Reforms Overdue at Export Development Canada: C.D. Howe Institute



    TORONTO, Dec. 11 /CNW/ - Reforms to streamline and refocus Export
Development Canada (EDC) are overdue, according to a study released today by
the C.D. Howe Institute. In Insuring Canada's Exports: The Case for Reform at
Export Development Canada, author Maciej Kotowski says an upcoming legislative
review of EDC's mandate offers an opportunity to begin EDC's withdrawal from
the short-term export credit insurance business.
    Narrowing EDC's activities would improve competition in the export
insurance business. Unlike most OECD countries, Canada's short-term credit
insurance market is dominated by a state-owned enterprise. In many other
countries, such as the United States and New Zealand, state-backed providers'
mandates do not allow them to actively compete with private insurers. EDC does
not have any such restriction, and EDC's presence likely "crowds out" private
entry.
    In Europe, private insurers account for 95 percent of short-term export
credit insurance. Some countries, such as the United Kingdom and Australia,
have privatized much of the previously government-administered programs. EDC,
on the other hand, over the past decade has enjoyed a 60 percent market share
in the Canadian export insurance market.
    The privatization of EDC's short-term insurance portfolio could easily be
implemented. Government, however, may continue to play a role in long-term
insurance and trade financing, especially in risky political environments.
    Refocusing EDC's operations, concludes Kotowski, would result in a
stronger private insurance market in Canada, add a modest source of government
tax revenue, improve competitiveness and innovation in Canadian financial
markets, and put Canada on side with our peers and trading partners.
    For the study go to http://www.cdhowe.org/pdf/commentary_257.pdf.





For further information:

For further information: Maciej Kotowski, Department of Economics, UC
Berkeley; Finn Poschmann, Director of Research, C.D. Howe Institute, (416)
865-1904, email: cdhowe@cdhowe.org


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