2018 Financial Performance

USMCA: Preserves Access to U.S. Market Scotiabank is committed to long-term growth across the Pacific Alliance Key Features of NAFTA 2.0 ○ Autos. Maintains integrated supply chains for vehicle and parts manufacturing across North America. Both Canada and Mexico would be shielded from any US move to impose so-called 'national security' Section 232 tariffs on automobiles. Mexico has negotiated an additional cushion to the transition to the new tighter auto rules of origin that maintains tariff- free access for 1.6MM vehicles a year under NAFTA's existing terms ○ Agriculture. Limited increases in bilateral access to specific commodity markets ○ Natural resources. Recent Mexican oil reforms institutionalized in the agreement, while US claims under NAFTA on a proportionate share of Canadian oil shipments is ended ○ Sunset clause. No automatic expiry. Agreement will be reviewed every six years with 10 ensuing annual reviews to address outstanding concerns 。 Dispute settlement. Existing state-state dispute-settlement mechanisms under NAFTA's chapters 19 and 20 preserved; investor protections under NAFTA's chapter 11 maintained between US and Mexico; bilateral Canada-Mexico issues covered by CPTPP. 。 IP. Extends patent and copyright protections in Canada and Mexico in line with previous understandings under draft TPP 。 Government procurement. No intensification of 'Buy American' rules o Visas. No change in NAFTA visa framework • Next steps ○ Signing expected in late 2018. Side letters that shield Canada and Mexico from Sec. 232 auto tariffs become active o Ratification process in US could take six months or more. Any demands for changes likely to be handled in side letters In Mexico and Canada, the legislative process should be completed within a few months • Implications for the Pacific Alliance o Little impact expected on Peru, Chile, or Colombia o Canada and Mexico will continue to pursue their trade diversification agendas with the members of the Alliance. Article 32.10 should not impede negotiation of future trade agreements with so-called 'non-market economies' Scotiabank® 54 52

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