CANADA ECONOMICS
StatCan. 2018-02-06. Canadian International Trade Balance 2017
FULL DOCUMENT: https://drive.google.com/open?
INTERNATIONAL TRADE
StatCan. Canadian international merchandise trade, December 2017
- Imports: $49.7 billion, December 2017, 1.5% increase (monthly change)
- Exports: $46.5 billion, December 2017, 0.6% increase (monthly change)
- Trade balance: -$3.2 billion, December 2017
- Source(s): CANSIM table 228-0069: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=2280069&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
Canada's merchandise trade deficit with the world totalled $3.2 billion in December, widening from a $2.7 billion deficit in November. Imports rose 1.5% and exports were up 0.6%, both led by energy products.
Chart 1: Merchandise exports and imports
Widespread increases lead to record imports
Total imports were up 1.5% to a record $49.7 billion in December, with increases in 9 of 11 sections. Volumes rose 1.0% and prices increased 0.5%. Higher imports of energy products and industrial machinery, equipment and parts were partially offset by lower imports of aircraft and other transportation equipment and parts.
Imports of energy products were up 16.9% to $3.0 billion in December. Crude oil and crude bitumen imports increased 23.9%, while refined petroleum energy products rose 17.8%, mainly on higher imports of diesel and fuel oils. For the section as a whole, prices were up 8.8% and volumes increased 7.4%.
Imports of industrial machinery, equipment and parts also contributed to the overall gain in December, up 6.3% to $5.0 billion. Imports of logging, mining and construction machinery and equipment led the way, rising 24.6% to a record $897 million, the third consecutive monthly increase. These gains precede new emissions regulations affecting off-road diesel engines and machines. As of January 1, 2018, imports of equipment not meeting the new standards are no longer permitted.
Following two strong monthly increases, imports of aircraft and other transportation equipment and parts were down 23.4% in December to $1.7 billion, as fewer airliners were imported from the United States.
Exports rise for the third consecutive month
Total exports rose for the third consecutive month, up 0.6% to $46.5 billion in December despite decreases in 6 of 11 sections. Prices were up 0.5% while volumes were essentially unchanged. Higher exports of energy products, and metal and non-metallic mineral products were partially offset by lower exports of consumer goods. Exports excluding energy products decreased 0.6%.
Exports of energy products rose 6.2% to $8.5 billion in December, the fifth consecutive monthly increase and the highest level since November 2014. Following pipeline disruptions in November, exports of crude oil and crude bitumen led the increase in December, up 7.4% to $5.6 billion on higher volumes. Exports of natural gas (+26.6%) and electricity (+48.8%) also contributed to the gain as unusually low temperatures hit the North-eastern United States in December. For the section as a whole, prices were up 4.6% and volumes increased 1.5%.
Also contributing to the overall increase in December were higher exports of metal and non-metallic mineral products, up 7.7% to $5.6 billion. Unwrought precious metals and precious metal alloys led the increase on higher shipments of unwrought gold to Hong Kong, the United States and the United Kingdom.
Trade with non-US countries increases
Following a 5.6% increase in November, imports from countries other than the United States rose 6.8% to $18.2 billion in December, notably on higher imports of passenger cars and light trucks from Germany as well as refined petroleum energy products from the Netherlands.
Exports to countries other than the United States rose 4.9% to $11.6 billion in December, led by Japan (aircraft), India (potash), the United Kingdom (unwrought gold) and Hong Kong (also unwrought gold).
As a result, Canada's trade deficit with countries other than the United States widened from $6.0 billion in November to $6.6 billion in December.
Imports from the United States fell 1.3% to $31.5 billion in December, while exports to the United States were down 0.8% to $34.9 billion. Canada's trade surplus with the United States widened slightly from $3.3 billion in November to $3.4 billion in December.
Trade partially rebounds in the fourth quarter
Following a 7.6% decrease in the third quarter, nominal exports rose 4.6% to $137.4 billion in the fourth quarter, notably on higher exports of energy products. Imports increased 3.1% to $144.7 billion, mainly on higher imports of aircraft and other transportation equipment and parts as well as energy products. Consequently, Canada's quarterly merchandise trade deficit with the world narrowed from $9.0 billion in the third quarter to $7.3 billion in the fourth quarter.
In real (or volume) terms, quarterly imports rose 1.2% to $125.9 billion on higher imports of electronic and electrical equipment and parts. Following a 3.2% decline in the third quarter, real exports increased 0.3% to $121.2 billion in the fourth quarter, led by basic and industrial chemical, plastic and rubber products.
Nominal annual trade deficit narrows in 2017
Annual exports on a nominal basis were up 5.3% to $549.3 billion in 2017, almost entirely on higher energy product exports. Annual imports were up 4.7% to $573.2 billion. Imports of motor vehicles and parts, energy products, and consumer goods contributed the most to the increase. Consequently, Canada's annual merchandise trade deficit with the world narrowed from $25.9 billion in 2016 to $24.0 billion in 2017.
In real (or volume) terms, annual imports rose 4.2% to $496.2 billion, while annual real exports were up 1.2% to $489.5 billion.
Chart 2: International merchandise trade balance
Revisions to November exports and imports
Revisions reflected initial estimates being updated with or replaced by administrative and survey data as they became available, as well as amendments made for late documentation of high-value transactions. Exports in November, originally reported as $46.2 billion in last month's release, were essentially unchanged in the current month's release. November imports, originally reported as $48.7 billion in last month's release, were revised to $49.0 billion.
FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180206/dq180206a-eng.pdf
THE GLOBE AND MAIL. REUTERS. FEBRUARY 6, 2018. Canada’s trade deficit balloons as imports hit record high
DAVID LJUNGGREN, OTTAWA
Canada's trade deficit unexpectedly ballooned to $3.19-billion in December as imports grew faster than exports for the second month in a row, data from Statistics Canada indicated on Tuesday.
The shortfall – the 11th in a row – exceeded the $2.20-billion deficit predicted by analysts in a Reuters poll and was the seventh largest on record.
Bank of Canada Governor Stephen Poloz has frequently expressed concerns about the export sector, especially given the uncertainty over the future of the North American Free Trade Agreement (NAFTA).
"Trade has been consistently a soft spot for Canada and this report doesn't change that," said Benjamin Reitzes, senior economist at BMO Capital Markets.
Trade looked set to subtract more than expected from fourth-quarter annualized gross domestic product, he said in an interview, making the Bank of Canada's forecast of 2.5 per cent growth "much more difficult to attain."
Poloz said on Jan. 25 that even he did not know what potential there may be for further interest rate hikes this year. He reiterated that policymakers remained both data-dependent and alert to developments with NAFTA. The central bank has raised rates three times since the middle of 2017.
The Canadian dollar was little changed on the news. Data released in Washington showed the U.S. trade deficit hit a nine-year high in December.
Imports rose by 1.5 per cent to a record $49.70-billion on increases in nine of 11 sections as volumes posted a 1.0 per cent gain. Imports of energy products jumped by 16.9 per cent.
Exports increased for the third month in a row, strengthening by 0.6 per cent to $46.51-billion. Exports of energy products, which had been hit by pipeline disruptions in November, expanded by 6.2 per cent to hit the highest level in more than three years.
"It was a flat month and not a great handover into 2018. I am still optimistic that trade in 2018 will be positive, given the strength of global growth," said Ross Prusakowski, a senior economist at Export Development Canada.
Exports to the United States fell by 0.8 per cent, while imports dropped by 1.3 per cent. As a result, the trade surplus with the United States, which accounted for 75.1 per cent of Canadian goods exported in December, edged up to $3.42-billion from $3.28-billion in November.
The annual merchandise trade deficit with the world in 2017 was $24.00-billion, the second highest on record after the $25.87-billion posted in 2016.
REUTERS. FEBRUARY 6, 2018. Canada December trade deficit jumps as imports hit record high
David Ljunggren
OTTAWA (Reuters) - Canada’s trade deficit unexpectedly ballooned to C$3.19 billion ($2.55 billion) in December as imports grew faster than exports for the second month in a row, data from Statistics Canada indicated on Tuesday.
The shortfall - the 11th in a row - exceeded the C$2.20 billion deficit predicted by analysts in a Reuters poll and was the seventh largest on record.
Bank of Canada Governor Stephen Poloz has frequently expressed concerns about the export sector, especially given the uncertainty over the future of the North American Free Trade Agreement (NAFTA).
“Trade has been consistently a soft spot for Canada and this report doesn’t change that,” said Benjamin Reitzes, senior economist at BMO Capital Markets.
Trade looked set to subtract more than expected from fourth-quarter annualized gross domestic product, he said in an interview, making the Bank of Canada’s forecast of 2.5 percent growth “much more difficult to attain.”
Poloz said on Jan. 25 that even he did not know what potential there may be for further interest rate hikes this year. He reiterated that policymakers remained both data-dependent and alert to developments with NAFTA. The central bank has raised rates three times since the middle of 2017.
The Canadian dollar was little changed on the news. Data released in Washington showed the U.S. trade deficit hit a nine-year high in December.
Imports rose by 1.5 percent to a record C$49.70 billion on increases in nine of 11 sections as volumes posted a 1.0 percent gain. Imports of energy products jumped by 16.9 percent.
Exports increased for the third month in a row, strengthening by 0.6 percent to C$46.51 billion. Exports of energy products, which had been hit by pipeline disruptions in November, expanded by 6.2 percent to hit the highest level in more than three years.
“It was a flat month and not a great handover into 2018. I am still optimistic that trade in 2018 will be positive, given the strength of global growth,” said Ross Prusakowski, a senior economist at Export Development Canada.
Exports to the United States fell by 0.8 percent, while imports dropped by 1.3 percent. As a result, the trade surplus with the United States, which accounted for 75.1 percent of Canadian goods exported in December, edged up to C$3.42 billion from C$3.28 billion in November.
The annual merchandise trade deficit with the world in 2017 was C$24.00 billion, the second highest on record after the C$25.87 billion posted in 2016.
($1=$1.25 Canadian)
Additional reporting by Fergal Smith in Toronto; Editing by Jeffrey Benkoe
BLOOMBERG. 6 February 2018. Canadians Love Free Trade. That Doesn't Mean They're Good At It
By Theophilos Argitis
- Non-energy trade deficit widened to record in December
- Energy now accounts for a quarter of exports volumes
Canada’s economy went on a tear last year, but someone forgot to tell exporters.
Trade figures released Tuesday show the sector continues to be a drag on growth as it struggles to make gains outside of energy, even with a favorable exchange rate and growing demand in the U.S. Non-energy exports fell last year in volume terms, and over the past decade any growth has been exclusively due to higher prices.
The lethargy, in place for years, is a conundrum for policy makers and may cast doubt on the economy’s ability to sustain its growth rate, after expanding at about a 3 percent clip in 2017, the fastest in six years.
“Canada’s trade picture remains quite weak as non-commodity exports have made almost no traction for nearly a decade,” Benjamin Reitzes an economist at Bank of Montreal, said in a note to investors.
Canadians like to see themselves as the perennial optimists of global trade, even as questions mount elsewhere over the benefits of open economies. Prime Minister Justin Trudeau touts trade as a central tenet of prosperity, and his Liberal Party lawmakers are vocal champions of keeping the North American Free Trade Agreement, currently heading into the seventh round of negotiations, in place.
But excluding oil, Canada’s trade performance has been dismal. Its non-energy trade deficit widened to a record in December, C$8.64 billion ($6.9 billion), and also for the full year, C$87 billion.
Export Drag
Overall, including oil, growth in export volumes failed to keep up with imports, meaning the trade sector was actually a drag on the stellar 2017 performance, which was wholly reliant on domestic demand. That may give the Bank of Canada pause about raising interest rates further as it gauges the overall health of the economy.
Weak non-energy trade also means Canada is increasingly depending on oil to keep its trade balance from deteriorating further, despite Trudeau’s efforts to pivot away from commodities. Energy exports accounted for 17 percent of the total in 2017, up from 14 percent a year earlier.
In volume terms, which strips out price changes, energy now accounts for more than one quarter of all exports -- the most in records back to 1997.
— With assistance by Erik Hertzberg
StatCan. Comparing Canadian and US bilateral trade in goods data, 2014, 2015 and 2016
In 2016, Canada reported a US$24.4 billion trade in goods surplus with the United States, while from the US perspective this surplus was reported as US$16.3 billion, a difference of US$8.1 billion. It may be expected that the bilateral trade statistics of one country would mirror those of its trading partners. In practice, this is rarely the case, as countries use different data sources and statistical methods. These factors can lead to differences or "asymmetries" when comparing the bilateral trade statistics of two countries, like Canada and the United States.
In order to help data users understand and monitor these differences, Statistics Canada will begin publishing bilateral trade in goods comparative tables for key trading partners, starting with the United States. These tables will be published on the Canada and the World Statistics Hub beginning in March 2018, and will be updated on a quarterly basis.
Trading partner attribution is the main reason for differences between Canada's and the United States' customs-based trade in goods statistics
There are numerous reasons for the differences in the customs-based statistics produced by Canada and the United States, however, the application of international standards in recording imports and exports of goods is the main source of asymmetry, particularly the attribution of trading partner.
Both Canada and the United States follow international standards with respect to the attribution of the trading partner. The international standards recommend that imports be allocated to the country of origin as opposed to the country from which the good was last shipped (referred to as the country of export). Total exports (which also include re-exports of goods originally produced in another country) are attributed to the country of last known destination.
The application of these standards results in trade asymmetries. For instance, suppose a $50 million shipment of laptops is exported from China to Canada. China records this in its customs-based trade statistics as a $50 million domestic export to Canada and Canada records an import of $50 million from the country of origin China. One month after the $50 million shipment of laptops arrives in Canada, it is re-exported to the United States. The United States records this as a $50 million import from China (as China is the country of origin), although the country of export is Canada. Canada records it as a re-export to the United States and includes it in its value of total exports to the United States. Ultimately Canada reports a $50 million export to the United States and the United States reports a $50 million import from China, resulting in a $50 million asymmetry. If this was the only transaction in the month, Canada would show a $50 million trade surplus with the United States, and the United States would show a $0 trade balance with Canada.
Infographic 1: Canadian exports of goods to the United States and American imports of goods from Canada
Looking to the 2016 customs-based trade in goods data, Canada reported US$297.6 billion in total exports to the United States, which is US$19.8 billion higher than the US$277.8 billion in imports that the United States reported from Canada. Most of this difference is the result of the attribution of trading partner for Canada's re-exports of foreign-origin goods to the United States.
The value of Canada's re-exports to the United States totalled US$30.6 billion in 2016. Since US imports are attributed to the country of origin of the good, these re-exports from Canada are not included in the US value of imports from Canada. In addition, Canada's value of re-exports to the United States includes goods of US origin that are returned to the United States, which were valued at US$14.3 billion in 2016. In this case, the United States does not attribute these to the country of origin, which is the United States, but to the country of export, Canada. In order to compare Canada's exports to the United States with US imports from Canada, the remaining US$16.3 billion of Canada's re-exports of foreign-origin goods must be removed from Canada's original value of exports to the United States (US$297.6 billion), as the United States shows these as coming from other countries. This reduces Canada's exports to the United States from US$297.6 billion to US$281.3 billion and narrows the asymmetry from US$19.8 billion to US$3.5 billion. These adjustments are shown in Table 2.
Accounting for US imports of Canadian-origin goods from countries other than Canada widens this remaining asymmetry. Since the United States attributes customs-based imports to the country of origin, any good imported into the United States that originates in Canada is included in US imports from Canada regardless of the country of export. These goods were not exported from Canada to the United States and therefore are not included in Canada's exports to the United States.
As an example, a $50 million shipment of automotive parts is exported from Canada to Mexico. Canada records this as a domestic export to Mexico and Mexico as an import from the country of origin Canada. Several months later, Mexico re-exports this $50 million shipment to the United States. The United States records this as a $50 million import from the country of origin Canada, although the country of export is Mexico. Unless there is an amendment made to the final destination of the shipment in the export documentation in Canada, Canada continues to attribute this export to Mexico. Ultimately Canada records a $50 million export to Mexico and the United States records a $50 million import from Canada. If this was the only transaction in the month, Canada would show a $0 trade balance with the United States and the United States would show a $50 million trade deficit with Canada.
Trading partner attribution also leads to asymmetry when looking at the reverse scenario, of Canada's imports from the United States and US exports to Canada. In this case, suppose a $50 million shipment of cell phones is exported from China to the United States. China records this in its customs-based trade statistics as a domestic export to the United States. This shipment is recorded by the United States as an import from China. If the same shipment of cell phones is later shipped to Canada from the United States, Canada attributes this import to the country of origin China, although the country of export is the United States. The United States records it as a re-export to Canada and includes it in its value of total exports to Canada. Ultimately Canada reports a $50 million import from China and the United States reports a $50 million export to Canada, resulting in a $50 million asymmetry. If this was the only transaction in the month, Canada would show a $0 trade balance with the United States and the United States would show a $50 million surplus with Canada.
Infographic 2: Canadian imports of goods from the United States and American exports of goods to Canada
Other reasons for differences in Canadian and US customs-based trade in goods data
Other factors contributing to the asymmetry in Canadian and US customs-based trade in goods data include revision policies and trade valuation. Beginning with revision policies, Statistics Canada and the US Census Bureau follow different schedules for the publication of revisions to trade statistics. Factors influencing revisions include late receipt of import and export documentation, corrections applied to previously submitted customs forms, and replacement of estimates with actual figures. Statistics Canada and the US Census Bureau revise their data at different times and frequencies. The latest publication of revisions to 2016 customs-based trade in goods data by the US Census Bureau was in June 2017. In contrast, the latest publication of revisions by Statistics Canada was in February 2018. The trade data of both countries therefore reflect different vintages of data, which may result in discrepancies, as revisions are included in one data source but not the other.
Furthermore, Canada and the United States take different approaches to valuation in their trade statistics. Import and export values can include or exclude portions of the costs associated with shipping the goods. For example, the reported values may include costs incurred up to the port of exit in one country or the port of entry in another. This results in different values being reported for the same shipment in one country's exports in comparison to another country's imports.
The value of US imports of goods from Canada is based on the price payable for goods imported into the United States (referred to as the customs value), not including charges for shipping the goods, like insurance and freight. On the other hand, the value of Canada's exports includes the portion of the charges for shipping the goods to the port of exit and onto the exporting carrier in Canada. Therefore, due to this method of trade valuation, Canada's value of exports to the United States is conceptually higher than the US value of imports from Canada.
For the reverse trade flow, the value of Canada's imports from the United States includes charges for shipping the goods to and loading them onto the exporting carrier at the port of exit in the United States. The value of US exports includes charges for shipping the goods up to the exporting carrier at the port of exit in the United States. Essentially, the difference in this case is the cost of loading the shipment onto the carrier. Therefore, Canada's value of imports will be slightly higher conceptually than the value of US exports. This difference cannot be quantified as neither Canada nor the United States reports a separate value for freight charges from the customs value for this flow of trade.
Differences in balance of payments basis trade in goods statistics result from country attributions and balance of payments adjustments
This discussion has so far focused on customs-based trade in goods data. The customs-based statistics provide a measure of the change in the stock of material resources within a country that result from the physical movement of goods across the border. Balance of payments adjustments are made to the customs-based data in order to conceptually align them with other macroeconomic account statistics, such as gross domestic product, based on international standards. These data provide a measure of economic transactions in goods between Canadian residents and non-residents that result from a change in ownership.
The attribution of the trading partner is a significant factor in the asymmetry on a balance of payments basis. As with the customs-based data, US imports on a balance of payments basis are attributed to the country of origin. Canadian total exports include re-exports of foreign goods and therefore include shipments that are not included in US imports from Canada. The resulting asymmetry in this case is the same as with customs-based US imports from Canada and Canadian exports to the United States, as illustrated in the example of the laptop shipment above. On a balance of payments basis, US imports from Canada include Canadian-origin goods imported from countries other than Canada, which are attributed to other countries of destination in Canadian export data. Canadian exports include re-exports of foreign-origin goods, which are attributed to other countries of origin in the US import data.
Asymmetry due to trading partner attributions is less significant in the reverse scenario, regarding Canada's imports from the United States and US exports to Canada. Unlike customs-based imports, Canada's balance of payments based imports are attributed to the country of export of the good rather than the country of origin. As noted, the international standards stipulate that the balance of payments basis data measure trade resulting from a change in ownership, and both Canada and the United States are in line with these standards. The Canadian perspective is that the country of export reflects the location of the last owner of the good. Canada's imports therefore include all exports shipped from the United States to Canada regardless of the country of origin of the goods.
For example, suppose that a $50 million shipment of cell phones is exported from China to the United States. As with the customs-based data example, China records this as a domestic export to the United States. This shipment is recorded by the United States as an import from China. If the same shipment of cell phones is then later shipped to Canada from the United States, Canada attributes this import to the country of export, which is the United States, although the country of origin is China. The United States records it as a re-export to Canada and includes it in its value of total exports to Canada. In this case, the trade statistics of Canada and the United States are closely aligned, as Canada reports a $50 million import from the United States and the United States reports a $50 million export to Canada.
Although some balance of payments adjustments are shared between the two countries, these are largely compiled independently from different data sources, and may result in differences between the reported imports of one country and the reported exports of the other. Balance of payments adjustments that may lead to asymmetries include trade definition (like repairs), valuation and residency, and timing.
Differences in bilateral trade statistics are common and are becoming more important to understand with increasing globalization. As noted, there are a number of conceptual reasons for the differences in the bilateral trade in goods statistics produced by Canada and the United States. The publication of bilateral comparative tables is a step toward helping data users make sense of the data and use them appropriately.
FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180206/dq180206b-eng.pdf
NAFTA
The Globe and Mail. 6 Feb 2018. NAFTA uncertainty hurts job creation, foreign investment, ambassador warns. NAFTA: Montreal talks were most hopeful yet
SHAWN McCARTHY, OTTAWA
ADRIAN MORROW, WASHINGTON
… I don’t see any reason why we can’t get there.
DAVID MACNAUGHTON, AMBASSADOR TO THE UNITED STATES
Canadian Ambassador David MacNaughton and Washington’s representative in Ottawa, Kelly Craft, spoke on Monday at a conference on the importance of bilateral energy trade.
Mr. MacNaughton said he believes the North American free-trade agreement talks can be concluded within the next two months, meeting a March
31 deadline set by U.S. negotiators. “I think [if] we roll up our sleeves and work hard at this, we can at least get to the point where we have an understanding, an agreement in principle … I don’t see any reason why we can’t get there.”
Mr. MacNaughton said the Mexican presidential election on July 1, plus November midterm congressional elections in the United States will make it increasingly difficult to reach a deal beyond March 31.
Meanwhile, businesses are wary about making investments in the three countries without a clear indication of what the trade rules will be. “The uncertainty is causing people not to make investments that they might ordinarily make,” he said. “I think if you look at Mexico’s interest, the United States’ interest and Canada’s interest, it is creating jobs. And the more you have people sitting there not investing because they don’t know what the rules are going to be, the fewer jobs get created.”
Foreign Affairs Minister Chrystia Freeland and her U.S. and Mexican counterparts wound up a round of negotiations in Montreal last week with little sign of progress on key issues. Mr. MacNaughton said there has been good progress on the “plumbing” issues, but that four or five key roadblocks remain.
Still, the tone of the Montreal talks was more hopeful than in any previous round.
Negotiations have been deadlocked for months over a series of tough protectionist demands by the Trump administration: a 50-per-cent U.S.-content requirement on autos made in Canada and Mexico; a cap on the amount of U.S. government procurement Canadian and Mexican companies would be allowed to bid for; the abolition or gutting of the deal’s disputeresolution provisions; and a “sunset clause” that would automatically terminate NAFTA in five years unless all three countries agreed to keep it.
In Montreal, Canadian negotiators presented a series of compromise proposals. Mr. Trump’s trade czar, Robert Lighthizer, rejected Canada’s key compromise on autos, but said he was encouraged that Ottawa was trying to work with his core demands. Mr. Lighthizer did not reject proposed Canadian compromises on the sunset clause and Chapter 11, the provision that allows corporations to sue governments before trade tribunals.
The three parties will reconvene in Mexico City in the final week of February for the seventh round of talks. Ms. Freeland has said there will be a further round in April in Washington.
The Trump administration has imposed deadlines on the NAFTA talks from the start: At first, they aimed to have them completed by the end of 2017. In the fall, Mr. Lighthizer changed that target to March, 2018. But Mr. Trump and his lieutenants have begun taking a softer line in recent weeks.
In January, when asked by The Wall Street Journal if he had a timetable for deciding whether to leave NAFTA or stay in, he replied “No.” Mr. Trump told the newspaper he might extend the talks until after the Mexican presidential election, when it would be easier for Mexico to negotiate.
In Davos later that month, U.S. Commerce Secretary Wilbur Ross said there was a “good chance” that the renegotiation would be successful.
In a speech at a cylinder factory in Cincinnati, Ohio, on Monday, Mr. Trump reiterated his long-standing threat to pull out of NAFTA if he does not see it renegotiated to his satisfaction.
“Either you renegotiate or you terminate. But we’re renegotiating. We’ll see what happens,” he said.
Mr. Trump also warned unspecified countries that he was planning some sort of trade action shortly.
The Globe and Mail. 6 Feb 2018. OPINION. Trust the signals coming from U.S. politicians: More nuanced rhetoric is emerging from NAFTA talks. Have NAFTA’s prospects brightened?
ANDREI SULZENKO, Former Canadian trade negotiator and current executive fellow at the School of Public Policy, University of Calgary
NAFTA also needs now to be placed in the context of U.S. midterm elections in November when all of the House of Representatives and a third of the Senate are up for re-election. Notice of withdrawal from NAFTA would be a net negative for Republicans electorally, given the reliance of many states on exports to Canada and Mexico. The last thing the President needs is to be blamed by his own party for unnecessary losses that could jeopardize Republican majorities in both houses.
In recent months, the collective wisdom among NAFTA commentators has been that the United States was pushing one-sided, win-lose demands on Canada and Mexico as a set up for giving notice of withdrawal from the agreement. That was then. Now, a much more nuanced picture is emerging, significantly reducing the probability of the U.S. side taking that step, even as a negotiating tactic.
The telltale signs of this shift have been accumulating over the past few weeks. Most notably, President Donald Trump’s first State of the Union address last week did not mention the North American free-trade agreement explicitly, making a vow merely to “fix bad trade deals and negotiate new ones.”
That kind of toned-down rhetoric was also evident in his recent appearance at the annual Davos gabfest of business and political elites in Switzerland, as well as in various news interviews.
A similar tone was struck by U.S. negotiators following the most recent round of talks in Montreal. There were no breakthroughs on tough issues, but the three parties agreed to keep talking.
Further, there has been more vocal opposition from Canada and Mexico. Prime Minister Justin Trudeau is reported as saying “Canada is willing to walk away from NAFTA if the United States proposes a bad deal.” Mexico has also threatened to walk away from a one-sided deal. (Both Canada and Mexico are signatories to the recently revived and rebranded Trans-Pacific Partnership, thereby preserving preferential access to each other’s markets in the absence of NAFTA.)
Does all this signal a turning of the tide, or is it more likely a short-term feint? The evidence suggests the former; and, as always, it’s mainly about U.S. politics.
The principal driver is the fact the President needs all the friends he can get now that the Robert Mueller special counsel investigation is drawing closer to the White House – this means primarily Republicans in Congress. Republicans have historically been pro-trade liberalization, and recently 36 of 51 Republican senators signed a letter to the President stating “the next step to advance the economy requires that we keep NAFTA in place, but modernize it to better reflect our 21st-century economy.” Similar views have been expressed forcefully by the U.S. business community.
NAFTA also needs now to be placed in the context of U.S. midterm elections in November when all of the House of Representatives and a third of the Senate are up for re-election. Notice of withdrawal from NAFTA would be a net negative for Republicans electorally, given the reliance of many states on exports to Canada and Mexico. The last thing the President needs is to be blamed by his own party for unnecessary losses that could jeopardize Republican majorities in both houses.
There is also probably a growing realization in the administration that ripping up NAFTA is not the most effective “America First” policy. A much bigger booster of investment in the United States was the recently passed tax legislation.
In any event, lingering uncertainty about NAFTA through protracted negotiations is quite effective on its own in skewing investment to the United States – witness Fiat Chrysler’s recent decision to move a truck plant from Mexico to the United States.
Further, Mr. Trump may now understand better that pursuing existing statutory trade-remedy authorities is a good way to trumpet “America First” policies, even if ultimately offside international rules. Recent actions against solar-panel and washing-machine imports from Asia, on top of actions against Canadian lumber and aircraft (now quashed by the U.S. International Trade Commission), give red meat to the electoral base without having to rip up trade agreements.
What then, is the likely scenario going forward? It appears to be more of the same trench warfare, potentially leading to exhaustion and stalemate. Alternatively, faced with that likelihood, the U.S. side might start emulating Canada by actually looking for compromise.
The scenario is, of course, complicated by the rapidly approaching midterm campaign as well as the forthcoming Mexican presidential election.
The best advice to the NAFTA parties, therefore, is to be absent, at least publicly, from the political level from negotiations and leave it to the technocrats for the time being.
All that translates into a serious stock-taking toward the end of 2018 once the political landscape in the United States is reset.
In the meantime, Canadians should not be under any illusion that this is a good outcome.
The longer business uncertainty continues, the less likely North American investment decisions are to favour Canada. After all, even with a secure and stable NAFTA, it always has been a struggle to attract investments to Canada in order to serve primarily the 12-times larger U.S. market.
WEF
The Globe and Mail. 6 Feb 2018. ARTICLE. What I learned in Davos: Canada matters
BILL THOMAS, Global chairman of KPMG International and former CEO and senior partner of KPMG in Canada
Canada is known as a powerhouse of innovation. We’re entrepreneurial. We’re peacemakers. We’re friendly. We’re smart. And, above all – as many world leaders were quoted saying in Davos recently at the World Economic Forum’s annual meeting – our country is genuinely open for business.
We’ve earned our reputation as global influencers and we’ll continue to benefit from punching above our weight for as long as we take a leading role in every global meeting and gathering that looks to shape the future of the world. But as it stands, we’re not getting the recognition we deserve.
I’m regularly in conversations with Canadian chief executives, discussing today’s big issues in business and looking ahead to succeeding amid an uncertain future. These discussions continued in Switzerland as CEOs from Canada and the rest of the world met to discuss issues. Of particular focus in these discussions was Canada’s role in the three big issues our world faces: trade, technology and talent.
Trade is the most polarizing of the “T”s. We’re at a critical point in the negotiations of international deals across the world whose impacts will surely go beyond reshaping global trade paths and influencing businesses’ investment decisions. Here in Canada, we’re rightly focused on NAFTA, but across the Atlantic in Europe, the Brexit negotiations are equally as important.
Trade deals are essentially about tariffs on goods and services and the uncertainty undoubtedly leads to CEOs pressing the pause button on investment decisions. Canada can lead by example in negotiations and by continuing to focus resources on ensuring our avenues of business are ready for takeoff.
The second “T” is technology. Davos saw a number of really important discussions about the way we can harness the potential of technology, particularly artificial intelligence, in a way that doesn’t harm society. There is a widespread recognition that, in the short to medium term, at least, technology will create rather than destroy jobs. The challenge we face is to create the right conditions for growth to be driven by technology and to create as many of those jobs here in Canada as possible. There were many discussions about the fact we, as a country, have all the right conditions (from worldclass research institutions, infrastructure for growth and an entrepreneurial culture) to do just that … we just have to seize the opportunity.
The third “T” that dominated my conversations with clients was talent, and just about every CEO I spoke with here at home and abroad bemoaned the shortage of suitably skilled recruits, particularly technology graduates. We have to work with our educational institutions to ensure they are sufficiently disrupting themselves in these times to deliver the quality and type of students the world needs.
And while much of the media attention around Davos was directed toward another “T” – U.S. President Donald Trump and his large delegation of cabinet members and other leaders – we shouldn’t underestimate the importance to our economy of Indian Prime Minister Narendra Modi’s opening speech. He put down a very powerful marker that his government is committed to a reform agenda that will make it increasingly easy to do business with India.
With the recent appropriate focus around the world on the #MeToo campaign, I expected gender equality and diversity to be an important topic at Davos, where only 20 per cent of delegates were women. We simply can’t come up with the right, credible answers to the biggest challenges we face when half of the world’s population receives only a fifth of the seats at the table. That said, I was very encouraged this year by the level of determination to move the dial on equality.
Davos remains a mass of contradictions and there are certainly elements of elitism as the world’s foremost leaders gather on a Swiss mountaintop. But I am more convinced than ever that amid the pageantry , the dialogue does lead to better relations between countries and better conditions for society and business. That helps all of us, especially us Canadians, as we depend on global trade and engagement for our jobs and livelihoods.
AVIATION
REUTERS. FEBRUARY 6, 2018. Bombardier sees Asia-Pacific taking delivery of 2,050 aircraft by 2036
(Reuters) - Asia-Pacific, excluding Greater China, is expected to take delivery of 2,050 aircraft by 2036, according to a forecast by Canadian planemaker Bombardier Inc (BBDb.TO).
"Strong GDP growth and a booming middle class should drive passenger traffic numbers to triple in the next 20 years," said Francois Cognard, vice president, sales, Asia-Pacific, at Bombardier. (bit.ly/2GUrQbQ)
Bombardier Inc
3.15
BBDB.TOTORONTO STOCK EXCHANGE
-0.03(-0.94%)
BBDb.TO
BBDb.TO
As domestic connectivity in the region increases, the company sees an opportunity for 1,050 large regional aircraft of 50 to 100 seats and 1,000 small single-aisle aircraft of 100 to 150 seat.
The region will make up 16 percent of the worldwide market, which would be valued at $820 billion, Bombardier said.
Reporting by Karan Nagarkatti in Bengaluru; Editing by Sriraj Kalluvila
THE GLOBE AND MAIL. FEBRUARY 6, 2018. Canada selling helicopters to Philippines despite human rights concerns
STEVEN CHASE, OTTAWA
Canada is selling helicopters to the Philippines military just months after Prime Minister Justin Trudeau voiced concerns over human rights abuses by the country's security forces.
Mr. Trudeau drew international headlines last November after he raised the matter of extrajudicial killing with Philippine President Rodrigo Duterte at an international summit in Manila. Mr. Duterte later lashed out publicly at Mr. Trudeau over the matter, calling foreign questioning of the matter "a personal and official insult."
On Tuesday, however, news broke that the Canadian government has brokered a deal to sell 16 combat utility helicopters to the Philippines air force. The deal is worth more than US$233.36-million and the helicopters are produced in Mirabel, Que.
"The helicopters will be used for the military's internal security operations," Philippines Major-General Restituto Padilla, military chief of plans, said. He said the aircraft could also be used for search-and-rescue and disaster relief operations.
The deal comes as the Philippines military prepares to step up operations against Islamist and communist rebels.
Arms control advocates question why the Trudeau government is helping equip the military of a country where death squads have carried out unlawful or unauthorized killings for years – activities that have prompted concern at the highest levels in Ottawa.
"Once again, Canadian equipment is going to the military of a known human rights violator," said Cesar Jaramillo, executive director of Project Ploughshares, a disarmament group that is an agency of the Canadian Council of Churches and which tracks arms shipments.
"As with arms sales to Saudi Arabia, in which red flags are widely acknowledged, Ottawa cannot claim ignorance about the well-documented pattern of human rights abuses in the Philippines – some of which President Duterte has publicly boasted about."
Mr. Trudeau explained his concerns about the Philippines to the media last November, saying he spoke to Mr. Duterte about the need for the rule of law in the Asian country.
"As I mentioned to President Duterte, we're concerned with human rights, with the extrajudicial killings," Mr. Trudeau said at the time. The Prime Minister said Canada has "a reputation for being able to have strong and frank, sometimes firm, discussions around the rule of law and human rights with its partners." He characterized his private conversation with Mr. Duterte as "a cordial and positive exchange."
NDP foreign affairs critic Hélène Laverdière called for Canada to halt this sale and refuse export permits. "How can Trudeau justify this deal with the Philippines when Duterte's government has plunged the country into a terrible human-rights crisis?" the NDP MP said on Twitter.
Foreign Affairs Minister Chrystia Freeland's office was not immediately available to comment on the sale.
The Bell 412EPI helicopters will be delivered early next year as Mr. Duterte refocuses the armed forces modernization program to tackle growing domestic threats as Maoist fighters and pro-Islamic State extremists try to regroup.
According to Human Rights Watch, since taking office in 2016, Mr. Duterte has carried out a "war on drugs" campaign that resulted in the death of more than 7,000 suspected drug dealers and addicts.
Cases investigated by the media and rights groups "invariably found unlawful executions by police or agents of the police typically acting as death squads," Human Rights Watch says.
Mr. Duterte has been outspoken in support of the anti-drug campaign and has sought to silence its critics. According to Human Rights Watch, "no meaningful investigation into the killings has been undertaken."
With files from Reuters and Canadian Press
BOEING. Feb. 6, 2018. Boeing Announces Nearly $1 Billion in Services Orders at Singapore Airshow. Orders demonstrate strong Asia Pacific interest in Boeing services. Orders stretch across each portfolio representing parts, modifications, training and Boeing AnalytX
SINGAPORE – Boeing [NYSE: BA] today announced services orders valued at more than $900 million that will enable carriers and partners to excel in today’s competitive airline environment.
“Boeing is serious about helping customers optimize the performance of their fleets and reduce operational costs throughout the lifecycle,” said Stan Deal, president and CEO of Boeing Global Services. “Predicted growth for aerospace services in the Asia Pacific brings opportunities to partner with local industry to understand the region’s greatest needs, invest in new capabilities to meet those needs, and then bring them to market quickly.”
Today’s agreements stretch across Global Services’ four capability areas, including parts; engineering, modifications and maintenance; digital aviation and analytics; and training and professional services.
Regional agreements announced today include in part:
- All Nippon Airways signed a contract for 36 landing gear exchanges for the 787.
- China Southern Airlines and Guangzhou Aircraft Maintenance Engineering Company Limited (GAMECO) signed an agreement to develop service capabilities for the Boeing Global Fleet Care portfolio, as well as enhanced component and composite repair capabilities.
- Malaysia Airlines signed an agreement for 48 landing gear exchanges for the Next-Generation 737. Through the program, operators receive an overhauled and certified landing gear from an exchange pool maintained by Boeing, with stocked components and supporting parts shipping within 24 hours.
- Nippon Cargo Airlines signed a five-year agreement to renew Jeppesen charting and electronic flight bag services to optimize navigation and flight operations across their 747 fleet.
- Royal Brunei Airlines signed an agreement for five 787-8 overhead flight crew rest retrofits. The modifications, to be completed at Boeing Shanghai, will allow the carrier to fly the 787-8 airplanes on long-haul routes, providing increased operations flexibility to the fleet and operator.
- SilkAir signed an agreement to receive fleet material services for 54 of its 737 MAX and Next-Generation aircraft. Fleet material services include Component Services Program, Integrated Material Management and Customer Furnished Parts, providing the customer with a centralized supplier of parts.
- Singapore Airlines signed a contract to use Electronic Logbook on its 777 and 787 fleet. As a Boeing electronic flight bag app, the Electronic Logbook replaces paper logbooks with digital records that improve operational efficiency and reliability, reducing schedule interruptions.
Singapore’s Defense Science and Technology Agency signed an agreement to engage in collaborative research and experimentation activities, powered by Boeing AnalytX.
Worldwide agreements announced today include:
- Alaska Airlines signed an agreement to renew Jeppesen Flight Planning for its 737 fleet.
- Biman Bangladesh Airlines has expanded its use of Boeing’s Component Services Program by adding the service to support induction of new 787 aircraft that will enter its fleet in August this year, in addition to expanding and extending current component service coverage of its existing 737 and 777 fleets. With this service extension, Biman is on CSP support for all three of its airplane models.
- DHL has ordered one 767-300ER Boeing converted freighter. Boeing converted freighters carry high-density cargo on long-range routes, as well as e-commerce cargo on domestic and regional routes.
- Honeywell Aerospace signed a contract extending Aviall’s product support agreement as the exclusive distributor for Honeywell Aerospace through 2022, covering interior and exterior lighting equipment for all commercial aftermarket product sales. Products covered include indicators, annunciators and other components used on commercial aircraft.
- Lufthansa Group signed an agreement for 25 landing gear exchange and overhauls across its 777-200F and 777-300ER fleets for AeroLogic, Lufthansa Cargo and Swiss International Airlines. The service eliminates the need for operators to contract, schedule and manage the overhaul process.
- Parker Aerospace’s Aircraft Wheel & Brake Division signed a five-year master distributor agreement with Aviall for its Cleveland Wheels & Brakes product line. Aviall will forecast, warehouse and market through its network, including Parker AWB’s former network of direct distributors.
- Tianjin Air Capital signed a contract with AerData for Secure Technical Records for Electronic Asset Management, a tool that transforms operations by replacing paper documents with digital ones, for a fleet of more than 50 aircraft.
- Tunisair signed a contract to integrate Jeppesen Aviator services on iPad into its flight operations, reducing pilot time spent on data entry and accessing individual apps.
REUTERS. FEBRUARY 6, 2018. Boeing signs nearly $1 billion of services deals, eyes $50 billion target
SINGAPORE (Reuters) - Boeing’s services unit announced on Tuesday deals worth nearly $1 billion as part of its effort to more than triple the division’s annual revenue to $50 billion in as little as five years.
The jet manufacturer has been looking to boost revenue in its services business which involves jet maintenance, repair and overhaul (MRO), data analytics and pilot training.
Revenue grew by 5.5 percent to $14.6 billion in 2017 and the growth rate is forecast to be even higher this year, Boeing Global Services CEO Stan Deal told Reuters at the Singapore Airshow.
“Over the next 5 to 10 years we are going to accomplish that as a stretch objective,” he said of the $50 billion target, adding it will “clearly involve” acquisitions.
Deal said areas of interest for acquisitions included aircraft interiors and data analytics.
The agreements announced on Tuesday included landing gear exchange deals with Japan’s ANA Holdings Inc and Malaysia Airlines and an order from cargo group DHL for a 767-300ER converted freighter.
The revenue split in the Dallas-based services division is about half military and half commercial services at present, but Deal said that balance was expected to shift toward commercial over time.
“Commercial is just more rapid because of the strong continued growth in commercial aviation and the continued strong growth projections particularly in the Asia-Pacific,” he said.
Reporting by Jamie Freed and Fathin Ungku; Editing by Muralikumar Anantharaman
REUTERS. FEBRUARY 6, 2018. Airbus deal has led to pause in C Series orders: Bombardier executive
Jamie Freed, Tim Hepher
SINGAPORE (Reuters) - Canada’s Bombardier believes there has been a “bit of a pause” in orders of its C Series jet as airlines wait for it to complete a partnership deal with Airbus SE, its commercial sales head said on Tuesday.
The Canadian manufacturer in October agreed to sell a majority stake in the C Series program, but the deal is awaiting regulatory approval. In the meantime, Bombardier and Airbus cannot coordinate on sales campaigns for the 110-130 seat jets.
Bombardier Commercial Aircraft sales head Colin Bole said the long-term sales prospects for the C Series had strengthened as a result of the Airbus deal, but it could be causing some temporary delays in order decisions.
“I won’t deny it does create probably a bit of a pause in the meantime,” he told Reuters at the Singapore Airshow. “Most airlines at least are trying to understand what this means in the long run.”
Bombardier agreed the joint venture with Airbus when it was fighting off a move by rival Boeing Co to have the U.S. levy heavy duties against the C Series jet.
The Canadian firm won an unexpected victory against Boeing in the trade dispute last month, but it is pushing ahead with plans to assemble the jet for U.S. customers in Alabama regardless, Bole said.
As Airbus and Bombardier work to complete the C Series deal this year, the Canadian firm’s Brazilian rival Embraer SA is discussing a tie-up with Boeing.
U.S. carrier JetBlue Airways Corp last month said it had extended a review on the future of its Embraer E-190 jet fleet due to the evolving commercial landscape.
“The market for smaller and mid-size aircraft is going through tremendous change with the recent Airbus-Bombardier deal and Boeing-Embraer talks,” it said in an email to its staff reviewed by Reuters.
With the Airbus deal yet to be completed, Bombardier is hoping for a strong year of sales for its Q400 turboprops after having received 41 orders last year.
The Q400 turboprop has a lower market share than Franco-Italian rival ATR.
“Last year was a very successful year for the Q400,” Bole said. “I expect a similar year or even better year this year. We are building that market share.”
Reporting by Jamie Freed and Tim Hepher in Singapore; additional reporting by Allison Lampert in Montreal Editing by Muralikumar Anantharaman/Keith Weir
________________
LGCJ.:
