable mining and forestry practices. EDC has built significant ties to leading regional corporations in these sectors through the Business Connections Program, which can lead to introductions between these buyers and qualified Canadian companies. 

Advanced manufacturing is highly developed in Mexico. Increased internet penetration and smartphone usage is driving growth in e-commerce, digital services and telecom, primarily in Argentina, Brazil and Mexico. 

Regional market challenges 

Concerns about security and corruption continue to be two of the greatest challenges to doing business in Latin America. While there have been noticeable improvements in the fight against corruption, Rave warns Canadian companies to remain vigilant when brokering deals in the region, as no jurisdiction in the world is immune to this type of business threat. 

When choosing an in-market partner, Rave reminds Canadian companies to perform the necessary due diligence, and, at a minimum, ensure the potential partner is a recognized legal entity established in accordance with applicable domestic laws. 
 

Last year, three-quarters of Canada’s exports went to the U.S. This is understandable, given the proximity, market size, buying power and similarities in terms of language, law and business practices. But given the unpredictable Canada-U.S. trade landscape, it’s critical for Canadian companies to expand their sights and seek out additional opportunities beyond the most proximate.  

This approach will involve a considerable level of energy and effort, which are the essential characteristics required when attempting to break out of any pattern. Diversifying requires building new relationships, understanding new requirements and regulations and building resources, both financial and informational.  

It’s what Todd Winterhalt, senior vice-president of international markets at EDC, refers to as the three Rs of growing global businesses. “Yes, it’s a little more cost-intensive at the beginning, but the diversification benefit boils down to resilience and the ability to weather things that come up––particularly in one market.”

The Team Canada trade ecosystem is an interconnected group of federal government partners that work together to support your international growth. With more than 1,000 trade professionals in 160-plus cities around the world, the Trade Commissioner Service (TCS) is one such partner–– and a critical link in helping you determine which foreign markets offer the most potential for your business. 

EDC works closely with the TCS, collaborating through representations in strategic markets around the world, to build avenues and connections between Canadian companies and international suppliers and customers.  

You can also rely on EDC’s team of world-class economists and analysts to produce timely economic reports, including the Global Economic Outlook, Country Risk Quarterly, and market profiles. Through our TradeInsights portal, you’ll find a sizable library of resources, including guides, articles, webinars and podcasts.  

To make informed business decisions related to the U.S. market, be sure to visit our new U.S. market intelligence hub, where you’ll find up-to-date resources and tools, the latest U.S. economic intelligence and handy links to resources from our network of partners.

EDC offers financial solutions to help you overcome the risks of doing business abroad. 

Are you concerned about the volatility in the Canadian dollar exchange rate? We have solutions that mitigate the risks associated with foreign exchange fluctuations by stabilizing your costs and protecting your profit margins from adverse currency movements.

Do you need working capital to manage existing contracts, or to adapt and evolve your business? EDC guarantees let you access more working capital from your financial institution. By taking on some of the risk related to your business growth, we enable your financial institution to lend you more, or release assets that would otherwise be held as collateral.

Are you looking to protect against supply chain disruptions and the risk of non-payment of goods shipped to the U.S. or elsewhere? EDC trade credit insurance protects against losses in the event of non-payment from your buyer. 

As businesses across Canada feel the impact of market uncertainty, we’re increasing our support to Canadian exporters and investors as you adjust and adapt to these new market realities. The EDC Trade Impact Program will facilitate an additional $5 billion over two years in support for eligible companies across a range of products to help you navigate economic challenges.

We’re here to help. Call us at 1-800-229-0575 or send us a question.