Episode Transcript
[00:00:00] Speaker A: Welcome to the Tradesecurity podcast brought to you by the Receivables Insurance association of Canada. I'm Janet Eastman and today we're looking at the shift in Canada's trade strategy that comes with the 2025 federal budget.
To outline what has changed and what it means for Canadian business, I'm joined by Jordan Mofford. He is Credit Analyst Manager at cofast Canada.
Good to talk to you, Jordan.
[00:00:27] Speaker B: Good to be here.
[00:00:28] Speaker A: So let's get things started. I'd like you to outline how this budget is different than what we've seen in the past and what impact that may have. And in particular, we're looking at around section 2.2, which you've said marks a pivotal shift in Canadian trade strategy.
[00:00:47] Speaker B: Firstly, thank you Jan for having me on the Trade Securely podcast and I do look forward to our discussion today as this is a really important topic.
With respects to Section 2.2 of the 2025 federal budget, it marks a pivotal shift in Canadian trade strategy with infrastructure investment and significant export growth being the key drivers.
This shift from reliance to resilience is certainly a clear response to the global trade disruptions in 2025 that still persist. The budget aligns with the need for Canada to significantly diversify and increase trade with global markets. And while many Canadians are concerned with the outlook of an increased deficit, most do support the idea that diversifying our trading partners would benefit us and can rationalize the strategy as a type of generational investment.
[00:01:35] Speaker A: Okay, so let's talk about the budget and that it's aiming to double exports to non US markets over the next 10 years.
What's going to power that growth? And really, Canadian companies are going to have to move out of their comfort zone and look at doing business in different countries and in different languages and accepting different risks. So how are we going to get this growth going? Really?
[00:02:02] Speaker B: Yeah. As you mentioned, that trade infrastructure strategy, it is aimed at doubling these exports to non US markets. So that's going to be targeting 300 billion in new trade over a 10 year period. The growth is going to be powered by an improved supply chain and strategic infrastructure projects.
And to comment first on supply chain to really strengthen our supply chain and unlock new exports routes. This 5 billion is to be allotted for the Trade Corridors Fund over a seven year period via Transport Canada. This fund is designed to support port expansions, rail upgrades and digital infrastructure projects to optimize logistics and as supply chain issues and bottlenecks. Having been historical pain points in Canada, this change is viewed as a bold and welcome Move by industry leaders.
And in addition to supply chain improvements, further focus will take place on strategic infrastructure projects including the Great Lakes, St. Lawrence region, northern Quebec ports and the Arctic trade corridors where a 1 billion Arctic infrastructure fund will invest in major transportation projects in the north with civilian and military use including airports, seaports and roads.
These updates, as noted in the budget, outline a strategic but ambitious trade infrastructure plan which paints a clear picture of Canada's need to diversify exports and build economic resilience.
And these strategies and changes would be expected to significantly increase the demand for trade credit insurance or TCI in Canada.
Simply put, more exports will equal more demand for trade credit insurance. When Canadian companies start selling more to foreign markets, they face higher payment risk. Especially in regions with less predictable economic or political stability.
TCI becomes essential.
It protects receivables against non payment and it enables safer expansion into these markets.
[00:04:00] Speaker A: You mentioned this $5 billion that's being allotted for the trade quarter as fund over a seven year period going to be operated by Transport Canada. And this is an opportunity for large corporations, but it's also a good thing for smaller companies that they may subcontract to. So let's talk about the risks for these companies in that supply chain.
[00:04:22] Speaker B: Absolutely. So let's dive in the the $5 billion allotted for that trade quarter fund. It's expected to accelerate trade volumes in underutilized regions and to stimulate the need for working capital.
And working towards an improved supply chain is very important for Canada. But the size and scope of these projects impose additional risks where TCI can play a pivotal role with the size of these infrastructure projects.
Some of these risks include long payment cycles tied to large contracts where extended payment terms are often involved.
Multi tier supply chain risk would also play a factor.
And in these types of projects, multiple layers of subcontracting can create domino like situations when it comes to defaults.
We could use an example of let's say a mid tier contractor failing to some degree due to cost overruns. Then the effect would become ever apparent downstream when those smaller firms might not be getting paid.
And with project size comes the need for additional financing and higher credit limits. TCI comes in as a multi benefit product that covers non payment risk giving companies time to offer credit terms without jeopardizing liquidity.
TCI policies protect receivables from insolvency and protracted default with respect to that multi tier supply chain I mentioned. And TCI allows access to better financing terms and higher credit limits which can be the difference between these businesses winning a project or having to walk away. So bottom line here, TCI isn't just a risk tool, it's really a strategic enabler for growth and resilience.
[00:06:02] Speaker A: Okay, so what's the opportunity in this budget then for the small and medium enterprises? And how can they pursue opportunities with a kind of peace of mind intact and protect their business? You talked about the role of trade credit insurance, so can, can you explain that further?
[00:06:19] Speaker B: Yeah, absolutely. The, the trade section of the budget emphasizes regional diversification in these underutilized areas. This would in turn bring in more small and medium sized business.
And with their limited experience and exposure to global markets, international buyers navigating credit risk management, exposure to payment defaults and currency fluctuations, this would make them prime candidates to be able to benefit from tci.
And with respect to some of the projects we've mentioned, these SMEs in construction, logistics, engineering and even technology come to mind when thinking of companies that would be impacted by these projects, which tend to create specialized service needs, which leads to room for these smaller firms.
And with Section 2.2 emphasizing new trade routes, SMEs in manufacturing, agri, food, for example, can tap into opportunities to expand into other markets. Asia, Europe, beyond.
But with this growth, there comes risk.
And these SMEs could find themselves dealing with payment delays, cash flow strain, contractual complexity, global supply chain disruptions, and volatility in global markets. So TCI really steps in here and acts as that financial shock absorber. It doesn't eliminate operational or compliance challenges, but it certainly ensures that when those risks translate into non payment, these companies aren't left exposed.
[00:07:51] Speaker A: Okay, so when it comes to doing business in unfamiliar countries, companies need to understand the political landscape. And TCI can help with this as well. Can you explain that?
[00:08:03] Speaker B: Yes, absolutely. With, with an ever evolving tariff landscape, instability in alternative and developing markets just seems to be commonplace. And these factors ultimately lead to an increase in default risk.
And as a business plans to navigate and operate, operate in, within these new markets, staying informed and protected becomes more critical than ever.
I like to think of it as venturing into a new market without understanding the political terrain. It's kind of like jumping into unknown waters.
So when you look to tci, it's acting as that life jacket. As companies navigate unfamiliar countries, political landscapes, sudden regulatory changes, currency fluctuations, just to name a few.
[00:08:47] Speaker A: Okay. And tci, when somebody's looking at new markets, if you're working with an insurer, they're going to be able to give you an idea of whether it's safe to trade with the particular person that you want to do business with, correct?
[00:09:03] Speaker B: Yeah, that's right. It can really be that look before you leap approach to be able to partner with an insurer and to have that information readily available.
[00:09:12] Speaker A: Okay, perfect. So, Jordan, what's your key takeaway as companies move forward now?
[00:09:20] Speaker B: Well, what we discussed today and section 2.2 of the budget as it relates to Canadian trade and the strategy, it offers significant opportunity for growth for Canadian companies and really that success depends on balancing ambition with protection. So looking to TCI as that bridge and enabling companies to scale, I believe that's what they need to take forward, apply and be able to be successful in these ever changing markets.
[00:09:46] Speaker A: Okay, I'm gonna ask you one more question. Jordan and I know we looked at this budget from a 10 year perspective or perspective or something. They were saying we wanna do all of this.
I forget what the word was.5 billion over seven years. But over the next 10 years we're going to try to double our exports to non US markets. So if you could look ahead, what do you think the Canadian landscape is.
[00:10:12] Speaker B: Going to look like?
Well, I don't have a crystal ball in front of me. If I did, that'd be very helpful. But I would, I would say with the ambition that we're putting forward, Canada would look a lot different.
And it would certainly be beneficial for our country and our businesses to be able to reach out globally and certainly build their brands. So I would hope to see that come to fruition in 10 years. But we will certainly see, won't we?
[00:10:36] Speaker A: Yeah, kind of a once in a lifetime opportunity to see what Canada can do. Jordan, thank you so much for sharing your time and your insights on Trade Securely.
[00:10:45] Speaker B: Thank you. Good to be here and have a great day.
[00:10:47] Speaker A: Yep, same to you. Jordan Mofford is a credit analyst manager at COFAS Canada.
Thanks for tuning in to the Trade Securely podcast. Don't forget to subscribe and share this episode with your colleagues and follow the Receivables Insurance association of Canada on LinkedIn X and YouTube. And remember, if you have any questions about trading securely, reach out to one of our members. It's receivables insurance canada.com. i'm Janet Eastman. Until next time, stay informed, stay resilient and trade securely.
