A new trade deal between Canada and Europe will bolster economic growth generally, but offers particular opportunities for securities dealers, says the Investment Industry Association of Canada (IIAC).
In his latest letter to the industry, Ian Russell, president and CEO of the IIAC, applauds a recent trade deal between Canada and the European Union, known as the Comprehensive Economic and Trade Agreement (CETA). “Trade agreements used to be characterized primarily by reduced tariffs. This pact goes far beyond that — covering commercial interactions, services and the flow of money between companies in the signatory nations,” he notes.
Assuming that the deal — which still has to be approved by the European Council, the European Parliament and individual countries — comes into effect as planned in 2016, the IIAC says that it will “greatly expand Canada’s commercial window on the world and improve the prospects for investment and growth. It will also bring a competitive discipline to Canadian business and the Canadian economy.”
The trade group says that the deal is expected to lead to increased exports to Europe, and improved access to European capital for Canada; generating an additional 0.5% in real economic growth and 80,000 new jobs. “Whatever the magnitude of contribution to growth and employment, CETA comes at the right time to boost tepid growth in the Canadian economy,” Russell says; adding that it’s also expected to “benefit a beleaguered securities industry as strategic corporate positioning will throw up opportunities to arrange financings for expanded investment.”
The IIAC says that the deal allows, “Canadian dealers to penetrate the financial markets more easily as the trade agreement mandates national treatment in respect of securities regulation”; and, it notes that, “CETA reportedly has the most efficient and innovative state-to-state dispute settlement mechanism of any free trade deal signed by Canada.”
The opportunities this could open to Canadian securities dealers includes offering advice on corporate acquisitions for Canadian companies doing business in Europe, and to European companies seeking investment opportunities in Canada. “As markets for Canadian products and services expand in Europe, Canadian dealers will have opportunities to arrange debt and equity offerings for Canadian companies to finance related expansion in plant and equipment,” it notes.
“European business will look to Canadian dealers to identify potential acquisitions in the Canadian corporate sector and finance their purchase and expansion. The investment banking operations of the mid-tier boutiques will find similar investment banking opportunities with mandates to identify and finance smaller-sized business acquisitions,” it says. Additionally, the dealers that have built up their banking operations in London in recent years will be better able compete for business flowing from the trade deal, it suggests.
Ultimately, the IIAC says that the CETA “will improve prospects for renewing economic growth in the country, and moving the Canadian economy closer to its potential. And it offers the prospect of reinvigorating the Canadian investment industry, for both large and small securities firms.”