The mad rush to resurrect the flagging economy has dredged up some ghosts. Consider the Canada Account, a large pool of federal money earmarked to help exporters compete internationally. Its long history has been rife with controversy, and it’s been largely dormant during the past several years. But now the Canada Account is poised to become an important instrument in the government’s stimulus plans.
It’s administered by Export Development Canada, a Crown corporation that facilitates exports by providing financing, loan guarantees and other services. But in contrast with transactions EDC sponsors directly, the Canada Account backs unusually risky deals the government deems in the country’s “national interest.” Of the 11 transactions disclosed since October 2001, four of them provided financing to troubled airlines seeking to buy planes from Bombardier Inc. (All of those airlines subsequently filed for court protection from creditors, and Ottawa wound up owning a handful of planes.) The feds also guaranteed a loan to the Romanian government for the purchase of a nuclear reactor from Atomic Energy of Canada Ltd., a Crown corporation. In the years since 2000, the Canada Account had anywhere between $5 billion and $10 billion in loans and guarantees outstanding, against a $13-billion limit.
Suddenly, the Canada Account, which had its cap raised to $20 billion in the latest federal budget, is poised to do more — much more. In December, Minister of International Trade Stockwell Day dipped into the fund to offer $2.7 billion in short-term loans to troubled U.S. automakers GM and Chrysler, both of which operate plants in Ontario. (None of that money has yet been drawn on, and the actual terms have yet to be negotiated.) Also in December, Day promised up to $380 million in Canada Account financing and guarantees to a struggling shipyard in Quebec, Davie Yards Inc.
In this age of economic anxiety, the Canada Account’s resurgence has attracted little attention. It’s instructive, though, to consider what the Conservative Party of Canada and its predecessors have said about it in the past.
Both EDC and the Canada Account have long been criticized for a lack of transparency. In 2000, Reform MP Deepak Obhrai challenged the government on it in the House of Commons. “What is the government hiding?” he taunted. “Another get-rich scheme for Liberal cronies?” (Obhrai is now a Conservative MP.)
Thanks to modest improvements to disclosure practices in 2001, EDC’s website now lists vague details about large transactions, but no specifics. EDC enjoys broad exemptions from access-to-information legislation.
Critics have long claimed Canada Account transactions are politically motivated. “We have all seen very clearly that the Canada Account has become a slush fund for Liberal ministers,” said John Duncan, then a Canadian Alliance MP, in October 2001. “We do not need it.” (Duncan was, and remains today, the representative for Vancouver Island North.)
Past loans have been criticized for not being on commercial terms. The Canada Account has been used, for example, to extend interest-free loans to other countries that can be repaid over many decades. Of the more than $881 million in outstanding loans to foreign governments through the account as of March 31, 2008, more than four-fifths were for terms of between 31 and 55 years, with interest rates as low as 0%. “If we give someone a loan but there is no interest paid on it and there is no requirement to pay it back, is it really a loan, or is it just a giveaway of taxpayers’ money?” Reform Party MP Monte Solberg asked in the House in 2000. (Solberg later became a Conservative MP in Stephen Harper’s first government). Past governments have also been accused of using the account to funnel money into politically sensitive ridings and regions. “I would like to think that we would get away from these politically motivated deals,” said John Williams, a Canadian Alliance MP, in 2001. (Williams later became the Conservative MP for Edmonton–St. Albert.)
EDC claims the Canada Account has always been profitable. According to financial statements published by the Department of Foreign Affairs and International Trade, though, the Canada Account brought in revenue of about $180 million for the year ended March 31, 2006, for example, but had expenses of $219 million — which suggests a net loss. (During fiscal 2007 and 2008, the account recorded profits.)
Given the Canada Account’s limited accountability and maximum flexibility, it’s easy to see why the Conservatives’ aversion to it seems to have melted away.