Klaus Houben, Senior Regional Manager – Europe, EDC Representation October 1, 2015 CETA –...

Klaus Houben,Senior Regional Manager – Europe, EDC Representation

October 1, 2015

CETA – OPPROTUNITIES AND RECOMMENDATIONS

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AGENDA

1• EDC Support

2• EU and Canada

3• CETA Overview

4• Recommendations

Overview of EDC Europe

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EDC OVERVIEW

Support and develop Canada’s export trade and international business efforts

Provide financing and insurance solutions as well as market intelligence to Canadian exporters and investors

Canada’s Export Credit Agency

Crown corporation wholly owned by the Government of Canada

Financially self-sustaining – Rated AAA/S&P

Operates on commercial principles

About EDC

EDC’s Role

EDC Support EU and Canada CETA Coverage Recommendations

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EDC MANDATE & CANADIAN BENEFITS

EDC’s Mandate: to support, directly or indirectly, Canadian exports and foreign investments

Canadian Benefits + Credit Considerations

Financing

Bonding

Insurance

The amount of EDC support on a financing opportunity is driven by the Canadian benefits as well as credit considerations.


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100% AAA Sovereign Issuer

› EDC notes are a direct and unconditional obligation of the Issuer, therefore are direct and

unconditional obligations of Canada

› CAD 1.4 billion in revenue, CAD 1.1 billion in net income, CAD1.1 billion dividend

› CAD 21 billion Loan Book supported by CAD 8 billion in Equity

EDC IS CANADA

Domestic Currency Foreign Currency

Long-term Short-term Long-term Short-term

Standard & Poor’s AAA A-1+ AAA A-1+

Moody’s Aaa P1 Aaa P1

JCR AAA AAA

DBRS AAA R-1 (high) AAA R-1 (high)

Canada Banking System Is World's Soundest, Economic Forum Says in Survey. Canada’s banking system was ranked the world’s soundest for the seventh straight year by the World Economic Forum. September 3rd, 2014


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› Supported CAD 99 billion of trade and investment volume

› Served about 7,400 customers in 198 countries

› 90% of our 1,084 financing transactions were done in partnership with financial institutions

› Contributed to 4% of GDP, supporting 719,200 jobs

2014 Business Volume by Region

2014 PERFORMANCE HIGHLIGHTS


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›Business Facilitated for Canadian Companies reached CAD 99 billion in 2014

* as of December 31, 2014

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0 20 40 60 80 100 120

$ Billions

Yea

r

99.0

95.4

87.4

102.8

84.6

82.8

85.8

77.7

66.3

57.4

54.9

51.9

44.3

40.9

36.2

31.4

25.7

BUSINESS GROWTH


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EDC’S FOREIGN REPRESENTATIONS

LONDON U.K.

JOHANNESBURGSOUTH AFRICA


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EDC IN EUROPE

EDC’s Business Volume in Europe, by Sector (2014) Canadian Customers Served (2010 – 2014)

EDC’s Business Volume in Europe, by Product (2010 – 2014)

Extractive 16%

ICT 18%

Infr. & Environment 18%

Light Mftg. 7%

Resources 18%

Transport. 22%

2010 2011 2012 2013 20140

100200300400500600700800

2010 2011 2012 2013 2014

Financing 2,051.4 2,145.5 3,632.2 4,537.5 4,409.4

Insurance 7,629.5 9,862.1 6,752.2 6,917.9 5,847.4

Total 9,680.9 12,007.7 10,384.4 11,455.5 10,256.8


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EDC’s Business Volume in Czech Republic, by Product (in CDN million)

EDC’s Business Volume in Czech Republic, by Sector (2014)

Number of Canadian Customers Served in Czech Republic

2010 2011 2012 2013 2014

Financing 4 70 72 227 184

Insurance 38 35 25 37 28

Total 42 105 97 264 212

ICT1%

Infr. & Enviro87%

Light Mftg.5%

Resource3%

Transport4%

2010 2011 2012 2013 201495

100105110115120125

EDC IN CZECH REPUBLIC


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EDC PRODUCTS & SERVICES

› Insurance (Credit & PRI)

› Finance (Domestic & Foreign)

› Bonding

› Equity


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WHY PARTNER WITH EDC?

› Add valuable capacity and flexibility to your financing packages

› As an ECA, EDC may be able to co-lend with other ECAs and in longer-tenor, ECA specific tranches of debt packages

› EDC has many reinsurance partners that enable us to front insurance policies of varying size and scope

› Introduces new suppliers to your firm

› Strong CSR policies


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SELECTED EDC TRANSACTIONS IN EUROPE

CAD 25-50 mlnFinancing

June 2012


March 2014


November 2012

CAD 500 mln-1 blnFinancing

December 2012

General Corporate Purposes


March 2014

Support for future procurement by

Canadian Exporters


February 2014


Canadian Exporters

* Most of those transactions facilitated in EUR, but for internal purposes shown in CAD


December 2013


Canadian Exporters

France Germany Germany Luxembourg

Austria Germany United Kingdom


February 2015


Canadian Exporters

Spain


Canadian Exporters


Canadian Exporters


Canadian Exporters


http://en.wikipedia.org/wiki/File:BMW.svg

EU and Canada

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› As a strong supporter of free trade, Canada has always been a natural ally and important trade partner for the EU

› Current trade relations with Canada guided by a Framework Agreement for Commercial and Economic Cooperation in force since 1976

› EU and Canada hold annually bilateral summits and Joint Cooperation Committee to review a range of issues relating to EU-Canada economic and trade relations

› In 2014 Canada was the EU's 12th most important trading partner, accounting for 1.7% of the EU's total external trade

› In 2013 the EU-28 was Canada's second most important trading partner, after the U.S., with around 9.2% of Canada's total external trade in goods

› Canadian companies established in Europe create many jobs, share their know-how and export from Europe to foreign markets. The value of goods they produce in the EU largely exceeds the value of EU-Canada trade

EU AND CANADA


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› The value of bilateral trade in goods between the EU and Canada totaled €59,1 billion in 2014

EU AND CANADA


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› Machinery, transport equipment and chemicals dominate the EU's exports of goods to Canada, and also constitute an important part of the EU's imports of goods from Canada

EU AND CANADA


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› As advanced economies, trade in services such as professional services, transport, banking, and insurance is an important aspect of the EU-Canada trade relationship

› The value of bilateral trade in services between the two partners amounted to €28,8 billion in 2013

EU AND CANADA


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› According to EU statistics, Canada is the fourth-largest investor in the EU, after the United States, Switzerland and Japan

› Canadian direct investment stocks in the EU totaled almost €117.0 billion (2013)

EU AND CANADA


CETA Coverage

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› Official Negotiations started in 2009 at Canada-EU Summit in Prague

› On 18 October 2013 an Agreement in Principle on a Comprehensive Economic and Trade Agreement was reached

› On 26 September 2014 Prime Minister Harper, European Commission President José Manuel Barroso and European Council President Herman Van Rompuy signed a joint declaration to “celebrate the end of negotiations of the Canada-EU Trade Agreement” at the EU-Canada Summit in Ottawa

› Next steps:

• Approval of the European Council and the European Parliament

• Implementation legislation passed by the Parliament of Canada and each Canadian province

• Uncertain whether approval of the Member States of the EU is required - the issue will likely be debated when the Agreement comes before the European Council for approval

CETA OVERVIEW

EDC Support EU and Canada CETA CoverageRecommendation

s

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› The objective of CETA: increase bilateral trade and investment flows and contribute to growth in times of economic uncertainty

› Seen as gold standard, “21 Century” trade agreement

› Once implemented, the agreement is expected to increase two-way bilateral trade in goods and services by 23% or €26 billion

• EU exports to Canada are estimated to go up by 24.3% or €17 billion

• Canadian exports to the EU are predicted to increase by 20.6% or €8.6 billion

› The economic model of the Joint Study predicts annual real income gains of approximately €11.6 billion for the EU and €8.2 billion for Canada within seven years following the implementation of an agreement

› 50% of the total expected gains for the EU are related to trade in services, 25% to the removal of tariffs and the remaining 25% of the GDP gains can be reached by the dismantling of Non-tariff barriers (NTB)

CETA OVERVIEW


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› One of the most comprehensive tariff reduction package the EU has ever achieved in the context of an FTA

› Overall, the tariffs for 98.6% of all Canadian tariff lines will ultimately be fully eliminated:

• 98.2% of Canadian tariff lines at zero at entry into force of the agreement

• All other products identified for liberalization will have their tariffs brought to zero within 3, 5 or 7 years

› 100% of the industrial tariff lines for both sides will be fully eliminated

• 99.6% upon entry into force

• A limited number of automotive products will be liberalised on a reciprocal basis over 3, 5 or 7 years

• Once fully implemented, EU exporters would save on average duty payments on industrial goods of €470 million annually

TRADE LIBERALIZATION


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› Nearly 92% of EU agriculture and food products will be exported to Canada duty-free (90.9% at entry into force)

› Both sides will fully eliminate all tariffs on fisheries products

› Export duties and other export restrictions will be generally prohibited - important in particular with regard to energy and raw materials for which the EU is dependent on imports and of which Canada is a major producer

› Canada accepted a general prohibition of Duty Draw Back - applicable three years after entry into force of the Agreement

› No obligations related to the provision or the elimination of domestic agricultural or fisheries subsidies

TRADE LIBERALIZATION


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› Promotes mutual recognition of standards to facilitate trade

› Follows WTO TBT Agreement on on Technical Barriers to Trade

› Contains provisions that will improve transparency and foster closer contacts between the EU and Canada in the field of technical regulations

› Protocol on Conformity Assessment - regulatory bodies can recognize each others product tests and certifications to reduce costs for testing and obtaining product certification for exporters

› Reducing the cost of complying with technical regulations, standards and conformity assessment procedures could amount to GDP gains of up to €2.9 billion a year for the EU

TECHNICAL BARRIERS TARIFFS (TBT)


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CANADIAN EXAMPLE – SECTOR GAINS FROM TARIFF REDUCTIONS


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Source: “Stronger Ties. CETA Tariff Elimination and the Impact on Canadian Exports”. Conference Board of Canada. June 2015.

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› Around half of the overall GDP gains for the EU are expected to come from liberalising trade in services

› European companies gain access to the Canadian market in key sectors such as financial services, telecommunications, energy and maritime transport

› Services in all sectors are granted access and non-discriminatory treatment except for specific exceptions listed in the CETA

› Canada for the first time includes explicit clear and comprehensive provincial and territorial reservations, guaranteeing to EU service providers the benefit of the current market access

› Best coverage each side has ever offered

› Overall, output gains for the EU could amount to €5.8 billion per year once the agreement is fully implemented

CROSS-BORDER TRADE IN SERVICES


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› Mutual recognition of professional qualifications

• Gradual coordination of licensing for professions such as architects or lawyers

• First time that substantive and binding provisions on licensing and qualification, as well as the mutual recognition of professional qualifications have been included in any of Canada’s free trade agreements

› Temporary Entry

• Comprehensive disciplines and coverage

• Covers intra-corporate transferees, investors, business visitors, after sales and after lease services, some contract service suppliers and professionals

› No impact on permanent employment or migration

LABOUR MOBILITY


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› CETA removes and alleviates barriers for investors to enter the Canadian market

› Commitments to treat investors fairly and equitably and in a non-discriminatory manner, no less favorably than domestic or other foreign investors

› Canada and EU also commit that they will not impose any new restrictions on foreign shareholding

› Best access ever provided to any FTA partner

› Clear and detailed rules of procedure to promote the efficient resolution of investor-state disputes

PROMOTING AND PROTECTING INVESTMENT


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› EU companies will be able to bid for public contracts in Canada at all levels of government (federal entities, provincial and territorial ministries and most agencies of government as well as "crown corporations”)

› The most comprehensive access to the procurement markets Canada has made thus far to a third country, including the US

› Overall value of contracts awarded by the federal government in Canada estimated at CAD 15 to 19 billion per year

› Contracts at other levels of government even exceeds this - in 2011 procurements by Canadian municipalities estimated at CAD 112 billion – almost 7% of Canadian GDP

› Single electronic procurement website that combines information on all tenders to ensure that the EU companies can effectively take advantage of these new opportunities

GOVERNMENT PROCUREMENT


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› Both the horizontal and the product specific rules of origin are based to the extent possible on the standard EU rules

› Possibility of a future rule of origin cumulation with the US for vehicles and a very limited number of agricultural products

› CETA leaves open for the future the possibility of cumulation of origin with third countries with which both the EU and Canada have a free trade agreement

› Forward looking provisions that allow for the adjustment of the rules of origin to provide additional flexibility in the event that the EU strikes free trade deals with other countries, such as the United States

RULES OF ORIGIN


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Recommendations

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› Take advantage of the time between the signing of the Agreement and its implementation to prepare entry into the Canadian market or trade with Canada

› Lift interest and engagement in the region

› Adopt a more sophisticated and longer-term approach to strategy development, due diligence, valuation and postdeal integration

› Navigate business and regulatory issues

› Find qualified partners and structuring trade financing solutions

The biggest risk in relation to Canada: to continue ignoring it

RECOMMENDATIONS


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Thank you for your attention.

Klaus HoubenSenior Regional Manager – Europe

EDC [email protected]

Export Development CanadaConsulate of CanadaBenrather Strasse 840213 Düsseldorf

Germany

mailto:[email protected]

Klaus Houben, Senior Regional Manager – Europe, EDC Representation October 1, 2015 CETA –...

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