EDC’s raison d’etre — to transfer the private risks of international business to the public sector — hasn’t changed. By socializing these risks, it spawns moral hazard, allowing exports, investments, and projects to proceed that are economically unviable. EDC interrupts important messages, conveyed by the market to recipient governments, that good governance and the rule of law will attract honest business. By doing so, EDC bankrolls bad governments against their people and spawns crony capitalism. Now, using its government-granted borrowing, tax and regulatory advantages, EDC also finances and insures commercially viable projects that the private sector would otherwise finance. EDC then uses these profits as mad money to finance the pet projects pushed by politicians here or in the emerging markets, projects that the private sector is too prudent to support.

Jeffrey Garten, the dean of the Yale School of Management, and The Economist magazine both argue that governments ought to get out of the export credit business altogether, and that the marketplace has been corrupted by the presence of government. Internationally and domestically, a lively debate challenges the very public policy purpose of export credit agencies in general, and of EDC in particular.

Gowling — without so much as an explanation — dismissed that debate. Its report blatantly favours those who wish to maintain EDC’s privileged status — a handful of subsidy-dependent, politically important, large corporations — while discounting the view that EDC’s commercially viable activities should be privatized and its high-risk, “lender of last resort” activities eliminated.

Gowling heard a clear and compelling message from the insurance industry that EDC should withdraw from the credit insurance business. Gowling instead recommended creating — for an indefinite period — a Big Brother of the insurance industry, in which EDC and the private sector would produce a single credit insurance policy. Effectively, this would be a public-private cartel designed, in the report’s words, “with a view to developing the market, [and] creating Canadian private-sector capacity.”

To mute the banking sector’s criticism that EDC takes away its business, Gowling recommended that the government transfer private risk to the public purse through guarantees that would reward the private banks in officially supported transactions.

This public-private collusion to create a cartel, this socialization of private sector risk, this corporate welfare, this buying off its opponents with public resources, is offensive to taxpayers and harmful to the Canadian economy.

While I disagree with many of Gowling’s recommendations, I do commend Gowling for one very important contribution to the debate over the need for EDC. Gowling dispels the myth that EDC has long laboured to create, that it is a commercially viable, self-sustaining enterprise.

EDC finances its activities at preferential rates on the taxpayer’s good faith and credit, it does not pay taxes to the government or dividends to shareholders, and it doesn’t obtain reinsurance or abide by the same regulations governing the private sector. Gowling acknowledged that these financial benefits “likely confer a competitive advantage” over its private-sector competitors. Gowling also confirmed that EDC must mine the profitable private financial services sector — both banking and insurance — to finance commercially unviable high-risk projects. These high-risk ventures, euphemistically known as its “lender of last resort” activities, account for 70% of EDC’s business. “In short,” says Gowling, “without commercial quality business to offset its higher-risk business, EDC would require substantially more capital as well as annual government appropriations.”

Without these advantages, in other words, EDC would be unable to finance Candu reactors in Eastern Europe, the Three Gorges dam in China, and gold mines in Guyana and Kyrgyzstan, and neither would it be able to evade the annual wrath of taxpayers.

Until EDC is subject to the Access to Information Act, taxpayers will be unable to determine if EDC’s portfolio is sufficiently diverse to protect taxpayers, or confirm the anecdotal evidence that relatively few large firms receive the lion’s share of EDC support. We won’t be able to analyze which parts of EDC’s operations subsidize others or if EDC adheres to the rules and regulations laid out by the Office of the Superintendent of Financial Institutions and the Bank for International Settlements for the private sector. We won’t know which exports, projects and foreign investments EDC is considering supporting, as we know with the World Bank. Nor can we know what losses EDC is incurring on its high-risk projects.

Increasingly, industry officials, EDC clients and even former employees describe EDC as “a slush fund for the government in power.” Too many of EDC’s operations are morally repugnant, environmentally unsustainable, and financially unsound. Parliament should do its duty to the country and dismantle EDC in an orderly fashion.

Patricia Adams is an economist and the executive director of the Toronto-based environmental group Probe International. She participated in the Gowling review, and appeared before the standing committee on foreign affairs and international trade this week.; Patricia Adams is an economist and the executive director of Probe International, a Toronto-based environmental organization. She has participated in the Gowlings review, and on Tuesday, she presented her views to the federal government’s standing committee on foreign affairs and international trade.