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4 2.0 Benefits of International Trade in the Financial Services Sector Financial services play an important role in the Canadian economy and are a cornerstone of healthy economic activity. There is a strong correlation between a competitive financial services sector and economic growth and productivity. Many other sectors of the economy would be unable to function efficiently without access to financial services such as insurance, banking, investment and financing. 2.1 Contribution to the Canadian Economy The international operations of Canadian firms are a significant source of capital. In fact, international operations provide an increasing share of revenues for Canadian financial institutions. Canadian life and health insurers held $804 billion worth of foreign policy holder assets invested at the end of 2015, an increase of almost 20 percent from 2014. Research conducted by the Conference Board of Canada found that 40 percent of firms surveyed derive up to a quarter of their revenues from their international operations. 5 The success of these operations drives additional expansion back in Canada. The financial sector employs about 791,000 people in Canada or about 4.4 percent of the Canadian workforce. 6 The life and health insurance industry employs approximately 150,000 Canadians all across the country in what are generally high-skilled, high-paying jobs. The average salary of Canadians working in finance and insurance services is over $63,000, well above the national average of approximately $49,000. 7 2.2 Facilitating Trade in Other Sectors The international operations of Canadian financial services firms can facilitate the expansion of other areas of the Canadian economy. When going abroad, Canadian financial institutions generally use a whole suite of additional services such as accounting services, legal services, IT services, and others, and will often rely on pre-existing relationships with known service providers. Once established, the foreign operations of Canadian financial firms become a conduit for additional exports of products to the foreign consumer base. Therefore, the international expansion of financial services can facilitate exports in other service areas. Each dollar of Canadian foreign direct investment (FDI) can generate up to 20 cents of additional exports. 8 5 Ai, Lin; Burt, Michael. Examining the International Footprint of Canada's Financial Sector. Conference Board of Canada. 2014. Pg. 25 6 Burt, Michael. An Engine for Growth: 2016 Report Card on Canada's and Toronto's Financial Services Sector. The Conference Board of Canada. 2016. 7 Statistics Canada Statistics Canada. Table 281-0063 - Survey of Employment, Payrolls and Hours (SEPH), employment and average weekly earnings. Accessed: June 3, 2016. 8 As referenced in: Evans, Todd; Gouett, Matthew. Canadians at the Gate: International Expansion of the Canadian Banking Sector. Export Development Canada. September 10, 2013. Pg. 13.