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

2. agenda 1
EDC Support 2
EU and Canada 3
CETA Overview 4
Recommendations

3. Overview of EDC Europe

4. EDC OVERVIEW Canada’s Export Credit Agency
About EDC
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
EDC’s Role
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

5. Canadian Benefits + Credit Considerations
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.
EDC Support
EU and Canada
CETA Coverage
Recommendations

6. EDC IS CANADA 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
Domestic Currency
Foreign Currency
Long-term
Short-term
Standard & Poor’s
AAA
A-1+
Moody’s
Aaa P1
JCR
DBRS
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

7. 2014 Business Volume by Region
2014 PERFORMANCE HIGHLIGHTS
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
Customer count has decreased from a peak of 8,469 in 2009 at the peak of the financial crisis with more sources of credit available again, a lower demand for trade insurance and a smaller pool of exporters.
EDC Support
EU and Canada
CETA Coverage
Recommendations

8. BUSINESS GROWTH
Business Facilitated for Canadian Companies reached CAD 99 billion in 2014
99.0
95.4
87.4
102.8
84.6
82.8
85.8
77.7
Year
66.3
57.4
54.9
51.9
44.3
40.9
36.2
31.4
25.7
$ Billions
* as of December 31, 2014
EDC Support
EU and Canada
CETA Coverage
Recommendations

9. EDC’S FOREIGN REPRESENTATIONS
LONDON
U.K.
International representation around the world in markets  that show the most potential for growth.  We currently have 16 Representations abroad with the vast majority in emerging markets.
Through our services, our customers’ business in 145 emerging markets totaled $27.4 billion in 2013, a 4 per cent increase from 2012
Our loans to foreign buyers in emerging markets, a key focus for EDC, was $4.4 billion in This included close to $790 million in financing to the Middle East, up from $12 million in 2012, $623 million in Chile, up from $55 million in 2012, $382 million to China, up from $213 million in 2012, $495 million to Russia & CIS, up from $382 million in 2012, and $294 million to Southeast Asia, up from $174 million in 2012.
A pull facility is a financing commitment to a foreign borrower not tied to a specific contract but one that allows EDC to influence the buyer’s future procurement decisions and to pull exports from Canada through targeted introductions and matchmaking efforts.  EDC has concluded 297 pull facilities (since the program started in 2003) with a total signed loan volume of CAD 25.4 billion. This business was undertaken with 225 buyers in 47 different countries, supporting CAD 39 billion in exports for 4,142 Canadian exporters
JOHANNESBURG
SOUTH AFRICA
EDC Support
EU and Canada
CETA Coverage
Recommendations

10. EDC IN EUROPE 2010 2011 2012 2013 2014 Financing 2,051.4 2,145.5
EDC’s Business Volume in Europe, by Product (2010 – 2014)
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
EDC’s Business Volume in Europe, by Sector (2014)
Canadian Customers Served (2010 – 2014)
EDC Support
EU and Canada
CETA Coverage
Recommendations

11. EDC in CZECH Republic 2010 2011 2012 2013 2014 Financing 4 70 72 227
EDC’s Business Volume in Czech Republic, by Product (in CDN million)
2010
2011
2012
2013
2014
Financing 4 70 72
227
184
Insurance 38 35 25 37 28
Total 42
105 97
264
212
EDC’s Business Volume in Czech Republic, by Sector (2014)
Number of Canadian Customers Served in Czech Republic
TRANS FILE: Volume in Europe by Product
Report Filter: Country Desc {Filter: Czech Republic}
Column Label: Program 3
Row Label:
Values: Sum of Business Facilitated
* Note: you have to combine certain items to come up with the aggregations above. I.e., STI and FII combine to make Insurance and FIN and CIB combined to make Financing.
TRANSFILE: Volume in Europe by Sector
Column Label:
Row Label: Market Sector Team Name
TRANSFILE – Number of Canadian Customers Served in Europe
Report Filter: Country Desc {Filter: Czech Republic}; Customers Served Indicator {Filter: “Y”}
Row Label: CI Legal Name
Values:
EDC Support
EU and Canada
CETA Coverage
Recommendations

12. EDC Products & Services
Insurance (Credit & PRI)
Finance (Domestic & Foreign)
Bonding
Equity
EDC Support
EU and Canada
CETA Coverage
Recommendations

13. 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
EDC Support
EU and Canada
CETA Coverage
Recommendations

14. SELECTED EDC TRANSACTIONS IN EUROPE
CAD mln
Financing
June 2012
France
CAD mln
Financing
November 2012
Germany
CAD 500 mln-1 bln
Financing
December 2012
General Corporate Purposes
Germany
CAD mln
Financing
December 2013
Support for future procurement by Canadian Exporters
Luxembourg
Support for future procurement by Canadian Exporters
Support for future procurement by Canadian Exporters
Austria
CAD mln
Financing
March 2014
Germany
CAD mln
Financing
March 2014
Support for future procurement by Canadian Exporters
United Kingdom
CAD mln
Financing
February 2015
Support for future procurement by Canadian Exporters
Spain
CAD mln
Financing
Support for future procurement by Canadian Exporters
Support for future procurement by Canadian Exporters
February 2014
* Most of those transactions facilitated in EUR, but for internal purposes shown in CAD
EDC Support
EU and Canada
CETA Coverage
Recommendations

15. EU and Canada

16. EU AND CANADA
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

17. EU AND CANADA
The value of bilateral trade in goods between the EU and Canada totaled €59,1 billion in 2014
EDC Support
EU and Canada
CETA Coverage
Recommendations

18. EU AND CANADA
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

19. EU AND CANADA
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

20. EU AND CANADA
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)
EDC Support
EU and Canada
CETA Coverage
Recommendations

21. CETA Coverage

22. CETA OVERVIEW
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

23. CETA OVERVIEW
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)
EDC Support
EU and Canada
CETA Coverage
Recommendations

24. TRADE LIBERALIZATION
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

25. TRADE LIBERALIZATION
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

26. TECHNICAL BARRIERS TARIFFS (TBT)
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

27. CANADIAN EXAMPLE – SECTOR GAINS FROM TARIFF REDUCTIONS
Source: “Stronger Ties. CETA Tariff Elimination and the Impact on Canadian Exports”. Conference Board of Canada. June 2015.
EDC Support
EU and Canada
CETA Coverage
Recommendations

28. CROSS-BORDER TRADE IN SERVICES
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

29. LABOUR MOBILITY 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
EDC Support
EU and Canada
CETA Coverage
Recommendations

30. PROMOTING AND PROTECTING INVESTMENT
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

31. GOVERNMENT PROCUREMENT
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 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
EDC Support
EU and Canada
CETA Coverage
Recommendations

32. RULES OF ORIGIN
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

33. Recommendations

34. The biggest risk in relation to Canada: to continue ignoring it
RECOMMENDATIONS
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
EDC Support
EU and Canada
CETA Coverage
Recommendations

35. Thank you for your attention
Thank you for your attention. Klaus Houben Senior Regional Manager – Europe EDC Representation Export Development Canada Consulate of Canada Benrather Strasse Düsseldorf Germany