Ease up on export bank’s Russia-ban: Business groups
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By PETER MAZEREEUW
PUBLISHED : Wednesday, Aug. 31, 2016 12:00 AM
Canadian businesses are calling on the government to reverse orders to
Canada’s export credit agency that stop it fromsupporting trade with
Russia, saying it has cost them millions of dollars in business.
But the government and official opposition are standing firm, saying the
move is an extension of the more targeted sanctions against the country for its
incursion into Ukraine.
Export Development Canada, a Crown corporation, stopped providing insurance
and financing for business deals between Canadian and Russian companies in 2014
on orders from the Conservative government at the time, according to
spokesperson Phil Taylor.
That policy was brought in along with a package of trade sanctions as a
response to Russia’s annexation of Crimea from Ukraine in 2014, according to
Global Affairs Canada.
However, whilethe trade sanctions are targeted against specific
individuals and entities in Russia, and the Russian oil and gas industry—with
its direct ties to many of Russia’s power players—the EDC ban affects any and
all transactions between Canadian and Russian businesses that require the
special financing and insurance the export bank usually supplies.
"This is affecting everyone," said Sebastien Dakin, a regional director for
the Canada Eurasia Russia Business Association (CERBA).
Do business
in Russia at your ‘own peril’
Companies seeking to export everything from food and clothing to
manufactured goods to Russia don’t have access to insurance offered by EDC, and
so are taking a risk when they ship goods that they will receive payment once
those goods arrive. They also can’t access EDC financing for buyers, and so
often have to find customers in Russia able to pay for large orders up front.
Some members have had to stop selling to Russia altogether, said Mr. Dakin.
CERBA has lobbied the government on the issue, as has the Agricultural
Manufacturers of Canada. The exports from AMC members have dropped from about
$144 million in 2012 to about $23 million last year, said president Leah Olson.
"The industry has been very impacted by the policy. We strongly support the
notion that EDC should be active in that whole market region, including
Russia," said Ben Voss, president of Morris Industries, a company that sells
air carts, air drills, and other agricultural implements.
The government hasn’t changed its mind. In an emailed statement, a
spokesperson for Trade Minister Chrystia Freeland (University-Rosedale, Ont.)
reiterated that the ban on supporting business in Russia"is the guidance
provided to EDC."
"Canada has one of the strongest sanctions regimes [in] the world against
Russia and we will continue to use it to apply economic pressure on the Putin
government. By engaging with Russia on the one hand and demonstrating our firm
resolve on sanctions on the other, we strengthen our ability to hold them to
account," wrote Anne-Louise Chauvette, Ms. Freeland’s communications director.
Conservative foreign affairs critic Peter Kent (Thornhill, Ont.) said his
party continued tosupport tough penalties against Russia in response to
its military action in Crimea and east Ukraine, despite the "collateral damage"
to Canadian companies.
"It’s unfortunate," he said, but "that’s the reality of life today."
"Official opposition policy is that sanctions have worked, and are working,
and, if anything, should be strengthened," he said.
"Canadian companies doing business in Russia do that business at their own
peril," he said.
Companies like Mr. Voss’s Morris Industries can’t easily turn to banks or
other financial institutions to fill in for EDC, as most won’t take the risk of
guaranteeing a purchase across borders, he said.
Global Affairs Canada explained the instructions for EDC to stop "pursuing
business" in Russia by notinga similar policy put in place by the U.S.
Export-Import Bank.
"Actions taken by the government of Canada in response to Russia’s illegal
annexation of Crimea are made strategically and in close coordination with our
partners," said GAC spokesperson Diana Khaddaj in an emailed statement.
Quebec aerospace manufacturer Bombardier experienced the "peril" described
by Mr. Kent firsthand. The company suspended negotiations on a $3.4-billion
sale of turboprop aircraft to a Russian company in late 2014 after the
sanctions were imposed on Russia, and another Russian buyer was left to
scramble for financing for a sale of the company’s CSeries jets last year after
EDC stopped providing that service.
A spokesperson for Russia’s Ilyushin Finance Company, which had hoped to buy
those jets, blamed EDC for its failure to go ahead with the purchase as
planned, telling Aviation International News earlier this month that the hold
on EDC financing for business with Russia was politically motivated.
IFC’s purchase order was eventually changed to include fewer jets and a
single turboprop aircraft, AIN reported.
Bombardier declined to make a spokesperson available for an interview on the
EDC policy. In an emailed statement, spokesperson Simon Letendre wrote that the
company was continuing to pursue business in Russia.
Pork ban holding up
Canadian exports
The EDC website explains the policy on Russia by referring to Canadian trade
sanctions.
However, those sanctions do not require a blanket ban on trade between the
two countries.
The current sanctions against Russia "are not comprehensive sanctions that
prohibit Canadians from doing business with Russian entities" but are targeted
to certain people, entities, goods, services, and technology, said Vincent
DeRose, a partner in the Borden Ladner Gervais Ottawa law office who leads the
firm’s defence and security group.
Industry Canada trade statistics show that manufactured machinery and
equipment are among the biggest exports from Canada to Russia. Aerospace
products including helicopters, airplanes, and flight simulators made up the
top two most exported product groups tracked by Industry Canada last year, with
a combined value of about $124 million.
Pork was the leading export from Canada to Russia by far up until 2014, but
the Russian government banned meat imports from Canada and other Western
countries that year in response to their sanctions.
Fortunately, Canadian pork producers have mostly been able to find other
markets—primarily in Asia—for their formerly Russian-bound product, said Gary
Stordy, a spokesperson for the Canadian Pork Council.
peter@hilltimes.com
@PJMazereeuw Peter Mazereeuw is a
deputy editor for The Hill Times covering trade, immigration and more. He
can be reached at peter@hilltimes.com. Follow him on
Twitter at @PJMazereeuw.
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