Finance Committee on April 29th, 2010

[Mike Wallace, Conservative, Burlington, ON]

Yes, it's strictly administrative.

[The Chair, Conservative, James Rajotte]

Okay. Anything further, Mr. McKay?

Thank you.

Monsieur Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

I just have a point of clarification. Does this type of document, bill or agreement have necessarily to be part of the budget implementation bill? Is this due to the fact that there are some budgetary obligations? Are you taking advantage of this bill to include that?

[Rakesh Patry]

Essentially this is an effort to rectify a procedural error that had occurred. Generally speaking, social security agreements would not be tabled along with the budget. They would be tabled within both houses of Parliament independently.

As we are not in a position to meet our treaty obligations with Poland currently, due to the error that has been made, we were seeking the fastest solution to ensure that people who are entitled to receive benefits will receive their full benefits as soon as possible. So this is an effort to ensure that pensioners would be entitled to benefits from Canada and Poland, as per the terms of the agreement and in as quickly a timeframe as possible.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Very well. Thank you.

[The Chair, Conservative, James Rajotte]

Merci.

Thank you very much for being with us here today.

We will move to part 11, amendments to the Export Development Act, granting EDC the authority to open offices abroad...portfolio management on the Canada account.

Are there any questions from members?

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

In terms of the management of portfolio risk, what does it mean that EDC will be able to do now that it hasn't been able to do thus far?

[Philippe Hall, Chief, Export Finance Section, International Trade and Finance, Department of Finance]

Thank you.

EDC is actually looking for a clarification of the current wording in its act. So we're basically amending the act to enable the corporation to enter into any type of transaction that has as a main objective to manage its portfolio risks that are necessary or desirable for the financial management of the corporation.

EDC lawyers were of the view that the current wording in the act was not clear enough, and they had requested such change.

This was also a recommendation made in the context of the 2008 legislative review of the Export Development Act, and this recommendation was also accepted and supported by the government's response to that legislative review.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So why is it in a budget bill?

[Philippe Hall]

Given the activity that EDC is currently under--and they are of the view that these transactions will enable them to deal with the various risks they are under right now--they were looking to have the clarity to be able to--

[John McKay, Liberal, Scarborough—Guildwood, ON]

I understand that, but why is it in a budget bill?

[Philippe Hall]

[Inaudible--Editor]

[John McKay, Liberal, Scarborough—Guildwood, ON]

Okay. Well, I'm being unfair to you, because really it's a political decision to throw everything into a bill, which is--

[Ted Menzies, Conservative, Macleod, AB]

What about 2005?

[The Chair, Conservative, James Rajotte]

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

The substantive question here is does this give you the power to purchase other insurance products to manage your portfolio?

[Philippe Hall]

When you say “you”, you are referring to the--

[John McKay, Liberal, Scarborough—Guildwood, ON]

EDC. Well, maybe you as well; I don't know.

[Philippe Hall]

No, I work for the Department of Finance.

It would enable EDC to enter into transactions, be it swaps or hedges, in an effort to diminish its risk.

Does that answer your question?

[John McKay, Liberal, Scarborough—Guildwood, ON]

Yes. The problem is that swaps and hedges these days are getting a bad name. So what are we doing here? We're legislating EDC to enter into transactions that are of a higher category of risk?

[Philippe Hall]

No, I would say it's actually on the contrary. We're enabling the corporation to deal with its amount of risk. Although some financial instruments have got a bad reputation over the last few months, one would not want to throw out the baby with the bathwater.

These powers are also powers that are given to other crowns already. The BDC and the FCC already have similar powers. And EDC and the legislative review both thought it was in the best interests, in the interests of the corporation, and hence the bottom line of the corporation and the bottom line of the Government of Canada, that they be allowed to enter into these transactions to deal with the risks they are involved in.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Do FCC and BDC use these powers?

[Philippe Hall]

It is my understanding that they do, yes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Again, Chair, I don't know how to react to this stuff. This is right out of left field, and it probably should be appropriately studied by another committee other than this one. Well, maybe it should studied by this one, but it's like, well, “Here it is, trust us”. That's what it's becoming.

On the Canada account, the Canada account is essentially a fund that the staff recommends against, but the minister can do an override and make an investment for reasons best known to the minister. Will the increased ability to buy hedges and swaps affect this Canada account?

[Philippe Hall]

Actually, the powers that are being given in clause 1831 refer to EDC's corporate account. With regard to clause 1833, as you do mention, this is related to the Canada account, which is section 23 of the Export Development Act. Now, these transactions are ones that, based on prudent risk management, EDC decides not to support but then turns towards the government. If they are deemed to be of national interest, EDC will enter into these transactions but the risk will be borne on the government books and not on EDC's own books. So there is kind of a—