Peru Trade Deal Gives Canadian Firm a Key Cost Advantage
When the leadership team at International Road Dynamics Inc. (IRD) looked beyond Canada’s borders to grow its business, they made a key strategic decision. They would not rely on the U.S. market alone to sell IRD’s highway traffic management products.
Instead, IRD targeted less traditional markets, such as Latin America, China and India, for their untapped potential. Two decades later, more than 50 percent of IRD’s business is conducted outside Canada and the U.S., and the company is now a world leader in automated toll systems, truck weigh stations, traffic controls and driver management systems.
There are challenges, though: in recent years, the Canadian dollar’s strong performance has forced IRD to source more products in local markets to remain competitive. That’s why Arthur Bergan, Chairman of the Board at IRD, was especially pleased when Canada began pursuing free trade agreements (FTAs) in the Andean region, an effort that resulted in an agreement between Canada and Peru (implemented in August 2009) and Canada and Colombia (implemented in August 2011).
“Any time you get a free trade agreement, immediately the importers and the government look at your country as being a friendly country. So it helps,” says Bergan. “The FTA [with Peru] reduces the cost of doing business locally, which offsets other costs we’re struggling with such as the high dollar.”
The Canada-Peru Free Trade Agreement offers Canadian companies improved market access by eliminating tariffs on the majority of Canadian exports. Key non-tariff trade barriers have also been addressed through measures to ensure that government regulations do not become obstacles to trade. The agreement also promotes transparent regulatory practices.
For investors, the agreement creates a more stable environment, ensuring they receive the same treatment as local investors. It also protects them from discrimination and from expropriation without fair compensation.
Bergan is optimistic that the Canada-Peru Free Trade Agreement will pay dividends. Although the turnaround time on infrastructure projects is generally lengthy, Bergan says his Peruvian distributor is already reporting increased interest in IRD’s products and solutions. With no customs duties to pay, the cost of doing business in Peru is reduced. It’s a savings Bergan can pass on to distributors, opening greater opportunities for IRD in the Andean market.
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