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

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

Overview of EDC Europe

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

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

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

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

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

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 2013. 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

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

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

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

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

SELECTED EDC TRANSACTIONS IN EUROPE CAD 25-50 mln Financing June 2012 France CAD 25-50 mln Financing November 2012 Germany CAD 500 mln-1 bln Financing December 2012 General Corporate Purposes Germany CAD 250-500 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 100-250 mln Financing March 2014 Germany CAD 100-250 mln Financing March 2014 Support for future procurement by Canadian Exporters United Kingdom CAD 100-250 mln Financing February 2015 Support for future procurement by Canadian Exporters Spain CAD 50-100 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

EU and Canada

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

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

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

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

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

CETA Coverage

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

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

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

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

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

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

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

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

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

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 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 EDC Support EU and Canada CETA Coverage Recommendations

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

Recommendations

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

Thank you for your attention Thank you for your attention. Klaus Houben Senior Regional Manager – Europe EDC Representation khouben@edc.ca Export Development Canada Consulate of Canada Benrather Strasse 8 40213 Düsseldorf Germany