CANADA ECONOMICS

CANADA - CHINA

The Globe and Mail. 21 Jul 2017. Chinese telecom giant expelled from trade association. Hytera: Expert questions how seriously Ottawa examined the Norsat takeover
ROBERT FIFE
STEVEN CHASE

This is the problem of engaging with the Chinese government more generally, because the people you are engaged with and are the decision makers one day may be out on their heels the next day. This is part of the concern that Conservatives have in going full-bore with a free-trade agreement set of talks.

- Tony Clement, Conservative critic for public safety

A Chinese telecom giant at the centre of a controversial takeover of a Canadian high-tech firm has run afoul of China’s powerful Ministry of Public Security.
Hytera Communications – whose principal shareholder is billionaire chairman Chen Qingzhou – has had long-standing close ties to the ministry that oversees China’s police and security agencies. It has won numerous contracts to supply mobile and digital radio systems to Chinese police departments and local governments.
But last month, just days before it closed a deal to buy Vancouver-based Norsat International, Hytera was suddenly expelled from a mobile-technology trade association run by the ministry for its involvement in disputed bidding on a police contract.
The expulsion is unrelated to the takeover of the Canadian satellite communications company, but critics say Hytera’s past connections to Chinese security authorities and its questionable business dealings should have raised red flags in Ottawa.
The Trudeau government approved the Norsat sale to Hytera in early June without conducting a full-scale national security review. »
Such a review would have examined the economic and security impact of transferring sensitive Western satellite technology to Hytera, which has also been accused of stealing patents from Motorola.
“This is concerning and damaging new information that indicates that Hytera is a bad actor,” Conservative critic for public safety Tony Clement told The Globe and Mail this week. “I call upon the Liberal government to do a full new nationalsecurity review based on this new information and assess what risks there are to Canadian policies that could be potentially violated because of this information.”
The domestic trouble engulfing Hytera, a company that only burst onto the Canadian landscape this spring, is reminiscent of the problems facing Anbang Insurance Group, whose chief executive has run afoul of the Chinese government this year. Anbang, one of the biggest players of Chinese firms pursuing high-profile overseas acquisitions and investments, recently purchased a retirementhome chain in British Columbia. It announced last month that CEO Wu Xiaohui has been detained by authorities and is “unable to perform his duties” with the company. The Anbang billionaire’s arrest came amid an anti-corruption campaign by Chinese President Xi Jinping.
On the Norsat controversy, the U.S Defence Department began a review of all its contracts after the firm closed a deal on June 23 to be swallowed up by Hytera. The U.S. military has contracts to buy satellite communications equipment from Norsat – technology that will now be transferred to China.
The details of what exactly led to Hytera’s expulsion from China’s Professional Digital Trunking (PDT) alliance remains shrouded in mystery.
The PDT alliance issued a statement on June 19, saying Hytera’s membership was terminated for undisclosed actions during the bidding process on a digital policy system for the police department in the city of Maoming, in the southern province of Guangdong.
One source said Hytera was accused of undercutting other Chinese competitors with low prices.
It is unknown whether Mr. Chen, who has travelled on trade missions with the Chinese President, has run into trouble with the Communist Party, which has recently detained several billionaire businessmen and top party officials over alleged corruption and bribery.
Hytera did not respond to requests to explain why its membership was terminated. PDT alliance spokesperson Zhou Yameng would not provide any details on the reasons for the expulsion or what punishment Hytera may face. It is the first time the alliance has expelled a member, according to one source who is part of the alliance.
“About the issue that Hytera was expelled by PDT alliance, we won’t take interviews by any media,” the spokesperson told The Globe.
The office of Innovation Minister Navdeep Bains, who approved the takeover without an in-depth national-security review, said the government took the advice of security officials in allowing the transaction to proceed but had no comment on Hytera’s troubles with China’s Ministry of Public Security.
However, Mr. Bains’s press secretary, Karl Sasseville, said Ottawa has other tools that could prevent the transfer of Norsat’s technology to China.
“Canada has robust domestic laws in place to prevent the exploitation of sensitive goods and technology and know-how,” he said. “These laws, which apply to Canadian and internationally owned companies, provide valuable checks and balances.”
Mr. Clement said the mystery behind Hytera’s ouster from the PDT alliance underlines the problem the Liberals have in their efforts to negotiate a freetrade deal with China. Since the Liberals came to power in 2015, they have taken a more laissezfaire approach to Chinese investment than the former Conservative government, including foregoing national-security reviews of several Chinese takeovers of Canadian technology companies.
“This is the problem of engaging with the Chinese government more generally, because the people you are engaged with and are the decision makers one day may be out on their heels the next day. This is part of the concern that Conservatives have in going full-bore with a free-trade agreement set of talks,” he said.
China expert Charles Burton, a former diplomat at the Canadian embassy in Beijing, questioned how seriously the Trudeau government examined the Norsat takeover.
“Evidently, Hytera has engaged in business malfeasance to win contract bids with local Chinese police departments on multiple occasions,” Mr. Burton said.
“As this has been an ongoing issue with Hytera long prior to its bid for Norsat, it calls into question whether the government became aware of these serious concerns in the course of its review of Hytera’s application to acquire Norsat and if so, why were these concerns dismissed when the bid was approved?”
Motorola has alleged that Hytera has bolstered its business through technology that uses patents and trade secrets stolen from the U.S. firm in 2008. The case is the subject of court cases in the United States and Germany, as well as an investigation that is being conducted by the U.S. International Trade Commission.
Aside from the security concerns raised by the Hytera takeover, Mr. Burton said he was puzzled over why Ottawa allowed the deal to proceed given Hytera’s ties to China’s Public Security Ministry.
“It is clear that Hytera is complicit in developing technologies for the use of police communications,” Mr. Burton said. “Canada has in past been unwilling to transfer technologies for Chinese police use due to the pervasive reports of Chinese police violations of human rights through gross invasion of privacy of communications in investigations and use of torture in interrogation.”
In March, the Liberal cabinet approved the takeover of Montreal high-tech firm ITF Technologies – which the former Harper government had blocked on the grounds it would undermine a technological edge that Western militaries have over China. At the time, the Canadian Security Intelligence Service had recommended against the takeover, saying ITF technology transfer would give China access to “advanced military laser technology” and would diminish “Canadian and allied military advantages.”

ECONOMY

StatCan. 2017-07-21. Consumer Price Index, June 2017

Consumer Price Index
June 2017
1.0% increase
(12-month change)
Source(s): CANSIM table 326-0020.

The Consumer Price Index (CPI) rose 1.0% on a year-over-year basis in June, following a 1.3% gain in May.

Energy prices decreased in the 12 months to June, after increasing in May. At the same time, prices for food rose year over year in June, following a small decline in May.

Excluding food and energy, the CPI was up 1.4% on a year-over-year basis in June, matching the gain in May.

Chart 1   Chart 1: The 12-month change in the Consumer Price Index (CPI) and the CPI excluding food and energy
The 12-month change in the Consumer Price Index (CPI) and the CPI excluding food and energy



12-month change in the major components

Prices were up in seven of the eight major components in the 12 months to June, with the shelter index and the recreation, education and reading index contributing the most to the year-over-year rise in the CPI. The clothing and footwear index declined on a year-over-year basis.

Chart 2   Chart 2: Consumer prices increase in seven of the eight major components
Consumer prices increase in seven of the eight major components



Transportation costs rose 0.6% on a year-over-year basis in June, following a 2.2% gain in May. This deceleration was led by gasoline prices, which fell 1.4% in the 12 months to June, after increasing 6.8% in May. The purchase of passenger vehicles index declined for the first time since February 2015, down 0.2% year over year in June. Meanwhile, passenger vehicle insurance premiums rose 2.1% in the 12 months to June, following a 1.4% increase in May.

The shelter index increased 1.6% year over year in June, after rising 1.9% in May. Homeowners' replacement costs, which rose 4.1% on a year-over-year basis in June, contributed the most to this price increase. At the same time, prices for natural gas (+10.0%) and fuel oil (+7.8%) increased at a slower rate in the 12 months to June, than they did in May, contributing the most to the deceleration in the shelter index. On a year-over-year basis, growth in the rent index (+0.7%) rose to a rate not recorded since May 2016, while there was no change in mortgage interest cost for the third month in a row, following 31 months of declines.

Household operations, furnishings and equipment costs rose 0.2% on a year-over-year basis in June, matching the increase in May. The telephone services index was up 2.0% in the 12 months to June, following a 1.1% rise in May. At the same time, prices for household appliances declined 3.3% in June, after falling 2.1% in May.

The food index rose 0.6% in the 12 months to June, after posting declines for eight consecutive months. Prices for food purchased from stores decreased 0.3% on a year-over-year basis, after dropping 1.2% in May. Year-over-year declines in the meat and bakery products indexes moderated, while the fresh vegetables index increased at a faster pace in June than in May. On a year-over-year basis, prices for cereal products fell 3.7% in June, following a 2.7% decline in May. Prices for food purchased from restaurants registered a 2.5% gain in the 12 months to June.

12-month change in the provinces

Consumer prices rose less on a year-over-year basis in nine provinces in June than they did in May. The 12-month increase in the CPI in Nova Scotia was unchanged from a month earlier.

Chart 3   Chart 3: Consumer prices rise at a slower rate in nine provinces
Consumer prices rise at a slower rate in nine provinces



In Newfoundland and Labrador, the CPI increased 1.5% on a year-over-year basis in June, after rising 3.0% in May. The gasoline index, which led this deceleration, declined 8.7% year over year in June, following a 22.9% increase in May. A reduction in the province's gasoline tax contributed to this decline. In contrast to the movement at the national level, prices for fresh vegetables (-7.4%) fell in the 12 months to June. The traveller accommodation index in Newfoundland and Labrador grew 3.1% year over year in June, after declining 5.1% the previous month.

The CPI in Ontario was up 1.3% in the 12 months to June, following a 1.4% gain in May. Homeowners' replacement costs contributed the most to this growth, up 6.9% year over year in June, following a 7.9% increase in May. Traveller accommodation prices increased at a faster rate in June (+10.1%) than in May (+5.9%). Prices for women's clothing declined 4.8% in the 12-month period ending in June.

In Alberta, the CPI increased 0.4% year over year in June, following a 1.2% gain in May. The natural gas index rose 14.2% on a year-over-year basis in June, after increasing 35.5% in May. Contrary to the movement at the national level, passenger vehicle insurance premiums (-1.4%) in Alberta fell in the 12-month period ending in June. Among the provinces, growth in women's clothing prices accelerated the most in Alberta.

Seasonally adjusted monthly Consumer Price Index

On a seasonally adjusted monthly basis, the CPI was unchanged in June, after declining 0.2% in May.

Chart 4   Chart 4: Seasonally adjusted monthly Consumer Price Index
Seasonally adjusted monthly Consumer Price Index



In June, the clothing and footwear index was unchanged on a seasonally adjusted monthly basis. At the same time, six major components increased, with the food index (+0.4%) and the alcoholic beverages and tobacco products index (+0.4%) recording the largest gains. The transportation index declined 0.5%.

Chart 5   Chart 5: The purchase of passenger vehicles index, annual average, Canada, 1949 to 2016
The purchase of passenger vehicles index, annual average, Canada, 1949 to 2016



FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170721/dq170721a-eng.pdf

BLOOMBERG. 21 July 2017. Canadian Inflation Falls to 1%, But Core Rate Rises
By Greg Quinn

• Retail sales jump 0.6% in May, double the median forecast
• Data ‘quite comforting’ for Poloz, despite headline weakness

Canada’s core consumer prices and retail sales came in faster than expected, signaling that overall inflation may turn around to clear the way for another rate increase this year.

The average of the central bank’s three core inflation measures rose to 1.4 percent in June, Statistics Canada said Friday from Ottawa, up from a May reading of 1.3 percent that was the lowest since 1999. Retail sales doubled economist forecasts for May with a 0.6 percent increase, bringing the year-over-year gain to 7.3 percent, more than double the average over the last decade.

Canada’s dollar strengthened a fourth day as the reports lined up with Bank of Canada Governor Stephen Poloz’s argument that inflation will shrug off some temporary weakness and move back toward his 2 percent target over the next year. Poloz lifted the key rate to 0.75 percent this month, the first such move in seven years, and said further tightening depends on how fresh data changes the inflation outlook.

“Seeing the core measures trend up, that’s quite comforting for the bank,” Fred Demers, chief Canada macro strategist at TD Securities, said by phone from Toronto. The retail gain also puts the economy on track for another quarter of growth at faster than a 3 percent annualized pace, meaning another rate increase in October “is a very likely scenario,” he said.

The economy grew at a 3.7 percent pace in the first three months of the year, the kind of expansion Poloz has said will bring the country to full output around the end of this year.

Consumer Strength

Consumers encouraged by low interest rates and job creation are leading the charge. The third straight gain in retail sales was led by a 2.4 percent increase at motor vehicle and parts dealers. Sales volumes, a better guide to economic growth because it strips out price swings, are up 6.4 percent from a year earlier, the largest rise since 2010.

The momentum was enough for investors to look beyond the overall inflation rate falling to 1 percent in June, the slowest since October 2015. That’s because several key items the Bank of Canada identified as temporary sources of weakness firmed up in June.

Prices for energy fell 1.3 percent, and for automobiles declined 0.2 percent, the first drop since February 2015. The Bank of Canada estimated those two components shaved 0.7 percentage points off the inflation rate in the second quarter.

Food costs rose 0.6 percent, breaking a string of eight previous declines. The central bank has also said intense retail competition is holding down prices more than may be justified by a decline in the cost of agricultural products.

“We would absolutely not read the fact that headline missed consensus as jeopardizing normalization, not least with another solid retail sales report,” Jimmy Jean, a strategist in the fixed-income group at Desjardins Capital Markets in Montreal, wrote in a research note.



The Canadian dollar rose 0.4 percent to C$1.2536 per U.S. dollar at 11:38 a.m. Toronto time. Futures swaps trading also suggests investors have almost fully priced in another rate increase by December.

Two of the three core measures quickened in June. The ‘common’ core rate moved to 1.4 percent from 1.3 percent and ‘median’ core rate was 1.6 percent following a May reading of 1.5 percent. The ‘trim’ core rate was unchanged at 1.2 percent.

Faster core inflation “should be encouraging for the Bank of Canada and put all the CPI naysayers to rest for one month at least,” Benjamin Reitzes, a Canadian rates and macro strategist at BMO Capital Markets, said by phone from Toronto. “On the retail sales, volumes were up 1.1 percent, that’s what counts.” The figures suggest the Bank can still raise interest rates in October, he said. “October is still a very reasonable call for the bank.”

— With assistance by Erik Hertzberg

StatCan. 2017-07-21. Retail trade, May 2017

Retail sales — Canada
$48.9 billion
May 2017
0.6% increase
(monthly change)
Source(s): CANSIM table 080-0020.

Retail sales increased for the third consecutive month, rising 0.6% to $48.9 billion in May. Sales were up in 5 of 11 subsectors, representing 56% of total retail trade.

Higher sales at motor vehicle and parts dealers were the main contributor to the gain. Excluding sales in this subsector, retail sales were down 0.1% in May.

After removing the effects of price changes, retail sales in volume terms rose 1.1%.

Chart 1   Chart 1: Retail sales increase in May
Retail sales increase in May



Higher sales at motor vehicle and parts dealers

Following a decrease in April, sales at motor vehicle and parts dealers increased 2.4% in May. Higher sales at new car dealers (+2.7%) accounted for most of the gain at the subsector level. Used car dealers (+4.7%) and automotive parts, accessories and tire stores (+2.7%) also posted higher sales. Sales at other motor vehicle dealers (-4.2%) were down for the fourth time in five months.

Higher receipts were reported at food and beverage stores (+0.9%). The main contributors to the gain were supermarkets and other grocery stores (+0.9%) and beer, wine and liquor stores (+2.4%). Following a 3.5% increase in April, lower sales were reported at specialty food stores (-2.2%).

Sales at electronics and appliance stores (+1.2%) continued their upward trend in May, rising for a fifth consecutive month.

In the general merchandise stores subsector (-1.3%), sales were down for the first time in five months.

Sales at gasoline stations were affected by lower gasoline prices in May. Gasoline stations (-0.6%) posted their first sales decline in three months, despite a higher volume of gasoline sold.

Sales up in eight provinces

Retail sales were up in eight provinces in May.

British Columbia (+2.6%) reported the largest increase in dollar terms, led by higher sales at new car dealers and, to a lesser extent, building material and garden equipment and supplies dealers.

Sales in Alberta (+1.6%) rose for the ninth time in ten months.

Retail sales in Ontario edged up 0.2% in May, the seventh sales increase in nine months. Higher sales at new car dealers more than offset lower sales at general merchandise stores and health and personal care stores.

Following a 1.5% increase in April, sales in Quebec decreased 0.8% in May.

In New Brunswick (+1.2%), retail sales rose for the fifth consecutive month on higher sales at new car dealers.

E-commerce sales by Canadian retailers

The figures in this section are based on unadjusted (that is, not seasonally adjusted) estimates.

On an unadjusted basis, retail e-commerce sales were $1.3 billion in May, accounting for 2.3% of total retail trade. On a year-over-year basis, retail e-commerce increased 46.9% while total unadjusted retail sales rose 10.3%.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170721/dq170721b-eng.pdf

The Globe and Mail. Reuters. Jul. 21, 2017. Solid retail sales support rate hike; inflation lowest since 2015
DAVID LJUNGGREN

OTTAWA — Canadian retail sales posted their third healthy increase in a row in May, a sign of strength that analysts said boosts the case for another rate hike this year despite data showing persistently weak inflation.

Sales rose by 0.6 per cent from April to hit a record C$48.91-billion ($38.82-billion), Statistics Canada said on Friday. The increase was greater than the 0.2 per cent advance forecast by analysts in a Reuters poll.

The Bank of Canada last week raised interest rates for the first time in nearly seven years. It also vowed to wait for more economic data before committing to its next move.


Separately, Statscan said the annual inflation rate slowed to a 20-month low of 1.0 per cent in June, well below the central bank’s 2.0 per cent target, although core measures showed signs of strength.

“The Bank of Canada hiked rates based on the outlook for growth ... and in my view the numbers today really speak to that principle,” said Jimmy Jean, a senior economist at Desjardins, a Canadian brokerage.

“I think the Bank of Canada will be very satisfied ... it keeps very alive and well the likelihood of a hike in October.”

The bank is expected to lift rates again in October, according to a Reuters poll of primary dealers.

The Canadian dollar strengthened, hitting C$1.2547 to the greenback, or 79.70 U.S. cents, up from C$1.2595, or 75.40 U.S. cents.

May’s advance in retail trade was driven by a 2.4 per cent increase in sales at motor vehicles and parts dealers.

“The better-than-expected performance of the Canadian economy ... should allow the Bank of Canada to follow through with another rate hike in October,” said economist Dina Ignjatovic of TD Economics.

The overall inflation rate – which matched the forecast of analysts – was the lowest since the 1.0 per cent recorded in October 2015.

Gas prices fell 1.4 per cent in the 12 months to June after increasing by 6.8 per cent on an annual basis in May.

Two of the three measures of core inflation, which the Bank of Canada introduced last year, posted gains.

Among those core inflation measures, CPI common, rose to 1.4 per cent from 1.3 per cent. The bank says this gauge is useful in assessing the economy’s underperformance.

CPI median, which shows the median inflation rate across CPI components, rose to 1.6 per cent from 1.5 per cent while CPI trim, which excludes upside and downside outliers, stayed at 1.2 per cent.

REUTERS. JULY 21, 2017. Canada retail sales jump, could boost case for rate hike

OTTAWA (Reuters) - Canadian retail sales posted their third healthy increase in a row in May, Statistics Canada data indicated on Friday, in a sign of economic vitality that could boost the case for the Bank of Canada to hike rates again this year.

Sales rose by 0.6 percent from April to hit a record C$48.91 billion ($38.82 billion), Statscan said, much greater than the 0.2 percent advance forecast by analysts in a Reuters poll. Sales increased in five of 11 subsectors, representing 56 percent of total retail trade.

The central bank last week raised interest rates for the first time in nearly seven years and said further hikes would depend on the strength of the economy.

May's advance in retail trade was largely driven by a 2.4 percent increase in sales at motor vehicles and parts dealers. Excluding this subsector, retail sales dropped by 0.1 percent.

Stripping out the effects of price changes, May sales volumes grew by 1.1 percent. Gasoline stations recorded a 0.6 percent decline, as lower prices outweighed a higher volume of gas sold.

Reporting by David Ljunggren; Editing by Jeffrey Benkoe

NAFTA

The Globe and Mail. 21 Jul 2017. Scheer mounts attack as PM focuses on NAFTA talks. Liberals suggest Tory campaign against Khadr payout could hurt negotiations. Conservative Leader Andrew Scheer, seen in Ottawa on Thursday, says Tories accept the ruling that Omar Khadr’s rights were violated, but the matter of his compensation ‘was worth fighting for.’
LAURA STONE, OTTAWA

Prime Minister Justin Trudeau says the renegotiation of the North American free-trade agreement is “too important” for partisanship, after federal Conservatives went on a cross-border campaign to criticize the Liberal government for paying $10.5-million to former Guantanamo detainee Omar Khadr.
But Conservative Leader Andrew Scheer vowed on Thursday to keep up his party’s condemnation of the settlement, saying any negative outcome resulting from the Khadr payout lies with the government.
Senior Liberals this week suggested that the Tories’ campaign against the government’s settlement with Mr. Khadr could affect trade talks with the Trump administration, set to begin on Aug. 16 in Washington.
Mr. Trudeau addressed the controversy on Thursday, saying Canadians have been pleased that various levels of government and different political parties are working together on the CanadaU.S. file.
“This is too important to fall into partisanship,” Mr. Trudeau told reporters during a news conference in Barrie, Ont.
“Canadians expect their representatives, whatever party they be part of, to be standing up for Canadian interests and making sure that we are creating the right deal for Canada as we move forward on modernizing NAFTA.”
Mr. Scheer, however, said he rejects the link the Liberals are making between the payment to Mr. Khadr and free-trade negotiations. “The only people now who are trying to make this assertion are the Liberals themselves. And this comes on the heels of them desperately trying to deflect blame to others,” Mr. Scheer said at a news conference in Ottawa.
“If they were so concerned about the backlash, I would ask, ‘Did they give anyone in the U.S. a head’s up? Did they let their negotiating team in Washington know that it was coming? Did they talk to the State Department?’ ”
The Trump administration has so far been quiet on the Khadr issue and a State Department official declined to comment when contacted on Thursday.
Still, Mr. Scheer said Conservatives will continue to present a “united front” to the United States on trade issues.
“I have instructed my members of Parliament … to speak with one voice as Canadians, to make sure that we’re doing what’s in the best interest of Canadian businesses and Canadian workers,” Mr. Scheer said.
Mr. Khadr, a Canadian citizen, was sent to Guantanamo Bay at the age of 15 after he was accused of throwing a grenade that killed U.S. army medic Sergeant Christopher Speer and injured Sergeant Layne Morris in Afghanistan. The Supreme Court of Canada ruled in 2010 that the actions of Canadian officials who participated in U.S. interrogations of Mr. Khadr had offended “the most basic Canadian standards about the treatment of detained youth suspects.”
Before the settlement, Mr. Khadr’s lawyers had filed a $20million lawsuit against the federal government.
Mr. Trudeau again defended his government’s decision on Thursday.
“Obviously, people are troubled by the settlement, and as was I. And that’s why we settled. If we had continued to fight this in court, we would have been spending three or four times as much money on a payout,” he said.
“Previous governments systematically and deliberately neglected to defend and were even complicit in the violation of a Canadian citizen’s rights. This is not about the facts of what Mr. Khadr did or didn’t do. This is about what the Canadian government did or didn’t do. And when a Canadian’s rights are violated, everyone pays.”
Mr. Scheer disputed Mr. Trudeau’s argument about cost-saving, noting the Liberals settled out of court and have never publicly disclosed or explained the reported $10.5-million sum.
“Nobody believes that Justin Trudeau made this payment to save taxpayers’ money,” Mr. Scheer said. “We’re running massive $30-billion deficits. The amount of money that he’s claiming he would have saved would be a rounding error.”
He added that the Conservatives accept the Supreme Court’s ruling that Mr. Khadr’s rights were violated, but said the matter of compensating Mr. Khadr “was worth fighting for” in court.
On Sunday, The Wall Street Journal published an opinion piece from Conservative MP Peter Kent, called A Terrorist’s Big Payday, Courtesy Of Trudeau, and Conservative MP Michelle Rempel appeared Monday on Fox News, the same day the U.S. administration released its list of negotiating objectives for NAFTA. The Conservative Party also launched a website, Khadr Questions, which invites visitors to tweet to Mr. Trudeau’s government with questions and concerns about the payment.

The Globe and Mail. 21 Jul 2017. Envoy previews Canada’s NAFTA strategy
ADRIAN MORROW, WASHINGTON

The renegotiation of the North American free-trade agreement must focus on finding changes to the deal that U.S. President Donald Trump can claim as victories, but that won’t be harmful to Canada or Mexico, says David MacNaughton, Canada’s envoy to Washington.
In a sneak preview of Ottawa’s strategy for the high-stakes trade talks, Mr. MacNaughton told a forum in the U.S. capital on Thursday that NAFTA’s supporters cannot simply defend the trade deal in its current form. Instead, he suggested, the game will be to propose improvements to the pact that will benefit everyone, but that Mr. Trump can also sell to his base as fulfillment of his campaign promise to overhaul the deal.
“This was such a big part of the President’s campaign last year, and for any of us to think that we could sort of just ignore that would be crazy. We have to find ways where he can declare victory without it being seen in either Mexico or Canada as being a loss,” Mr. MacNaughton said at the Washington International Trade Association panel, where he appeared alongside his Mexican counterpart Geronimo Gutierrez.
Mr. MacNaughton cited incorporating e-commerce provisions into NAFTA as one possible example of an improvement all three parties could agree on.
“We have to think about being a little inspirational. Because if all we’re doing is defending the status quo, I’ll tell you, I think we’re going to lose,” he said.
Preparations for the renegotiations have kicked into high gear this week, with the United States releasing a list of negotiating objectives and announcing the first round of talks for Aug. 16 to 20 in Washington. The Trump administration has signalled it wants a swift negotiation that wraps up late this year or early next. Mr. MacNaughton and Mr. Gutierrez said it would be difficult but not impossible to work through Washington’s gargantuan list of negotiating subjects – there are more than 100 – in such a short time.
“While all of those who have been involved in trade negotiations will tell you it’s not possible to do it in the next four months, I don’t believe it. If there’s goodwill and you really work hard, anything is possible,” Mr. MacNaughton said.
Mr. Gutierrez said Mexico is motivated to get the talks done well ahead of its July 1, 2018, presidential election.
Despite Mr. Trump’s protectionist rhetoric and some of the White House’s tough demands – including slashing the trade deficit and scrapping trade-arbitration panels – both ambassadors said they were optimistic the administration could be persuaded to cut a deal that benefits all three countries. Mr. MacNaughton pointed to Vice-President Mike Pence’s comments at a governors meeting in Rhode Island last week, in which he said a renegotiated NAFTA would be a “win-win-win” for all three countries.
“I know that people seize on some of the words that the President uses every once in a while, and everybody focuses in on that, but the reality is, in terms of our discussions with the administration, the White House … that’s what the United States is focused in on, too. ‘How do we make this a win-win-win?’ ” he said.
Mr. Gutierrez said preparatory talks between the three sides have done much to build goodwill. “I think that each side believes that the other guy is trying honestly to reach a deal, and that’s very important. We were not there in January of this year,” he said. Mr. Gutierrez also denied that Ottawa and Mexico City are teaming up to present a united front against the United States.
In perhaps a sign of Canada’s optimism about the talks, Mr. MacNaughton even felt comfortable cracking a few Trump-themed jokes. Pointing to the United States’ trade surplus with Canada in steel and the services industry, he quipped that slashing the trade deficit may not be such a bad idea.
At another point, he exhorted NAFTA’s advocates to adopt the slogan “better is always possible,” which Justin Trudeau successfully employed in the 2015 election campaign. “I thought about ‘Make North America Great Again,’ ” Mr. MacNaughton deadpanned, “but that’s already been used by somebody.”

ENERGY

StatCan. 2017-07-21. Refined petroleum products, June 2017

Data on the production, inventories and domestic sales of refined petroleum products for Canada and the regions are now available for June upon request.

Other selected data about these products are also available.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170721/dq170721g-eng.pdf

HOUSING BUBBLE

StatCan. 2017-07-21. Investment in new housing construction, May 2017

Investment in new housing construction — Canada
$4,404.0 million
May 2017
4.1% increase
(12-month change)
Source(s): CANSIM table 026-0017.

New housing construction investment totalled $4.4 billion in May, up 4.1% from May 2016. This increase was mostly explained by higher investment in Ontario and, to a lesser extent, in British Columbia and Manitoba. Of the four provinces that posted a decline, Quebec's decrease was the largest.

The 11.2% drop in Quebec was due primarily to a strike in the construction industry in the last week of the month. All types of housing construction declined in this province except row housing, which saw a slight increase.

In Ontario, new housing construction investment totalled $1.8 billion in May, a 7.1% year-over-year increase. This gain was largely attributable to higher spending on single-family dwellings (+$81.5 million). However, apartment construction spending in the province fell by $14.4 million.

Spending in British Columbia totalled $995.0 million, up 7.3% year over year. This increase was attributable to higher construction investment in apartments (+$69.2 million) and, to a lesser extent, row houses (+$7.1 million).

In Manitoba, new housing construction investment rose 36.9% year over year to $144.6 million. This growth was led by higher investment in single-family dwellings. Manitoba was the lone province to post increases for all types of dwellings.

Chart 1   Chart 1: Investment in new housing construction, by type of dwelling
Investment in new housing construction, by type of dwelling



Increases for all types of dwellings

Nationally, construction spending increased for all types of dwellings. Increased investment in single-family dwellings (+$77.6 million) accounted for 44.6% of the national gain.

Higher investment in apartment buildings was still mostly attributable to spending in British Columbia. The largest decreases for this type of dwelling were in Alberta and Ontario.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170721/dq170721c-eng.pdf

BOMBARDIER

REUTERS. JULY 21, 2017. Siemens, Bombardier close to deal on transportation tie-up: sources
By Arno Schuetze and Allison Lampert

FRANKFURT/MONTREAL (Reuters) - Canada's Bombardier (BBDb.TO) and Germany's Siemens (SIEGn.DE) are in the final stages of talks to combine their rail operations, several sources familiar with the matter said on Friday, in a deal that would give the two added heft to compete against Chinese rail giant CRRC (601766.SS).

The deal, which would create two separate joint ventures for their signaling and rolling-stock divisions, could be announced as early as August, the sources said.

Bombardier and Siemens declined to comment.

Siemens' supervisory board will discuss the matter at its meeting on Aug. 2, while Bombardier's board is expected to consider it next week, the sources said, adding that an announcement could come in early August. Bombardier is not expected to discuss the deal on its second-quarter earnings call on July 28.

Under the agreement, Bombardier would take a majority stake in the planned combination of the rolling stock operations, while Siemens would take the lead in a joint venture in signaling technology, the sources said. No money would be exchanged as part of the deal, one source said.

The companies have offered extensive job guarantees to get backing from the strong German labor side, two of the sources said.

Rail consolidation has been a trend over the last few years, as global companies seek to contain costs and Western companies struggle with the rising ambitions of China's state-backed CRRC at home and abroad.

Reports about Siemens and Bombardier exploring a joint venture surfaced in the media in April. Analysts warned at the time that a combined company with total sales of $16 billion would face antitrust concerns in Europe. Also, both companies might not agree on who would get a controlling stake in the venture, analysts said.

The current potential deal addresses those concerns because control is divided through the two joint ventures.

One source said Bombardier and Siemens would have to sell off some rolling stock, such as some high-speed trains operations, to address the antitrust concerns.

Bombardier, Siemens and French rival Alstom have talked to each other about combining their businesses in various arrangements over the past years. This would be the third attempt by Siemens and Bombardier, one of the people said.

Additional reporting by Alexander Huebner and Georgina Prodhan; Editing by Georgina Prodhan and Jeffrey Benkoe

INTERNATIONAL TRADE

TCS. 07/21/2017. Canada-Chile Business Ties Flourish With FTA

Twenty years ago, Solmax International Inc. saw an opportunity and seized it, says Dominic Bérubé, the company’s general manager of operations in San Bernardo, Chile. Today the Canadian company is a well‑established entity within Chile’s mining and construction industries.

As the Canada‑Chile Free Trade Agreement (CCFTA) celebrates its 20th anniversary this month, Bérubé is amongst company representatives from both countries who say the deal has helped businesses flourish.

Canada and Chile flags
“Our journey in Chile started no doubt thanks to the FTA agreement,” Bérubé says, explaining that the company took part in a trade mission to Chile in December 1996 organized by Global Affairs Canada (GAC), at a time when the Canadian and Chilean governments were finalizing the agreement. “The trade mission was to show Canadian entrepreneurs the potential of the Chilean market. We participated and we were convinced that we needed to be part of this new, opening market.”

The CCFTA came into force July 5, 1997. It is one of Canada’s oldest trade deals, and the first with a South American nation. For Chile, it was the first comprehensive trade agreement concluded with a developed nation.

The following month—August of 1997—Bérubé moved to Chile to set up a branch of Solmax there. Headquartered in Varennes, Que., near Montreal, the company started as a construction firm in 1981 and was using geomembrane liners in its construction work. In 1996 it began manufacturing the geomembrane liners, which are used to protect the environment from contamination from processes related to mining, energy, waste management, water, and civil engineering. Today, Solmax is one of the world’s largest manufacturers of polyethylene geomembrane, exporting to more than 60 countries.

“When we began manufacturing that’s when Solmax began putting a lot of emphasis on international development and we started looking at exporting as part of our strategic business plan,” Bérubé says, adding the company established a presence in Houston, Texas, and a plant in Malaysia. “We definitely would have been less interested in Chile as a market had it not been for the free trade agreement.”

Having a free trade agreement in place instilled confidence in Chile as a market, for Solmax, Bérubé says, explaining the FTA created a sense of confidence in that market and of stability for the business environment.

“Solmax established its first branch here in Chile to distribute geomembrane liners—we came into this country together with the FTA even though our products were not actually covered under the agreement at first,” he says.

The company made a case to the FTA negotiating committee to have its products specifically included under the Agreement. After careful consideration, the geomembrane products were added later that year, Bérubé says. He adds that even without specific reference to their products within the Agreement, Chile would still have remained a good choice for Solmax.

“Since Canada has such a good profile here and mining is such an important industry and with the FTA and so many Canadian companies here, that has helped our business,” he says. “The market continues to flourish—mining has certainly flourished—and commercializing our products for this industry has been profitable. The FTA has played an important role, the stable political and economic situation and the ease of doing business here has helped.”

Bérubé stayed in Chile for three years before returning to Canada. Solmax has since expanded its business interests in Chile, acquiring a piping company a few years ago. Bérubé returned to Chile to run that part of the operations.

“I can definitely say that this is a good free trade agreement success story: today Solmax is a well‑known brand in Chile both for its geomembrane liners and its piping products.”

As Chile’s first free trade agreement with a developed nation, the Agreement with Canada helped Chile attain a certain standard in the international business community, says Andrés Kuhlmann, president of the Chile‑Canada Chamber of Commerce. It paved the way for other bilateral free trade agreements Chile later negotiated with Mexico and the United States, he adds.

“One of the most important aspects of this FTA is the protection of foreign investors—this is absolutely key for attracting investment from Canada,” Kuhlmann says. “I’m sure that without the FTA it would not be possible for some investors to invest in Chile. The legal framework in Chile and the FTA’s binding legal framework provide enough certainty for investors in our country.”

The Agreement has been especially important in instilling confidence in Chile for foreign business partners and investors in general, says Kuhlmann, who is also the CEO of Transelec, the main energy transmission company in Chile,  providing service to 98 percent of the population across  nearly 10,000 km of transmission lines.

“For investors a free trade agreement marks a basic standard. Chile has a very good reputation amongst Canadian investors and part of that reputation is that there is a very high standard,” Kuhlmann says. “Infrastructure and mining are the two main investments from Canada and these are very long-term investments. I think the FTA has been key for a small economy like ours to attract such large investments.”

Kuhlmann’s company, Transelec, has been directly impacted by this sense of confidence in doing business with Chile. The company was operating in Chile when the utilities sector was privatized in the 1980s, Kuhlmann explains. In 2000 it was purchased by Hydro Québec which then sold it to four Canadian shareholders in 2006.

“We have a long history of Canadian investment and today Transelec is still in Canadian hands,” he says. “When we speak about investment, the advantages under a free trade agreement are not always specific, but I can say for sure the FTA was important in helping this investment to materialize.”

Kuhlmann says the FTA has also fostered the development of strong Canada‑Chile ties in sectors related to infrastructure and mining such as in engineering, for example, where several large Canadian corporations have established operations in Chile. On a smaller scale, the Agreement is also encouraging Chilean investment into Canada, he says.

Business between Canada and Chile has flourished since the CCFTA came into force, says Geoff White, senior trade commissioner with the Canadian Trade Commissioner Service (TCS) in Santiago, Chile. Two‑way merchandise trade between the two has more than tripled since 1997, with bilateral trade reaching $2.4 billion in 2016.

“The Agreement has been beneficial for business for both countries,” says White. “I think that Chile has been a good choice for Canada. There are good conditions for doing business here such as a stable political environment, strong adherence to the rule of law and a solid economy.”

The Agreement has been a boon for both trade and investment, says White. Canada is now the fourth largest investor in Chile (after the United States, Spain and the Netherlands) and the top foreign investor in Chile’s mining sector.

Canada’s top exports to Chile include machinery; mineral fuels and oils—principally coal; pharmaceutical products; cereals; and meats. Canada’s top imports from Chile are precious stones and metals—mostly gold and silver to be refined in Canada; copper—Chile is the world’s largest copper producer; fruits; beverages—mainly wine; and fish and seafood.

A 2013 study conducted by Global Affairs Canada’s Office of the Chief Economist on the Economic Impact of the Canada-Chile Free Trade Agreement concluded that Canada’s overall economic welfare gains from this Agreement were approximately $250 million annually.

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LGCJ.: