CANADA ECONOMICS

OECD

Global Affairs Canada. June 6, 2017. International Trade Minister to promote Canada’s progressive trade agenda at OECD ministerial meeting

Ottawa, Ontario - Canada is committed to ensuring that the benefits of international trade and investment are broadly shared and create growth, opportunities and good middle-class jobs for people everywhere.

On June 7 and 8, 2017, the Honourable François-Philippe Champagne, Minister of International Trade, will attend the 2017 Organisation for Economic Co-operation and Development (OECD) Ministerial Council Meeting in Paris, France. At the meeting, Minister Champagne will engage in multilateral sessions and bilateral meetings with his international counterparts to advance a progressive trade agenda and reinforce Canada’s leadership in inclusive and sustainable trade and investment.

On the margins of the meeting, Minister Champagne will also chair a progressive trade side event with delegates aimed at working together to make sure that all segments of society can take advantage of the opportunities that flow from trade.

Quotes

“Canada’s progressive trade agenda is in line with the government’s vision for more innovative and prosperous growth that benefits everyone, particularly with respect to the creation of jobs for the middle class and those working hard to join it.”

- François-Philippe Champagne, Minister of International Trade

Quick facts

• Established in 1961, the OECD currently comprises 35 member countries. It includes many of the world’s most advanced countries as well as emerging countries like Mexico, Chile and Turkey.
• OECD members comprise approximately 63 percent of the world economy (GDP), 62 percent of world merchandise imports and 17.6 percent of the world’s population.
• Canada’s merchandise trade with OECD countries was $874.3 billion in 2016.
• OECD countries accounted for 89.6 percent of Canada’s merchandise exports and 77 percent of Canada’s merchandise imports in 2016.

Department of Finance Canada. June 6, 2017. Parliamentary Secretary Brings Canada's People-First Approach to OECD Meetings in Paris

Paris, France – The Government of Canada is deepening its international engagement and investing in key partnerships to strengthen the middle class at home and around the world.

The Parliamentary Secretary to the Minister of Finance, Ginette Petitpas Taylor, will attend Organisation for Economic Co-operation and Development (OECD) meetings in Paris this week. These meetings bring together OECD Ministers to explore policies and best practices that could deliver more inclusive growth.

Parliamentary Secretary Petitpas Taylor will underline the importance of international partnerships and convey Canada's openness to rules-based free trade and investment. She will highlight how Canada is building a stronger middle class through investments in education, skills training, infrastructure and innovation, so that Canadians have access to well-paying jobs and more opportunities to succeed in the economy of tomorrow.

Parliamentary Secretary Petitpas Taylor will also participate in a panel discussion on a people-centred approach to health, where she will highlight Canadian actions and investments to support mental health.

Tomorrow, she will sign an international agreement to combat international tax avoidance as part of the OECD and G20 base erosion and profit shifting initiative.

Later in the week, she will participate in OECD discussions on how to spur inclusive growth and ensure that people, firms, regions and cities thrive in an open and digital economy. The OECD Ministerial Council Meeting will echo the pledge of the 2030 Agenda for Sustainable Development to "Leave No One Behind."

Ministers will discuss:

• the economic outlook;
• the opportunities and challenges of economic integration;
• the challenges of globalization;
• domestic policies to ensure people, firms, regions and cities can thrive in an open and digital environment;
• building inclusive globalization; and
• international trade and investment for the benefit of all.

FOREIGN POLICY PRIORITIES

Global Affairs Canada. June 6, 2017. Speech. Address by Minister Freeland on Canada’s foreign policy priorities. Ottawa, Canada. 

Mr. Speaker,

Here is a question: Is Canada an essential country, at this time in the life of our planet?

Most of us here would agree that it is. But if we assert this, we are called to explain why. And we are called to consider the specifics of what we must do as a consequence.

International relationships that had seemed immutable for 70 years are being called into question. From Europe, to Asia, to our own North American home, long-standing pacts that have formed the bedrock of our security and prosperity for generations are being tested.

And new shared human imperatives—the fight against climate change first among them—call for renewed, uncommon resolve.

Turning aside from our responsibilities is not an option. Instead we must think carefully and deeply about what is happening, and find a way forward.

By definition, the path we choose must be one that serves the interests of all Canadians and upholds our broadly held national values; that preserves and nurtures Canadian prosperity and security; and that contributes to our collective goal of a better, safer, more just, more prosperous, and sustainable world. One we can pass onto our children and grandchildren, with a sense of having done the right thing.

This is no small order, Mr. Speaker. It is what I would like to spend few minutes talking about today.

Since before the end of the Second World War, beginning with the international conference at Bretton Woods in 1944, Canada has been deeply engaged in, and greatly enjoyed the benefits of, a global order based on rules.

These were principles and standards that were applied, perhaps not perfectly at all times by all states, but certainly by the vast majority of democratic states, most of the time.

The system had at its heart the core notions of territorial integrity, human rights, democracy, respect for the rule of law, and an aspiration to free and friendly trade.

The common volition toward this order arose from a fervent determination not to repeat the immediate past.

Humankind had learned through the direct experience of horror and hardship, Mr. Speaker, that the narrow pursuit of national self-interest, the law of the jungle, led to nothing but carnage and poverty.

Two global conflicts and the Great Depression, all in the span of less than half a century, taught our parents and grandparents that national borders must be inviolate; that international trading relationships created not only prosperity but also peace; and that a true world community, one based on shared aspirations and standards, was not only desirable but essential to our very survival.

That deep yearning toward lasting peace led to the creation of international institutions that endure to this day—with the nations of Western Europe, together with their transatlantic allies, the United States and Canada, at their foundation

In each of these evolutions in how we humans organize ourselves, Canadians played pivotal roles.

There was Bretton Woods itself, where the Canadian delegation was instrumental in drafting provisions of the fledgling International Monetary Fund and International Bank for Reconstruction and Development.

A few years later in 1947, a Canadian, Dana Wilgress, played a leading role at the meetings in Geneva that led to the development of the General Agreement on Tariffs and Trade, precursor to the WTO.

It is a Canadian, John Humphrey, who is generally credited as the principal author of the Universal Declaration on Human Rights, which was adopted by the UN General Assembly in 1948. That was the first of what became a series of declarations to set international standards in this vital area.

And let us not neglect the great Canadian perhaps best known for advancing the cause of humanitarian internationalism—Lester B. Pearson. He was awarded the Nobel Peace Prize for his leadership during the Suez crisis in 1956, for the creation of modern peacekeeping.

These institutions may seem commonplace now, Mr. Speaker. We may take them for granted. We should not. Seventy years ago they were revolutionary. And they set the stage for the longest period of peace and prosperity in our history.

It was the same appreciation of the common interests of the human family, in caring for our common home, that led us to the acid rain treaty of the Mulroney era. It is what led us to the Montreal Protocol of 1987 to phase out CFCs and preserve the ozone layer. It is what led us to Paris, Mr. Speaker, with 194 signatories at our side. That is global co-operation.

And it is important to note that when sacrifice was required to support and strengthen the global order—military power, in defence of our principles and our alliances—Canada was there. In the Suez, in Korea, in the Congo, in Cyprus, in the First Gulf War, in the Balkans, in Afghanistan, up to and including today in Iraq, among many other places, Canada has been there.

As the Prime Minister has often said, that is what Canadians do. We step up.

Today it is worth reminding ourselves why we step up—why we devote time and resources to foreign policy, defence and development, why we have sent Canadian soldiers, sailors, aviators, diplomats, aid workers, intelligence officers, doctors, nurses, medics and engineers into situations of danger, disaster, and chaos overseas, even at times when Canadian territory was not directly at risk.

Why do we spend billions on defence, if we are not immediately threatened?

For some countries—Israel, Latvia come to mind—the answer is self-evident. Countries that face a clear and immediate existential challenge know they need to spend on military and foreign policy. And they know why.

For a few lucky countries—like Canada and the United States—that feel protected by geography and are good neighbours, the answer is less obvious. Indeed, you could easily imagine a Canadian view that says, we are safe on our continent, and we have things to do at home, so let's turn inward. Let’s say Canada first.

Here’s why that would be wrong.

First, though no foreign adversary is poised to invade us, we do face clear challenges. Climate change is by definition a shared menace, affecting every single person on this planet. Civil war, poverty, drought and natural disasters anywhere in the world threaten us as well—not least because these catastrophes spawn globally destabilizing mass migrations. The dictatorship in North Korea, crimes against humanity in Syria, the monstrous extremists of Daesh, and Russian military adventurism and expansionism also all pose clear strategic threats to the liberal democratic world, including Canada.

Our ability to act against such threats alone is limited. It requires cooperation with like-minded countries.

On the military front, Canada’s geography has meant that we have always been able to count on American self-interest to provide a protective umbrella beneath which we have found indirect shelter.

Some think, some even say, we should therefore free ride on U.S. military power. Why invest billions to maintain a capable, professional, well-funded and well-equipped Canadian military?

The answer is obvious: To rely solely on the U.S. security umbrella would make us a client state. And although we have an incredibly good relationship with our American friends and neighbours, such a dependence would not be in Canada’s interest.

That is why doing our fair share is clearly necessary. It is why our commitment to NORAD, and to our strategic relationship with the United States, is so critical. It is by pulling our weight in this partnership, and in all our international partnerships, that we, in fact, have weight.

To put it plainly: Canadian diplomacy and development sometimes require the backing of hard power. Force is of course always a last resort. But the principled use of force, together with our allies and governed by international law, is part of our history and must be part of our future.

To have that capacity requires a substantial investment, which this government is committed to making. The Minister of Defence will elaborate fully on that tomorrow. I know he will make Canadians justly proud.

Whatever their politics, Canadians understand that, as a middle power living next to the world’s only super power, Canada has a huge interest in an international order based on rules. One in which might is not always right. One in which more powerful countries are constrained in their treatment of smaller ones by standards that are internationally respected, enforced and upheld.

The single most important pillar of this, which emerged following the carnage of the First and Second World Wars, is the sanctity of borders. And that principle, today, is under siege.

This is why the democratic world has united behind Ukraine. The illegal seizure of Ukrainian territory by Russia is the first time since the end of the Second World War that a European power has annexed by force the territory of another European country. This is not something we can accept or ignore.

The atrocities of Daesh directly challenge both the sanctity of borders and the liberal international order itself. They create chaos, not only because of the carnage they perpetrate on their innocent victims, but because of the humanitarian crises and migratory explosions that follow. This is why the world has united against this scourge; violent extremism challenges our way of life. We will always oppose it.

Another key benefit for Canada from an international system based on rules, is of course free trade. In this sphere as well, beggar-thy-neighbour policies hit middle powers soonest and hardest. That is the implacable lesson of the 1930s, and the Great Depression. Rising trade barriers hurt the people they are intended to help. They curb growth, stifle innovation and kill employment. This is a lesson we should learn from history. We should not need to teach it to ourselves again through painful experience.

The international order an earlier generation built faces two big challenges, both unprecedented.

The first is the rapid emergence of the global South and Asia—most prominently, China—and the need to integrate these countries into the world’s economic and political system in a way that is additive, that preserves the best of the old order that preceded their rise, and that addresses the existential threat of climate change. This is a problem that simply cannot be solved by nations working alone. We must work together.

I have focused these remarks on the development of the postwar international order—a process that was led primarily by the Atlantic powers of North America and Western Europe.

But we recognize that the global balance of power has changed greatly since then—and will continue to evolve as more nations prosper.

The G20, in whose creation Canada was instrumental, was an early acknowledgement of this emerging reality. The countries of Latin America and the Caribbean, Africa and Asia are on the ascendant, delivering ever-increasing living standards to fast-growing populations bursting with innovation, creativity and enterprise.

This is not a trend anyone should fear: it is one we should embrace. Let us recognize that the peace and prosperity we in the West have enjoyed these past 70 years are desired by all, and increasingly within reach of all. And, as Canadians, let us be agents of that change.

Let us seize the great opportunity we now have to help the people of the world’s fastest-growing countries join the global middle class and the multilateral system that supports it. Peace and prosperity are every person’s birthright. The second great challenge is an exhaustion in the West of the belief among working people, the middle class, that the globalized system can help them better their lives. This is an enormous crisis of confidence. It has the potential, if we let it, to undermine global prosperity itself.

At the root of this anxiety around the world is a pervasive sense that too many people have been left behind, betrayed by a system they were promised would make them better off, but hasn’t.

Here’s the key: it’s true that the system is flawed. But international trade is the wrong target, Mr. Speaker. The real culprit is domestic policy that fails to appreciate that continued growth, and political stability, depend on domestic measures that share the wealth.

Admittedly, this is a complicated problem. If there were easy solutions everybody would be applying them.

But let’s be clear on this point: it is wrong to view the woes of our middle class as the result of fiendish behaviour by foreigners.

The truth is that the nature of work has changed because of profound, and generally benign, global economic innovation. This transformation, driven primarily by automation and the digital revolution, is broadly positive.

Managed fairly, it has the potential to increase prosperity for all—not just the global one percent. That means supporting families, supporting pensioners, and supporting education and retraining—as the Minister of Finance did in his recent budget.

By better supporting the middle class, and those working hard to join it, Canada is defining an approach to globalization that can be a model. At the same time, we strongly support the global 2030 Goals for Sustainable Development, Mr. Speaker. The world abroad and the world at home are not two solitudes. They are connected.

Likewise, by embracing multiculturalism and diversity, Canadians are embodying a way of life that works. We can say this in all humility, but also without any false self-effacement: Canadians know about living side-by side with people of diverse origins and beliefs, whose ancestors hail from the far corners of the globe, in harmony and peace. We’re good at it. Watch how we do it.

We say this in the full knowledge that we also have problems of our own to overcome—most egregiously the injustices suffered by Indigenous people in Canada. We must never flinch from acknowledging this great failure, even as we do the hard work of seeking restoration and reconciliation.

Now, it is clearly not our role to impose our values around the world, Mr. Speaker. No one appointed us the world's policeman. But it is our role to clearly stand for these rights both in Canada and abroad.

It is our role to provide refuge to the persecuted and downtrodden, to the extent we are able, as we are so proud to have done for more than 40,000 Syrian refugees.

It is our role to set a standard for how states should treat women, gays and lesbians, transgendered people, racial, ethnic, cultural, linguistic and religious minorities, and Indigenous people.

We can and must play an active role in the preservation and strengthening of the global order from which we have benefited so greatly. Doing so is in our interest, because our own open society is most secure in a world of open societies‎. And it is under threat in a world where open societies are under threat.

In short, Canadian liberalism is a precious idea. It would not long survive in a world dominated by the clash of great powers and their vassals, struggling for supremacy or, at best, an uneasy détente.

Canada can work for better, Mr. Speaker. We must work for better.

Let me pause here and address the United States, directly. As the Prime Minister said last week: Canada is deeply disappointed by the decision by the U.S. federal government to withdraw from the Paris Agreement on climate.

That said, we will continue to seek opportunities for constructive progress on the environment, wherever we can find them, with our counterparts in Washington and across the great United States, at all levels of government and with partners in business, labour and civil society.

As I have said, we Canadians can rightly be proud of the role we played in building the postwar order, and the unprecedented peace and prosperity that followed.

Yet even as we celebrate our own part in that project, it’s only fair for us to acknowledge the larger contribution of the United States. For in blood, in treasure, in strategic vision, in leadership, America has paid the lion's share.

The United States has truly been the indispensable nation, Mr. Speaker. For their unique, seven-decades-long contribution to our shared peace ‎and prosperity, and on behalf of all Canadians, I would like to profoundly thank our American friends.

As I have argued, Canada believes strongly that this stable, predictable international order has been deeply in our national interest. And we believe it has helped foster peace and prosperity for our ‎southern neighbours, too.

Yet it would be naive or hypocritical to claim before this House that all Americans today agree. Indeed, many of the voters in last year's presidential election cast their ballots, animated in part by a desire to shrug off the burden of world leadership. To say this is not controversial: it is simply a fact.

Canada is grateful, and will always be grateful, to our neighbour for the outsized role it has played in the world. And we seek and will continue to seek to persuade our friends that their continued international leadership is very much in their national interest—as well as that of the rest of the free world.

Yet we also recognize that this is ultimately not our decision to make. It is a choice Americans must make for themselves.

The fact that our friend and ally has come to question the very worth of its mantle of global leadership, puts into sharper focus the need for the rest of us to set our own clear and sovereign course. For Canada that course must be the renewal, indeed the strengthening, of the postwar multilateral order.

We will follow this path, with open hands and open hearts extended to our American friends, seeking to make common cause as we have so often in the past. And indeed, as we continue to do now on multiple fronts—from border security, to the defence of North America through NORAD, to the fight against Daesh, to our efforts within NATO, to nurturing and improving our trading relationship, which is the strongest in the world.

And, at the same time, we will work with other like-minded people and countries who share our aims.

Mr. Speaker, to put this in sharper focus, those aims are as follows:

First, we will robustly support the rules-based international order, and all its institutions, and seek ways to strengthen and improve them.

We will strongly support the multilateral forums where such discussions are held—including the G7, the G20, the OAS, APEC, the WTO, the Commonwealth and La Francophonie, the Arctic Council, and of course NATO and the UN.

A cornerstone of our multilateral agenda is our steadfast commitment to the Transatlantic Alliance. Our bond is manifest in CETA, our historic trade agreement with the European Union—which we believe in and warmly support—and in our military deployment this summer to Latvia.

There can be no clearer sign that NATO and Article 5 are at the heart of Canada’s national security policy.

We will strive for leadership in all these multilateral forums. We are honoured to be hosting the G7 next year, and we are energetically pursuing a two-year term on the UN Security Council. We seek this UN seat because we wish to be heard. For we are safer and more prosperous, Mr. Speaker, when more of the world shares Canadian values.

Those values include feminism, and the promotion of the rights of women and girls.

It is important, and historic, that we have a prime minister and a government proud to proclaim ourselves feminists. Women’s rights are human rights. That includes sexual reproductive rights and the right to safe and accessible abortions. These rights are at the core of our foreign policy.

To that end, in the coming days, my colleague the Minister of International Development and La Francophonie will unveil Canada’s first feminist international assistance policy, which will target women’s rights and gender equality. We will put Canada at the forefront of this global effort.

This is a matter of basic justice and also basic economics. We know that empowering women, overseas and here at home, makes families and countries more prosperous. Canada’s values are informed by our historical duality of French and English; by our cooperative brand of federalism; by our multi-cultural, multi-ethnic and multi-linguistic citizenry; and by our geography—bridging Atlantic, Pacific and Arctic. Our values are informed by the traditions and aspirations of the Indigenous people in Canada. And our values include an unshakeable commitment to pluralism, human rights and the rule of law.

Second: We will make the necessary investments in our military, to not only redress years of neglect and underfunding, but also to place the Canadian Armed Forces on a new footing—with the equipment, training, resources and consistent, predictable financing they need to do their difficult, dangerous and important work.

We owe this to our women and men in uniform. We will not let them down, Mr. Speaker.

Canada’s broader interest in investing in a capable, professional and robust military is very clear: If middle powers do not implicate themselves in the furtherance of peace and stability around the world, that will be left to the Great Powers to settle among themselves. This would not be in Canada’s interest.

Third, we are a trading nation. Far from seeing trade as a zero-sum game, we believe in trading relationships that benefit all parties. We look forward to working with our continental partners to modernize the North American Free Trade Agreement, and to making a great trading partnership even better. We will also intensify our efforts to diversify Canadian trade worldwide. We will actively seek new trade agreements that further Canadian economic interests and that reflect our values—with the Canada-EU Trade Agreement as our template.

We are proud of the role Canada has played in creating a rules-based international trading order. We believe in the WTO and will continue our work to make it stronger, and more responsive to the needs of ordinary people in Canada and around the world.

We believe in progressive trade that works for working people. That is why we are very proud that this month, Canada will ratify the last of the fundamental conventions of the International Labour Organization.

In summary, we will be tireless in pursing our national interest, tireless in upholding progressive Canadian values, tireless in working to create a rules-based international order for the 21st century. Seventy years ago Canada played a pivotal role in forming the postwar international order. We are now called—by virtue of our unique experience, expertise, geography, diversity and values—to do this again, for a new century.

Mr. Speaker, these are ambitious objectives. There is no guarantee of success.

We set them, not in the assumption that success will come easily, but in the certain knowledge that it will not. We will venture, in noble and good causes. We will risk. We will enjoy victories—and we will suffer defeats. But we will keep working toward a better world, Mr. Speaker, because that is what Canadians do.

Let me conclude on a personal note.

A popular criticism today of the argument I am making here, is that all such ideas are abstract, perhaps of interest to the so-called Laurentian elite, or the media, or the Ottawa bubble, but not at all relevant to “real” Canadians.

That line of reasoning is the ultimate, elite condescension; it is nonsense. And in reply, I offer the example of my grandfather, John Wilbur Freeland.

He was born in Peace River, Alberta—the son of a pioneer family. Wilbur was 24 in 1940, and making a bit of a living as a cowboy and boxer. His nickname was “Pretty Boy” Freeland.

My grandpa was the opposite of an Upper Canada elite. But in the darkest days of the Second World War, Wilbur enlisted to serve. Two of his brothers, Carleton and Warren, joined up too. Wilbur and Carleton came home. Warren did not.

My grandfather told me‎ they signed up partly for the excitement—Europe, even at war, was an exotic destination for the youths of the Peace Country.

But there was more to it than a young man’s thirst for adventure. My grandfather was one of a generation of Canadians who intuitively understood the connection between their lives, and those of people they’d never met, whose speech they couldn’t comprehend, who lived on a continent so far away as to constitute, back then, another world.

That generation of Canadians—the Greatest Generation, we call them, with good reason—had survived the Great Depression. They were born in the aftermath of the First World War. They appreciated viscerally that a world without fixed borders or rules for the global economy, was a world of strife and poverty. They sought to prevent that from ever happening again.

That is why they risked and gave their lives to fight in a European war. That is why, when they came home, they cheerfully contributed to the great project of rebuilding Europe and creating a postwar world order. That is why they counted themselves lucky to be able to do so.

They were our parents, and grandparents, and great-grandparents. The challenge we face today is significant, to be sure. But it pales next to the task they faced, and met.

Our job today is to preserve their achievement, and to build on it; to use the multilateral structures they created as the foundation for planetary accords and institutions fit for the new realities of this century.

They rose to their generation’s great challenge. And so can we.

HOUSING BUBBLE

The Globe and Mail. Jun. 06, 2017. Yes, a sudden chill. But just look at these home prices in the Toronto area ...
MICHAEL BABAD, Columnist

Briefing highlights

• Just look at these Toronto prices
• Home costs forecast to dip, then rebound
• Markets at a glance
• Valeant said in talks to sell eye surgery unit

Look at these prices

Yes, Toronto home prices may be easing in the wake of Ontario’s new measures.

But consider the inflated levels at which they still stand, and what it would take to bring them truly back to Earth. If they can actually come back to Earth.

“Benchmark prices still look like they were up somewhat in May, but what appears to be happening is a lot of supply at the high end of the market, and the first sign of some price correction there,” said Bank of Montreal senior economist Robert Kavcic.

“But in the low-to-middle range of the market (condos, semis, towns, presumably larger inventory outside the core), the market is still very tight and prices continued to rise in May,” he added after the Toronto Real Estate Board released its sales and price report for last month.

“Similar to Vancouver’s episode, we will likely see most of the impact at the higher end, and May is a good preview of that.”

As The Globe and Mail’s Janet McFarland reports, the market is cooling after the Ontario measures, which included a tax on foreign speculators and an expansion of rent control. That happened in Vancouver, too, after the B.C. government’s levy on foreign buyers of Vancouver-area homes, but that market is now making fresh gains.

The Toronto board’s report showed prices easing on a monthly basis, from April to May, with listings surging. Prices are still sharply higher than a year earlier, though.

Home prices in and around Toronto have become a focus of concern, with observers warning of trouble if prices aren’t held in check and consumer debt levels don’t ease.

And it’s no wonder. Here’s the Toronto board’s look at where things stood in May, with benchmark prices and the annual per cent gains of detached homes in and around Canada’s biggest city, along with the cost of a semi.



And here’s a similar look at the city itself, with the legend below.





“Looking ahead, Vancouver took about six to eight months to adjust to the changes and rebalance the market,” Mr. Kavcic said.

“I suspect we’ll see the modest correction at the high end of the Toronto market continue for a few months before stabilizing and ultimately moving higher again, at least while the Bank of Canada sits on the sidelines.”

Adrienne Warren of Bank of Nova Scotia agreed.

“Recent developments in Vancouver’s housing market following the implementation of a foreign-buyers tax in August, 2016, suggest the softening in Toronto home sales could prove short-lived,” Ms. Warren said.

“Vancouver home sales posted solid gains in the four months to May, and are trending back above their 10-year average,” she added.

“Meanwhile, benchmark prices, after a modest 4-per-cent decline from August, 2016, through January, 2017, have since rebounded 8 per cent to a new record high.”

 ENERGY - QATAR

The Globe and Mail. Jun. 06, 2017. Special. Qatar rift shatters myth of Gulf solidarity
JANICE STEIN

Janice Stein is the founding director of the Munk School of Global Affairs.

When some of the Arab world’s most powerful countries broke diplomatic relations with Qatar, they also shattered the twin myths of Gulf solidarity and the Sunni-Shia divide. Both these myths are convenient and easy for outsiders to use when they look at the Gulf. Unfortunately, neither is fully accurate. On the contrary, they mask the complexities of the Gulf and the broader Arab world.

This is not the first time that Qatar has been at the epicentre of a split within the Gulf. Qatar is home to Al Jazeera, the Arab broadcasting network that has shaken up Arab politics with its perspective and thoroughly annoyed leaders in Saudi Arabia, the United Arab Emirates and Egypt. Three years ago, Gulf leaders demanded that the Emir rein in the network and withdrew their ambassadors in protest. After an eight-month struggle, Qatar promised modest concessions but the network is still supported personally today by the young Sheikh Tamim bin Hamad al Thani, the current ruler of Qatar, as it was by his father.


The struggle over Al Jazeera has little to do with the Sunni-Shia divide, or even Gulf solidarity, and everything to do with autocratic rulers who continue to be deeply uncomfortable with independent voices. The Gulf has its own version of “fake news,” as do autocrats everywhere.

Layer onto this a deep divide over the Muslim Brotherhood, an Islamic organization founded in Cairo almost 90 years ago. The Brotherhood is a Sunni-led organization, so conflict over its role also doesn’t have to do with the Sunni-Shia divide. Over time, the Brotherhood has renounced violence and won the presidency in Egypt after Hosni Mubarak was ousted. That government was ousted by the Egyptian military which today considers the Brotherhood a mortal threat. So too do the rulers of Saudi Arabia who have long regarded the Brotherhood as a competitor for legitimacy.

Both governments allege that Qatar supports the Brotherhood, both overtly and covertly. This issue has long been an irritant within the Gulf and beyond. President Abdel-Fattah el-Sissi of Egypt sputters with rage when the Brotherhood is mentioned and alleges that the Brotherhood receives support not only from Qatar but from Iran. Why the leading Shia power would support a Sunni Islamist movement is not obvious, but that is of no great consequence in the heated rhetoric that comes out of Cairo and Riyadh. Wherever they are, autocratic governments thrive on enemies.

The straw that broke the camel’s back in the last few weeks was an inflammatory statement, allegedly made by the Emir on his website. The statement praised Iran, Hamas, and Hezbollah. The Emir claimed, however, that his website had been hacked and that these statements were false, deliberately designed to divide the Gulf and shatter Arab unity. His protest that he was a cybervictim went unheard. This time, a cyberattack, if indeed it was one, led to a serious rupture of relations in the Gulf. Saudi Arabia, the United Arab Emirates, Bahrain, and Egypt broke diplomatic relations, and they were quickly followed by the internationally recognized government of Libya, the internationally recognized government of Yemen and the Maldives. They ordered all Qatari diplomats out within 48 hours.

The Sunni-Shia divide did play a role in this latest incident, as Gulf leaders accused Qatar of being a pawn of Iran in a deadly game of regional politics. Even this allegation merits a second look. Hamas, the government that rules Gaza, is a Sunni movement with long-standing ties to the Muslim Brotherhood.

The latest breakdown of relations does not fit well with the overarching theme of the division of the Muslim world into Shia and Sunni branches. The picture is much messier and suggests that all politics is local. The Gulf is no exception where long-standing ruling families harbour deep resentments and local grievances, and wrap these grievances in rhetoric that plays well to outsiders.

No outsider is more receptive to the rhetoric of a Sunni-Shia split than U.S. President Donald Trump, who travelled to Riyadh to cement the U.S. alliance with Saudi Arabia and unite the Sunni world against Iran. That this strategy fits poorly with the facts is of no great moment to this President. He will now have to struggle with the reality of local politics in the Gulf. Qatar hosts the largest base for U.S. forces in the region but is now the black sheep of the Gulf family. Welcome, President Trump, to international politics gone local.

The Globe and Mail. Reuters. Jun. 06, 2017. Oil slips on worries Mideast rift could undermine OPEC cuts
CHRISTOPHER JOHNSON

LONDON — Oil prices slipped further below $50 a barrel on Tuesday on concerns that a diplomatic rift between Qatar and several Arab states including Saudi Arabia could undermine efforts by OPEC to tighten the market.

Kuwait Oil Minister Essam al-Marzouq said Qatar was committed to an OPEC agreement to restrict supply, telling Kuwaiti state news agency KUNA Doha was complying with its obligations.

“Qatar is ... committed to the supply cut decision and its compliance ratio ranges between 93 and 102 per cent,” he said.

But the many traders, confronted by surplus oil in many parts of the world, were still unnerved.

Greg McKenna, chief market strategist at futures brokerage AxiTrader, said there was “a real chance” OPEC solidarity surrounding its production cuts might fracture.

Benchmark Brent crude oil was 20 cents a barrel lower at $49.27 by 1350 GMT, down around 8 per cent from its level before OPEC and its non-OPEC allies said they were extending cuts until March 2018. The initial six-month deal to curb output had been due to run till the end of this month.

U.S. light crude was down 20 cents at $47.20.

Leading Arab powers including Saudi Arabia, Egypt and the United Arab Emirates cut ties with Qatar on Monday, accusing it of support for Islamist militants and Iran.

Under measures taken, ships coming from or going to the small peninsular nation were barred from docking at Fujairah, in the UAE, which is used by Qatari oil and liquefied natural gas (LNG) tankers to take on new shipping fuel.

With oil production of about 620,000 barrels per day (bpd), Qatar is one of the smallest crude producers in the Organization of the Petroleum Exporting Countries, but some investors fear tension within the cartel could weaken its agreement to hold back production in order to prop up prices.

Several analysts said these fears were exaggerated.

“The OPEC agreement stands and is highly unlikely to change because of tension with Qatar. Crude production in the Middle East will not change because of Qatar,” said Oystein Berentsen, managing director for oil trading company Strong Petroleum.

David Wech, managing director of Vienna-based consultancy JBC Energy, agreed: “We do not see too much cause for concern at this point regarding potential risk to the OPEC-led supply accord currently in effect.”

Rising U.S. production is also putting pressure on oil.

U.S. crude output has jumped more than 10 per cent since mid-2016 to 9.34 million bpd, industry figures show. “The relentless increase in U.S. oil production appears to have the market worried that the OPEC cuts will be completely nullified by the increased U.S. production,” said William O’Loughlin, analyst at Rivkin Securities.

BLOOMBERG. 2017 M06 6. Qatar Airways Ambitions Threatened by Gulf Diplomatic Breakdown
by Deena Kamel

• Carrier faces loss of feeder flights from Arab neighbors
• Airspace closures could make African flights impossible
• Here's What's Behind the Qatar Diplomatic Split

Over the past two decades, Qatar Airways has grown from a regional player into a world-straddling colossus, with flights to more than 150 destinations, some of the industry’s newest planes, and ambitious plans for overseas alliances. The diplomatic spat between Qatar and its Middle East neighbors threatens to scuttle those ambitions.

On Monday, Saudi Arabia, Bahrain, Egypt, and the United Arab Emirates suspended ties with Qatar, shutting down flights and maritime links to the country. That will force state-owned Qatar Air to ground more than 50 daily departures--or about 10 percent of its total--according to scheduling firm OAG.

The carrier operates a shuttle to Dubai 14 times daily, as well as frequent flights to Riyadh, Cairo, and more than a dozen other destinations in the countries imposing the blockade. If the ban continues, Qatar Air’s revenue could fall by 30 percent due to lost traffic and idled planes, the cost of diverting flights, a decline in premium bookings, and a possible slump in leisure demand, consultancy Frost & Sullivan estimates.

Plans to bar Qatari jets from entering airspace over the countries involved in the dispute--especially neighboring Saudi Arabia--could be even more problematic, inflating expenses by forcing significant diversions and putting the viability of some routes in jeopardy, according to Martin Consulting, an airline advisory firm in Dubai.

“Diverting around closed airspace means higher fuel costs and longer flight times,” said Mark Martin, the firm's chief. “Destinations in Africa and across the Indian Ocean may no longer be sustainable.”

The Saudi ban on flights was introduced Monday, with the airspace restrictions to take effect on Tuesday. Egypt and Bahrain have also said that Qatari carriers will be barred from overflights, though the U.A.E. has indicated that its airspace will remain open. Qatar Air declined to comment, beyond saying that it has suspended service to the four countries.

Other regional airlines will also take a hit, though not as dramatically as Qatar. Dubai-based Emirates and FlyDubai, Etihad Airways PJSC of Abu Dhabi, and Air Arabia of Sharjah were set to cease flights to Doha on June 6. Saudi Arabian Airlines, Egyptair, and Bahrain-based Gulf Air will also halt services; all told, those carriers will cancel about two dozen daily departures, according to OAG.

Etihad and Emirates—which last year began deploying an Airbus SE A380 superjumbo for some Doha services—could see their revenue fall by as much as 15 percent if the ban continues, according to Frost & Sullivan. Qatar Air code-share partners such as British Airways and American Airlines could also be hurt by the measures, the consultancy says.

Earnings at Qatar Air, like other Gulf carriers, are already being squeezed as the low price of crude weighs on economic growth in the region and hurts demand for travel among oil-industry executives. And an American ban on people using laptops aboard U.S.-bound flights amid concern about potential terrorist attacks is also taking a toll on business-class demand.

More than 10 percent of all seats in and out of Qatar are on flights involving the four nations imposing the ban, said Diogenis Papiomytis, director of aerospace at Frost & Sullivan, with most passengers who use those links transferring to or from the long-haul services that make up the bulk of Qatar Air’s earnings. On routes between Qatar and the U.A.E., 80 percent of passengers have an origin or final destination beyond the two countries, according to Papiomytis, who said the measures represent a “major headache” for route planners at all carriers concerned.

“The network impact is huge; the financial impact depends on the length of closures,” he said.

The disruption is dealing a blow to the plans of Akbar Al Baker, Qatar Air’s chief executive officer, who has overseen construction of a gleaming new hub in Doha and has said he wants to strengthen ties to overseas carriers. Qatar Air owns 20 percent of British Airways parent IAG SA and 10 percent of South America’s biggest carrier, LatAm Airlines Group SA, deals that Al Baker says can help cut costs on purchases of planes and other supplies.

Qatar Air has expressed interest in Royal Air Maroc, it’s negotiating the purchase of a 49 percent stake in Italy’s Meridiana SpA, and Al Baker has said he aims to set up an airline in India with a fleet of 100 narrow-body planes. Before the blockade, the carrier had planned to add more than two dozen new routes this year and next.

“We see there is potential for us in many other regions and cities,” Al Baker told Bloomberg Television in April. “We have a lot of other opportunities, a lot of other new markets.

INVESTIMENT

The Globe and Mail. Jun. 05, 2017. Could boutique investment banks be on the rebound?
NIALL MCGEE AND CHRISTINA PELLEGRINI

There are early signs that boutique investment banks are staging a rebound after years in the wilderness.

Two independent firms grabbed a slice of the investment banking fees in Osisko Gold Royalties Ltd.’s $1.13-billion acquisition of precious metals assets from Orion Mine Finance Group. The cash-and-stock deal, which was announced Monday, sent Osisko’s share price almost 14 per cent higher to $16.35. With the deal, Osisko will add a diverse roster of cash-generating assets to its portfolio.

Independent investment bank Maxit Capital LP is Osisko’s lead financial adviser and also produced a fairness report for Osisko’s board. BMO Nesbitt Burns Inc., National Bank Financial Inc. and PricewaterhouseCoopers were also named as advisers for Osisko. On the other side the deal, Orion turned to CIBC World Markets Inc. and boutique Haywood Securities Inc. for financial advice.

The win for the boutiques goes against the conventional narrative of big banks muscling out their smaller brethren on billion-dollar-plus deals.

Toronto-based Maxit was founded in 2013 by veteran investment banker Bob Sangha. The firm shuns the traditional model of a full-service investment bank, offering only advice. Maxit does not have a sales and trading desk, and it does not write traditional research reports. The firm makes the claim that its advice is conflict-free, because it is not chasing a fee for underwriting a bought deal, which some allege puts full-service dealers in a conflicted position. Mr. Sangha’s relationship with Osisko goes back about a decade, when he worked for BMO. Mr. Sangha continued the relationship during his tenure with Dundee Securities, now known as Eight Capital. After Maxit was set up, the boutique advised Osisko on its $408-million (U.S.) acquisition of Virginia Mines Inc. in 2014.

“They are an outstanding firm. They provide great advice,” Bryan Coates, president of Osisko, said in an interview.

In 2014, Osisko worked alongside Maxit to fend off a hostile takeover attempt from industry behemoth Goldcorp Inc. The company, then known as Osisko Mining Corp., instead agreed to be acquired by Yamana Gold Inc. and Agnico Eagle Mines Ltd.

“They are very well experienced and respected in the mining circle,” Mr. Coates said of Mr. Sangha and Maxit’s managing partner, Sandeep Singh.

While Osisko is one of Maxit’s top clients, the firm has also landed lucrative advisory mandates with Kirkland Lake Gold Ltd., Alamos Gold Inc. and Premier Gold Mines Ltd. over the past few years.

Around 50 boutiques either went out of business or were acquired in distressed sells during the latest commodities slump that ran roughly between 2013 and 2016. A rebound in the commodities sector over the past 18 months has helped reinvigorate the independent sector.

In 2017, GMP Securities LP advised Eldorado Gold Corp. on its $590-million deal for Integra Gold Corp., while Haywood worked on a smaller tie-up between Luna Gold Corp. and JDL Gold Corp.

The Globe and Mail. Jun. 05, 2017. Scotiabank's playbook: More deals in Latin America
ANDREW WILLIS

Bank of Nova Scotia brass used to throw an annual holiday cocktail party for journalists and spiced up the event a few years back by serving up pisco sours, a Peruvian favourite, to celebrate an acquisition in the South American country.

If they hold the bash this year, a shot of Mexican tequila or a Chilean Borgona wine punch, with fresh strawberries, may be required, if Scotiabank chief executive Brian Porter can deliver on an acquisition-based international growth strategy that boasts higher potential returns and less risk that the U.S. expansion plans playing out at rival Canadian banks.

Scotiabank turned in better-than-expected financial results last week, with quarterly profit up 11 per cent to $2.06-billion, due in part of the strength of its Latin America operations. Mr. Porter made it clear that his well-capitalized bank plans to continue expanding in the region, highlighting the possibility of making acquisitions over the next year in Mexico and Chile.

Scotiabank has deep roots in both countries; it currently owns the seventh largest bank in both Mexico and Chile, measured by assets. Mr. Porter said he wants to bulk up franchises in both countries, to increase their profitability. The Canadian bank has approximately 6 per cent of the market in each country, and last week, Scotiabank executives said the goal is to increase that share to 10 per cent or more.

As Scotiabank targets a slightly smaller regional rival to hit that 10-per-cent market-share threshold, the Canadian bank is working through a relatively short list of takeover targets – approximately a dozen banks in both Mexico and Chile fit the bill. As he considers where to make a move, Mr. Porter can take advantage of deal-making dynamics that are far more favourable than what’s facing the four other major Canadian banks, which are looking for growth from the U.S. market.

Scotiabank’s playbook in Latin America is to either buy branches from global banks that are leaving the region, or take stakes in family-owned banks with an eye to taking full control over time. It snapped up operations in Costa Rica and Panama when Citibank quit the countries in 2012. The same year, Scotiabank moved into Colombia by taking a stake in a bank owned by one of the country’s wealthiest clans, an allegiance that opened doors in a region and aligned Scotiabank’s interests with those of the bank’s founders.

In Mexico and Chile, there are a number of banks slightly smaller than Scotiabank that are either owned by foreign institutions, or controlled by families or financial conglomerates.

There are several European banks on this list that are retrenching, as part of the lingering hangover from the global financial crisis, and may be open to raising capital by selling Latin American branches. The family-owned banks in Mexico and Chile likely already have ties to Scotiabank, which has been operating in Latin America and the Caribbean since 1889.

On any potential Latin American takeover, Scotiabank is likely to be bidding against a relatively small number of rivals; HSBC and Spain’s BBVA may also step up, as would the largest domestic players in each country. If successful, Scotiabank can look forward to cost-cutting synergies when it marries up an acquisition with its existing branches in the country. That translates into deals at attractive valuations.

In contrast, recent U.S. takeovers by Canadian Imperial Bank of Commerce and Royal Bank of Canada featured premium prices with limited synergies, as the domestic banks acquired beachheads in the Midwest and California, respectively.

And if Mr. Porter can build more scale in Scotiabank’s Latin American operations, he’ll boost profitability at a division that already sports a healthy 14-per-cent return on equity (ROE).

Again, contrast that return to the 10 per cent ROE that Toronto-Dominion Bank earned in the most recent quarter from its 1,300 U.S. branches, the largest network owned by a Canadian bank. U.S. retail banking is intensely competitive and even the largest branch networks are hard pressed to match the profit margins and growth potential of a well-run Latin American franchise.

The drawback to Latin American expansion is what bank executives dryly refer to as “country risk,” or the potential for a government to go off the rails financially. Scotiabank took a $600-million (U.S.) hit when it shut down operations in Argentina in 2002 following a currency crisis in the country.

Mr. Porter can be expected to put prudent limits on Scotiabank’s overall investment in any region. Even if the Canadian bank doubled the size of its businesses in Mexico and Chile, Scotiabank has more than enough capital to deal with problems in the region. And in President Donald Trump’s United States, there’s country risk in the U.S. market, in the form of potential border taxes.

Scotiabank has compelling reasons to do deals in Latin America, and toast the transaction with an exotic beverage to ring out the year.

DAIRY (US-CANADA)

REUTERS. Jun 5, 2017. U.S. asks Canada to end 'underhanded' dairy pricing class
By Rod Nickel

(Reuters) - The United States has asked Canada to eliminate a new "underhanded" dairy-pricing class that has undercut sales by U.S. dairies to Canadian processors, U.S. Agriculture Secretary Sonny Perdue said on Monday.

Perdue was speaking to reporters after he met with Canadian Agriculture Minister Lawrence MacAulay in Toronto.

Canada's dairy farmers last year struck a new pricing deal, known as Class 7, with processors including Saputo Inc and Parmalat Canada [PLTPRC.UL]. Foreign industry groups said the deal priced domestic milk ingredients used to make cheese and yogurt below cost.

"I made it very clear that the Class 7 designation we felt was unfair, undercutting this (U.S.) industry that grew up south of the border," Perdue said. "... The quick win would be to do away with Class 7 milk, which we think is a very unfair, underhanded circumvention of WTO (World Trade Organization)."

Perdue's comments come as the United States has signalled it wants to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico. They illustrate possible obstacles to a new deal, even as the United States and Mexico went into overtime on Monday on sugar trade talks.

In a statement, MacAulay said he and Perdue discussed "shared priorities."

Perdue said that Class 7, which took effect in February, enabled Canadian farmers to overproduce milk, contributing to depressed world prices. Canada protects its dairy sector from foreign competition with high tariffs on imports above a quota and controls domestic production to support prices.

Canada's dairy system drew criticism in April from U.S. President Donald Trump, who said he would "stand up for our dairy farmers" against Canada's "unfair" practices. He did not give details about his concerns.

Dairy Farmers of Canada, an influential lobby group that was closely involved in creating Class 7, could not be reached for comment. In the past, the group has stressed that Class 7 is a domestic policy, and allows Canadian processors to continue choosing their suppliers.

Perdue said he also raised concerns about how U.S. wheat is priced in Canada, and about how U.S. wines are displayed for sale in some provinces.

Under Canadian legislation, U.S. wheat automatically receives the lowest quality designation and price in Canada under the country's grading system. Perdue said the wheat-grading issue seems to be less of a concern to Canada and its farmers and could be resolved quickly.

Bilateral trade in agriculture and food was worth C$62 billion ($46 billion) in 2016, according to the Canadian government.

(Editing by James Dalgleish)

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