Companies trade, not governments. Despite the push by the government, if Canada is to double non-US exports over the next decade, it will need to convince thousands of individual Canadian companies to eschew the convenience and proximity of the US market and brave an unfamiliar world. In that sense, nudging corporate Canada to diversify will require both new trade policy tools and new data.
For decades, free trade agreements (FTAs) were the primary tool for trade diversification in the Government of Canada’s arsenal. By committing other states to reduce market access barriers abroad, these macroeconomic interventions promised to generally lower export costs for Canadian companies. Some FTAs have been game changing. As one example, the North American Free Trade Agreement (NAFTA) led to a Canadian export boom with more than 10 percent annual growth rates in the second half of the 1990s.
Despite that, most FTAs only produce marginal benefits for Canadian exports. The reason for that is simply because tariffs are already low, thanks to Canada’s most important FTA — the World Trade Organization. For many companies, the paperwork required to claim tariff-free entry under an FTA by meeting complicated country-of-origin rules is not worth the effort when the tariff differential is small. Moreover, duty-free access to the world’s largest and richest consumer market, the United States, dulled the urge for entrepreneurs to diversify, a trend that continues even under President Trump’s second term, thanks to a tariff exemption for goods complying with the rules of origin under the Canada-United States-Mexico FTA that most Canadian exports qualify for.
As a result, this rational “diversification inertia” among Canadian companies has not been shaken by Trump’s trade war and cannot be fixed through new FTAs. Trade liberalization is at best a necessary, but not sufficient, condition for trading with the world. Instead, different policy tools are needed that can directly change firm-level incentives.
Targeted financial assistance to companies is one way to boost diversification. A recent report by the Canadian Council for the Americas suggested introducing a tax credit for companies that actively diversify. But incentives must be smartly designed to avoid waste while promoting diversification. Germany, for example, nudged its companies to diversify their foreign direct investment away from China and into Türkiye or India by adjusting political-risk insurance rates.
Another angle would be reducing costs of diversification. Usually, finding buyers or suppliers abroad is complicated, due to search costs and information asymmetry. The traditional Canadian response has been to organize trade missions to build confidence and interpersonal relationships, such as how the minister responsible for Canada-US trade, Dominic LeBlanc, led the largest Canadian trade mission in living memory to Mexico in February 2026.
Such visits are crucial, but they are also an inefficient way to bring down search costs. They are, essentially, the business equivalent of speed dating. Better still would be an online technology-assisted matchmaking platform — a Tinder for companies, so to speak — that would easily allow companies to identify verified and trusted alternative suppliers.
A Critical Lack of Data
What impedes the deployment of clever incentives and creative technologies is a lack not of imagination but of data. Countries are still flying largely blind when it comes to supply chain information and thus lack the evidentiary basis to make targeted interventions. Trade statistics are collected at highly granular levels, but they are delinked from the business data of the companies actually trading. Conversely, the parts of the public sector that do engage with traders directly, such as Export Development Canada (EDC) and the Trade Commissioner Service, either don’t systematically compile information or are unable to share it for fear of breaching business confidentiality.
As a result, implementing a trade policy built on behaviour-changing microinterventions requires a new, systematic supply chain information architecture. While the Government of Canada has mapped supply chains for high-profile commodities such as rare earths — identifying chokepoints and aiding companies to strategically swap suppliers amid possible disruption — similar initiatives remain absent for crafting economy-wide diversification incentives and scalable business matchmaking.
The good news, however, is that such data already exists. New corporate due diligence reporting — including under Canada’s Supply Chains Act, aimed at fighting forced labour and child labour — is a potential trove of supply chain data. In addition, Crown corporations such as the EDC, the Canadian Commercial Corporation and the Business Development Bank of Canada sit on valuable data by virtue of directly interacting with export-oriented businesses. To complement that, private data providers could be contracted to fill gaps in the public ecosystem.
More important than collecting new data, the real challenge lies in pooling existing supply chain data. To achieve this, a trusted infrastructure is needed to guard against risks such as leakage of sensitive corporate information, cyberattacks and nefarious uses. But the advantages of pooling data that already exists in governmental silos make the effort worthwhile by promising smarter policies, more targeted interventions and better diversification incentives.
When trade accounting took off in the early eighteenth century, it revolutionized early trade policy by adding precision and strategy to tariff measures and trade negotiations. As historian T. H. Breen writes on early English practice, in The Marketplace of Revolution: How Consumer Politics Shaped American Independence, “collecting [trade] data of this sort for the purpose of informing government policy had no real precedent. These imposing registers represented a bold attempt to bring quantitative precision to the nation’s balance of trade.” Today, we urgently need another “bold attempt” at data gathering to revolutionize the Canadian supply chain trade policy of the twenty-first century.
