Jock Finlayson Executive Vice President and Chief Policy Officer

1. Jock Finlayson Executive Vice President and Chief Policy Officer CETA: A Canadian/BC Business PerspectiveUniversity of Victoria CETA ConferenceVictoria, BCMay 6, 2014

2. Overview 2 • European Union • 28 member states • 503 million people • world’s largest market with Cdn$17.5 trillion GDP • close to one-quarter of global economic activity • EU is Canada’s 2nd largest trading partner – 4th largest in the case of BC • Foreign direct investment is significant • Other aspects of the economic relationship: tourism, S&T partnerships, education exchanges

3. Some Context 3 • A decade or more of stalled global trade talks (WTO) • Steady increase in the number of bilateral, pluri-lateral and regional trade/investment accords • Canadian goods face average tariff of 2.2% in EU (trade-weighted basis); EU goods face average 3.5% tariff here • Manufacturing supply chains and the growing complexity of cross-border commercial linkages underscore how non-tariff barriers and “behind the border” policies and regulatory regimes can impact market access for traded goods • Non-tariff barriers and regulatory differences also affect foreign market access for producers of “tradable services”

4. Population, EU-27, 1960-2012(at January 1, million persons) 4 Source: Eurostat.

5. Europe – The “Old Continent”?(Median Age, Years, 2012) 5 Source: CIA World Fact Book; Eurostat * Not a member of the EU

6. EU Members’ Per Capita Incomes(US dollars, PPP basis) 6

7. Strategic Considerations 7 • Canada should be able to conclude a wide-ranging economic agreement with a region comprised (mainly) of mature democracies governed by the rule of law • CETA sets the stage for Canadian participation in other regional accords (TPP) and for other future bilateral agreements • EU and Canada both have high environmental, labour and other regulatory standards • US and the EU are pursuing a comprehensive bilateral agreement. Canada will be disadvantaged if they move forward but CETA for some reason is not finalized

8. Broad Pattern of Canadian Trade and Investment Linkages with EU 8 Source: D. Schwanen, Uneasy Birth: What Canadians Should Expect from a Canada-EU Trade Deal, C.D. Howe Institute, August 2013; RBC Economics, “The Comprehensive Economic and Trade Agreement,” October 2013.

9. Healthy Export Growth to the EU over Past Decade 9 Source: Statistics Canada.

10. …Especially Compared to the US 10 Source: Statistics Canada.

11. High and Growing EU Reliance on Energy Imports(dependence on imports as % of consumption) 11 Source: Eurostat Statistical Yearbook.

12. Canadian Innovation Performance(ranking among n=148 countries, 2013) 12 Source: World Economic Forum; Conference Board of Canada.

13. Coalition for Action on Innovation in Canada – “To Do” List 13 • Modify tax support for private sector R&D to improve results • Expand pools of risk capital for innovative SMEs • Develop a leading-edge intellectual property regime • Expand and strengthen business-academic linkages • Speed the adoption/diffusion of innovative products, services and management knowledge • Establish national goals for learning • Align immigration policy to attract the best and the brightest • Nurture innovation clusters in areas of existing strength www.actioninnovation.ca

14. BC Exports to EU Still Below Pre-recession Levels 14 Source: BC Stats.

15. EU Accounts for About 5% of all BC Goods Exports 15 Source: BC Stats.

16. Some Areas of Opportunity for BC Business Under the CETA 16 Wood Products • EU tariffs on BC exports average 2.2% (some peaks near 10%) • $500-550 million in annual BC exports to the EU Fish/seafood • EU is world’s largest fish/seafood import market • BC exports average < $100 million p.a. • EU tariffs (11% average, 25% peaks; 5% on salmon) Minerals/Metals • BC = 45% of Canadian merchandise exports to EU in 2012, averaging $1 billion per year over 2010-12 • Raw materials generally enter EU tariff-free; tariffs apply to metals and processed minerals (up to 10%)

17. Some Areas of Opportunity for BC Business Under the CETA (cont’d) 17 Agrifood • Exports = $35-40 million p.a. • EU tariffs average almost 14% • Canadian supply management regimes apparently will remain in place under CETA Advanced Manufacturing Products • 99% of EU tariff lines will be duty-free once CETA is implemented • Opportunities for BC manufacturers in a few niche areas Government Procurement • $2.7 trillion EU market • Professional, consulting, IT-related and construction services • Increased competition from EU suppliers in the BC procurement market – positive for consumers and taxpayers

18. Some Areas of Opportunity for BC Business Under the CETA (cont’d) 18 Commercial Services • EU is the world’s largest import market ($1.4 trillion) • Canada’s services exports to EU averaged $14.5 billion over 2010-12 • BC’s interests include professional, environmental and technical services, IT-related, and tourism Investment • BC firms have direct investments in the EU in several sectors (mining, finance, renewable energy, environmental technologies, transportation, ICT)

19. A Challenge: Our Cost Competitiveness Has Eroded 19 Source: Centre for the Study of Living Standards.

20. Another Challenge: Few Large BC Firms 20 Source: BC Stats using data supplied by Statistics Canada, data for 2012.