CANADA ECONOMICS

BANK OF CANADA. Conference: Monetary Policy Framework Issues: Toward the 2021 Inflation-Target Renewal

The primary goal of this day-long workshop is to explore a range of issues related to monetary policy frameworks – namely the role and objectives of monetary policy, the specification and effectiveness of monetary policy tools, transparency and communications, and lessons learned from other central banks. Examining these topics will help shape the Bank’s broader research agenda, including issues that may be relevant for the 2021 renewal of the inflation-control agreement with the Government of Canada.

The workshop, taking place at the Bank of Canada, will comprise a series of lively and thought-provoking panel discussions. It will be webcast live. The invited audience will include academics, other central bankers, private sector economists and financial market experts, labour union representatives, senior officials from government departments and Crown agencies, representatives from policy think tanks, and the media.

For more information, email communications@bankofcanada.ca or call 613-782-8782.

Preliminary Agenda

Thursday, 14 September 2017
08:50 - 09:00 Welcome Remarks
Lawrence Schembri (Bank of Canada)

09:00 - 10:15 The Role and Objectives of Canadian Monetary Policy
Chair: Rhys Mendes (Bank of Canada)

John Murray (Queen’s University)
Stephen Gordon (Laval University)
Paul Beaudry (University of British Columbia)
Martin Eichenbaum (Northwestern University)

10:45 - 12:00 The Scope and Effectiveness of Monetary Policy Tools
Chair: Sylvain Leduc (Bank of Canada)

Steve Ambler (Université du Québec à Montréal)
Michelle Alexopoulos (University of Toronto)
Jean-Francois Perrault (Scotiabank)
Andrew Levin (Dartmouth College)

13:30 - 14:45 Monetary Policy Transparency and Communication
Chair: Timothy Lane (Bank of Canada)

Kevin Carmichael (Centre for International Governance Innovation)
Pierre Siklos (Wilfrid Laurier University)
Michael Ehrmann (European Central Bank)
Lars Svensson (Stockholm School of Economics)

15:15 - 16:45 Lessons from Other Central Banks
Chair: Carolyn A. Wilkins (Bank of Canada)

Nadine Baudot-Trajtenberg (Bank of Israel)
Athanasios Orphanides (MIT Sloan School of Management)
Stephen Williamson (University of Western Ontario)
Paul Tucker (Harvard Kennedy School)

16:45 Closing Remarks
Carolyn A. Wilkins (Bank of Canada)

Content Type(s): Conference

NAFTA

The Globe and Mail. 5 Sep 2017. U.S. goes hard on demands, soft on specifics in NAFTA talks. American negotiators are insisting Canada and Mexico will have to make all the concessions in the overhaul of the North American free-trade agreement while the United States will not give anything up, The Globe and Mail has learned.
ADRIAN MORROW

Minister of Foreign Affairs Chrystia Freeland arrives to where the second round of NAFTA talks involving the United States, Mexico and Canada is taking place in Mexico City on Monday.
A source familiar with the closed-door talks at the Hyatt Regency hotel in Mexico City, where the second round of the NAFTA renegotiation is unfolding, said the Trump administration has taken a hard line at the bargaining table.
The U.S. decision to dig in at such an early stage of discussions means there will be little fast progress, despite a packed agenda and compressed time frame: Negotiators are working on 25 different parts of the agreement, and the United States is pushing to have a deal done before the end of the year.
The United States ratcheted up the tension even further on Saturday by demanding that Canada loosen its system of supply management for dairy, eggs and poultry, said the source, who spoke on condition of anonymity in order to reveal confidential details of the discussions.
This round of discussions, which began Friday, wrap up Tuesday. According to a schedule obtained by The Globe, the final day of talks will include a second day of talks on the rules of origin. »
The rules of origin govern how much content in manufactured goods must be produced within the NAFTA zone to be exported between the three countries without paying tariffs. Negotiators will also discuss environment and government procurement, a subject that could include controversial Buy American provisions.
Foreign Minister Chrystia Freeland arrived in Mexico City on Monday and had dinner with her counterparts – U.S. Trade Representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo – before a series of meetings they will hold on Tuesday. Two senior advisers from each country also attended the dinner.
The next round of talks will start later this month in Ottawa; future rounds will continue rotating between the three countries.
Despite the United States’ hard stand, the country did not give its negotiating partners many specifics on what it wants, government and industry sources said.
Washington has not, for instance, said exactly what it wants Canada to do with supply management, whether to loosen the rules or allocate a larger quota for U.S. farmers.
It was a similar story on the rules of origin. The United States signalled in the opening round of talks last month that it would demand more NAFTA-zone content in autos – as well as a quota of specifically U.S.-made content – but has not yet given Canada and Mexico the details on what that would be, the sources said.
One industry source said the United States’ prime imperative on rules of origin appears to be helping the domestic steel industry. But the American government is still trying to figure out how exactly to rejig the rules of origin to make that happen.
Canada’s apparent strategy has been to make large demands – including that climate change be written into the deal and that the Unites States bans states from adopting so-called “right-towork” laws accused of gutting unions – knowing they will likely be dialled back as part of the give-and-take. Mexico, meanwhile, is tabling few detailed demands, two sources said, waiting for the United States to reveal its positions before responding.
Armando Ortega, a former Mexican trade negotiator, said the United States’ intransigence is unusual at the early stage of talks: Normal negotiations usually begin with all sides putting their best foot forward and trying to reach common objectives. The tough American stand, he said, might be politically motivated posturing. President Donald Trump won last year’s election largely by attacking Mexico on trade and border security.
“If you are Lighthizer, you need to play to the audience. Your boss being who it is, you certainly would like to be very tough, especially if you’re in the country that has been your pinata,” he said in an interview.
Mr. Ortega, president of the Canadian Chamber of Commerce in Mexico, said it is ironic that the United States – which demanded the negotiations and wants them done by the end of the year – hasn’t laid out all the details of its demands.
“They’re the demandeur, they should be putting things on the table,” he said.
Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said rules of origin will be the key issue for the United States in talks because they will give it something straightforward to take back to its supporters.
He said he believed the United States is still trying to sort out how much North American content the domestic industry could realistically produce to figure out what it can ask for without inadvertently driving production outside of the NAFTA zone.
“That number is the most easily analyzed success or failure point for the U.S. administration. So I think we won’t see a solid number until much later in the process,” Mr. Volpe told The Globe in the lobby of the Hyatt.
Mr. Volpe said the United States’ hard line at the opening of the talks was likely an “on the moment tactic,” and doesn’t mean the negotiations are doomed.
“The waters are going to boil some times more than others,” he said. “But it’s just language.”

REUTERS. SEPTEMBER 5, 2017. NAFTA ministers seen announcing progress on non-controversial topics
David Lawder, Ana Isabel Martinez

A NAFTA banner is pictured where the second round of NAFTA talks involving the United States, Mexico and Canada is taking place in Mexico City, Mexico, September 4, 2017. REUTERS/Edgard Garrido
MEXICO CITY (Reuters) - Trade negotiators from Canada, the United States and Mexico were set on Tuesday to wrap up the second round of talks to modernize the North American Free Trade agreement with a need to demonstrate at least some progress on non-controversial areas.

No major breakthroughs were expected at a joint news conference with U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland scheduled for 2:45 p.m. CDT (1945 GMT).

But government officials and lobbyists said they were hoping that the trade ministers would be able to announce a timetable for completing some chapters.

Juan Pablo Castañon, head of Mexico’s influential CCE business lobby group, said negotiators had made headway on areas such as energy, telecommunications and investment, as well as improving conditions for small-and-medium-sized firms and streamlining customs procedures.

Castañon told Mexican radio on Tuesday he hoped the talks in the remaining hours would produce “a unified text that allows discussion to finalize chapters on trade facilitation, on small and medium-sized businesses and telecommunications.”

The three countries are racing to rewrite the NAFTA agreement by early next year to avoid conflicts with 2018 election cycles in Mexico and the United States. Moving quickly to consolidate texts is paramount if they are to achieve that goal.

It took five years and more than 20 negotiating rounds to negotiate the since-canceled 12-country Trans-Pacific Partnership trade deal.

The NAFTA negotiators were not expected to make progress on difficult subjects such as rules of origin, labor standards and changes to dispute-resolution mechanisms, for which Canadian and Mexican officials have not seen specific U.S. proposals, officials and industry representatives briefed on the talks said.

One area of concern identified by lobbyists is Lighthizer’s stated objective of incorporating a U.S.-specific automotive content requirement, which they say could prove a major obstacle that delays the talks.

Another problem is whether U.S. President Donald Trump will find the final outcome acceptable enough to stay in NAFTA. Trump used the agreement as a punching bag during his election campaign last year and has repeatedly threatened to pull out of it, even after the modernization talks began on Aug. 16.

Lighthizer has adhered to Trump’s line that NAFTA must be rewritten to reduce U.S. trade deficits of about $64 billion with Mexico and $11 billion with Canada and started the talks with strong demands for major changes.

“Sparks could fly at some of the tables today because Lighthizer is here,” said a Mexican business executive briefed on the talks. “I don’t think today’s meetings will be easy.”

Additional reporting by Anthony Esposito and Adriana Barrera; Editing by Dan Grebler

VENEZUELA

The Globe and Mail. Reuters. 5 Sep 2017. Venezuela’s Maduro plans to address UN Human Rights Council
TOM MILES

President Nicolas Maduro, accused of trampling on human rights and democracy in Venezuela, is expected to address the opening day of a three-week United Nations Human Rights Council session on Sept. 11.
Mr. Maduro’s government has been criticized by the United Nations, Washington and other governments for overriding Venezuela’s opposition-led Congress, jailing hundreds of opponents and failing to allow the entry of foreign humanitarian aid to ease a severe economic crisis.
“We received a ‘note verbale’ today that he is coming,” UN human-rights spokesman Rolando Gomez said on Monday. “He will be speaking at the opening of the council session.”
Mr. Maduro will speak shortly after an opening address by UN High Commissioner for Human Rights Zeid Ra’ad al-Hussein, who said last week democracy was “barely alive” in the Latin American country.
An Aug. 30 report from Mr. Zeid’s office said security forces had committed extensive and apparently deliberate humanrights violations in crushing anti-government protests.
The report called for further investigation and accountability and urged Mr. Maduro to release arbitrarily detained demonstrators and to halt the unlawful use of military courts to try civilians.
Venezuela has not allowed UN rights officials to make a factfinding visit to the country since 1996. The UN says around 882 people are currently believed to be still in custody, out of 5,341 arbitrarily detained in street protests since April.
Detainees are often subjected to ill treatment, in some documented cases amounting to torture, last week’s report said.
Mr. Maduro’s appearance at the council comes almost two years after he delivered a 45minute speech to it praising Venezuela’s socialist policies and decrying the “harassment of the imperialist powers of the United States.”
An official at Venezuela’s mission to the UN in Geneva said she could not immediately confirm the information about Mr. Maduro’s trip to Europe.
Other speakers at the rights council session will include Qatari Foreign Minister Sheik Mohammed bin Abdulrahman al-Thani.
Saudi Arabia, Bahrain, Egypt and the United Arab Emirates have cut political and trade ties with Qatar this year, accusing it of supporting terrorism, which it denies.

BOMBARDIER/BOEING

The Globe and Mail. 5 Sep 2017. Boeing refuses to back down. Boeing steps up Bombardier complaint
DANIEL LEBLANC

The aircraft maker says it is standing firm on its trade complaint against Bombardier, despite Ottawa’s displeasure, and is willing to live with the consequences. Aircraft maker says it’s willing to face the consequences of Ottawa’s threat to review all military purchases
Boeing Co. is refusing to back down from its trade complaint against Bombardier Inc., warning the federal government that Canada’s aerospace industry will be one of the main victims if the U.S.-based giant is frozen out of future military contracts.
In an interview from his company’s offices in Ottawa, Boeing International president Marc Allen said the priority is fighting back against illegal subsidies and ensuring the global aerospace industry operates by a clear and common set of rules.
“We recognize the Canadian government might be upset with us. We don’t intend to upset anybody, but we plainly have to do what we believe is right,” Mr. Allen said. “If we don’t have a [level playing field], we all lose.”
He added that the company is willing to live with the consequences of its trade complaint, including any impact on Canada’s planned purchase of 18 Super Hornet fighter jets manufactured by the U.S.-based manufacturer.
Federal officials refused to comment on the dispute with Boeing last week. Bombardier has publicly rejected allegations of dumping or illegal subsidies and is fighting the matter in front of the ITC.
In mid-May, Foreign Affairs Minister Chrystia Freeland responded to the trade complaint by announcing a review of all military procurements related to Boeing.
“Our government will defend the interests of Bombardier, the Canadian aerospace industry and our aerospace workers,” she said. »
However, Mr. Allen said the federal government should not forget that Boeing does $4-billion a year of business in Canada, raising the stakes in the public battle.
“If Canada kicks Boeing out, I think that will be deeply unfortunate for us both. It would be a deeply unfortunate outcome,” he said.
Mr. Allen went on to urge the government to stop making a link between the Super Hornet purchase and Boeing’s case against Bombardier at the United States International Trade Commission.
“We are not here to tell the sovereign state what to do, that’s not our role and we would never pretend to that. Do we think the two should be tied together? No, we don’t think they should be,” Mr. Allen said. “If you ask me my opinion, I wouldn’t want the U.S. government trading national security for trade.”
The U.S. Department of Commerce announced in May that it would investigate accusations that sales of Bombardier’s new jetliner constitute dumping into the U.S. market. The investigation could lead to punitive U.S. duties being slapped on sales of the jet. A first decision on the matter is expected in late September.
The federal government responded to the Boeing trade complaint by ending all communication with the firm. Defence Minister Harjit Sajjan said Boeing was not behaving as a “trusted partner,” while Ms. Freeland said U.S. duties slapped on Bombardier would end up hurting the firm’s Americans suppliers.
However, the president of Boeing International said his company’s economic footprint in Canada, with 560 suppliers and 17,000 jobs, also needs to be taken into consideration.
“It has to be a two-way street, there has to be this mutually beneficial relationship for it to be one that grows, one that both sides are happy and excited about,” Mr. Allen said.
He said Boeing offers well-paying, high-tech jobs, as well as future opportunities in areas such as biofuels, ballistic-missile defence and aerial tankers.
“It’s much broader than just fighters. The real question is: What’s the partnership going to look like? Is Canada going to kick Boeing out or will there be a real partnership that grows and continues to be bigger and more exciting as we go? Plainly we think it’s a win-win, it’s mutually beneficial for us to develop forward on that relation,” he said.
He added Boeing is ready to resume its dialogue with the federal government.
“When the government calls on us to act as a trusted partner, we take that very seriously, very, very seriously. Of course, that would require all sides to the challenge, to find ways that address all of the different interests in play,” he said.
Still, Mr. Allen continued to argue that Bombardier, which has received more than $2-billion in government subsidies, acted in a “predatory” fashion when it sold 75 CS100 planes to Delta Air Lines Inc. at a cut-rate price last year. He said Boeing will push through with its case in the same way it has been fighting against European-based Airbus in front of the World Trade Organization for more than a decade.
The federal government started negotiations earlier this year to buy Super Hornet fighter planes to bolster the capacity of the Royal Canadian Air Force as it seeks a longer-term solution to replace its fleet of aging CF-18 warplanes. The purchase is being handled as a foreign-military sale in the United States, which means the American government is acting as an intermediary between Canada and Boeing.
“The U.S. has continued to follow the process to this point,” Mr. Allen said, adding he cannot predict what will happen in the future.

The Globe and Mail. Reuters. 5 Sep 2017. WTO reverses Boeing tax-credit ruling in blow to EU
TIM HEPHER
TOM MILES

A Boeing 777 jet is seen on an assembly line in Everett, Wash. A WTO panel ruled last year that a reduction in Washington business and occupation tax in return for a decision to place 777X production in the state had deliberately shut out imports.
The World Trade Organization has reversed a ruling that Boeing Co. received prohibited support for its newest aircraft, dealing a blow to the European Union in its long-running row with the United States over subsidies.
Monday’s decision by WTO appeal judges overturns a ruling that had banned some Washington State support for plants, including a $1-billion (U.S.) factory designed to build the world’s largest carbon-composite wings for Boeing’s 777X jet.
A WTO panel ruled last year that a reduction in the state’s business and occupation tax in return for a decision to place 777X production in the state had deliberately shut out imports.
But its appeals body found the tax breaks had not explicitly targeted trade flows, removing them from the WTO’s most severe category of banned aid known as “prohibited” subsidies.
The decision neutralizes a potential trump card, which the EU played in 2014 to shake up the world’s biggest trade dispute.
Prohibited subsidies are a form of aid that the WTO’s 164 members consider exceptionally market-distorting and are automatically banned wherever they are proved to exist.
The WTO appeals body did not consider whether the 777X tax credits fell under the more common banner of “actionable” subsidies, since the EU had not resorted to fallback arguments as it gambled on securing a quick, game-changing victory.
But the EU may use evidence from the case to try to widen a previous successful claim against earlier versions of the same tax credits, meaning that although the EU’s latest gambit failed, the 13-year-old war between Washington and Brussels over support for their dominant plane makers will continue.
“Today’s ruling will strengthen the [original EU] case on the long term and allow us to expand our compliance demands,” Airbus spokeswoman Maggie Bergsma said, while Boeing called the ruling a “sweeping and clear win.”
U.S. Trade Representative Robert Lighthizer said the EU had lost most of its claims and “cannot justify their own illegal subsidies by hiding behind groundless claims against the U.S.”
Neither side has been able to make the key charge of prohibited subsidies stick at the appeals stage, but both have won billions of dollars of claims about “actionable” subsidies, while disagreeing over who comes off worst and racking up an estimated $100-million in costs.
The WTO is considering appeals on whether each side complied with previous demands to remove billions of dollars of unfair support. A decision on whether the EU has fallen into line is expected at the end of the year, with a ruling on U.S. compliance due in 2018.
U.S. sources say the timetable could give the administration of President Donald Trump, who has pledged tough enforcement of trade laws, the first crack at introducing sanctions that could theoretically be targeted at any industry, not just aerospace.
If either side is found not to have complied by removing the harmful support for its planes, the other will be able to impose countermeasures.
However, new disputes could arise if sanctions are imposed, despite claims to have complied subsequently.
A European source predicted legal procedures could continue indefinitely until both sides decide to settle.
Airbus renewed a call for a broad global agreement on support for plane makers.

THE GLOBE AND MAIL. SEPTEMBER 4, 2017. EDITORIAL. Globe editorial: To keep the public trust, Bombardier needs to change

The expression "too big to fail" may have reached buzzword status during the 2008 financial crisis, but the concept is not exclusive to banking.

It has become a much-studied topic in business schools around the globe, along with a related and sometimes corollary phenomenon, hubristic leadership. Which brings us to Canadian transportation titan Bombardier Inc.

There is much to celebrate about the company, a technological and market leader in an industry that provides a living for thousands of Canadians.

But it is navigating a nasty legal storm involving allegations of bribery and collusion in Europe and Central Asia. If that weren't enough, choppy reputational waters continue to lap up against its rail division, which was recently excluded from a big-money procurement competition for the New York City subway because of delivery problems involving another contract. In Toronto, Bombardier similarly earned the ire of local transit agencies, after years of delays and snafus on a major delivery of new streetcars.

It is worth at least considering whether the company's alleged ethical violations and spotty management history might be rooted in indulgence, chiefly in the form of decades of government support and the outsized influence of its founders, who control the company.

Last week, a Swedish prosecutor went so far as to allege that the behaviour of a Bombardier employee who is currently on trial in Stockholm for aggravated bribery may be linked to the company's corporate culture.

That's a claim that merits deeper investigation, both on the part of Bombardier's principal shareholders and its public-sector partners in Quebec City and Ottawa.

Modifying organizational DNA is no easy undertaking, and Bombardier faces a particular challenge given its board composition and the dual-share structure that confers control on the founding families. Still, the company's major institutional investors, including Quebec's Caisse de dépôt et placement, forced concessions on the governance front earlier this year. Those efforts must continue.

Critics often lampoon Bombardier as being in the government-subsidy business, not just jets and subway cars. The joke is not without some truth, thanks to the nature of the global industries it operates in, and the public support companies like it are often offered because they are major employers, in Canada and other countries. That's why it has to keep a sharp on eye on its moral compass: Its future depends not just on technological innovation, but also on maintaining the public trust.

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LGCJ.: