CANADA ECONOMICS

PARLIAMENT

The Globe and Mail. THE CANADIAN PRESS. SEPTEMBER 17, 2017. POLITICS Tories launch ad campaign against tax changes. As Parliament resumes, Trudeau and Morneau will face opposition questions for the first time on controversial small-business plans
HANNAH YOON
BILL CURRY

OTTAWA - The Conservative Party is launching a national advertising campaign this week to oppose the Liberals' small-business tax plans, an issue that is set to dominate the agenda as Parliament returns Monday.

Prime Minister Justin Trudeau and his Finance Minister, Bill Morneau, will face opposition questions for the first time since the government announced the controversial package of proposed changes in July.

Conservative Leader Andrew Scheer will appear in his party's radio and online ads criticizing the proposals. The party has decided that the tax changes will be the Official Opposition's primary focus heading into the fall sitting.

"The Trudeau Liberals are threatening local business and all the jobs they create with big new tax hikes. But I won't just stand by and let the Liberals drive them into the ground," Mr. Scheer says in the radio spots.

The Conservatives are initially planning to spend about $100,000 to place the ads.

The proposed tax reforms continue to generate concern not just from Conservatives, but also from some Liberals.

New Brunswick Liberal MP Wayne Long, who has previously said he opposes the changes as currently worded, released an open letter to Mr. Morneau on Sunday that further outlines his position.

"Consultation is not about defending – it is about listening," Mr. Long wrote. "I share the same concerns of my many constituents, that we are moving too fast. We are not fully examining the possible unintended consequences of what is being proposed."

While the Canadian Medical Association is among the business groups opposing the tax changes, The Canadian Press reported on Sunday that some doctors who disagree with the CMA intend to release an open letter this week in support of the federal government's plans.

In an interview, Conservative House Leader Candice Bergen said the party has decided to make the tax issue the No.1 priority when MPs face off for Question Period this week.

Mr. Scheer won his party leadership in late May. The NDP will select a new permanent leader in October.

Mr. Morneau announced a package of proposed changes to small-business tax rules on July 18 and formal consultations will close on Oct. 2. The government says the proposals are aimed at making sure people are not incorporating simply as a way of paying less tax. Liberals say the measures are about closing "loopholes" that primarily advantage high-income Canadians. Small-business advocates counter that the current rules are long-standing tax practices that help businesses grow and warn the proposed changes will damage the economy.

The Liberal government fully expects plenty of questions on the tax changes. Government House Leader Bardish Chagger is also the minister for small business and has been holding cross-country hearings on the topic.

"We will be going through all of the information received," she said. "We really do want to get it right. That's why we are speaking to the people who believe they'll be impacted or will be impacted."

In addition to taxes, here are some of the other issues that are expected to dominate Parliament's fall sitting:

The legalization of recreational marijuana

With a target date of July 1, 2018, the pressure is on Ottawa to sort out the details of its plan to legalize the recreational use of marijuana. There are two bills currently before the House of Commons.

Bill C-45 enacts the Cannabis Act to provide legal access to cannabis and contains measures to control and regulate its production, distribution and sale.

Bill C-46 would update the impaired-driving provisions of the Criminal Code. It would allow for mandatory roadside screening for alcohol and outlines new rules to prevent drug-impaired driving.

During committee hearings on C-45 last week, Canadian police groups warned they will not be ready in time for July 1 and requested a delay. They have also asked Ottawa to reconsider a provision that would allow Canadians to grow up to four marijuana plants for personal use.

Liberal MP Bill Blair, a former Toronto police chief who plays a lead role for the Liberals on this issue, said he understands the concerns of police but that there is an urgency to act.

"Organized crime is making billions of dollars in profit from this criminal enterprise. It's the easiest money they make," he said in an interview with CTV's Question Period that was broadcast Sunday. "And I find it completely unacceptable that we're going to leave our kids in a very dangerous jeopardy by not regulating this market."

NAFTA

Renegotiating Canada's most important trade deal was never part of the Liberal Party's original agenda, but it quickly moved to the front burner with the election of U.S. President Donald Trump.

The United States, Mexico and Canada are pursuing an aggressive timeline in an attempt to wrap up negotiations before the end of the year. The United States and Mexico have each played host to a round of talks. The next meetings will take place Sept. 23 to 27 in Ottawa.

The most recent point of contention is over a U.S. request for a five-year sunset clause. Under the proposal, the North American free-trade agreement would expire in five years unless all three countries agreed to renew the arrangement. Both Canada and Mexico have said they oppose the idea, warning it would create uncertainty for business.

Myanmar and the United Nations

The Prime Minister and Foreign Affairs Minister Chrystia Freeland will be heading to New York later in the week for meetings of the United Nations.

The top global security issues currently facing world leaders include the ongoing missile threats coming from North Korea, as well as a humanitarian crisis unfolding in Myanmar.

Members of the country's minority population of Rohingya Muslims have been forced to flee to Bangladesh. Reports have said Myanmar's military is driving them from the country and setting their homes on fire.

"This looks a lot like ethnic cleansing and that is not acceptable," Ms. Freeland told a Toronto rally on Saturday.

Ms. Freeland said Mr. Trudeau has raised Canada's concerns directly with Myanmar's de facto leader Aung San Suu Kyi.

Ms. Suu Kyi is a Nobel Peace Prize holder and honorary Canadian citizen. The situation has led some to call on Canada to revoke the honour.

As for North Korea, the rogue nation's repeated missile threats are prompting renewed debate over whether Canada should be a participant in the U.S. missile-defence program.

Indigenous issues

In last month's mini cabinet shuffle, plans were announced to split the Indigenous Affairs department in two. Former Health Minister Jane Philpott now heads Indigenous Services, freeing up minister Carolyn Bennett to focus on longer-term efforts as Minister of Crown-Indigenous Relations and Northern Affairs.

To NDP House Leader Murray Rankin, the move signalled an acknowledgment by the government that it has done a poor job of delivering on its many campaign promises to Canada's Indigenous peoples.

The NDP intends to make aboriginal issues a priority this fall.

"The reconciliation talk isn't walking the reconciliation walk," Mr. Rankin said.

Border issues and immigration

This summer saw nearly 8,000 people make unauthorized crossings into Canada, raising serious questions about Canada's refugee system and its immigration arrangements with the United States.

The number of people crossing at points that are not official border posts has slowed down of late, a trend that has been attributed to the start of the school year and Liberal government efforts to inform potential asylum seekers that crossing into Canada is no guarantee that they will be allowed to stay.

Still, the issue is not going away. The volume of unauthorized crossings appears to rise and fall in direct relation to various immigration policies that have been proposed by Mr. Trump. Republicans and Democrats in Congress continue to work with the President on immigration reform, but a firm plan has not yet emerged.

National-security legislation

Just as MPs were heading for the exits in late June, Ottawa released its long-awaited legislation overhauling Canada's national-security regime.

Bill C-59 represents the Liberal government's effort at repealing controversial elements of Bill C-51, a law that was passed under the Conservatives.

The bill would create the National Security and Intelligence Review Agency, bringing together various civilian watchdogs that had previously been tied to specific agencies.

After studying the bill over the summer, the Canadian Civil Liberties Association said that while the bill does fix some of the problems with the Conservative law, other problems were ignored and the Liberal bill creates new issues of its own.

Specifically, concerns continue to be expressed about the legal powers of Canada's spy agency to not only gather intelligence, but to act on it with new "disruption" powers.

The globe and Mail. Bloomberg. 18/Sep/2017. AUTO INDUSTRY. Changing NAFTA won’t stop auto-job exodus to Mexico: officials
SUSANA GONZALEZ
GREG KEENAN  AND STEVEN CHASE

TORONTO AND OTTAWA - Strengthening rules of origin for vehicles made in Mexico under a new North American free-trade agreement will not stop the flood of automotive jobs into that country, leaders of the major auto industry unions in Canada and the United States said Friday.

Jerry Dias, president of Unifor, and Dennis Williams, president of the United Auto Workers, said a new agreement needs to ensure that wages and standards of living rise for Mexican workers and that Canada and the United States win a greater share of auto-industry jobs.

"How do we wrestle back the work and how do we change the standard of living for Mexican workers?" Mr. Dias said before he and Mr. Williams met with Canada's Foreign Affairs Minister Chrystia Freeland in Toronto.

The meeting came after U.S. Trade Representative Robert Lighthizer opened up talks on renegotiating NAFTA with a call last week for stronger rules of origin for vehicles made and sold in the three countries, and for a requirement that vehicles sold in the region have a certain amount of U.S. parts and labour content to qualify for duty-free shipment in the trade zone.

That call for a specific amount of U.S. content was rejected by Ms. Freeland last week and her position has not changed, her spokesman Adam Austen said Friday.

Mr. Austen pointed to her comments from last week, which were that "Canada is not in favour of specific national content in rules of origin." Ms. Freeland would not answer questions asked during a photo opportunity before the meeting.

Mr. Dias is in favour of stronger rules of origin for North American-made vehicles, but both union leaders warned that stronger NAFTA-wide rules of origin could likely lead to increased jobs in Mexico and not necessarily the United States. That would be the opposite of the Trump administration's intention, which is to increase jobs in vehicle and parts manufacturing in the United States.

Stricter U.S. content rules could also work contrary to the way that U.S. officials want, auto industry officials and trade experts have said. Auto makers and parts companies could decide not to meet NAFTA requirements and instead meet the current U.S. tariff on non-North American vehicles and parts, which is just 2.5 per cent.

"Rule of origin in itself doesn't help us," Mr. Williams said. "It helps us a bit, but it doesn't solve the problem."

Mr. Dias said a new agreement could probably put "a wall around Canada and the United States" that protects auto jobs, but neither he nor Mr. Williams would say where they stand on a specific U.S. content rule.

They promised to fight any deal that doesn't contain clauses designed to improve the lives of workers in Mexico.

"We'll just simply yell at the top of our lungs that we're getting another raw deal," Mr. Williams told reporters after the meeting.

Auto makers oppose stricter rules of origin for vehicles, noting that the requirement that cars and trucks contain 62.5-per-cent content from North American countries is the most stringent they face in any global trade agreement.

Companies that make auto parts have said that rule requiring that a specific amount of content be U.S.-sourced would disrupt supply chains that have been established in the 23 years since the original NAFTA deal came into force in 1994, and are working well.

Mr. Dias pointed to the Cami plant operated by General Motors Co. in Ingersoll, Ont., as a "poster child" for what he believes is wrong about the current NAFTA deal.

GM has shifted production of the GMC Terrain crossover to Mexico from the Ingersoll plant, which will lead to the loss of 600 jobs.

Unifor and GM are negotiating on a new contract to replace the labour deal that expires in September. Mr. Dias said Unifor workers are prepared to go on strike if the auto maker does not designate another vehicle to be made in Cami so that the jobs will be kept there.

There has been no discussion yet with GM about whether it is prepared to earmark another vehicle for Cami, Mr. Dias said.

The plant, which employs about 3,000 people, also assembles the Chevrolet Equinox crossover.

BLOOMBERG. 18 September 2017. GM Hit With First Canada Strike in Decades on Nafta Losses
By David Welch  and Kristine Owram

• Output of top-selling Equinox SUV crimped at Ontario plant
• Union wanted another vehicle to replace jobs lost to Mexico

General Motors Co. auto workers went on strike at a Canadian plant for the first time in 21 years over jobs lost to Mexico, with the union’s president calling the situation “the poster child for what’s wrong with Nafta.”

The strike, which started late Sunday, will cut production of the Chevrolet Equinox, a key sport utility vehicle that the automaker just redesigned for the first time in seven years.

Unifor, which represents about 6,500 GM workers in Canada, said it wanted the Detroit-based automaker to give the plant another vehicle to build in place of the GMC Terrain, which was moved to Mexico earlier this year, costing the plant in Ingersoll, Ontario, 600 jobs. The union has been battling to stop a wave of auto jobs and investment moving to cheaper locations south of the border.

The union said it was urging GM to designate the Ingersoll plant, which has more than 3,000 employees, the lead producer of the Chevrolet Equinox, its top-selling SUV model. The Equinox is produced in both Canada and Mexico.


“If you can’t keep your jobs when you have the best plant in the world, then you’ve got a problem,”  Jerry Dias, president of Unifor, said in a phone interview. The plant has won several quality awards from J.D. Power and is recognized as one of the most productive plants in the world, the union said. “This is really now about us saying, ‘Enough, you just gave us a solid blow with the Terrain and we’re not absorbing another one.”’

Jobs Lost

Dias has emerged as the face for labor during renegotiations of the North American Free Trade Agreement, pushing for higher working standards in both the U.S. and Mexico.

Under Nafta, Mexico’s light vehicle production more than tripled, from 1.1 million units in 1994 to about 3.5 million units in 2016, according to a report by the Federal Reserve Bank of Chicago. Canada, meanwhile, lost more than 53,000 automotive jobs from 2001 to 2014, according to a study by the Automotive Policy Research Centre.

The Ingersoll factory was excluded from the labor agreements that Unifor struck with U.S. auto companies last year that secured more investment in Canada. GM agreed to invest C$554 million in its other Canadian operations, which include an assembly plant, an engine factory and a parts-distribution facility.

GM encouraged Unifor to resume negotiations for an agreement in a statement on its website. The company has two plants in Mexico making small SUVs including the Equinox, weakening the union’s bargaining position.

This is the first strike at a Canadian assembly plant since 1996 when Unifor’s forerunner, the Canadian Auto Workers, held a three-week walkout at GM.

U.S. sales of the Equinox jumped 17 percent this year through August, according to researcher Autodata Corp. The model is GM’s second-best seller, behind only the Chevrolet Silverado pickup.

UN

Global Affairs Canada. September 17, 2017. Minister of Foreign Affairs and Minister of International Development and La Francophonie to attend United Nations General Assembly in New York

Ottawa, Ontario - To advance the interests of Canadians at home and abroad, the Honourable Chrystia Freeland, Minister of Foreign Affairs, and the Honourable Marie-Claude Bibeau, Minister of International Development and La Francophonie, today announced that they will join Prime Minister Justin Trudeau at the 72nd session of the United Nations General Assembly (UNGA) in New York.

Minister Freeland will attend the UNGA from September 19 to 22 and Minister Bibeau from September 18 to 20. Along with the entire Canadian delegation, the ministers will advocate for human rights, advancing gender equality and women’s empowerment, promoting peace and security, and leading the global fight against terrorism.

Minister Freeland’s program at the UNGA will cover a wide array of current international issues, including the deteriorating situation in Venezuela and the ongoing and unacceptable violence in Myanmar, particularly the situation in Rakhine State for Rohingya Muslims and other ethnic minorities.

Minister Bibeau’s UNGA program will focus on engaging youth and her counterparts to empower women and girls and accelerate the financing and implementation of the UN’s sustainable development goals.

Canada’s participation at UNGA will seek to promote a rules-based international order, strengthen multilateral institutions, champion diversity and inclusion, and expand Canada’s leadership on global issues, including gender equality, climate change, refugees and migration, health and open government.

Quotes

“We are working hard to strengthen all the international bodies to which Canada belongs, to make them more responsive to the needs of the middle class, not just in Canada but worldwide. ‎Working through the UN allows us to have a greater impact and to amplify our voice by shaping international programs, policies and practices on a range of issues, from security and trade to climate change and human rights.”

- Hon. Chrystia Freeland, P.C., M.P., Minister of Foreign Affairs

“Our government has a clear vision on how best to tackle poverty and inequality. We firmly believe that women and girls must be empowered as they are true agents of change. This feminist vision for Canada’s international assistance has been welcomed by the international community, and I look forward to continuing to present it during this year’s General Assembly.”

- Hon. Marie-Claude Bibeau, P.C., M.P., Minister of International Development and La Francophonie

Quick Facts

• The annual week-long high-level opening of the UNGA is the largest leader-level and ministerial gathering of the UN’s 193 member states.
• This will be the first UNGA opening for newly appointed UN Secretary-General António Guterres.
• Canada is currently the fifth-largest donor to the UN system.

INTERNATIONAL TRANSACTIONS

StatCan. 2017-09-18. Canada's international transactions in securities, July 2017

Foreign investment in Canadian securities: $24.0 billion, July 2017
Canadian investment in foreign securities: -$1.8 billion, July 2017
Source(s): CANSIM table 376-0131.

Foreign investment in Canadian securities amounted to $24.0 billion in July, led by record acquisitions of Canadian bonds. At the same time, Canadian investors reduced their holdings of foreign securities by $1.8 billion, following strong acquisitions in June.

As a result, Canada's international transactions in securities generated a net inflow of funds into the Canadian economy of $25.8 billion in July. Foreign investment in Canadian securities has exceeded Canadian investment in foreign securities by $86.2 billion since the beginning of 2017, led by foreign acquisitions of Canadian private corporate instruments.

Record foreign investment in Canadian bonds

Foreign investors acquired $24.0 billion of Canadian securities in July, following a divestment of $858 million in June. The bulk of the inflows targeted the Canadian bond market in the month. Since the beginning of the year, foreign acquisitions of Canadian securities have totalled $124.0 billion, with $97.3 billion in securities issued by private corporations.

Non-resident investment in Canadian bonds reached a record $23.8 billion in July. New issues of private corporate bonds in foreign markets of $11.4 billion, largely denominated in foreign currencies, contributed the most to the investment activity. Nearly half of these new bonds were issued by Canadian banks. In addition, non-resident investors purchased $8.0 billion of federal government bonds and $2.9 billion of provincial government bonds in the month. The foreign investment in federal government bonds followed a large divestment of $9.8 billion in June.

Canadian long-term interest rates were up by 35 basis points in July. The Bank of Canada raised its benchmark overnight interest rate by 25 basis points in July, the first increase since 2010. Meanwhile, the Canadian dollar appreciated against its US counterpart by three US cents.

Chart 1   Chart 1: Foreign investment in Canadian securities

Foreign investment in Canadian securities

Non-resident investors reduced their holdings of Canadian money market instruments by $1.5 billion in July. Foreign acquisitions of corporate paper were more than offset by a divestment in government paper. Canadian short-term interest rates increased by eight basis points in July.

Foreign investment in Canadian equities amounted to $1.6 billion in July. Issuance of new Canadian shares to non-resident portfolio investors, resulting from cross-border mergers and acquisitions, led the activity during the month. Canadian stock prices edged down in July.

Canadian investors reduce their holdings of foreign equities

Canadian investors sold $1.8 billion of foreign securities in July. Divestment in foreign equities was moderated by purchases of foreign debt securities in the month.

Canadians reduced their holdings of foreign shares by $2.9 billion in July, divesting in both US and non-US foreign shares. Nevertheless, Canadian investors have acquired $31.3 billion in foreign equities in 2017, in contrast to a divestment of $243 million over the same period in 2016. US stock prices were up by 1.9% in the month and 10.4% since December 2016.

Canadian investors acquired $1.1 billion of foreign debt securities in July, mainly acquisitions of US Treasury bonds. US long-term interest rates were up by 13 basis points, while short-term rates were up by 9 basis points in the month.

Chart 2   Chart 2: Canadian investment in foreign securities

Canadian investment in foreign securities

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170918/dq170918a-eng.pdf

MONETARY POLICY AND INFLATION

BANK OF CANADA. 14 September 2017. Bank of Canada Workshop “Monetary Policy Framework Issues: Toward the 2021 Inflation-Target Renewal”. Lawrence Schembri - Deputy Governor

Ottawa, Ontario - Good morning everyone, et bonjour à tous.

Bienvenue à la Banque du Canada. Je m’appelle Larry Schembri. Je suis un sous-gouverneur ici à la Banque.

It is a great pleasure for me to open this workshop on issues central to the monetary policy framework and its implementation.

Given the significant challenges central banks have faced in achieving their monetary policy goals since the global financial crisis, this is a propitious moment to step back and re-examine these fundamental issues from a variety of perspectives.

As many of you know, the current monetary policy framework in Canada consists of two components:

• a consumer price index (CPI) inflation target of 2 per cent, the midpoint of a control range of 1 to 3 per cent; and
• a flexible, market-determined exchange rate.

While the second component has been in place for almost 60 of the past 70 years, our inflation-targeting regime was implemented in 1991 and the current specification has existed since 1995.

This framework has served Canada well in the face of significant movements in commodity prices and Canada’s terms of trade, as well as other shocks, including the Great Recession. Inflation has averaged just below 2 per cent since we implemented the target, and both output growth and inflation have been much more stable relative to before 1991.

In addition, two important features of our inflation-targeting regime have drawn favourable international recognition:

• first, the price stability policy goal of the regime is founded on a joint agreement between the Bank of Canada and the Government of Canada; and
• second, the agreement is reviewed regularly on a five-year basis.

The joint agreement with a democratically elected government enhances the legitimacy of the price stability objective and thereby boosts its credibility. It also gives the Bank of Canada operational independence to achieve this goal.

The regular five-year review, meanwhile, affords the Bank the opportunity to revisit many important aspects of our monetary policy framework and its implementation.

While the framework has worked well in the past, improvements should always be considered—especially given the changing economic environment, the lessons learned from experience in Canada and elsewhere, and pertinent research findings.

In the past, the Bank has used this opportunity to organize and give visibility to its monetary policy research program, which has examined various dimensions of our monetary framework—well beyond the relatively narrow scope of the joint inflation-control agreement and the goal of price stability.

The regular five-year review also presents the opportunity to engage various stakeholders in this process to provide us with helpful ideas and useful feedback on our work. This workshop is a case in point. It has been organized early in the current five-year review cycle, so we can draw from a wide range of perspectives—from academics, economic journalists and other central bankers and policy makers—well before we begin to develop the key questions for our research program that will culminate in the 2021 renewal and publication of our background document.

In addition to striving to obtain a wide range of perspectives, the workshop has been organized in a fairly open-ended manner to stimulate dialogue on a broad span of issues. And in keeping with our desire to be open and transparent about this process, and to include all Canadians, today’s conference is being webcast and we will post running commentary on our social media channels.

We have divided the workshop into four panels:

• one on the role and objectives of monetary policy in Canada;
• two panels on more operational issues, namely the scope and effectiveness of monetary policy tools, and monetary policy communication; and
• a panel on lessons learned from other central banks.

In the past, we have considered several important framework questions, most notably:

• whether to lower or raise the inflation target;
• whether to adopt a price-level path target, instead of an inflation target; and
• what would be the implications for monetary policy of financial stability vulnerabilities and risks.

These issues were considered primarily during the last two review cycles, which ended in 2011 and 2016, respectively.

In recent years, discussions of monetary policy frameworks have focused on the impact of a number of significant economic developments. These include:

the decline in the equilibrium real interest rate and thus in the “neutral” policy interest rate, which limits the scope for use of countercyclical changes in the policy interest rate;
the decline in potential output growth—especially in advanced economies—driven by demographic trends and lower labour productivity growth, forces that monetary policy has limited or no ability to counteract; and
the elevated level of indebtedness of both the private and public sectors, which raises concerns about financial stability, fiscal space and central bank independence.
And, looking ahead, new financial technologies could affect the implementation and transmission of monetary policy.

So, we are most fortunate to have with us today a very distinguished group of speakers to enlighten us with their thinking on these and other challenging issues. Please let me close by thanking them, and all conference participants, especially those who have come some distance to be with us today.

It promises to be a very stimulating workshop, and my colleagues and I are very much looking forward to listening and discussing with you. Bonne journée.

AVIATION

BOMBARDIER. BOEING. The Globe and Mail. 18 Sep 2017. Boeing raises the stakes in Bombardier dispute. Boeing touts billions in fighter-jet gains. Ottawa will not ink deal until Bombardier case is dropped. U.S.-based Boeing has cited the overall value of investment and economic activity associated with Super Hornet production as an incentive for the Trudeau government to award it the contract.
DANIEL LEBLANC



Boeing Co. is upping the pressure on the federal government to finalize the purchase of Super Hornets, promising that the manufacturers of the fighter jet will spend $18-billion in Canada’s aerospace industry over the next 10 years if the contract is awarded.
The promised benefits are the latest salvo in the five-monthlong dispute that is pitting U.S.based Boeing against Bombardier Inc. and the federal government. The two sides are applying economic and political pressure on their rivals as tensions grow.
Prime Minister Justin Trudeau is scheduled to discuss the controversy on Monday with his British counterpart, Theresa May, during a meeting in Ottawa. Ms. May is also siding with Bombardier, which has large facilities in Northern Ireland.
Ottawa is refusing to sign the deal to buy 18 Super Hornets, or even hold talks with Boeing, unless the company drops a trade complaint against Montreal-based Bombardier before the U.S. Department of Commerce.
The government froze out Boeing in April after the company complained that Bombardier C Series planes were unfairly subsidized by the Canadian and Quebec governments. A first ruling by the U.S. International Trade Commission is expected on Sept. 25.
Still, the acquisition process for the Super Hornets continues. When Ottawa launched the purchase of the Super Hornets in March, before the start of the dispute with Boeing, it told the U.S. government that it wanted 100 per cent of the value of the contract to be spent on Canadian offsets under Canada’s Industrial and Technological Benefits (ITB) Policy.
The U.S. Department of Defence revealed this week that the contract for the Super Hornets could be worth up to $6.4billion, putting an approximate value on the benefits package that could flow to Canadian industry over five years.
“We have committed to working with the government of Canada agreeing to meet 100 per cent Canadian content value in addition to all other requirements in the areas of value proposition elements, export assistance, regional diversity and support of small-medium business growth,” Boeing said in a statement to The Globe and Mail.
The company added that the overall investments and economic activity generated by the major industrial groups involved in the Super Hornet, including enginemaker General Electric Co., will greatly outpace the minimum ITB package over the next decade.
“Canadian aerospace firms stand to benefit greatly with Boeing’s ITB proposal. We project that between Boeing and the Super Hornet industry team, the direct spend on the Canadian aerospace sector will exceed over $18-billion over the next 10 years, far exceeding the stated ITB requirements,” the company added.
Earlier this month, 10 companies that are part of the “Boeing team in Canada” sent a letter to Mr. Trudeau urging him to approve the Super Hornet deal.
Ottawa is undeterred, stating it is refusing to sign a new deal with Boeing until it drops its case against Bombardier. According to the federal government, Bombardier is at the heart of Canada’s aerospace industry, generating $5.1-billion in economic activity a year.
“The government made it clear that the ITB policy would be applied to this purchase, however, as Boeing is not acting as a trusted partner, we have suspended our engagement with Boeing,” said Karl Sasseville, a spokesman for Innovation Minister Navdeep Bains.
Sahir Khan, of the University of Ottawa’s Institute of Fiscal Studies and Democracy, said there is irony in the fact that Boeing is heralding the potential offsets from the fighter jet contract at the same time as it criticizes government subsidies to Bombardier.
According to Mr. Khan, who is a former assistant parliamentary budget officer, regional benefits are in fact government subsidies for the Canadian industry hidden in major military contracts.
“All else being equal, offsets tend to increase the cost of acquisition and sustainment with the positive tradeoff being jobs and technology transfer to the acquiring country,” Mr. Khan said. “From a policy point of view, offsets must be viewed in comparison to other program instruments such as direct subsidies, tax incentives, loans, wage/training credits in terms of both costs and potential impact.”

REUTERS. SEPTEMBER 17, 2017. Northrop Grumman nears deal to purchase Orbital ATK: source
Jessica Resnick-Ault, Mike Stone

NEW YORK (Reuters) - U.S. defense contractor Northrop Grumman Corp (NOC.N) is poised to announce a purchase of missile and rocket maker Orbital ATK Inc (OA.N) as soon as Monday, a person familiar with the transaction said on Sunday.

The deal would come as the firing of missiles by North Korea in recent months has focused attention on missile defense systems.

With Orbital’s stock market value of $6.3 billion and $1.4 billion of long-term debt, the deal’s final value will likely exceed $7.7 billion.

Northrop Grumman declined to comment. Orbital did not immediately respond to a request for comment.

Orbital’s rocket motors, missiles and electro-optical countermeasure product lines would enlarge Northrop’s offerings to its largest customer, the U.S. Department of Defense, analyst Byron Callan of Capital Alpha Partners LLC said in a research note on Sunday.

The deal is noteworthy not only because it boosts Northrop’s exposure to missile defense, but also because the company has not bought a large rival in many years. It would also represent a departure from a focus of returning earnings to shareholders.

Orbital ATK has contracts with NASA as well as the U.S. Army and the deal would give Northrop more than $4.4 billion in annual revenue according to Orbital’s 2016 financials.

Despite infrequent strategic mergers, Northrop has not shied away from bold corporate actions to please investors. In 2011 Northrop spun off its Huntington Ingalls Industries (HII.N) shipbuilding business to shareholders. In 2009, it sold its government services business, TASC.

Northrop’s last buying spree more than a decade ago included the 2002 purchase of TRW Inc for about $7.8 billion.

Based on Friday’s closing stock price, Northrop was valued at $46.5 billion. The acquisition price could exceed $7.5 billion if a typical premium was attached to it, the Wall Street Journal said in a report published earlier on Sunday.

Another reason for the deal could be the Pentagon’s efforts to rebuild missiles defenses. The Air Force had asked the defense industry last summer for proposals to replace the aging nuclear cruise missiles and intercontinental ballistic missile system as the military moved ahead with a costly modernization of its aging atomic weapons systems.

In August, Northrop received a $328 million contract to continue developing a replacement of the aging Minuteman III intercontinental ballistic missile system for the U.S. Air Force.

Northrop is also the prime contractor for the B-21 bomber as well as the maker of the Global Hawk unmanned aerial vehicle.

Orbital is a subcontractor for composite structures on the B-21, and Callan of Capital Alpha Partners said the deal might spark concerns at the Pentagon because of vertical integration within that program.

So far this year Orbital’s stock has increased 25 percent as investors have eyed an increase in U.S. defense spending.

Earlier in September, aerospace supplier United Technologies Corp (UTX.N) agreed to buy avionics and interiors maker Rockwell Collins Inc (COL.N) in $30 billion deal that would be the largest in the industry’s history.

Reporting by Jessica Resnick-Ault in New York and Mike Stone in Washington; Editing by Richard Chang

AGRICULTURE

The Globe and Mail. The Canadian Press. 18 Sep 2017. Canadian grain bets on future growth. Construction crews work on a new grain terminal for G3 Canada in Vancouver. The company’s CEO says farming techniques and climate change are set to make Canada even more productive. As shipments hit a record high, firms upgrade terminals to ensure Canada’s place as a global bread basket.
IAN BICKIS

The gatekeepers of Canada’s rich agriculture exports are spending hundreds of millions of dollars to upgrade export terminals as they prepare the country to become an ever-growing bread basket to the world.
Canadian grain shipments have been steadily rising and hit a record high in the previous crop year. And Canadian companies are making long-term bets on the growth of crop exports.
Statistics for the 2016-17 crop year show that Canada continues to improve on the massive logistical hurdle of moving prairie grains to global markets.
“It was the best year we’ve ever had in terms of total movement and total amount of grain that was exported,” said Mark Hemmes, president of Quorum Corp., which monitors grain shipping for the federal government.
The numbers show Canada’s rail network moved 50.7 million tonnes of grain from Western Canada for a 5-per-cent bump from the year before, with about 39.7 million of that getting shipped to the ports of Vancouver, Prince Rupert,and Thunder Bay. To put it into perspective, the amount of grain hauled on trains last season would be the equivalent weight of carrying 430 CN Towers, which lined up end to end would stretch from about Montreal to Quebec City.
Farming techniques and climate change are set to make Canada even more productive, says Karl Gerrand, chief executive of grain handler G3 Canada.
“Farmers are getting better at growing grain. They’re using drone technology, they’re using GPS technology, genetics continues to improve, we’re growing more grain out of less land.”
The company, which bought a majority stake in the Canadian Wheat Board’s assets after it lost its monopoly in 2012, is in the midst of spending more than half a billion dollars on a modern grain-shipping terminal in Vancouver, the first built from scratch at the port since the late 1960s.
Mr. Gerrand said climate change will also increase international demand for Canadian agriculture, which has already seen a big jump in shipments to Asia.
“From a Canadian perspective, we’re positioned fairly well to manage what appears to be coming at us like a freight train,” Mr. Gerrand said.
“What you’re going to find over time, and research would indicate, is that geographical areas like Canada, the northern climes, will become more efficient at growing grains, at the expense, unfortunately, of the more southern climes.”
G3’s terminal will be a dominant player, with capacity to ship about eight million tonnes a year, but all the major grain handlers have been making investments.
Winnipeg-based grain handlers Parrish and Heimbecker Ltd. and Paterson GlobalFoods have a West Coast terminal in the works that will be able to ship about four million tonnes of grains a year.
The export terminal, to be built on the Fraser River in British Columbia’s Surrey port lands, is still going through regulatory review with a potential construction start next year.
And further north, Ray-Mont Logistics International officially opened its new grain terminal in Prince Rupert at the end of August, which can ship about a million tonnes a year.
The recent investments come on top of work wrapped up last year, including Viterra Inc.'s tripling the capacity of its Vancouver terminal to six million tonnes a year, and Richardson International
doubling the capacity of its terminal, also to about six million tonnes.
Mr. Gerrand said G3’s Vancouver terminal is designed to improve the efficiency of the system, allowing two 134-car trains to unload simultaneously while still hooked up to the locomotive and in motion, which he said will reduce cycle times from farmers fields to the port by more than 40 per cent.
“Everyone in the industry is concerned about congestion at all of our ports, including Vancouver. We’re bringing the solution,” he said.
Mr. Hemmes of shipping-monitor Quorum said the capacity and efficiency investments are needed, since farmers have been improving grain production by about 2.5 per cent to 3 per cent a year for the past five years, with more growth on the way.
He said the latest efforts, however, are part of a long-term push to improve grain transportation, with travel times cut in half since he started monitoring the system in the early 2000s.
“It used to be 70, sometimes as much as 80 days to get from the farm to the time it got on a vessel at the port. That’s down into the low 40s now. So the system has become far more efficient.”

BIS

The Globe and Mail. Bloomberg18 Sep 2017. BIS warns central banks against ignoring cryptocurrencies’ rise
CATHERINE BOSLEY

The world’s central banks can’t sit back and ignore the growth in cryptocurrencies as it could pose a risk to the stability of the financial system, according to the Bank for International Settlements.
It said central banks will need to figure out whether to issue a digital currency and what its attributes should be, although the decision is most pressing in countries such as Sweden, where cash use is dwindling.
Institutions need to take into account not only privacy issues and efficiency gains in payment systems, but also economic, financial and monetary-policy repercussions, the BIS said in its Quarterly Review.
The analysis comes at the end of a rough week for digital currencies, with JPMorgan Chase & Co. chief executive Jamie Dimon calling bitcoin a “fraud” and China moving to crack down on domestic trading of cryptocurrencies.
But with bitcoin and others gaining in popularity as payment systems go mobile and investors pour in money, central banks are beginning to delve into them and their underlying blockchain technology, which promises to speed up clearing and settlements. At the Bank of England, Mark Carney has cited cryptocurrencies as part of a potential “revolution” in finance.
To better understand the system, the Dutch central bank has created its own cryptocurrency, albeit for internal use only. U.S. officials are exploring the matter too, although in March, Federal Reserve Governor Jerome Powell said there were “significant policy issues” that needed further study, including vulnerability to cyberattack, privacy and counterfeiting.
According to the BIS, one option for central banks might be a currency available to the public, with only the central bank able to issue units that would be directly convertible with cash and reserves. There might be a greater risk of bank runs, however, and commercial lenders might face a shortage of deposits. Another question to be resolved would be the question of privacy.

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LGCJ.: