By Canadian Press

Exporters urging Ottawa to undo uneven application of Russian sanctions

Jan 11, 2018 | 12:00 PM

Canadian exporters with long histories of doing business in Russia are urging the federal government to help them compete with foreign rivals that they insist are profiting from Ottawa’s particularly rigid approach to international sanctions.

Companies say they’re losing ground because, unlike other countries that have imposed sanctions directed at Moscow, Canada went a step further by removing its export credit agency from the Russian market in 2014.

The absence of Export Development Canada’s services, which include important supports like trade insurance, has led to a retreat of Canadian business from Russia.

Canadian firms say the vacuum has helped open up new opportunities for competitors from places like the United States, Europe and Japan, where export credit agencies continue to support local businesses with interests in Russia, despite similar sanctions by their governments.

While in most cases the issue is overshadowed by apprehension over NAFTA, it remains a key worry for some Canadian sectors. Canada’s exports to Russia — $600 million in 2016 — pale when compared to bigger partnerships like the U.S.

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But for some Canadians, Russia was a top market until the federal government called on EDC to withdraw its services.

Industry associations call it an uneven playing field for Canadian firms that export products to Russia — everything from toasters to construction material to agricultural equipment.

The president of the Agricultural Manufacturers of Canada discussed the issue this week with some of her members at a major farm show in Saskatoon. Leah Olson said Russia was a significant market for Canadian farming equipment, particularly since the countries share similar harsh climates.

“With Canadian firms having to pull back … they’ve been seeing lots of their competitors now in the region,” said Olson, whose group represents nearly 300 manufacturers and suppliers.

Ben Voss, president and CEO of a Saskatchewan-based agricultural manufacturer, said up until 2014, there were years when more than half of the sales from his company, Morris Industries Ltd., were in Russia.

The country remains important to his firm because it still has 1,000 customers there, but sales to Russia now represent less than 10 per cent of his business.

“The European countries and even the Americans, ironically, are imposing sanctions — very strict sanctions — but then they’re still allowing lots of their domestic, economic activity to continue unprohibited,” Voss said in an interview.

“Whereas Canada seems to think that it was necessary to say, ‘We’re putting sanctions in and then we’re going to go one step further.’”

Voss, who has raised the issue directly with International Trade Minister Francois-Philippe Champagne, said he has the impression the government is open to finding a solution.

“It’s just a very delicate issue,” Voss said. “I think the previous government was much more hardlined on this.”

Champagne is aware of industry concerns about the uneven application of sanctions and how firms have been stung by the discrepancies, according to a recently released briefing note. 

The document, obtained by The Canadian Press through the Access to Information Act, was prepared for Champagne last spring ahead of a meeting with the Canada Eurasia Russia Business Association, which promotes trade and investment in the region.

“Canada is working in close co-ordination with its partners in order to maintain sanctions against Russia in response to illegal actions in Ukraine and Syria,” read suggested speaking points for Champagne in the memo.

“We don’t intend to put sticks in the spokes of legitimate businesses, although we recognize that sometimes sanctions have this involuntary effect…. Unfortunately, there have been some involuntary negative repercussions on Canadian companies. This was not our objective.”

If pressed on why EDC pulled its services for the Russian market, the document recommended Champagne respond by saying he didn’t know when they would be reinstated. The note also suggested he explain that Canada is continually speaking with its G7 and European partners to ensure, as much as possible, that they have a co-ordinated approach when it comes the sanctions.

“However, individual export credit agencies are taking directions from their respective governments and we are aware that they are allowing these business transactions to continue,” the document said.

Phil Taylor, a spokesman for EDC, said the agency was instructed in 2014 to stop conducting business in Russia — and any change to this position would come at the direction of the trade minister.

Sebastien Dakin, the Canada Eurasia Russia Business Association’s director for Ottawa and Montreal, said in an email that some companies have worked for many years developing their business relationships in Russia.

“In many cases, the business is threatened if not already lost, and will not come back easily,” Dakin wrote.

“This service is really helpful for companies, mainly when you do not have permanent representation on the ground. At the moment, Canadian trade commissioners are confined to a reactive role and companies are pretty much on their own, which is far from ideal on a far and challenging market such as Russia.”

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Andy Blatchford, The Canadian Press