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Winnipeg Free Press - PRINT EDITION

Export agency needs to accept more risk: report

By: Dean Beeby

Posted: 10/29/2012 1:00 AM | Comments: 0

OTTAWA, Ont. -- A Crown agency that promotes Canadian exports of arms and other products will have to accept much more risk as it moves into new markets abroad, says an internal report.

The Canadian Commercial Corp. is under pressure from Canadian firms to find new customers in the Middle East, South America, Africa and India as its traditional market -- the United States -- shrinks.

The corporation, created in 1946, negotiates government-to-government contracts to reduce the risks of non-payment to exporters, who lack the clout of the Canadian state when foreign governments try to skip their bills.

But the agency has itself become "risk-averse" and will have to shed that attitude to better-serve firms hungry for a more diverse customer base, says an analysis ordered by Ed Fast, the international trade minister.

"The corporation would have to be less risk-averse if it is to develop business in promising geographical regions, e.g., (the) Middle East and in emerging economies," the report concludes. At the same time, the analysis urges caution in at least one export sector -- nuclear energy, including Canada's Candu reactors -- where costs can rapidly spiral. Last year, the federal government licensed its Candu design to a subsidiary of SNC-Lavalin.

The agency "should conduct an analysis of strategic and transactional risks to the corporation if it were to undertake very large contracts such as those encountered in the nuclear energy sector."

The $156,000 review of the Canadian Commercial Corp., commissioned from Ottawa-area consultant Capra International Inc., is dated March 29 this year. A heavily censored copy was obtained by The Canadian Press under the Access to Information Act.

Since the 1950s, the corporation has been responsible for the Canada-U.S. Defence Production Sharing Agreement with the U.S. defence department.

Major Canadian suppliers to the American military, and to NASA, are required to go through the non-profit agency, which gets about $15 million annually from the federal government to act as middleman. Today, these defence and aerospace arrangements represent about 90 per cent of all contracts signed, worth $1.7 billion in 2011-12.

But in 2009, the corporation was given a broader mandate, which included selling more Canadian military goods and services to allies and "like-minded nations." The move, which also focused on other exports to developing markets such as Latin America and Africa, was made as military procurement in the United States stalled.

A spokeswoman for Fast did not respond to detailed questions about the report's findings, but said the minister and Foreign Affairs are reviewing a plan by the Canadian Commercial Corp. that responds to Capra's recommendations.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition October 29, 2012 B7

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