EDC

How EDC can beat critics

Canadian Business
February 1, 2003

Is EDC making the world a worse place? There’s no way for ordinary Canadians to make an informed judgment because the Crown corporation simply doesn’t reveal enough information.


Taking stock in international trade

Most Canadians would rather not invest in projects that jeopardize the Earth. Yet some worry we are doing precisely that. In early January, International Trade Minister Pierre Pettigrew confirmed that Export Development Canada (EDC) agreed to finance the sale of a CANDU reactor built by Atomic Energy of Canada Ltd. The feds will provide up to $328 million to help Romania pay for the completion of a second reactor at its Cernavoda facility. It’s the latest in Canada’s highly controversial, decades-long effort to export nuclear technology; previous recipients include India and Pakistan, which now use nukes to threaten each other — as well as global security.

These days, critics seem more worried than ever about the social, environmental and human consequences of such projects. “The government, for its own political purposes, supports projects that hurt people,” alleges Patricia Adams, executive director of Toronto-based Probe International, one of several organizations calling for EDC’s reform or dissolution. “It’s not just nuclear reactors. It’s mines, forestry projects, hydro dams. They support projects that are abhorrent to the Canadian public.”

Is EDC making the world a worse place? There’s no way for ordinary Canadians to make an informed judgment because the Crown corporation simply doesn’t reveal enough information. Founded in 1944, EDC is an export credit agency. It supports Canadian exports abroad by offering credit insurance to exporters and extending loans to their customers. Before the early ’80s, when most of EDC’s lending services went to sovereign nations, it was relatively forthcoming about its transactions. But as it moved increasingly toward serving commercial interests, it retreated behind a wall of secrecy — one reinforced by the fact that it is exempt from the federal Access to Information Act.

EDC’s justification is that it is obliged to protect the secrets of its clients, who don’t want their designs laid bare to competitors. “It’s not EDC that decides whether or not something should be disclosed,” explains spokesman Rod Giles. “It’s up to the counterparties involved to make that determination. EDC would respect the wishes of the commercial parties to a transaction, and generally that’s not to disclose certain information, beyond making people aware that a transaction has occurred.”

So Canadians must place their faith in its corporate governance machinery. Unfortunately, that has already malfunctioned. In 2001, Auditor General Sheila Fraser found that while EDC’s environmental review framework was adequate, it was frequently misapplied. Later, in EDC’s 2001 annual report, chairman Paul Gobeil vowed: “The Corporation will continue to demonstrate how to successfully balance economic, environmental and ethical interests.” Just how bungling environmental reviews is consistent with balancing those interests, Gobeil never elaborated.

EDC introduced genuine improvements to its disclosure and environmental policy about a year ago. For example, it now publishes a list on its Web site that reveals a few key details about individual transactions. Meanwhile, the new Cernavoda reactor is the first project for which EDC applied its new disclosure rules. A quick summary of the environmental impact assessment was made public for 45 days last year.

The new disclosure rules are a step in the right direction. They won’t, however, assure taxpayers that they’re not funding Armageddon. Take Cernavoda: a prcis of the environmental review revealed only fragments of the logic behind the project’s approval. Critics, predictably, were unsatisfied. “Main concerns [with the review] include the lack of an adequate public process, failure to consider alternatives to meeting projected energy needs, failure to disclose consequences of a nuclear accident or to disclose details of an emergency plan and failure to identify plans to manage nuclear wastes in perpetuity,” said a paper published in January by a group spearheaded by the Ottawa-based Halifax Initiative, a coalition of development, environment, faith, rights and labor organizations. It criticized Cernavoda and six other EDC-sponsored projects.

In response, EDC executive vice-president Eric Siegel blasted the group for making “erroneous and misleading” accusations. “EDC has one of the most comprehensive environmental review and disclosure policies among export credit agencies worldwide,” he stated, adding that the new directive “ensures that EDC will apply the highest level of scrutiny on those projects posing the greatest potential for adverse environmental effects.”

If EDC’s critics are misinformed, however, one wonders to what extent that ignorance arises from the Crown corporation’s own disclosure practices. Pettigrew would do well to reconsider to whom EDC’s obligations lie, and insist on further improvements. When corporations accept EDC’s money, their secrets become public concerns. If a Canadian flag is found flapping near some distant mushroom cloud or modern-day Three Mile Island, we’ll all be wishing we had known more.

Clarification: Export Development Canada (EDC) provided a loan guarantee of up to $328 million, under the Canada Account, to facilitate Romania’s purchase of a nuclear reactor. Also, EDC denies involvement in six other projects mentioned by the Halifax Initiative Coalition.

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