CANADA ECONOMICS

NAFTA

The Globe and Mail. 12 Sep 2017. Tech sector urges revisions to visa rules in NAFTA talks
KELLY CRYDERMAN

Brendan Wypich is a Canadian from Toronto who has been employed in California’s tech sector for a decade. His passage across the border has always been facilitated by the NAFTAcreated TN program, which allows tens of thousands of professionals from Canada, and Mexico, to temporarily enter and work in the United States every year.
TN status for Canadians – which requires a prearranged job with a U.S. employer but can be obtained at any border crossing and is valid for three years with an option to renew – has worked well for Mr. Wypich, whose job is to make sure apps have a human-friendly flow.
But he says many of the tech jobs in Silicon Valley or Los Angeles didn’t even exist when he first moved to the United States, and they certainly aren’t on the list of professions allowed TN program entry under the 23year-old NAFTA.
“That’s the main reason you go down there, for something new and innovative,” Mr. Wypich, 40, says. “But the professions [on the list] are ancient.”
An update to the list could emerge as a material issue in the continuing NAFTA renegotiations. It has been a long-standing irritant for companies on both sides of the border who want to move or hire employees and for the many Canadians who want to be a part of the world’s largest economy. Those who want an update argue the outdated list causes unnecessary delays and confusion in the daily movement of professionals – especially for those who work in the tech sector – and hurts North American competitiveness.
“You have a static list of occupations that was decided on in the early 1990s – when the Internet didn’t exist yet. And nobody had heard of Web designers as a career,” says Edward Alden, a senior fellow at the Washington office of the Council on Foreign Relations. “It’s a pretty obvious one that you need to update the list of eligible professions.”
But any hopes for modernization of the TN program, even if backed by business, could be swept aside by American political sentiment that the U.S. immigration system is already too permissive.
If an expansion of the TN program is brought up during NAFTA renegotiations, Mr. Alden says it’s likely to bump up against long-standing U.S. opposition to expanding any labour-mobility provisions. “The Canadian government is walking headlong into this toxic stew of immigration skepticism in the U.S. Congress.”
The TN program has stayed beneath the radar and hasn’t engendered wrath like the larger H-1B visa program, which was created to bring skilled foreign workers to the United States from around the world. The Trump Administration has famously seized on U.S. anger over illegal immigration. But the White House and Congress have also targeted legal immigration avenues and have taken up the cause of angry American workers who have been fired from their tech jobs to make way for Indian outsourcing firm employees who have come to the country on H-1B visas.
There is some indication the Canadian government is pushing for an overhaul. Last month, Foreign Affairs Minister Chrystia Freeland said she wants to make the NAFTA-led movement of professionals, “increasingly critical to companies’ ability to innovate across blended supply chains,” easier.
“NAFTA’s Chapter 16, which addresses temporary entry for businesspeople, should be reviewed and expanded to reflect the needs of our businesses,” Ms. Freeland said.
The TN program, for any of its faults, has been widely embraced by Canadians who want to work south of the border. U.S. Customs and Border Protection officials say 150,000 Canadians entered the country with TN status last year, up from approximately 105,000 in 2014.
Likewise, NAFTA also allows U.S. and Mexican professionals temporary work access to Canada, but the numbers are much smaller. In 2016, 17,602 Americans and 691 Mexicans were issued NAFTA-backed temporary work permits by Canadian authorities.
The occupations list for all three countries contains more than 60 job descriptions in health, finance and other professions, including architects, management consultants, occupational therapists, teachers and poultry scientists. Although NAFTA allows for the list to be updated by a working group representing the three signatories, only two occupations – plant pathologists and actuaries – have ever been added, in 2004.
“For those Canadians who have got TN visas in the last 23 years, it’s been a wonderful thing. For the rest of the professional world, it doesn’t do much,” says U.S. immigration lawyer Greg Boos, who splits his time between Vancouver and his office in Bellingham, Wash.
“I see a lot of people who are turned down, who don’t fit,” Mr. Boos says, adding that happens especially in professions related to the tech sector.
Mr. Boos says the other complaint about the TN program is the sometimes erratic nature of processing by U.S. authorities. U.S. Customs and Border Protection officials say they rarely turn away a Canadian seeking TN status. But in Mr. Boos’s experience, a Canadian travelling to the United States through Vancouver international airport is less likely to be grilled by U.S. officials than someone passing through Toronto Pearson, or a land crossing.
When NAFTA came into force in 1994, it was a “breakthrough” in global labour mobility, says Carlo Dade, director of the trade and investment centre at the Canada West Foundation. It gave Canadians who fit the professional categories list almost unparalleled access to jobs in the United States. And, unlike Mexicans, Canadians don’t usually need a visa to enter the United States under the TN category.
But as the decades have passed, other labour-mobility agreements – such as the AsiaPacific Economic Cooperation (APEC) business travel card – have progressed beyond NAFTA when it comes to ease of business movement, Mr. Dade says.
In Washington, Mr. Alden says the only way to get U.S. buy-in on modernizing the TN occupations list is if it can somehow be sold as a modest tweak to benefit American competitiveness. But even that strategy is a long shot.
“I just don’t understand how you package this politically, in a way that stands a snowball’s chance in hell in the Congress.”

AVIATION

BOMBARDIER. THE GLOBE AND MAIL. SEPTEMBER 12, 2017. TRADE DISPUTE. Trudeau, May set for talks on Bombardier-Boeing spat. Prime Minister Theresa May asked U.S. President Donald Trump to intervene in a court dispute between Boeing and Bombardier on Sept. 5, as her government seeks to protect jobs at a Bombardier plant in Belfast, Northern Ireland.

A new ally has emerged for aerospace giant Bombardier Inc. in its trade dispute with U.S. competitor Boeing Co.: British Prime Minister Theresa May.

Ms. May will visit with Prime Minister Justin Trudeau in Canada next week to discuss a number of urgent issues, including Bombardier's fight with Boeing Co. The bilateral meeting is expected to take place on Sept. 18, a source with knowledge of the situation told The Globe and Mail in St. John's where Mr. Trudeau and his cabinet are holding a two-day meeting.

Although there are a number of matters of interest to both countries, the dispute between Boeing and Bombardier is certain to be a priority item on the agenda when the two Prime Ministers meet face-to-face, the source said.

Ms. May also raised her concern for the Canadian plane manufacturer with U.S. President Donald Trump in a phone call last week, her office told The Globe and Mail.

Bombardier manufactures wings for the passenger jet series in Belfast in Northern Ireland, and employs 4,500 people there, prompting Ms. May's concern over the dispute. The British government has spent the last few months extensively lobbying Boeing to drop or settle the complaint, and has held dozens of meetings and phone calls with both plane manufacturers as well as the U.S. and Canadian governments on the matter.

In September alone, British Business Secretary Greg Clark has discussed the matter with three Boeing executives, U.S. Commerce Secretary Wilbur Ross, Canadian Foreign Affairs Minister Chrystia Freeland, and Bombardier chair Pierre Beaudoin, his department said.

"This is a commercial matter but the U.K. government is working tirelessly to safeguard Bombardier's operations and its highly skilled workers in Belfast," a U.K. government spokesperson said by e-mail.

"Ministers across government have engaged swiftly and extensively with Boeing, Bombardier, the U.S. and Canadian governments. Our priority is to encourage Boeing to drop its case and seek a negotiated settlement with Bombardier."

The Canadian plane maker said it was thankful the U.K. government "understands what is at stake and will take the actions necessary to respond to this direct attack on its aerospace industry," a Bombardier spokesperson said in an e-mail. "Boeing's petition is an unfounded assault on airlines, the traveling public and further innovation in aerospace."

Boeing reiterated its stance Tuesday that it believed Bombardier sells its products in the U.S. below cost, saying it would let the investigation continue and not drop the complaint.

"We believe that global trade only works if everyone plays by the same rules of the road, and that's a principle that ultimately creates the greatest value for Canada, the United Kingdom, the United States, and our aerospace industry," a spokesperson said.

Fresh supporters for the Canadian plane maker have lined up in recent weeks as Boeing continues to press forward with its April trade complaint that Bombardier's C Series planes are unfairly subsidized by the Canadian and Quebec governments.

Major U.S. Delta Air Lines Inc. came to Bombardier's defence earlier this year, arguing that Boeing's complaint was for too broad a range of aircraft sizes. Last year, Delta ordered 75 109-seat CS100 planes from Bombardier. U.S. filings show the airline wants the anti-dumping investigation narrowed to the 125-to-150-seat range, which would include Boeing's 737 MAX planes and Bombardier's CS300 aircraft.

Two other American carriers, Spirit Airlines Inc. and Sun Country Airlines, have joined the fray calling for Bombardier's right to sell aircraft in the country.

The manufacturer remains confident in the contested range of plane sizes despite the dispute. In its latest market forecast for 60-to-150-seat aircraft released Tuesday morning, Bombardier said the seat segment will be "a catalyst to further growth, market penetration and airline profitability."

The International Association of Machinists is planning to protest Boeing's trade complaints in Montreal Wednesday with a march to the city's U.S. consulate. "Boeing did not even bid on the Delta contract and the C-Series poses no threat to Boeing's 737 because it's not in the same size class," the association's Quebec co-ordinator Dave Chartrand said in a statement.

"Our members will be out there to protect their jobs and defend the aerospace industry in Canada. In the context of the NAFTA talks underway, we must protect this industry and the livelihood of our members in Montréal and across the country," Mr. Chartrand continued.

A decision from the U.S. Commerce Department on the anti-dumping investigation is expected Sept. 25.

BOMBARDIER. REUTERS. SEPTEMBER 12, 2017. Bombardier says 60- to 150-seater planes to drive industry growth

(Reuters) - Canadian plane and train maker Bombardier Inc (BBDb.TO) said on Tuesday it expects 60- to 150-seater airplanes to drive future growth in the commercial aircraft industry.

Bombardier Commercial Aircraft said it forecasted 12,550 deliveries in the category over a roughly 20-year period. It pegs the total market value at $820 billion with the smallsingle-aisle segment responsible for around 70 percent of revenue.

Small single-aisle aircraft deliveries are forecast at 6,800 units over the period, with revenue at $580 billion, the Bombardier unit said in a comprehensive forecast, adding that overall demand will be driven in part by replacing older planes and opening new global routes. (bit.ly/2eSoCsv)

Bombardier, with its C Series and CRJ Series jets, is the leader in the 60- to 150-seat aircraft category.

Bombardier also said it continued to view North America and Europe as the largest markets for new aircraft.

Shares of Montreal-based Bombardier were up 1 percent at C$2.44 on the Toronto Stock Exchange.

Reporting by Ahmed Farhatha in Bengaluru; Editing by Sai Sachin Ravikumar

BOMBARDIER. REUTERS. SEPTEMBER 12, 2017. British, Canadian PMs set for talks on Bombardier-Boeing spat

ST. JOHN‘S, Newfoundland (Reuters) - The leaders of Britain and Canada are set for talks next week on a crisis between Boeing Co (BA.N) and its Canadian rival Bombardier (BBDb.TO) that could have major political implications for both countries, a source close to the matter said on Tuesday.

The source, who declined to be identified because of the sensitivity of the situation, said Canadian Prime Minister Justin Trudeau and British counterpart Theresa May would meet in Ottawa on Sept. 18.

Boeing has launched a potentially damaging trade challenge action against Bombardier, alleging it is dumping its new C-Series passenger jets on the U.S. market.

Officials say both Britain and Canada are lobbying the U.S. Commerce Department to persuade Boeing to drop the challenge, which, if successful, could cripple Bombardier’s passenger jet division and cost thousands of jobs.

Bombardier is Northern Ireland’s largest manufacturing employer and May’s governing Conservatives depend on the support of a small Northern Irish party for their majority in parliament.

Bombardier is based in the Canadian province of Quebec, where Trudeau’s Liberals say they need to increase the number of Parliamentary seats to retain their majority in an election set for 2019.

Reporting by David Ljunggren; Editing by Chizu Nomiyama and Bernadette Baum

BOMBARDIER. THE GLOBE AND MAIL. AUGUST 9, 2017. OPINION. Why we need a global non-aggression pact among airliners
MATHIEU BÉDARD, CONTRIBUTED TO THE GLOBE AND MAIL
Mathieu Bédard is an economist at the Montreal Economic Institute.

The current tug-of-war between Bombardier and Boeing, which has accused the Quebec aircraft manufacturer of being unduly subsidized, shows that Canada has a strong interest in proposing a new international agreement to avoid a ruinous subsidy race in the aeronautic sector.

Although Boeing's complaint refers to Bombardier's C Series lineup, one Bombardier customer, U.S.-based Delta Airlines, has asked the U.S. Department of Commerce to limit its investigation to the larger version of the planes, not the smaller version Delta has ordered because Boeing does not build planes of the smaller size.

However, the massive help Bombardier has received over the past two years to support its C Series program – a total of more than $3-billion in investments and loans from the provincial and federal governments – sets a precedent, which other countries could use to justify heavily assisting their own aerospace industries. There is now a real risk that a costly beggar-thy-neighbour dynamic might be created.

Imagine if a country such as China, with a much larger tax base, decides to emulate Canadian subsidies to support its own industry. A similar reasoning applies to Russia, which has a much larger work force in the sector, and where the stakes are even higher than they are in Canada.

Canada would not come out ahead in a subsidy race. The Canadian industry would wither, and lose significant market share. A large portion of the more than 55,000 jobs in the aerospace manufacturing industry would thus be put in danger. Of course, even the "winners" of such a conflict would pay a heavy price – or at least, their taxpayers would.

One way to avoid this scenario would be to send a credible signal that such government intervention will be limited in the future. Such a signal could take the form of a new international agreement, which Canada has a strong interest in initiating.

While state aid is never a desirable thing from an economic point of view, it is a political reality. Nevertheless, it can be circumscribed by international agreements.

There have been other such agreements in the past. Notably, there is the Aircraft Sector Understanding (ASU), its first version signed in 1986 and updated a few times since then, with its latest major revision in 2011. The ASU has been relatively effective in limiting the expansion of state aid through export credits, but governments have been creative in finding other ways to directly and indirectly subsidize their national champions.

It would not be the first time the Canadian aeronautic sector provokes negotiations and the adoption of a new international treaty. The 2011 version of the ASU, negotiated through the Organization for Economic Co-operation and Development, was largely a response to the need to take into account the new Bombardier C Series planes, still in development back then.

A new version of this treaty, a kind of "ASU plus," could provide guidelines for other types of direct and indirect subsidies. It would define what kind of government support is acceptable. It would also specify the maximum amount that such assistance could represent in the total cost of producing a plane without threatening the fragile international equilibrium.

Finally, such an agreement should reaffirm WTO principles with regard to international trade: stability, respect for the rules, the absence of discrimination, gradually freer trade through negotiation, as well as economic development throughout the world.

The benefits of such an agreement would extend beyond the participating countries. The promise that all the countries involved in the current ASU would respect it would likely be enough of a credible commitment to dissuade non-signatories such as Russia and China from engaging in a harmful subsidy race.

A new agreement between aircraft manufacturing countries could act as a non-aggression pact, and prevent an "arms race" in the aeronautic sector that would have devastating effects on Canadian companies and workers.

Competition, in order to be as widely beneficial as possible, should not be based on which government has the deepest pockets, but on the merits of the competing products themselves, and of the companies that provide them.

AGRICULTURE

Competition Bureau Canada. September 11, 2017. Competition preserved in Canada's fertilizer industry

OTTAWA, ON – Following an extensive review, the Competition Bureau has concluded that the merger of Agrium Inc. and Potash Corporation of Saskatchewan Inc. (PCS) is unlikely to substantially lessen or prevent competition in the Canadian fertilizer industry.The Bureau has issued a No Action Letter to the merging parties confirming that it will not, at this time, challenge the proposed transaction before the Competition Tribunal.

The Bureau concluded that the transaction would not lead to a substantial lessening or prevention of competition in Canada for products sold by both companies, including potash fertilizer, dry or liquid phosphate fertilizer and nitric acid.

During its review, the Bureau conducted consultations with a broad range of market participants and made use of a range of analytical tools. As Agrium and PCS supply Canadian and foreign markets, the Bureau carried out its review in cooperation with the United States Federal Trade Commission (FTC) and other international counterparts.

Quick Facts

• Agrium and PCS both manufacture and globally supply fertilizer products.
• When a merger is subject to regulatory approvals in other jurisdictions, the Bureau works closely and in collaboration with its international counterparts.
• The Bureau's long-standing relationship with the FTC ensured an efficient and coordinated review of this matter, consistent with the agencies' agreement on Best practices on cooperation in cross-border merger investigations (see http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03704.html).

HOUSING

The Globe and Mail. 12 Sep 2017. Housing starts top expectations
DAVID PARKINSON

Canada’s housing starts rose to a five-month high in August, despite rising rates and regulations aimed at cooling the market. Canada’s housing starts rose to a five-month high in August, as home construction remained brisk despite rising interest rates and the new regulations aimed at cooling the housing market.
Canada Mortgage and Housing Corp. reported that national starts of new home construction hit a seasonally adjusted annual rate of 223,232 units last month, up slightly from July’s 221,974.
Economists had expected the starts to ease slightly in August, to about 215,000 annualized, after the strong July result, which itself was well above historical norms.
The starts of urban multipleunit dwellings rose 2.7 per cent month over month, to 145,618 units annualized.
Starts of urban single-family homes eased 3.2 per cent, to 61,906 units.
The continued strength suggests that builders have been little discouraged by the policies put in place by the Ontario government in April to rein in runaway housing markets in Toronto and surrounding regions, and by the Bank of Canada’s interest rate increase in July, which was followed by another in early September.
While house resale prices and sales in the Toronto area have cooled, and starts of new homes did initially sag immediately after the Ontario government announced its new rules, builders have bulled ahead with new projects throughout the summer.
Indeed, Ontario led the building charge in August, with more than 92,000 starts annualized, up more than 20 per cent from July and nearly 80 per cent from the slump in May in the immediate wake of the government’s announcement.
Starts in the Toronto market were at their highest in 17 months in August – despite evidence that the city’s housing market had moderated significantly since the government’s new rules took effect. »
“This was a good report that suggests that the Canadian housing market remains quite strong after the wobble it suffered in the second quarter, and the uncertainty of regulatory changes in Ontario and rising interest rates,” Toronto-Dominion Bank senior economist Michael Dolega said in a research note.
“The strong labour market and still-low interest rates (notwithstanding the Bank of Canada’s recent hikes) are pushing up demand for the time being, and developers are responding accordingly,” National Bank of Canada economist Kyle Dahms said in a research report.
Still, economists wonder how much longer those developers can keep up the pace. CMHC’s so-called “trend” of housing starts, representing a six-month moving average, is now nearly 220,000, its highest in five years. The country needs only about 190,000 starts a year to keep pace with demand from newhousehold formation.
“The level of starts seen in the last two months are above demographic needs … and is hence not sustainable,” Mr. Dahms said.
He suggested, in particular, that builders in Toronto may be overdoing it.
“Starts in Toronto appear to be unsustainable, in light of conditions in the home resale market showing an increasing inventory,” Mr. Dahms said. “This situation should be monitored in the coming months to evaluate the risk of overbuilding.”
Royal Bank of Canada economist Josh Nye noted that housing starts typically follow the trend on home resales, but with a lag. As a result, he believes some easing of in housing starts “is in order toward the end of the year,” catching up with the slowdown in the Toronto-area resale market.
But others suggested that the flow of people to Ontario in general, and Toronto in particular – owing both to rising immigration and migration from other provinces – is sustaining demand and justifying the continued strong levels of home construction.
“Notably, while Ontario housing starts are on pace for the best year in 14 years, population growth is running at the fastest rate since that time as well,” said Robert Kavcic, senior economist at Bank of Montreal.
Regardless, the strength in housing starts over the summer is good news for the country’s third-quarter gross domestic product, as residential construction looks poised to make a strong contribution to the economy’s quarterly growth.
“Thanks to solid gains in July and August, housing starts are on track to expand more than 30 per cent annualized in the third quarter. So, after subtracting from real GDP growth last quarter, residential construction is set to contribute to it in [the third quarter],” Mr. Dahms said.

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LGCJ.: