CANADA ECONOMICS

VENEZUELA

Global Affairs Canada. February 12, 2018. Foreign Affairs Minister to attend meeting of Lima Group on Venezuela

Ottawa, Ontario - Canada continues to play a leadership role in regional efforts to address the crisis in Venezuela.

The Honourable Chrystia Freeland, Minister of Foreign Affairs, today announced that she will attend a meeting of the Lima Group in Lima, Peru, on February 13, 2018.

Since the last meeting of the Lima Group in Santiago, Chile, on January 23, 2018, talks between the Maduro regime and members of the opposition have collapsed. The regime has unilaterally announced that presidential elections will be held on April 22, 2018, while barring the opposition coalition from participating in the elections. Meanwhile, the suffering of the Venezuelan people continues to intensify as shortages of food and medicine worsen.

Minister Freeland and other Lima Group foreign ministers will discuss next steps to support the Venezuelan people as they fight for democracy. Ministers will also urge the Maduro regime to restore constitutional order and ensure respect for human rights.

Quotes

“Recent developments point to an upcoming presidential election that will not be free and fair, further entrenching a dictatorial regime. With my fellow Lima Group foreign ministers, we will work on a united response to this latest move by the Maduro regime that deprives the Venezuelan people of their democratic rights. This further push toward authoritarianism only reinforces our resolve to advocate on behalf of all Venezuelans. Canadians will not stand by as the Government of Venezuela robs its people of their fundamental democratic and human rights and denies them access to basic humanitarian assistance.”

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

Quick Facts

• The Lima Group was established on August 8, 2017, to coordinate participating countries’ efforts and apply international pressure on Venezuela. Meetings of the group have been regularly attended by Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Guyana, Honduras, Jamaica, Mexico, Panama, Paraguay, Peru and Saint Lucia.
• Canada hosted the third ministerial meeting of the Lima Group in Toronto, Ontario, on October 26, 2017. The group discussed options to broaden cooperation with other international partners, maintain pressure on the Maduro regime and translate the group’s unwavering support for the Venezuelan people into further concrete actions. For Canada, this has involved two rounds of sanctions imposed on the Maduro regime.
• The Lima Group is committed to closely monitoring events in Venezuela and applying pressure on Venezuela’s government until the full restoration of democracy in the country is achieved.

Canada and the Venezuela crisis: http://www.international.gc.ca/world-monde/issues_development-enjeux_developpement/response_conflict-reponse_conflits/crisis-crises/venezuela.aspx?lang=eng

NAFTA

PM. Prime Minister concludes visit to the United States Ottawa, Ontario - February 10, 2018

 The Prime Minister, Justin Trudeau, today concluded his visit to Chicago, San Francisco, and Los Angeles. During his visit, the Prime Minister met with several political and business leaders to underscore the importance of the Canada-US relationship, and create more opportunities for Canada’s middle class.

In Chicago, the Prime Minister met with Illinois Governor Bruce Rauner and Mayor of Chicago Rahm Emanuel to discuss the importance of the North American Free Trade Agreement (NAFTA), as well as climate change, cross border tourism, and the energy sector. He also spoke to students at the University of Chicago Institute of Politics, where he stressed the importance of civic duty, youth engagement, gender equality, and multiculturalism.

In San Francisco, Prime Minister Trudeau met with global business leaders to promote Canada as one of the best places to invest. He met with Chief Executive Officer of Salesforce Marc Benioff, who announced that his company would invest US$2 billion over the next five years in Canada. This investment will expand Salesforce’s client relationship management services and lead to the creation of thousands of good, middle class jobs. The Prime Minister also met with AppDirect President and Chief Executive Officer Daniel Saks, who announced that he would create 300 new jobs and expand the company’s footprint in Canada.

The Prime Minister also held meetings with Amazon Chief Executive Officer Jeff Bezos, AMGen Chairman and Chief Executive Officer Robert Bradway, and eBay President and Chief Executive Officer Devin Wenig.

The next day, Prime Minister Trudeau met with Governor of California Jerry Brown and Lieutenant Governor of California Gavin Newsom to discuss the benefits of NAFTA for both California and Canada, and the importance of continued collaboration on climate change. 

In the Los Angeles area, the Prime Minister delivered an address at the Ronald Reagan Presidential Foundation and Institute in Simi Valley. During the address, he spoke about the historic partnership between Canada and the United States, and how it is essential to our shared security, prosperity, and to millions of middle class jobs.

While in Los Angeles, the Prime Minister also met with Mayor of Los Angeles Eric Garcetti to discuss diversity, inclusion, and the need to help middle class families.

Quote

“The connections between Canada and the United States are as old as our countries themselves – from deep family ties, to businesses that work back and forth across the border, to the world’s most important trade relationship. All of us benefit when we work together. This trip was a chance to build on our unique relationship, and continue to work together to create opportunities for the middle class on both sides of the border.”

—The Rt. Hon. Justin Trudeau, Prime Minister of Canada

Quick Facts

• Canada and the United States share one of the largest trading relationships in the world. Bilateral trade between the two countries was valued at nearly $882 billion in 2016, and Canada is the largest secure supplier of energy to the U.S.
• The two countries share the longest, secure border in the world, over which some 400,000 people and $2.4 billion worth of goods and services cross daily.
• Canada buys more goods from the United States than China, Japan and the UK combined.
• Canada is the number one export destination for most American states, and cross-border trade and investment supports nearly nine millions jobs in the United States.

Prime Minister to travel to the United States: https://pm.gc.ca/eng/news/2018/01/19/prime-minister-travel-united-states

Canada and United States Relations: http://international.gc.ca/world-monde/united_states-etats_unis/relations.aspx?lang=eng

BLOOMBERG. 12 February 2018. Nafta’s Red Tape Fight Hits a Snag
By  Josh Wingrove and Eric Martin

• Canada proposes adding cooperation council into trade pact
• Observers say that may backfire with shift of powers to USTR

The U.S., Canada and Mexico are at odds over a proposal to beef up Nafta’s powers to cut red tape, as one major business group warns efforts to simplify regulations could end up taking a step backward.

Canada wants to roll the existing U.S.-Canada Regulatory Cooperation Council into the North American Free Trade Agreement, a pact Donald Trump is threatening to quit. Advocates of the Canadian proposal liked the idea of entrenching stronger harmonization of rules on things like food safety and drones while also adding Mexico into the mix -- and doing so would also boost another Trump goal of cutting red tape for businesses.

But the push has hit a wall. The U.S. is signaling a skepticism for a trilateral council and that accepting it may require a power shift -- if rolled into Nafta, the council would move under the control of U.S. Trade Representative Robert Lighthizer’s office. A Lighthizer spokeswoman declined comment, while a business group that initially backed the idea is now sounding an alarm by saying USTR doesn’t have the expertise to do this.

“Putting it under USTR is not the right answer. This is not a place to resolve disputes,” said Maryscott Greenwood, the chief executive officer at the Canadian American Business Council who is closely involved in Nafta talks.

In a survey of business council members’ Nafta priorities, regulatory harmonization topped the list. “Our preference is to have the status quo on steroids. If you can do that through Nafta, terrific,” Washington-based Greenwood said. Instead, the U.S. power shift would “put the brakes on it.”

Red Tape Push

The U.S., Canada and Mexico began renegotiating Nafta in August at the insistence of Trump, who’s said the deal led U.S. companies to fire workers and move factories south of the border. He’s threatening to quit and initially wanted a deal by December but talks could now potentially stretch into 2019.

Trump has also boasted about clawing back certain business regulations at home, and a joint effort with Canada has been led by the RCC since its creation in 2011. Regulatory cooperation is a sleepy term that means governments aligning their rules for things like safety testing that allow a product to be sold. Standardized rules cut costs on such things as testing and labeling, and substantially simplify trade for business.

In the U.S., RCC efforts are currently led by the Office of Information and Regulatory Affairs, or OIRA, which is a division of the White House’s Office of Management and Budget, or OMB.

Mexico and the U.S. have their own High-Level Regulatory Cooperation Council, launched in 2010 to spur cooperation on things like food, nanotechnology and offshore oil and gas development standards. Mexico supports adding some form of an RCC into Nafta so long as it’s trilateral, a notion the U.S. is resisting, according to the person familiar with talks.

‘No Authority’

Lighthizer typically favors bilateral deals, and the U.S. is said to have signaled it typically considers any trade-related regulatory cooperation as, simply, a trade issue -- therefore on USTR turf, not the White House. The U.S. is said to have made that clear at the bargaining table.

“That was a big step in the wrong direction, if in fact that is what’s on the table,” Greenwood said.

The countries’ current positions are not entirely clear and they theoretically could still agree to preserve regulatory efforts outside Nafta. Representatives for Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo declined to comment.

“The preference would certainly be to use Nafta for what the private sector people hoped it would be used for -- a way to make permanent, and bolster, the RCC, rather than the opposite,” said trade consultant Eric Miller of Rideau Potomac Strategy Group, another close observer of Nafta talks. “You’re essentially taking it from the right authority and expertise to make it happen, and handing it to the people who have no authority and no expertise.”

Nafta, which took effect in 1994, governs much of the commerce between the U.S., Mexico and Canada, which trade $1 trillion annually in goods. Regulatory cooperation offers much of the economic incentive to improve the deal, and rolling the RCC into Nafta properly could be essential in growing existing trade, Miller said.

“If the U.S. business community really wants this, and the Canadian business community really wants this, they’ve got to step up and let the negotiators on all sides knows that this is a top priority and we have to fight for it,” he said.

TPP

The Globe and Mail. THE CANADIAN PRESS. 12 Feb 2018. Auto industry skeptical of TPP agreement with Japan. Side letter being touted by the Trade Minister is not enforceable, unions argue
MIKE BLANCHFIELD

The minister says a deal signed with Japan on the side of the Trans-Pacific Partnership will give Canada its greatest access ever into the Japanese market.Auto workers and manufacturers are rejecting assertions by Canada’s Trade Minister that the country won major access for them into the highly protected Japanese market in the recently rebooted Trans-Pacific Partnership.

International Trade Minister François-Philippe Champagne told the Senate trade committee last week that Canada won its greatest market access ever into the Japanese market when it signed on last month to the new 11-country version of the Pacific Rim pact that was salvaged after the Trump administration pulled the United States out last year.

Mr. Champagne said the agreement between Canada and Japan is contained in a side-letter, not in the text of the agreement, which he told senators is nonetheless “enforceable.”

That’s not possible, according to representatives from the auto workers union and two trade associations representing Canadian automobile manufacturers.

They said side agreements are not enforceable unless they are part of an actual trade agreement.

And they reiterated past concerns that Canada’s decision to join the new TPP, without the United States, would ultimately cost Canadian manufacturing jobs and undermine the country’s interests in wrestling with the United States over automobile roadblocks in the unresolved renegotiation of the North American free-trade agreement.

The text of the new TPP has not been released and Mr. Champagne’s office says the side letter with Japan isn’t yet ready to be released. Mr. Champagne pledged to release the letter during his upbeat Senate testimony on Wednesday, in which he heralded the autos deal with Japan as a breakthrough.

“We were able to achieve something that has never been achieved before, which is the largest market access for Canadian auto manufacturers in Japan, removing non-tariff trade barriers with respect to safety standards,” Mr. Champagne said.

“We’ve achieved that in a side letter, which is enforceable – the first time that the government of Japan is giving a side letter on auto which is enforceable.”

Mr. Champagne said the letter also contains a “most-favoured nation clause,” which means if Japan strikes a better deal with another party – the United States or Europe – those better terms would automatically apply to Canada.

Jerry Dias – the president of Unifor, the union representing auto workers – said the letter carries no weight because it is not part of the agreement.

“A side letter is unenforceable. We didn’t even push hard enough to get it folded into the body of the agreement,” said Mr. Dias, who predicted the agreement would lead to a flood of Chinese parts into the North American auto market – something the Trump administration is trying to avoid by pressing for higher continental content in autos at the NAFTA negotiations.

Mr. Dias dismissed the “mostfavoured nation clause” as an admission Mr. Champagne “carved a lousy deal.”

Flavio Volpe, president of the Automotive Parts Manufacturers Association, said there’s no indication the side letter will address any real trade barriers in Japan, and he said it is unlikely it would lead to more Canadian cars being sold in that market.

He said the letter will “have as much influence on new car sales in Japan as they will on the price of cheese in Windsor.

“Side letters are political agreements to deal with an issue that was too difficult to find an enforceable, termed agreement on,” he added. “In business, anyone seeking an enforceable covenant would put it in the actual contract.”

G7

THE GLOBE AND MAIL. FEBRUARY 12, 2018. Russia not welcome at G7 any time soon, top Canadian official says
MICHELLE ZILIO

OTTAWA - The G7 has not discussed inviting Russia back into the bloc and won't be doing so any time soon, says Canada's top representative to the group of countries.

Speaking to The Globe and Mail, G7 Sherpa Peter Boehm said Russia's involvement has not come up during recent meetings with his counterparts from the United States, France, Germany, Italy, Japan and Britain. Russia was suspended from the group of highly industrialized economies in 2014 over its annexation of Crimea. As a result, the G8 became known as the G7.

"There's no pick-up for that," said Mr. Boehm when asked if there had been any discussion about inviting Russia back into the G7.

A spokesperson for the Russian embassy in Ottawa said Russia sees more value in the G20 than the G7.

"We believe G20 is a more effective and adequate mechanism to face challenges of the modern multi-polar world, unlike G7 which belongs to the past. No vital international issue can be solved without such G20 members like Russia, China, India, Brazil and South Africa," said Kirill Kalinin.

Canada took the helm of the G7 presidency in 2018, which entails hosting the leaders' summit in the Charlevoix region of Quebec this June. Prime Minister Justin Trudeau announced the five themes of the presidency late last year: gender equality; climate change, oceans and clean energy; economic growth that works for everyone; preparing for jobs of the future; and building a more peaceful and secure world.

As a part of the gender equality and women's empowerment theme, the Liberal government is expected to focus on sexual– and reproductive-health rights – a policy area on which Mr. Trudeau and U.S. President Donald Trump have polar opposite views.

Mr. Trudeau – a self-identified feminist – announced last year that Canada would spend $650-million over three years on sexual– and reproductive-health rights worldwide, including contraception, sex education and legal abortion. The pledge came months after Mr. Trump reinstated the so-called global gag rule, prohibiting U.S. funding to international organizations that fail to disavow abortion.

Although Canada won't "tiptoe around anything," Mr. Boehm said he doesn't think abortion will be a prominent discussion point during the G7 presidency.

"I don't see the discussions amongst leaders really focused on one single theme, particularly if it is a theme where it's clear that one or maybe more countries have a certain discomfort in discussing it," he said.

As a deputy minister of Global Affairs, Mr. Boehm oversaw the development of the government's feminist foreign-aid policy last year before taking on the G7 file full-time. He has acted as sherpa for five other G7 leaders' summits, including the 2013 G8 meeting before Russia was suspended.

He said that while Canada and the U.S. "part company" on certain social policy issues, including sexual– and reproductive-health rights, the G7 delegations seem receptive to the focus on gender equality. He said the U.S. is particularly interested in women's economic empowerment.

The group of seven sherpas met in Waterloo, Ont., last week to discuss the gender equality theme. Mr. Boehm said his colleagues welcomed Canada's plan to create a gender equality advisory council, announced by Mr. Trudeau at the World Economic Forum in Davos in January. The council, co-chaired by Melinda Gates and Canadian Ambassador to France Isabelle Hudon, aims to ensure that gender quality and women's empowerment are integrated across all aspects of Canada's presidency.

The G7 will also draw more attention to the differences of opinion between the Trudeau and Trump administrations on climate change. The United States is the only country that has not signed onto the Paris climate accord – an agreement the Trudeau government intends to weave into everything Canada does during its G7 presidency.

Canada also intends to take up the issue of "increasingly difficult climatic events," Mr. Boehm said, especially in light of last year's devastating hurricane season in the Caribbean.

Mr. Boehm said G7 leaders are expected to discuss current geopolitical issues, such as the ongoing nuclear tensions with North Korea, unrest in Iran, and political and economic crisis in Venezuela.

"There are a lot of issues that are discussed and we don't necessarily agree on everything," Mr. Boehm said.

"But the beauty of these meetings is that it really allows for a full and frank exchange amongst leaders."

The leaders' summit will be held at a remote luxury resort in the town of La Malbaie, Que., located on the St. Lawrence river. Mr. Boehm said the RCMP, Canadian Armed Forces and Sûreté du Québec are working together to secure the area for the arrival of world leaders in June. He said organizers will also ensure space is made available for any peaceful protests that may occur during the meeting.

INNOVATION

BANK OF CANADA. February 8, 2018. Inclusive growth can come through innovation, says Senior Deputy Governor Wilkins

Montebello, Quebec - The digital economy holds promise for higher overall living standards in the future, but it could leave some behind, Senior Deputy Governor Carolyn A. Wilkins told an audience of G7 deputies today.

“Technological progress will raise economic growth, although the channels through which it contributed to rising inequality in the past are still forces to be reckoned with,” Senior Deputy Governor Wilkins said at the G7 Symposium on Innovation and Inclusive Growth, which the Bank of Canada is co-hosting. “It doesn’t have to be this way—if we apply fresh thinking in some key areas, we can make policy choices that manage the side effects of innovation, without stifling it.”

In her remarks, Senior Deputy Governor Wilkins spoke about how innovation has disproportionately benefited skilled and knowledge workers, and has led to more precarious jobs for others. It has also intensified market concentration and contributed to the rise of “superstar” firms. These trends have caused many to worry about their future. As income inequality rises in many countries, trust has eroded in areas of international co-operation, such as trade policy and financial sector regulation.

To mitigate the downsides of technological progress, policy-makers should develop and implement better strategies to create a dynamic workforce with the skills to match the jobs. They should also find effective ways to “keep market power in check, particularly the power that comes from control of consumer data,” she said.

And, they will need to manage the operational risks, including cyber risk, that third-party digital service providers can pose for the financial system.

“Policy-makers themselves need to dig into the technology,” Senior Deputy Governor Wilkins said. “The better we understand it, the better policy choices we will make.”

FULL DOCUMENT: http://www.bankofcanada.ca/wp-content/uploads/2018/02/press_080218.pdf

BANK OF CANADA. February 8, 2018. At the Crossroads: Innovation and Inclusive Growth. Remarks. Carolyn A. Wilkins, Senior Deputy Governor. G7 Symposium on Innovation and Inclusive Growth. Montebello, Quebec

Ooh, standin' at the crossroad, tried to flag a ride

Ooh-ee, I tried to flag a ride

Didn't nobody seem to know me, babe, everybody pass me by

“Cross Road Blues” by Robert Johnson, 1936

Introduction

Welcome to Canada—and to a snowy Montebello. This day is dedicated to a discussion about innovation and inclusive growth. It is great to have so many experts with us today. Thank you.

We know that technological advances are key to improving an economy’s potential to grow. They have raised living standards in G7 countries and across the globe, and have helped lift more than one billion people around the world out of extreme poverty since the Second World War.1 The current wave of innovation—digitalization and automation—promises to raise trend growth in the economy even more.

However, as we are discussing today, technological advances can leave people behind. It is perhaps only in the last decade or so that mainstream macroeconomists have sharpened their focus on how income distribution may affect long-term growth and macro dynamics. There is compelling evidence that innovation has been an important reason behind rising income inequality in advanced economies in recent decades.2 Research also finds that rising inequality can result in weaker and less-stable macroeconomic outcomes. This places us, as policy-makers, at a crossroads. Do we choose to stay on the same road and repeat the past? Or do we apply fresh thinking to policy and choose a new road where innovation delivers even stronger and more-inclusive growth?

This is the challenge that the G7 countries have set for themselves for 2018. Canada is proud to lead the G7’s work this year to better understand the issues so that we can set priorities for policy.

The context we are working in matters. The global economy is enjoying the most robust and synchronous growth we’ve seen in close to a decade. Businesses and consumers are feeling more confident. Yet, we know that many people in advanced economies are also anxious about what digitalization and automation might bring. They are worried about being left behind. For workers in some industries, such as manufacturing, this may seem like old news. For drivers, lawyers, investment advisors and many others, it’s new. By some estimates, close to half of the tasks done by workers could already be automated using current technology.3

This anxiety has real costs. It has eroded trust in the framework for international co-operation in areas that have served us well in the past: trade policy and financial sector regulation are good examples.

As a way of spurring discussion today, I will cover three points:

1. Technological progress will raise economic growth, although the channels through which it contributed to rising inequality in the past are still forces to be reckoned with.
2. It doesn’t have to be this way—if we apply fresh thinking in some key areas, we can make policy choices that manage the side effects of innovation, without stifling it.
3. Policy-makers themselves need to dig into the technology—the better we understand it and the underlying business incentives, the better policy choices we will make.

The past provides insight for the future

Technology has transformed our daily lives at an astonishing pace. Google is not yet 20 years old. Who knew, even 5 years ago, that some people would be making a small fortune as professional video-game players? And, while parents have been worrying about how much screen time their kids should have, a growing number of professions—from firefighters to surgeons—have embraced the “gamification” trend, integrating video exercises into their training programs.

Let’s remember that per capita output has increased around five times in G7 countries since the early 1950s. Our average life expectancy during this period has risen from 67 to 81 years.4 Not bad. Yet, recent voting behaviour and public discourse make it clear that many people question what is in it for them and their families when it comes to technology and globalization. A study here at home showed that the more pessimistic people were about technology, the more worried they were about their own prospects.5

Many of us would agree that the data point to a concerning trend. The share of income going to labour has been declining in many economies, including the G7.6 The share of income going to the top 1 per cent has nearly doubled since 1980 in some of our countries, amounting now to as much as 20 per cent.7

If we want to find a better road forward, identifying the underlying issues is the right place to start. One question is, what is it exactly about innovation—and, to a lesser extent, globalization—that opens the door to these outcomes? There’s a lot of good research, including by people in this room, pointing to many possible forces at play. I think three stand out:

• Technology has benefited skilled workers more than other workers because it has made them more productive. People in more-routine jobs have tended to be replaced entirely. Digitalization will likely reinforce this dynamic. Machine learning and other technologies mean that tasks requiring routine cognitive skills, such as reading medical scans or preparing legal and investment advice, can now be automated too. That said, I do not share the dystopian view of a world without workers. People will still have an absolute advantage in tasks that require common sense and a human touch. And they will also find employment in areas where they have a comparative advantage. The question is not so much whether there will be jobs for people, but, rather, how well they will pay, and what the working arrangements will be.8
• Some types of technology lead to market concentration and the rise of “superstar” firms. These firms tend to have fewer employees than conventional companies and can earn impressive monopoly profits.9 Market concentration happens quite naturally in industries with prominent network effects and other scale economies. There is nothing new in that. Phone companies are traditional examples, and social media companies and online marketplaces are more-modern examples. What is new is that the “winner-takes-all” effect is magnified in the digital economy because user data have become another source of monopoly power. Data from a large network create a formidable barrier to entry. Another barrier to entry can come from firms using their position as gatekeepers to crucial online services to impede their competitors. And, it’s easier to avoid taxes when production is not tied to a large factory with a fixed physical location.10
• Technology has helped to separate work into discrete tasks, allowing businesses to make more use of short-term, temporary jobs to maintain flexibility or respond to changing needs. Workers in these types of jobs tend to have less bargaining power than regular employees. They usually earn lower incomes, get fewer benefits and have less job security.11 This may be one reason why we have seen relatively weak wage growth in Canada and other G7 countries despite improving labour market conditions. With the current wave of innovation, the “gig economy” is likely to keep growing.12

It doesn’t have to be this way

We do not have to be hostage to these forces. That’s my second point. Canada’s priority as G7 host is to find ways to embrace technological progress while handling the challenges of digitalization and automation.

Adequate income and equality of opportunity are critical to handling the challenges of the digital economy. Adequate financial incentives to innovate and take ideas to market are critical to embracing technological progress. Trade-offs need to be made between these two objectives, and there are different views about what “adequate” means in practice. It is the job of governments to make these important choices, not central banks.

In any case, central bankers do not have the mandate or the tools to directly influence the pace of technological progress or the distribution of income. We do have a stake in supporting strong and sustainable growth, and that is why we play an important advisory role and help shed light on some of the trade-offs at play.

There are many policy areas to consider. Let me talk about a couple that I think should be priorities: developing skilled workers through inclusion, and keeping market power in check.

Developing a skilled workforce

Developing a skilled workforce is about education, training and continuous learning. It’s also about reducing the barriers to participation in the workforce.

We know that the fields of science, technology, engineering and mathematics (STEM) are an important part of the equation. Businesses in Canada tell us that it is increasingly difficult to find the right people in these areas, and I imagine this is the case globally. The obvious implication is that we need to find better ways to make these fields of study more accessible and interesting to students, starting at an early age. Improving our track record in terms of gender balance would add to the pool of STEM skills, but this will require some new ideas.13

We also know that on-the-job training and reskilling will become even more important because of the accelerating pace of change. Even a recent graduate may not have the exact skills needed to be a perfect match for the job. An increasing number of mid-career employees may find that their skills have become obsolete and that retraining is needed. As Governor Stephen S. Poloz mentioned recently, we will need more engagement from businesses to tackle this issue. They are best placed to know their own people and their own business needs in real time.14

The question is, how can public policy and academic institutions encourage and complement any new efforts by businesses? Each of our countries has interesting approaches to build on. Germany’s apprenticeship program is well known and established. It has been successful in giving students valuable vocational training while also meeting business needs.15 The Creative Destruction Lab in Canada is a lesser-known example in the tech field of universities working with students and businesses to bring the best ideas in science, machine learning and artificial intelligence to market.16

Let’s not forget that technology itself can be used to better match people with jobs, and to attract people into the labour force and keep them there. This will strengthen sustainable economic growth while supporting inclusiveness at the same time. Finding ways to include more women in the labour force, and empower them, is a priority for the G7 this year.

Another promising avenue to explore is how to adopt technologies that remove barriers for people with disabilities. Right now, just over 10 per cent of the labour force across the G7 consists of persons with disabilities. If their employment rate were raised to the same level as that for the rest of the labour force, we could add up to 12 million workers.17 Chat and email functions on our phones have already transformed workplace accessibility for the hearing-impaired. Entrepreneurs in Canada and elsewhere are developing technology to help people who are visually impaired see far-away details. Soon, driverless cars will help make people with a range of disabilities more mobile. As governments work to nurture innovative tech start-ups, they could emphasize technologies to enhance workplace and social inclusion.

Keeping market power in check

We are not going to get the full benefits of innovation if we leave market power unchecked.

I’m focusing on the tech industry because the discussion is about digitalization, but some of my points could apply elsewhere. The five biggest global technology companies have a market capitalization of about US$3.5 trillion. That’s almost one-fifth of the size of the US economy. The tech industry is making a valuable contribution to our economic performance. That said, the size and market dominance of some of the tech firms raise many of the usual concerns about the potential effects of monopoly power on prices and competition.

A new source of market dominance relates to data. Access to and control of user data could make some firms virtually unassailable.18 They can easily drive out competition by combining their scale with innovative use of data to anticipate and meet evolving customer needs, at a lower price (and sometimes for free). This has a couple of undesirable consequences. First, firms operating in less-competitive environments innovate less; we need the dynamism from firm entry and the contestability of markets to raise the trend line on growth as much as possible.19 Second, the biggest firms may well return to monopoly pricing in the long run. These consequences get in the way of stronger, more-inclusive growth.

That is why we should prioritize the modernization of anti-trust and competition policy, as well as the relevant legal frameworks. There are many unanswered questions, especially about how best to remove barriers to entry. If user data are the primary source of monopoly rents in the digital age, how should we regulate who owns these data and how they are shared? Some interesting ideas include giving users control of their data—perhaps even making firms pay users for their data—and regulating tech platforms as utilities.20 Intellectual property rights present similar issues. Patents are a key way to protect the return on valuable research and development. Given that they create barriers to entry and that the pace of technological change is accelerating, do we need to rethink our approach? It is good to see authorities across the G7 countries looking at all these issues.21 International collaboration is necessary because of the ubiquity and cross-border nature of many digital services.

New technologies pose additional regulatory and legal questions. For example, the sheer complexity of algorithms used for data analytics makes them difficult to interpret, audit and govern. In some cases, algorithmic pricing could lead to tacit collusion—price fixing without the quiet glass of scotch between commercial rivals. Even if it were identified, tacit collusion would not meet some current legal definitions of collusion.22 Legal clarity is also required in many jurisdictions with respect to data privacy, information security and consumer rights.

We also need to determine how best to manage the risks that concentration in digital services can pose for the financial system. Top of mind for me are the growing operational risks (including cyber risks) from a very concentrated set of third-party service providers that our financial institutions use—cloud services, data aggregators and related analytics. How concerned should we be about these third parties—telecommunications companies and tech companies—given that they typically fall outside the current regulatory perimeter? This is another question that would benefit from concerted attention at the international level. Good progress is already being made on issues related to international taxation to avoid base erosion and profit shifting.23

Policy-makers need to dig in

This brings me to my final point. Policy-makers need to dig in and be proactive. Good policy decisions can only come from a clear understanding of the new technologies and the related business incentives.

Let me give some examples from my own backyard.

At the Bank of Canada, we are focused on understanding the many ways in which digitalization and automation are affecting the economy and the financial system. For example, as non-traditional pricing models become more prevalent, we are rethinking how best to measure inflation. We are looking at how digitalization might be affecting labour markets and the transmission of monetary policy, and how a global digital marketplace for goods and services changes the ways in which domestic inflation pressures are generated. Our researchers are also studying emerging technologies in financial services to understand how the ecosystem is evolving, and to spot new risks as they emerge.

The workforce needs to have the right skills for the digital economy. So do public policy-makers. The Bank of Canada has several irons in the fire that take a learning-by-doing approach; one example is the work staff are undertaking to apply machine learning and techniques such as distant reading to analyze vast amounts of unstructured information. The goals are to increase the range and depth of skills of our staff, improve our projections and reduce the uncertainty we face when making policy decisions. We are also working on how we could use machine-learning applications to increase efficiencies and manage operational risks in all parts of our business. All the institutions represented in this room are doing interesting work in this area.

Public sector institutions need to innovate in their business cultures. We should be open to more-diverse perspectives and expertise, work more often with private sector experts and take manageable risks.24 The Bank of England and the Monetary Authority of Singapore are leaders in exploring fintech with the private sector.25 The Bank of Canada also has several experiments under way. One is in partnership with the TMX Group and Payments Canada. It uses distributed ledger technology to build a delivery versus payment settlement system for securities.26 Our experience with these types of partnerships so far is that we can quickly harness deep subject matter and business expertise, define realistic yet ambitious objectives and make faster progress than if we were working alone.

It’s good to see that G7 central banks, among others, have already been comparing notes on our work in these areas.

Conclusion

It is time to conclude. I do not need to convince you that the digital economy is a promising way to raise trend growth and overall living standards. We cannot be satisfied, though, if some of the potential gains are left on the table, because many people will be left behind and important markets will be virtually uncontestable.

It does not have to be this way if we choose a road for policy that effectively manages the downsides of innovation without stifling it. Of all the areas where we could develop and implement a better strategy, here are my top three: (i) develop a dynamic workforce with the skills to match the jobs, and encourage more labour force participation; (ii) keep market power in check, particularly the power that comes from control of consumer data, to encourage competition and limit monopoly profits; and (iii) manage the growing operational risks associated with the digital services that are provided by a concentrated set of firms to systemically important financial institutions.

We will need to judge wisely when it is best to use public policy tools to manage risks and when to let private enterprise work its magic. We’ll need to work together and in the field to inform these judgments. I am confident that, together, the G7 will show leadership and will build with the private sector a shared sense of responsibility for the future.

I would like to thank Gurnain K. Pasricha, Lori Rennison and Eric Santor for their help in preparing this speech.

NOTES 

1. The data for this calculation are taken from M. Roser and E. Ortiz-Ospina, Global Extreme Poverty (2018). Poverty is defined as a consumption level below Int$1.90 per day, adjusting for price differences and inflation. [←]
2. See International Monetary Fund, World Economic Outlook, Chapter 3, “Understanding the Downward Trend in Labor Income Shares,” April 2017; and G. Michaels, A. Natraj and J. Van Reenen, “Has ICT Polarized Skill Demand? Evidence from Eleven Countries over Twenty-Five Years,” Review of Economics and Statistics 96, no. 1 (March 2014): 60–77. [←]
3. According to McKinsey & Company, 46 per cent of tasks could be automated in the United States using current technology. In Canada, the share is slightly lower (42 per cent). See C. Lamb, “The Talented Mr. Robot: The Impact of Automation on Canada’s Workforce,” Brookfield Institute, June 2016. [←]
4. Data were taken from the Penn World Table and the UN World Population Prospects: The 2017 Revision. Between 1950–55 and 2010–15, life expectancy at birth increased from 67 years to 81 years, calculated as an average across the G7 countries. [←]
5. Ipsos, “Ipsos Canada Next,” 2017. [←]
6. T. Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press, 2014); The World Inequality Lab, World Inequality Report 2018. Countries included are the United States, Canada and 28 European countries. [←]
7. The richest 1 per cent of the population in the G7 countries took home between 7 and 11 per cent of national pre-tax income in 1980. That share has grown to between 9 and 20 per cent in recent years. Data were taken from the World Wealth and Income Database. [←]
8. See L. G. Kletzer, “The Question with AI Isn’t Whether We’ll Lose Our Jobs—It’s How Much We’ll Get Paid,” Harvard Business Review, January 31, 2018. [←]
9. See D. Autor, D. Dorn, L. F. Katz, C. Patterson and J. Van Reenen, “The Fall of the Labor Share and the Rise of Superstar Firms,” National Bureau of Economic Research Working Paper No. 23396 (May 2017); and S. Barkai, “Declining Labor and Capital Shares,” Job Market Paper, University of Chicago (2017). [←]
10. See J. De Loecker and J. Eeckhout, “The Rise of Market Power and the Macroeconomic Implications,” draft working paper, August 24, 2017. [←]
11. See A. Haldane, “Work, Wages and Monetary Policy” (speech at the National Science and Media Museum, Bradford, UK, June 21, 2017). [←]
12. Monopsonies are also increasingly prevalent in labour markets in the United States, which may be driving down wage growth and contributing to the decline in labour share. See J. Azar, I. E. Marinescu and M. Steinbaum, “Labor Market Concentration,” SSRN (December 15, 2017). [←]
13. See A. M. Munoz-Boudet, “STEM Fields Still Have a Gender Imbalance. Here's What We Can Do About It,” World Economic Forum, March 16, 2017. [←]
14. See S. S. Poloz, “Three Things Keeping Me Awake at Night” (speech to the Canadian Club Toronto, Toronto, Ontario, December 14, 2017). [←]
15. More information on Germany’s program is available on its Federal Ministry for Economic Affairs and Energy website. [←]
16. The Rotman School of Management launched the Creative Destruction Lab at the University of Toronto six years ago. The lab has since expanded to Vancouver in collaboration with the University of British Columbia’s Sauder School of Business, and elsewhere across Canada. [←]
17. This calculation excludes Japan. Data were taken from EuroStat for Germany, France, Italy and the United Kingdom (2011); from the Bureau of Labor Statistics for the United States (2016); and from Statistics Canada for Canada (2012). [←]
18. P. Aghion, N. Bloom, R. Blundell, R. Griffith and P. Howitt, “Competition and Innovation: An Inverted-U Relationship,” The Quarterly Journal of Economics 120, no. 2 (May 2005): 701–728. [←]
19. One striking example of this issue is that concentration has increased in three-quarters of US industrial sectors since the early 1970s. See S. Leduc, “Seeking Gazelles in Polar Bear Country” (speech to the Sherbrooke Chamber of Commerce, Sherbrooke, Quebec, October 3, 2017). [←]
20. I. A. Ibarra, L. Goff, D. J. Hernández, J. Lanier and E. G. Weyl, “Should We Treat Data as Labor? Moving Beyond ‘Free,’” American Economic Association Papers & Proceedings 1, no. 1 (December 27, 2017), forthcoming. [←]
21. For example, see the Japan Fair Trade Commission’s Competition Policy Research Center, Report of Study Group on Data and Competition Policy, June 6, 2017; Competition Bureau, Big Data and Innovation: Implications for Competition Policy in Canada, September 2017; and Autorité de la concurrence and Bundeskartellamt, Competition Law and Data, May 10, 2016. [←]
22. See “Price-Bots Can Collude Against Consumers,” The Economist, May 6, 2017. [←]
23. The Group of 20 and the Organisation for Economic Co-operation and Development have made some progress with an initiative known as BEPS (base erosion and profit shifting). The idea behind BEPS is to make it harder for global firms to shift profits to other countries and keep them hidden from their home tax authorities. This makes sense for fairness considerations and for ensuring that governments have enough resources for effective social programs. [←]
24. The Bank of Canada’s Risk Appetite Statement can be found on page 51 of the Bank’s 2015 Annual Report. [←]
25. The Bank of England’s Fintech accelerator program brings central bank and private sector experts together to create proofs of concept that could be useful in central banking and demonstrate solutions for real-world problems. The Monetary Authority of Singapore’s FinTech Regulatory Sandbox gives financial institutions and fintech firms an opportunity to experiment with new financial products without having to comply with all current legal and regulatory requirements. The MAS and the Bank of Canada are working together on a proof of concept for cross-border payments using blockchain technology. [←]
26. More information on the Bank of Canada’s research and experiments is available on its website. [←]

FULL DOCUMENT: http://www.bankofcanada.ca/wp-content/uploads/2018/02/remarks-080218.pdf

INTERNATIONAL TRADE

Global Affairs Canada. February 12, 2018. NOMINATION. Minister Champagne announces new chairperson of Canadian Commercial Corporation Board

Ottawa, Ontario - The Honourable François-Philippe Champagne, Minister of International Trade, today announced the appointment of Doug Harrison as chairperson of the Canadian Commercial Corporation’s (CCC’s) Board of Directors. Mr. Harrison is an experienced leader in international trade throughout Canada, Europe and Asia and shares a strong commitment in creating more opportunities for Canadians to grow their prosperity at home by their access to overseas markets.

The appointment of Doug Harrison as the new Chairperson of the CCC underscores Canada’s ambitious trade diversification agenda with an emphasis on new export markets across more sectors from coast to coast. The CCC is committed to supporting the growth of international trade, moving away from a concentration in defence to a diversification agenda that more fully reflects the depth and breadth of Canada’s economy.  The new chairperson will be instrumental in ensuring the organization reflects the interests of all Canadian exporters, business owners and entrepreneurs.

Mr. Harrison holds a Master of Business Administration degree from Heriot-Watt University in Scotland, is a certified management accountant and holds an Institute of Corporate Directors qualification. Mr. Harrison serves on the board of directors of Superior Plus Corp. and the Technical Standards and Safety Authority. He is also a former board member of the Conference Board of Canada and the Hamilton Utilities Corporation and a former chair of Mohawk College’s Board of Governors. He is currently President and CEO of VersaCold, an international transportation and logistics company.

The CCC appointment is the result of an open, transparent and merit-based selection process developed to attract high-quality candidates while reflecting gender parity and Canada’s diversity in Governor-in-Council appointments.

Quotes

“Doug Harrison’s proven leadership and management experience will be tremendous assets to CCC’s mandate to provide Canadian exporters and investors with the tools and support they need to diversify and expand their presence in international markets. As chair, his role in growing CCC’s services for Canadian companies abroad has a direct benefit on job creation for the middle class here at home”.

- François-Philippe Champagne, Minister of International Trade

Quick Facts

• Founded in 1946, the CCC is a crown corporation that operates on commercial principles and reports to Parliament through the Minister of International Trade.
• The CCC is Canada’s government-to-government contracting organization. The CCC supports the growth of international trade by helping Canadian exporters sell goods and services to foreign governments.

Backgrounder - Canadian Commercial Corporation

The Canadian Commercial Corporation (CCC) is a crown corporation under the international trade portfolio supporting Canadian exporters in markets abroad. The minister of international trade is accountable to Parliament for the governance and performance of the CCC.

The chairperson provides strategic and corporate planning and direction, implements modern corporate governance principles and best practices, and serves as CCC’s liaison with senior government officials.

The appointment of the CCC chairperson was a result of the Government of Canada’s new recruitment approach for Governor-in-Council appointments. This new approach ensures an open, transparent and merit-based process that attracts high-quality candidates while reflecting gender parity and Canada’s diversity.

Canadian Commercial Corporation: http://www.ccc.ca/

Canadian Intellectual Property Office. February 10, 2018. Launch of public consultations on amendments to the Trade-marks Regulations

Gatineau, QC – The Government of Canada is conducting public consultations on proposed amendments to the Trade-marks Regulations through the Canada Gazette, Part I. The period for public comment  is 30 days, between February 10, 2018 and March 11, 2018.

The primary objective of amending the Regulations is to allow Canada to accede to the Singapore Treaty, the Madrid Protocol and the Nice Agreement. This will modernize the trademark regime and enable Canada to keep pace with leading international standards and benchmarks. A second objective is to modernize Canada’s trademark regime by updating, clarifying, codifying and improving aspects of the regulatory framework. Together, these objectives will better serve clients, lower costs and improve the ease of doing business.

The proposed regulatory amendments are aligned with the Government’s plan to develop a new intellectual property (IP) strategy to help ensure that Canada’s IP regime is modern, robust and supports Canadian innovation in the 21st century. In addition to amending the Trade-marks Regulations, the Canadian Intellectual Property Office (CIPO) is working to amend the industrial design and patent frameworks so that Canada can join the Hague Agreement and the Patent Law Treaty.

We encourage Canadians to provide comments on the draft  Trade-marks Regulations, as we finalize the Regulations for publication in Canada Gazette, Part II.

Quotes

“A strong IP system is key to encouraging innovation, attracting investment, and helping businesses succeed in the global marketplace. We encourage Canadians to provide their comments on the proposed amendments to the Trade-marks Regulations.”

– Johanne Bélisle, CIPO’s Commissioner of Patents, Registrar of Trade-marks and Chief Executive Officer

Quick Facts

• Joining the treaties provides Canadian businesses with many benefits. For instance, the Madrid Protocol grants countries access to an international registration system administered by the World Intellectual Property Organization, which would allow Canadian businesses to apply for trademark protection in up to 100 jurisdictions through one application and one set of fees.
• Currently, Canadian businesses wishing to protect their trademarks in more than one country must file a separate application for each jurisdiction, which can require translating their application into multiple languages and paying fees in multiple currencies.
• Participation in these international agreements will also better align Canada’s IP system with our major international trading partners, making it easier for innovative Canadian businesses to protect their IP at home and abroad. It will also help to make Canada a more attractive destination for foreign investments and encourage foreign companies to bring innovations to market more quickly, to the benefit of Canadian consumers.

Canada Gazette: http://www.gazette.gc.ca/rp-pr/p1/2018/2018-02-10/html/reg3-eng.html
Public Consultations on the Proposed Trade-marks Regulations: http://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr04256.html

Backgrounder

The Government of Canada is moving to modernize Canada’s intellectual property (IP) regime and join five international IP treaties: the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (the Madrid Protocol), the Singapore Treaty on the Law of Trademarks (the Singapore Treaty) and the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks (the Nice Agreement) for trademarks, the Hague Agreement Concerning the International Registration of Industrial Designs (the Hague Agreement) for industrial designs, and the Patent Law Treaty for patents.

Canada’s accession to these treaties will modernize the trademark regime and enable Canada to keep pace with leading international standards and benchmarks. In turn, a modernized trademark regime will help Canadian businesses stay competitive in international markets by giving them an efficient means of protecting their IP in various jurisdictions around the world. A regime that is aligned with other jurisdictions will also lower the cost and increase the ease of doing business in Canada to the benefit of both Canadian businesses and those looking to invest in Canadian markets.

In February 2017, the Canadian Intellectual Property Office (CIPO) conducted technical reviews of the draft regulatory amendments with small groups of expert stakeholders. Feedback received during these sessions was incorporated prior to broader public consultations that were held from June 19 to July 21, 2017. To the extent possible, CIPO captured additional changes in the draft Trade-marks Regulations to address comments raised by stakeholders. In addition, CIPO plans to address other comments via practice notices and other guidance documents.

The proposed Regulations are published in Canada Gazette, Part I, for a 30-day period for public comment between February 10, 2018 and March 11, 2018. We encourage Canadians to provide comments on the draft Regulations  as we finalize the Regulations for publication in Canada Gazette, Part II.

Benefits of acceding to the Madrid Protocol, the Singapore Treaty and the Nice Agreement

The Madrid Protocol governs an international trademark registration system that allows applicants to seek protection in multiple countries through a single application, filed through the International Bureau at the World Intellectual Property Organization.

The Singapore Treaty is a trademark law treaty that simplifies and standardizes the administrative requirements and procedures of the trademark offices of member countries; however, it does not cover elements of substantive trademark law (e.g. whether a trademark distinguishes the owner’s goods or services from those of others).

The Nice Agreement governs a standardized classification system for goods and services applied for the registration of trademarks (the Nice Classification). Both the Singapore Treaty and Madrid Protocol require use of the Nice Classification.

Modernizing the domestic trademark regime

The proposed Regulations would also help to modernize Canada's domestic trademark regime by updating, clarifying, codifying and improving aspects of the regulatory framework, including:

• reducing filing costs for approximately 50% of applicants
• simplifying the requirements for applying
• increasing the types of communications with the office accepted electronically
• increasing flexibility to amend applications to correct small errors
• broadening the scope of business for trademark agents

These changes simplify certain requirements, reduce administrative burden, clarify communication procedures and align the different types of administrative proceedings before the Trademarks Opposition Board to better serve the needs of trademark owners.

AGRICULTURE

StatCan. 2018-02-12. Fruit and vegetable production, 2017

• Value of fruits: $1.0 billion, 2017, -4.6% decrease (annual change)
• Source(s): CANSIM table 001-0009: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=0010009&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
• Value of vegetables: $1.2 billion, 2017, 2.0% increase (annual change) 
• Source(s): CANSIM table 001-0013: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=0010013&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=

The farm-gate value of Canadian fruit and vegetable products decreased 1.2% from 2016 to $2.3 billion in 2017. This decrease was driven by the decline in the value of fruits due to unfavourable weather conditions and price decreases that affected some fruit varieties.

Total cultivated area for fruit was 132 685 hectares, while vegetable cultivated areas totalled 103 669 hectares in 2017. Ontario, Quebec and British Columbia combined accounted for 89.9% of total vegetable cultivated area, while making up about two-thirds of total fruit cultivated area.

Vegetables

The value of vegetables rose 2.0% to $1.2 billion in 2017. Carrots, tomatoes, dry onions, lettuce, sweet corn, cabbages and broccoli accounted for over half of the total value of field-grown vegetables in Canada.

Carrot sales totalled $129.3 million in 2017, followed by tomatoes ($110.1 million), dry onions ($91.4 million), lettuce ($78.4 million), sweet corn ($75.9 million), cabbages ($72.5 million) and broccoli ($72 million). Broccoli had the largest price increase, rising 20.4% in 2017, with an average farm price of $1,697 per tonne.

Yields for some vegetables were up in 2017. Dry onion total production yield increased 9.6% to 44.5 tonnes per hectare while the tomato yield rose 7.4% to 78.2 tonnes per hectare.

Chart 1: Fruit and vegetable farm-gate value

Fruits

The total value of fruits fell 4.6% to $1 billion in 2017, largely due to a drop in cranberry and blueberry value.

Cranberry value fell 27.2% to $114.9 million, reflecting a production decline of 30.3% to 125 568 tonnes in 2017. This decrease in production was largely due to a drop in crop size in Quebec. Favourable weather conditions in 2016 drove Quebec production to a record 125 143 tonnes, before it fell to 74 284 tonnes in 2017.

The bumper crop in 2016 was still negatively affecting low bush (wild) and high bush blueberry prices in 2017. The value of wild blueberries was down 48.0% to $47.4 million, while the value of high bush blueberries decreased 4.5% to $155.9 million. High bush marketed blueberry production was highly concentrated in British Columbia (94.6%), while wild blueberry production was mainly in Quebec and the Maritimes.

Total apple production, which accounted for about one-fifth of the total fruit value in 2017, decreased by 15.4% to 345 568 tonnes. This decline was driven by a 31.8% drop in Ontario marketed production volume. Colder spring and early summer conditions in Ontario affected the 2017 season. The decrease in production was partially offset by an average Canadian price increase of 13.9%.

Grapes accounted for 15.3% of total fruits value in Canada in 2017. Total grape value edged down 1.9% to $158.8 million. Ontario accounted for the largest share of the total grape value (53.8%), followed by British Columbia (39.8%).

Strawberry farm-gate value increased 18.1% to $128.2 million due to an increase in production and price. This was the fifth consecutive year with an increase in strawberry production. The growing use of day neutral strawberry plants with June bearing plants and the use of tunnels are contributing to this increase.

Sweet cherries (+46.1%) recorded the largest increase in value over 2016. Sweet cherries are produced mainly in British Columbia, where marketed production rose by 48.0% compared with a year earlier.

The value of peaches increased by 21.2% in 2017. Peaches are largely produced in Ontario, where there was a 19.8% increase in marketed production compared with a year earlier.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180212/dq180212a-eng.pdf

INFRASTRUCTURE

The Globe and Mail. 12 Feb 2018. Infrastructure funds benefit federal Liberal ridings most. Government defends spending, saying bulk of money used for public transit and Liberals hold most urban seats
BILL CURRY, OTTAWA
TOM CARDOSO, TORONTO

Liberal ridings are receiving a disproportionate share of federal infrastructure money, according to a Globe and Mail analysis, but the government says this is primarily because they are spending billions on public transit and the Liberals hold the most urban seats.

Infrastructure Canada recently posted a detailed interactive map showing where the first $14.4-billion in federal funds have been spread across the country since the Liberal government was elected in 2015.

The map features nearly 6,000 markers showing the approximate location of federally funded infrastructure projects.

The map does not include riding boundaries, but The Globe conducted an analysis of how those projects are distributed across federal ridings.

While the Liberals currently hold 54 per cent of the seats in the House of Commons, the map shows Liberal ridings have benefited from 64 per cent of the infrastructure cash announced to date. In contrast, Conservative ridings have received 21 per cent of the federal funds, even though the party holds 29 per cent of the seats.

Ridings held by the NDP received 11.9 per cent of the federal funding, which is just below the 13-per-cent share that could be expected based on the percentage of ridings held by the party.

The analysis provides a general sense of infrastructure spending trends, but the way the government presents the data creates challenges in reaching firm conclusions. The map attributes all projects to a single location, even though larger projects such as public transit systems or waste-water treatment upgrades will inevitably benefit more ridings than just the one where the marker is located.

For that reason, Liberal officials strongly dispute any conclusion that suggests the government is favouring Liberal ridings. “At no point in the review process – either at the ministerial or minister’s office level – does a project get assessed based on which party holds the seat in which the project resides,” said Kate Monfette, a spokesperson for federal Infrastructure Minister Amarjeet Sohi.

Ms. Monfette noted that public-transit projects – which are the largest component of federal infrastructure spending – will inevitably benefit Liberal ridings. “By its nature, public transit requires density, which means the majority of public-transit investments will take place within cities, where we find a significant number of Liberal seats,” she said.

Ms. Monfette said projects are selected by municipalities and the provinces and Ottawa’s role is simply to ensure they meet the criteria. She said the minister has never rejected a project that was deemed to have met federal guidelines. “We are proud of the investments we have made to date and that these were made on nothing other than merit and need as dictated by those partners,” she said.

Former parliamentary budget officer Kevin Page, who continues to monitor federal spending as president and chief executive officer of the University of Ottawa’s Institute of Fiscal Studies and Democracy, said there is a long history of governments using infrastructure spending for political gain and that such activity should be closely monitored.

Mr. Page said Ottawa has not set out a clear and objective ranking of Canada’s most pressing infrastructure needs, which then leads to questions over how certain projects are selected over others.

“Absolutely, there’s politics all over this in how projects get selected,” he said, speaking generally of how governments promote their infrastructure spending. “If we really want to open this up a little bit more and we want to depoliticize some of the decisions, we need to do the hard work of needs assessments.”

The analysis of the government’s data provides a strong contrast when it comes to ridings represented by a cabinet minister. Those ridings are shown to have received $86.8-million, on average, in federal infrastructure funding. Ridings held by backbench Liberal MPs have received $50.7-million on average, while opposition-held ridings have received an average of $35.1-million in federal funds.

At that more detailed level, the findings are particularly affected by the fact that some large citywide projects are listed on the map as being located in a minister’s riding.

Another way to examine the numbers is by adjusting federal spending for population, since Liberals hold some of the most populous ridings in Canada, as Ms. Monfette noted. Combined, Liberal ridings received $565 a person, while ridings held by all other parties received $330 a person. An imbalance remains even when all public transit funding of more than $100-million is removed in an effort to address the distorting effects of large projects that benefit more than one riding.

In that scenario, Liberal ridings received $399 per capita while opposition-held ridings received $292.

Removing public transit spending above $100-million also shows the Liberals received 59 per cent of federal funding while holding 54 per cent of seats.

To date, most of the projects that dot the government’s map are relatively small. Examples include $25,000 toward upgrades of the Sheringham Point Lighthouse on Vancouver Island and $200,000 to upgrade a reserved bus lane at the University of Sherbrooke.

When the Conservatives were in office, The Globe found similar trends in which ridings held by the governing party benefited from more infrastructure money than would be expected by party standings in the House.

The $14.4-billion in spending is spread across five categories. Public transit is the largest, representing $5.6-billion of that amount, while rural and Northern communities is the smallest, at $58.6-million. The other categories are trade and transportation, green and social infrastructure.

“The Liberal infrastructure agenda has always discriminated against suburban and rural Canadians and this data suggests that that bias continues,” Conservative finance critic Pierre Poilievre said. “All taxpayers contribute to these programs and therefore all of them should have equal benefit from them, even if they don’t vote Liberal.”

Infrastructure announcements under the Liberal government come from long-running programs that were already in place when the party took office in 2015, as well as from new spending under what the government called its first phase of infrastructure spending, worth $11.9-billion over five years.

Mr. Sohi, the Infrastructure Minister, is currently in negotiations with the provinces and territories to strike bilateral deals outlining the rules for a promised second phase of spending – worth $33-billion – over the next decade.



The second phase will primarily focus on large public-transit and green infrastructure projects. Separate federal funding has also been announced under the umbrella of social infrastructure for projects such as social housing.

THE GLOBE AND MAIL. FEBRUARY 12, 2018. Ottawa orders national-security review of Aecon sale to Chinese state-owned firm
ROBERT FIFE AND STEVEN CHASE, OTTAWA BUREAU CHIEF

OTTAWA - The Trudeau cabinet has ordered a formal national-security review of the $1.5-billion sale of Canadian infrastructure firm Aecon Group Inc. to the giant Chinese state-owned construction and engineering enterprise.

Aecon released a statement Monday morning saying that the Toronto-based firm and China Communications Construction Co. (CCCC) have extended the closing of the transaction until March 30 to allow for a formal national-security review to take place.

Aecon said in its Monday statement that the "federal Cabinet has, under section 25.3 of the Investment Canada Act, ordered a continuation of the national-security review of the proposed acquisition of Aecon by CCCI."

Federal Innovation Minister Navdeep Bains, who oversees Investment Canada, has refused to answer pointed questions in the House of Commons on whether the proposed takeover is going through a preliminary screening for a formal national-security review.

All foreign investments are subject to some degree of national security screening. The Aecon deal has been under scrutiny since last fall by Ottawa on whether it constitutes a "net benefit" for Canada.

The action the Trudeau cabinet has taken indicates there is lingering concern about the takeover. As the Investment Canada Act itself says, an order such as this is issued "if the minister has reasonable grounds to believe that an investment by a non-Canadian could be injurious to national security."

However, Mr. Bains's office issued a statement on Monday confirming that a national-security review will be undertaken and maintained that the transaction will be subject to vigorous scrutiny.

"This is the next step in this specific case. We are following the advice provided to us by the national-security agencies," said Mr. Bains's press secretary, Karl Sasseville. "We follow the advice of those who actually have the information and intelligence necessary to make these determinations: our national-security agencies. We will continue to do our diligence to review the potential national-security ‎implications, as we have been doing since day one. We never have and we never will compromise on national security."

A national-security review – conducted by Public Safety and Canada's security and intelligence services – focuses on the nature of the business to be acquired, the parties involved in the transaction and potential third-party influence. It considers the potential effects on defence, technology and critical infrastructure.

The government may deny the acquisition or set terms or conditions on the investment. Last year, there were five formal national-security reviews out of more than 700 foreign takeovers.

It is not known how long the formal security review will take, but there is growing opposition to the Chinese takeover from within the construction industry and from the federal Conservative Party. Aecon and CCCC were to have closed the transaction on Feb. 23.

Oliver Borgers, a lawyer with McCarthy Tétrault LLP in Toronto, said this extension of the review buys the government more time to scrutinize the deal.

"This signals that Minister Bains is of the view that the transaction could be injurious to national security," Mr. Borgers said.

"The cabinet order does not mean that a negative finding has been made, but rather that issues have been raised that require closer scrutiny."

The deal is opposed by the 20,000-member Canadian Construction Association and Conservative MPs, citing concerns that Aecon could under-price Canadian competitors by having access to Chinese government loans at less than market rates. The Conservatives have also expressed concerns about CCCC's close ties to the Communist Party and allegations of corruption and bribery on infrastructure in the developing world.

Aecon, led by CEO John Beck, sought to allay concerns about the deal on Friday when it sought to answer concerns that have been raised about its involvement in critical infrastructure projects, such as nuclear facilities – contracts that would pass on to CCCC if the transaction is approved by Ottawa.

"Aecon does not own any intellectual property related to nuclear energy; nor does it possess any other sensitive proprietary technology," the company said. "Aecon offers construction and refurbishment support to clients in the nuclear industry."

It also disputed comments by University of Ottawa security expert Wesley Wark where he characterized Aecon as "deeply embedded in both military and civilian critical infrastructure." The company said that, "Aecon is not building or involved in sensitive military installations."

The construction firm pushed back at the notion that an Aecon owned by China would receive subsidies from Beijing in the same way that China Communications Construction Co. does. The Canadian Construction Association has said it's worried that Aecon would be able to undercut domestic rivals once it's part of the CCCC family.

Aecon rejects that. Any subsidies that CCCC receives "are related to specific research and development projects in China that are available to any company involved in those projects." The subsidiary of CCCC that would own Aecon, the company said, "does not receive government subsidies for its international activities."

Aecon noted that three large trade unions – the Laborers' International Union of North America, the International Union of Operating Engineers and Canada's Building Trades Unions – back the deal.

Mr. Beck said in a statement on Friday that he expects Ottawa will review the deal on "the merits" and the company will continue to seek to "obtain all necessary regulatory approvals to the close the transaction."

REUTERS. FEBRUARY 12, 2018. Aecon's takeover by Chinese firm delayed as Canada extends review

(Reuters) - Construction company Aecon Group Inc (ARE.TO) said on Monday the completion date for its $1.5 billion sale to China’s CCCC International Holding Ltd (CCCI) has been pushed back, as Canada extended a national security review of the deal.

The proposed takeover, originally scheduled to close on Feb. 23, will now close on March 30, Aecon said.

Aecon Group Inc
19.41
ARE.TOTORONTO STOCK EXCHANGE
-0.09(-0.46%)
ARE.TO

ARE.TO601800.SS1800.HK

CCCI, the overseas investment and financing arm of engineering and construction company China Communications Construction Co Ltd (601800.SS) (1800.HK), said in October it would buy Aecon for $1.5 billion.

Prime Minister Justin Trudeau had said his government will closely monitor security issues when it decides whether to allow the deal, examining the implications for intellectual property protections.

However, the Aecon-CCCI deal has passed most other hurdles, including a clearance from Canada’s competition regulator.

Reporting by Nivedita Bhattacharjee in Bengaluru; Editing by Shounak Dasgupta

BLOOMBERG. 12 February 2018. Canada Launches Security Review of Aecon Deal With Chinese Buyer
By Josh Wingrove

• Aecon Group Inc. says it was informed of review ‘continuation’
• Stock trading below offer price suggests investor wariness

Prime Minister Justin Trudeau’s government has launched a full national security review of a takeover bid by a Chinese firm for a Canadian construction company.

Aecon Group Inc. announced the measure Monday morning, extending the timeline of its proposed sale to a unit of China Communications Construction Co. while saying it expects the deal to close by the end of the second quarter. The stock was little changed at C$19.49 at 10:20 a.m. Toronto time, below the C$20.37 takeover price.

The deal, announced Oct. 26, was already under a “net benefit” review, which includes some analysis on national security grounds. Monday’s announcement was for an additional national security review that lasts up to 90 days, or longer with an investor’s consent. It could emerge as a test of Trudeau’s commitment to deepening ties with China, though his government has never flatly blocked a proposed deal.

“This is the next step in this specific case. We are following the advice provided to us by the national security agencies,” Karl Sasseville, a spokesman for Canadian Innovation Minister Navdeep Bains, said in a written statement Monday. The department will continue to “review the potential national security ‎implications, as we have been doing since day one. We never have and we never will compromise on national security.”

Investors had already been betting a takeover of Aecon is no sure thing, with shares last week posting their biggest one-week decline since the C$1.19 billion ($945 million) offer was made public.

Expected to Close

Maxim Sytchev, an analyst with National Bank of Canada, said he still expected the deal to close and that Trudeau’s government has never flatly rejected a takeover.

“Ultimately this transaction is going to close,” he said in an interview Monday. “I don’t think necessarily it would make a huge amount of political sense to block what we see as a relatively small transaction with no inherent security overlay.”

In a statement Monday, Aecon said Trudeau’s government had given notice under section 25.3 of the Investment Canada Act, a passage that allows the government to order a review if it considers the takeover could be “injurious to national security.”

Outside Date

Aecon pushed the “outside date” to complete its plan of arrangement with the Chinese company to March 30, from Feb. 23. The company called the step “a continuation of the national security review of the proposed acquisition.” It expects the deal to close by the end of the second quarter, “assuming the satisfaction or waiver” of remaining conditions.

The shares fell 2.3 percent in the five days through Friday, the biggest one-week drop since the deal with CCCC International Holding Ltd., a unit of CCCC, was announced.

In a note to clients Monday, Chris Murray, managing director of institutional equity research at AltaCorp. Capital Inc., said he’s “coming to believe that the primary concern of the federal government may be with Aecon’s telecom infrastructure group,” that could lead to the possibility of a conditional approval that carves out part of the company. “While we remain positive about the closure of the transaction, we are cognizant that at this juncture, this is now a political process, which adds layers of complexity and uncertainty.”

Aecon continues “to respond to officials from the Investment Review Division” in Bains’s office, Chief Executive Officer John Beck said Friday in separate statement. “Aecon welcomes the review on the merits of the proposed transaction and will continue to seek to obtain all the necessary regulatory approvals to close the transaction.”

Competition Bureau

Aecon has already cleared one hurdle -- it announced Friday that its takeover was approved by the Canadian Competition Bureau, which later confirmed that it issued a “no action letter” to the company on Dec. 6, 2017, while warning it could still act.

“The Bureau concluded that the proposed transaction is not likely to result in a substantial lessening or prevention of competition in the construction and infrastructure industry in Canada,” Competition Bureau spokesman Jayme Albert said Friday in a statement. Canadian law allows “for a one-year period following the completion of a transaction during which the Commissioner may bring an application to the Competition Tribunal challenging the transaction.”

Trudeau has courted Chinese investment, but efforts to secure more formal ties stumbled during a visit by the Canadian leader in December when plans to launch free trade talks fell through.

AVIATION

REUTERS. FEBRUARY 12, 2018. Airbus shares fall after engine snag halts some deliveries and tests

PARIS (Reuters) - Shares in European planemaker Airbus fell on Monday after sources said Airbus had stopped delivering A320neo jets powered by Pratt & Whitney geared-turbofan engines and halted pre-delivery test flights after some engine snags.

Airbus shares, which hit a record high of 94 euros last month, were down by 1.1 percent at 82.61 euros in early session trading, making the stock the worst performer on France’s benchmark CAC-40 index.

Airbus has briefed airlines and leasing companies that it cannot say how long it will take to resolve the engine problem, one source told Reuters on condition of anonymity.

An Airbus spokesman said it is “in discussions with customers about delivery schedules” on a case-by-case basis.

Reporting by Sudip Kar-GuptaEditing by Richard Lough

REUTERS. FEBRUARY 10, 2018. Airbus halts some deliveries, tests after engine snag: sources
Tim Hepher

(Reuters) - Airbus has stopped delivering A320neo jets powered by Pratt & Whitney (UTX.N) geared-turbofan engines and halted pre-delivery test flights after the latest in a series of problems with the engines, two sources familiar with the matter said.

Airbus has briefed airlines and leasing companies and told them it cannot yet say how long it will take to resolve the problem, one source told Reuters on condition of anonymity.

Another said deliveries of the jets were not taking place, but that they had not been formally halted.

An Airbus spokesman said it is “in discussions with customers about delivery schedules” on a case-by-case basis.

The setback comes weeks after Airbus said it was overcoming a two-year sequence of problems on fuel-saving engines developed by United Technologies unit Pratt & Whitney, one of two engine suppliers for its best-selling A320neo.

The European Aviation Safety Agency on Friday imposed restrictions on the use of recently delivered A320neo-family jets with engines starting at a certain serial number.

That followed a spate of in-flight shutdowns or rejected take-offs that one source said began happening 10 days ago.

The restrictions cover jets with two engines from the same affected batch - effectively grounding those jets.

India’s IndiGo has grounded three jets, but regulators said its competitor GoAir is not affected.

In total, the grounding affects 15-20 recently delivered aircraft, the sources familiar with the matter said.

United Technologies Corp
127.37
UTX.NNEW YORK STOCK EXCHANGE
+2.34(+1.87%)
UTX.N

UTX.NGE.NSAF.PA

EASA’s safety bulletin also bans airlines from using A320neo jets on extended trips over water or isolated areas when one of the engines comes from the suspect batch.

Aircraft using alternative engines from CFM International (GE.N)(SAF.PA) are not affected.

Airbus says there are 113 Pratt & Whitney-powered A320neo aircraft flying with 18 customers. It is in the midst of increasing output and last week said it may speed up further.

A prolonged delay could have a financial impact for the planemaker, as it waits for payments that usually fall due on delivery, and for leasing companies, who start receiving rent on aircraft allotted to airlines as soon as they enter service.

“It is too early to determine financial implications, but the fact that it impacts a limited population of engines is a potentially mitigating factor,” RBC Capital Markets analyst Matthew McConnell said before the delivery freeze emerged.

“Still, this will put GTF (geared turbofan) execution issues back in the spotlight after a smooth few months when news flow was mostly focused on solid orders and ramping production.”

Additional reporting by Promit Mukherjee; Editing by Andrew Heavens

BLOOMBERG. 12 February 2018. WestJet CEO Sees Boeing's Slow-Selling Max 7 as Key to Savings
By Frederic Tamesco

• Saretsky says jet will spur C$200 million drive to cut costs
• Airline applies for Japan route with Dreamliner joining fleet

Boeing Co.’s slow-selling 737 Max 7 has a big fan in Western Canada.

WestJet Airlines Ltd. next year will become the second carrier, after Southwest Airlines Co., to operate the smallest version of Boeing’s upgraded workhorse. The Calgary-based company is set to receive five of the single-aisle jetliners next year.

“We love those planes,” WestJet Chief Executive Officer Gregg Saretsky said in an interview, citing the aircraft’s range and 12 additional seats compared with the Boeing 737-700, a linchpin of the airline’s fleet. “It’s great for long, thin markets.”

Saretsky is counting on the Max 7 and two larger variants of the 737 to boost the number of seats and reduce fuel consumption, which should contribute to WestJet’s push to achieve annual savings of as much as C$200 million ($160 million) over the next five years. The CEO is also betting on efficiencies from the deployment of 10 Boeing 787 Dreamliners as WestJet expands long-distance service.

WestJet advanced 11 percent in the 12 months ending Feb. 9, while larger rival Air Canada surged 68 percent. Canada’s benchmark S&P/TSX Composite Index fell 3.7 percent.

Jetliner Rollout

Boeing rolled out the Max 7, the third member of its upgraded 737 family, at its Renton, Washington, factory Feb. 5. The milestone marked the first public appearance by the jet before it begins flight-testing.

The model is longer and flies a greater distance than Boeing had originally planned. With input from Southwest and WestJet -- and as sales flagged -- Boeing decided to stretch the frame to squeeze in two more rows of passengers. The Max 7 can now fly as many as 172 travelers, and as far as 3,850 nautical miles.

That’s the longest range of any member of the Max family. As travel demand and fuel costs rose over the past 15 years, airlines gravitated to larger single-aisle planes such as the Max 8 and Airbus SE A320neo. The Max 7 has also faced tough competition from the largest of Bombardier Inc.’s C Series models, the CS300.

WestJet is scheduled to receive 23 of the Max 7 planes through 2027. It’s also taking 16 of Boeing’s Max 8 jets and 12 of the Max 10 aircraft.

Adding Dreamliners

The airline is adding its first three Dreamliners next year. Saretsky vows that the introduction will be smooth -- not like two years ago, when mechanical issues and delays marred the debut of used Boeing 767s that WestJet leased as it began flying to London from Toronto and western Canada. The 767s are now operating well, he said.

With the 787 in mind, WestJet has applied to civil-aviation authorities in Canada and abroad for permission to fly to China and Japan, Saretsky said. WestJet will probably announce in July which foreign cities it plans to serve initially with the 787.

“The beauty of the 787-9 is it has very long legs,” Saretsky said by telephone Thursday. “It can fly pretty much anywhere in the world from Canada. It can make India nonstop, it can make China nonstop, it can do any destination in Latin America or Europe nonstop.”

Discount Clash

WestJet is also starting a discount carrier called Swoop, which drew a labor complaint from the Air Line Pilots Association in connection with the airline’s efforts to recruit aviators.

WestJet declined Feb. 9 to comment on the complaint. A day earlier, Saretsky said Swoop would begin operating in June, as scheduled. The company has received more than 9,000 job applications for the 500 pilot and flight attendant positions it wants to fill this year, he said. It would prefer to hire as many WestJet pilots as possible.

Swoop is scheduled to begin operating with three Boeing 737 jets, rising to 10 by mid-2019. Over time, the unit could have as many as 40 planes in its fleet, Saretsky said, fueling the need for pilots.

“There won’t be a problem filling those roles,” he said. “If our pilots choose not to pursue that career path, we will go outside WestJet to fill those vacancies. We have several hundred applications already from very qualified pilots that are flying at other Canadian airlines, and from Canadians flying in the Middle East or China.”

— With assistance by Julie Johnsson

________________

LGCJ.: