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March 7, 2018

CANADA ECONOMICS



MERCOSUR - CANADA



Global Affairs Canada. March 7, 2018. International Trade Minister to hold media teleconference following meeting with Mercosur trade bloc

The Honourable François-Philippe Champagne, Minister of International Trade, on March 9, 2018, 12:45 p.m. ET, will hold a media availability from Asunción, Paraguay, following a ministerial
meeting with Mercosur member states.



NAFTA



The Globe and Mail. 7 Mar 2018. Poll shows Trudeau is not unbeatable
JOHN IBBITSON, Columnist

[The Ipsos survey] does not mean the Tories are favoured to win the next general election. But it does mean a prior assumption – that the Liberals were unbeatable – no longer holds. This is a whole new political ball game.

Yes, it’s only one poll, and yes it’s only halfway through the mandate, but Liberals should be worried by last week’s Ipsos survey, for two reasons: First, the Conservative coalition that sustained Stephen Harper’s governments appears to be realigning.

Second, the agenda may be shifting away from social issues and toward economic management, which is good for Conservatives and bad for Liberals.

This does not mean the Tories are favoured to win the next general election. But it does mean a prior assumption – that the Liberals were unbeatable – no longer holds. This is a whole new political ball game.

Up until last week, all Ipsos polls showed the Liberals and the Conservatives more or less where they were on election night. The Omar Khadr affair, Andrew Scheer becoming Conservative Leader, Jagmeet Singh becoming Leader of the NDP – nothing seemed to move the needle.

And so it came as something of a shock when Ipsos reported that Liberal support had suddenly swooned to 33 per cent, while the Conservatives had surged to 38 per cent, with the NDP earning the support of one voter in five.

The pollster was in the field as the fallout from Mr. Trudeau’s India trip splashed across people’s screens, suggesting strong public disapproval of the Prime Minister’s performance.

But was this simply a bad week that the Liberals will get over or a tipping point? It’s far too soon to say. But what is interesting about the poll is where the Liberals are doing badly.

In the Prairie provinces, support for the Grits has tanked. If an election were held tomorrow, the party would lose half a dozen seats or more in that region.

Melanee Thomas, a political scientist at University of Calgary, believes the 2015 election represented “the absolute high-water mark” of support for Liberals in the Prairie provinces, where anti-Liberal sentiment is broad and deep. “The only place the party can go is down.”

Alberta voters, especially, blame the federal Liberals for the lack of progress in getting pipelines built, she said.

The Conservatives are also seven points ahead of the Liberals in Ontario. This could be crucial.

Mr. Harper’s conservative coalition comprised voters in the western provinces and in the 905 – the band of suburban cities surrounding Toronto. The Ipsos poll suggests that coalition may be reemerging.

“If I were the Liberals, I would be worried about their support in

Ontario,” says Henry Jacek, a political scientist at McMaster University in Hamilton. “I do think that the shift in public opinion is substantial and started even before the India trip.”

Support for this government rests very much on the personality of the Prime Minister, he believes. If Mr. Trudeau’s public image is shifting from charismatic to cartoonish, the Liberals could be in serious trouble.

Or not. A Nanos poll released on Tuesday shows the Liberals maintaining a narrow lead over the Conservatives.

But as my colleague Bill Curry reports, internal government surveys show voters are worried about the chronic deficits run up by the Trudeau government.

And with the NAFTA talks dragging on inconclusively, compounded by U.S. President Donald Trump’s threat to slap tariffs on Canadian steel and aluminum exports, protecting the Canadian economy could become the most important issue facing the country.

Peter Graefe, also of McMaster, observes that “in terms of long-term issue ownership,” economic issues “probably play to the strengths of the Conservatives.”

Beyond that, Prof. Graefe suspects less affluent and welleducated Ontario voters may be losing patience with a Liberal government that focuses on progressive social issues, “but which is in some ways disconnected from actually dealing concretely with the lived realities of important segments of the Ontario population, where the economic growth has been positive but small for a decade, and people don’t really feel a sense that much is changing.”

To their credit, Mr. Trudeau’s team has made protecting free trade with the United States a top priority. But Finance Minister Bill Morneau’s 2018 budget focused more on gender, environmental and Indigenous issues than on economic fundamentals.

Are the Liberals chasing the wrong priorities as the Canadian economy confronts U.S.-generated headwinds?

We’ll see. But politicians and political watchers should pay heed to the Ipsos poll, while we wait to learn whether this shift is temporary or something big.

REUTERS. MARCH 7, 2018. Canadian dollar forecast to overcome trade worries and strengthen: Reuters poll
Fergal Smith

TORONTO (Reuters) - The Canadian dollar is forecast to rally over the coming year, a Reuters poll showed on Wednesday, as global economic strength and a broadly weaker greenback offsets smoldering investor fears of a trade war that could damage Canada’s economy.

The poll of nearly 50 foreign exchange strategists taken March 1-6 predicted that the loonie will climb to C$1.2700 to the greenback, or 78.74 U.S. cents, in one month, from around C$1.2875 on Tuesday. It is then expected to climb in a year to C$1.2300, matching the forecast from last month’s poll.

The Canadian dollar has bumped around in recent weeks on developments from North American Free Trade Agreement (NAFTA) talks between the U.S., Canada and Mexico, which the Trump administration last year said required renegotiation.

So far currency strategists and traders have opted to look on the bright side.

“Given an ongoing renegotiation of NAFTA and a lack of U.S. withdrawal we think there are pretty good conditions for sustained loonie strength,” said Ranko Berich, head of market analysis at Monex Canada and Monex Europe.

Conditions supportive of the Canadian dollar include strong global and domestic growth and interest rate hikes from the Bank of Canada, Berich said.

The central bank has raised interest rates three times since July. A separate Reuters poll forecasts the benchmark rate to be left on hold at 1.25 percent on Wednesday but for rates to be raised two more times by the end of the year.

In the meantime, strong global growth could help raise demand for the commodities that Canada produces, including oil, metals and lumber. The U.S. dollar is also forecast to remain on a relentless downward path.

“All of those commodities are denominated in U.S. dollars,” said Eric Theoret, a currency strategist at Scotiabank. “An environment of U.S. dollar weakness is supportive of commodities broadly.”

The greenback fell last month to a three-year low against a basket of major currencies, while the price of U.S. crude oil has rebounded as much as 156 percent from its February 2016 trough around $26 a barrel.

Still, the potential collapse of NAFTA or a global trade war could hurt Canada’s economy. Donald Trump’s top economic adviser, Gary Cohn, quit on Tuesday, giving free trade skeptics the upper hand in the White House.

On Monday, the loonie touched an eight-month low at C$1.3002 after Trump appeared to tie possible exemptions for Canada and Mexico from proposed tariffs on steel and aluminum to a “new” NAFTA as well as other steps.

Canada is the largest supplier of both metals to the United States. It sends 75 percent of its exports to the United States.

“Of primary concern to us is uncertainty around the trade and investment climate leading to a shortfall of capital flow into Canada,” said Ben Randol, senior FX strategist at Bank of America Merrill Lynch. “The more perceived risk, the more investors are likely to demand a currency adjustment.”

The Bank of Canada has said that uncertainty about the future of NAFTA is weighing increasingly on the outlook for Canada’s economy.

“If the U.S. does unilaterally withdraw from NAFTA, all bets are off,” Monex Canada’s Berich said.

Polling by Indradip Ghosh and Khushboo Mittal; Editing by Ross Finley and Robin Pomeroy



INTERNATIONAL TRADE BALANCE



StatCan. 2018-03-07. Canadian international merchandise trade, January 2018


Canada's merchandise trade deficit totalled $1.9 billion in January, narrowing from a $3.1 billion deficit in December. Imports decreased 4.3%, mainly due to lower imports of industrial machinery, equipment and parts. Exports fell 2.1%, primarily on fewer exports of passenger cars and light trucks.

Chart 1: Merchandise exports and imports

Chart 1: Merchandise exports and imports

Widespread declines in imports

Following a record high in December, total imports were down 4.3% in January to $47.7 billion, with declines in all commodity sections. Industrial machinery, equipment and parts, consumer goods, as well as electronic and electrical equipment and parts were the main contributors to the decline in January. Year over year, imports increased 2.0%.

Imports of industrial machinery, equipment and parts fell 11.3% to $4.5 billion in January, following two consecutive months of strong increases. Imports of logging, mining and construction machinery and equipment (-40.0%), which reached a record high in December, were largely behind the January decline. New regulations on off-road diesel engine and machine emissions came into effect on January 1, 2018, limiting imports to machinery that meets the new standards.

Imports of consumer goods declined 4.6% to $10.0 billion in January. Lower imports of clothing, footwear and accessories (-18.0%) led the decline in January, following a record fourth quarter in 2017. For the entire section, volumes were down 3.0% and prices decreased 1.7%.

Imports of electronic and electrical equipment and parts declined 6.3% to $5.4 billion in January. Communications and audio and video equipment (-10.3%) were largely responsible for the decrease, mainly due to lower imports of cell phones from China. This decline followed high import levels of cell phones in November and December.

Passenger cars and light trucks lead the decrease in exports

After three consecutive monthly increases, total exports fell 2.1% in January to $45.8 billion, with declines in 7 of 11 sections. Lower exports of motor vehicles and parts, aircraft and other transportation equipment and parts, as well as forestry products and building and packaging materials were partially offset by higher exports of energy products. Year over year, exports decreased 1.5%. Exports excluding energy products fell 3.2%.

Exports of motor vehicles and parts were down 5.7% to $7.2 billion in January, on lower exports of passenger cars and light trucks (-13.1%). Atypical plant closures for this time of year were responsible for the decline in January. These temporary shutdowns also led to lower imports of motor vehicle engines and parts (-7.6%).

Exports of forestry products and building and packaging materials declined 6.6% to $3.4 billion in January, on lower exports of lumber and other sawmill and millwork products (-14.5%). This decrease occurred as the US Department of Commerce resumed collecting import duties on Canadian lumber in late December 2017.

Partially offsetting these declines were exports of energy products (+2.9%), up for the sixth consecutive month. Since July 2017, exports of energy products have risen 28.7%, entirely due to higher prices.

Sharply lower imports from countries other than the United States

Following a record high in December, imports from countries other than the United States were down 8.5% to $16.8 billion in January, mostly attributable to lower imports from China (cell phones) and the Netherlands (refined petroleum products). There were also notable declines in imports from South Korea, the United Kingdom and Mexico.

Exports to countries other than the United States edged up 0.4% to $11.8 billion in January. Higher exports to the United Kingdom (unwrought gold) were largely offset by lower exports to Spain and China (oilseeds) as well as Turkey (coal).

As a result, Canada's merchandise trade deficit with countries other than the United States narrowed from $6.6 billion in December to $5.0 billion in January.

Exports to the United States fell 2.9% to $34.1 billion, mainly due to lower exports of passenger cars and light trucks, as well as aircraft. Imports from the United States were down 1.8% to $30.9 billion, primarily attributable to lower imports of logging, mining and construction machinery and equipment. As a result, Canada's trade surplus with the United States narrowed from $3.6 billion in December to $3.1 billion in January.

Widespread declines in import and export prices

The decrease in nominal imports and exports in January occurred as the Canadian dollar gained 2.2 US cents on average relative to the American dollar from December to January. Import prices fell 0.4%, while export prices grew 1.5%. However, import prices were down in 9 of 11 commodity sections, while export prices fell in every commodity section except energy products. Excluding the price of energy products, which rose sharply in January, the prices of both imports (-1.1%) and exports (-1.8%) fell.

In real terms (or in volume), total imports fell 3.9% in January and real exports were down 3.6%.

Revisions to December 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 December, originally reported as $46.5 billion in last month's release, were revised to $46.8 billion in the current month's release. December imports, originally reported as $49.7 billion in last month's release, were revised to $49.9 billion.

Chart 2: International merchandise trade balance

Chart 2: International merchandise trade balance

Table 228-0069 1, 2, 3, 4
Merchandise imports, exports and trade balance, customs and balance of payments basis for all countries, by seasonal adjustment and principal trading partners
monthly (dollars x 1,000,000)


Data table

The data below is a part of CANSIM table  228-0069.  Use the  Add/Remove data  tab to customize your table.

Selected items [Add/Remove data]
Geography = Canada
Basis = Balance of payments
Seasonal adjustment = Seasonally adjusted

TradePrincipal trading partners20172018
SeptemberOctoberNovemberDecemberJanuary
footnotes
ImportTotal of all merchandise46,729.646,019.748,806.449,865.547,746.2
United States30,057.029,907.831,827.331,508.530,949.4
European Union4,558.24,713.54,719.85,594.35,020.1
China3,409.43,406.13,847.33,899.33,460.5
Mexico1,917.91,620.31,724.71,751.11,615.8
ExportTotal of all merchandise43,492.944,577.946,415.946,815.445,839.2
United States32,069.933,378.335,264.635,107.934,082.8
European Union3,751.13,523.13,424.53,531.23,945.1
China2,137.41,975.02,106.12,057.91,952.7
Mexico727.6837.1745.5748.3758.8
Trade BalanceTotal of all merchandise-3,236.6-1,441.8-2,390.5-3,050.0-1,906.9
United States2,012.93,470.53,437.33,599.43,133.4
European Union-807.1-1,190.4-1,295.4-2,063.1-1,075.0
China-1,272.0-1,431.1-1,741.2-1,841.5-1,507.8
Mexico-1,190.3-783.2-979.2-1,002.8-857.1

Footnotes:

1.
This CANSIM table replaces archived CANSIM table 228-0058.
2.
Totals are not equal to the sum of their components.
3.
Countries listed are the top 27 principal trading partners of Canada based on annual 2012 total merchandise trade data.
4.
The concept of Trade Balance exists only on a Balance of Payments seasonally adjusted basis.
Source:  Statistics Canada. Table  228-0069 -  Merchandise imports, exports and trade balance, customs and balance of payments basis for all countries, by seasonal adjustment and principal trading partners, monthly (dollars),  CANSIM (database). (accessed: )
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FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180307/dq180307a-eng.pdf

THE GLOBE AND MAIL. MARCH 7, 2018. Canada’s trade deficit narrows but underlying picture weak
DAVID PARKINSON, ECONOMICS REPORTER

Canada's trade deficit declined sharply in January, but for all the wrong reasons – further evidence that the Canadian economy has lost its momentum.

Statistics Canada reported that the country's merchandise trade deficit narrowed to $1.9-billion in January from $3.1-billion in December, on a seasonally adjusted basis. It was the smallest trade gap in three months, and was smaller than the $2.5-billion that economists had anticipated.

But the details of the trade report showed weakness in both export and import demand, with the decline in imports outpacing the drop in exports.

Exports fell 2.1 per cent month over month, despite higher prices particularly for energy products, as volumes of export shipments slumped 3.6 per cent. The decline put export volumes – a key indicator for economic growth – at a 19-month low, as one of the engines of last year's growth spurt slipped deeper into its recent doldrums.

But imports were even weaker in the month, down 4.3 per cent in dollar terms, in a broad-based pullback following two months of strong gains. On a volume basis, imports fell 3.9 per cent.

The weak trade report follows a string of recent economic data pointing to a cooling of the Canadian economy in late 2017 that appears to have carried into early 2018. Last week, fourth-quarter gross domestic product growth came in at a modest 1.7 per cent, well below expectations and less than half the growth pace of the first half of last year. January readings for employment, retail sales and manufacturing all declined.

"The January trade data was disappointing," said Fotios Raptis, senior economist at Toronto-Dominion Bank, in a research report. "While the decline in import volumes was expected after a strong performance in prior months, the trend of weak export numbers pours cold water on the notion that the Canadian economy is rotating away from consumption and housing toward investment and trade."

Economists noted in particular that imports of machinery and equipment – an indicator of business capital investment, which many had hoped would play a leading role in driving economic growth this year – plunged 11.3 per cent in the month. That slump largely wiped out the strong gains over the prior two months.

However, Statscan suggested that the sharp drop may have been due to one-time factors, specifically new diesel emissions standards that took effect Jan. 1 that slowed imports of industrial vehicles and other machinery. Imports of logging, mining and construction machinery and equipment, which hit a record high in December ahead of the new restrictions, plunged 40 per cent in January.

But imports were weak across the board, including consumer goods (down 4.6 per cent month over month), energy (down 7.8 per cent) and the auto sector (down 3.1 per cent).

On the export side, autos slumped 5.7 per cent, due mainly to what Statscan characterized as "atypical" plant closures during the month. The energy sector gained 2.9 per cent, thanks to higher prices.

"Economic data over the winter months can often be very volatile and prone to distortions due to the weather. As such, we probably shouldn't read too much into a single month of declines in imports and exports," said Canadian Imperial Bank of Commerce economist Andrew Grantham in a report. "However, exports have disappointed for a number of months now."

The trade report came shortly before the Bank of Canada issued its latest interest-rate decision, in which the central bank opted to hold its key rate steady at 1.25 per cent following its quarter-percentage-point increase in January. While the trade data came too late to have been a meaningful factor in the bank's decision, the bank did acknowledge recent slowdowns in exports in its statement accompanying the rate announcement. It also raised its level of alarm about the contentious NAFTA trade renegotiations and the new U.S. plan to impose steel and aluminum tariffs, warning that "trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks."

Bank of Canada will follow up on its rate announcement with a speech by deputy governor Timothy Lane in Vancouver on Thursday, in which he will provide an "economic progress report" that should shed more light on the central bank's current view of the economy, including its outlook for trade.

Mr. Grantham said the trade sluggishness and the growing trade-policy uncertainty justify the Bank of Canada "sounding more cautious regarding that part of their forecast, and taking it very slowly in moving interest rates higher from here."

REUTERS. MARCH 7, 2018. Canada trade deficit narrows in January, exports fall by most since July
Leah Schnurr

OTTAWA (Reuters) - Canada’s trade deficit narrowed more than expected in January as imports pulled back from a record high, but exports tumbled by the most in six months as the country shipped fewer cars and forestry products, Statistics Canada said on Wednesday.

The C$1.91 billion ($1.48 billion) gap was smaller than the C$2.50 billion shortfall forecast by economists.

The report was likely released too late to alter the Bank of Canada’s interest rate decision due at 10 a.m. ET (1500 GMT). The central bank is widely expected to hold rates at 1.25 percent and investors will watch the statement for any reference to heightened risks relating to trade.

The Bank of Canada is already concerned about uncertainty over talks to update NAFTA and policy makers now have to contend with U.S. President Donald Trump’s vow to impose tariffs on steel and aluminum.

Exports in January fell 2.1 percent — the largest drop since July 2017 — from December’s record high.

“There’s reason to expect an even more cautious tone from the Bank of Canada,” said Andrew Grantham of CIBC Economics, adding in a note to clients that the weakness in exports was a bad indicator for monthly GDP.

The drop in exports came as prices for goods climbed 1.5 percent, in part due to the Canadian dollar rising against its U.S. counterpart in January.

Statscan said exports of passenger cars and light trucks fell due to unusual plant closures. Shipments of forestry products and building materials fell 6.6 percent as the United States resumed collecting import duties on Canadian lumber at the end of 2017.

Ross Prusakowski, a senior economist at Export Development Canada, noted the Canadian currency had weakened against the greenback in recent weeks.

“As Statscan has highlighted, there were a couple of transitory factors that affected a few key industries and that should in the near term kind of wash out of the data as well,” he said by phone.

Imports fell 4.3 percent as declines were broad based, including an 11.3 percent drop in industrial machinery and equipment. Canada’s trade surplus with the United States narrowed to C$3.13 billion.

Separately, Statscan said the labor productivity of Canadian businesses rose 0.2 percent in the fourth quarter as an increase in business output outpaced a slowdown in hours worked.

Reporting by Leah Schnurr and David Ljunggren; Editing by Bernadette Baum

BLOOMBERG. 7 March 2018. Canada's Trade Deficit Narrows More Than Expected on Imports
By Greg Quinn

Canada’s merchandise trade deficit was smaller than forecast in January, with a drop in imports from a record high outpacing a decline in exports.

The deficit of C$1.91 billion ($1.48 billion) was the product of a 4.3 percent decline in imports and a 2.1 percent drop in exports, with shipments in both directions falling at the fastest pace since July, Statistics Canada said Wednesday in Ottawa. Economists surveyed by Bloomberg had forecast a deficit of C$2.5 billion and Statistics Canada also reduced the estimated deficits for the prior two months. That suggests less of a drag on growth from trade.

Highlights

  • There was some evidence the import weakness may be short- lived. The January decline reflected the end of a boom in shipments of industrial equipment before tougher environmental rules took effect and a rush to buy cellphones over the holiday season.
  • Parts of the export decline appear to be longer-lasting, including a 6.6 percent drop in forestry products after U.S. duties were imposed in December, and another month marked by shutdowns in the country’s auto industry. Statistics Canada also noted Canada’s currency strengthened by 2.2 cents against the U.S. dollar in January, making exports costlier.
  • Canada’s trade balance has now been in deficit since February 2017.

Big Picture

Trade is one of the most closely watched parts of the Canadian economy this year, given the uncertainty for exporters around U.S. threats to tear up the North American Free Trade Agreement and impose tariffs on steel and aluminum. Canada is already poised for slower growth of 2 percent in 2018, from a Group-of-Seven leading 3 percent last year, as consumer spending fades.

Other Details

  • Imports of industrial machinery and equipment dropped 11.3 percent in January after two strong gains. Electronics imports fell 6.3 percent, led by cellphones from China.
  • Exports fell in seven of 11 major categories, and imports fell in every major component.
  • One area of export strength was energy, which rose 2.9 percent in January for the sixth straight monthly increase, reflecting higher prices. Non-energy exports fell 3.2 percent.
  • Canada’s trade surplus with the U.S. narrowed to C$3.1 billion from C$3.6 billion, led by lower auto exports.
  • Stripping out price changes, the volume of imports fell 3.9 percent, with export volumes down 3.6 percent.



US TARIFF ON STEEL AND ALUMINIUM



THE GLOBE AND MAIL. MARCH 7, 2018. Free trade goes out the door with resignation of Trump economic adviser Gary Cohn
JOANNA SLATER, NEW YORK
ADRIAN MORROW, WASHINGTON

Right up until the end, Gary Cohn was trying to change Donald Trump's mind.

This week, Mr. Cohn, the President's chief economic adviser, planned to host a meeting where executives could tell Mr. Trump how his proposed tariffs on steel and aluminum would harm their businesses.

But Mr. Cohn – a tough and savvy operator with decades of experience on Wall Street – was in a fight he could not win. On Tuesday, Mr. Cohn and the White House announced his resignation, making him the latest in a string of senior officials to head for the exits.

Mr. Cohn's departure will remove one of the most forceful proponents of free trade from the administration's internal deliberations. His resignation will also mean the disappearance of a significant interlocutor for Canadian officials inside the West Wing.

Over the past year, every major Canadian player involved in the renegotiation of the North American free-trade agreement had been in touch with Mr. Cohn, a government source said. That group included Katie Telford and Gerald Butts, top aides to Prime Minister Justin Trudeau; Foreign Affairs Minister Chrystia Freeland; and Brian Clow, the head of the U.S.-Canada relations unit in the Prime Minister's office.

More broadly, Mr. Cohn's retreat is likely to unsettle investors and corporate executives, who viewed him as a stabilizing force on economic policy. As long as Mr. Cohn was in place, went this line of thinking, Mr. Trump was unlikely to indulge in some of his more radical policy prescriptions. After Mr. Cohn's resignation became public early Tuesday evening, U.S. stock futures dipped sharply before recovering, but were down again early Wednesday.

Mr. Trump sought to put a positive spin on Mr. Cohn's departure, calling him a "rare talent" who had done a "superb job." The President wrote on Twitter that he would decide soon on a replacement for Mr. Cohn as director of the National Economic Council. "Many people wanting the job – will choose wisely!"

In recent days, a growing number of fellow Republicans have urged Mr. Trump to abandon his plan to impose tariffs. House Speaker Paul Ryan publicly broke with Mr. Trump over the tariffs this week, calling the proposal "extremely worrisome" and later urging the President to adopt a "more surgical approach." But Mr. Cohn's resignation suggests that Mr. Trump will not be dissuaded from his current course.

In some ways, it is surprising that Mr. Cohn, formerly the No. 2 executive at Goldman Sachs, did not leave sooner. A registered Democrat and a champion of Wall Street, Mr. Cohn was an awkward fit inside an administration brought to power by populist dissatisfaction. Allies of Stephen Bannon – another departed adviser – reportedly gave Mr. Cohn the epithet "Globalist Gary."

Mr. Cohn was on the brink of resigning last August after neo-Nazis and white supremacists marched in Charlottesville, Va., and Mr. Trump blamed "both sides" for the ensuing violence. Mr. Cohn reportedly drafted a resignation letter before changing his mind. Mr. Cohn told the Financial Times that the administration "can and must do better" in condemning hate groups. "As a Jewish American, I will not allow neo-Nazis ranting 'Jews will not replace us' to cause this Jew to leave his job."

Mr. Cohn stayed in his post to shepherd Mr. Trump's package of tax cuts through Congress at the end of last year. On Tuesday, both Mr. Cohn and Mr. Trump pointed to the US$1.5-trillion tax package, which delivered permanent rate decreases for corporations and increased the federal deficit, as the signal achievement of Mr. Cohn's 13-month tenure at the White House.

During his time in the administration, Mr. Cohn's influence ebbed and flowed. Last spring, he succeeded in delaying an immediate decision on steel tariffs and the matter was postponed for nearly a year. Last summer, he manoeuvred to put Peter Navarro, a hawkish trade adviser, under his supervision, limiting Mr. Navarro's access to Mr. Trump.

Mr. Cohn told Canadian and Mexican officials that he wanted a renegotiated NAFTA to focus on modernizing the deal – for instance by updating the agreement to include e-commerce – rather than inserting the sort of protectionist measures favoured by Mr. Trump and advisers in the "America First" camp.

At various points, Mr. Cohn appeared to be in the running for other government jobs. Last summer, Mr. Trump reportedly considered him as a potential candidate to become the next chair of the U.S. Federal Reserve (that post went instead to economist Jerome Powell). More recently, Mr. Trump discussed the possibility of him replacing John Kelly as the White House chief of staff, the New York Times reported.

On Tuesday afternoon, about two hours before Mr. Cohn's resignation became public, Mr. Trump alluded to the friction and staff turnover at the White House. "I like conflict, I like having two people with different points of view, and I certainly have that," he said at a news conference with the Prime Minister of Sweden. "There will be people that change," he continued. But "so many people want to come in."

The Globe and Mail. NEW YORK TIMES. 7 Mar 2018. Trump’s economic adviser to step down after warning against steel tariffs. Latest departure seen having ripple effect on U.S. President’s decisions on economy and on financial industry. Yakabuski: Rio Tinto considered boosting output
KATE KELLY
MAGGIE HABERMAN

Believe me, everybody wants to work in the White House.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES

It will take months if not years for the dust to settle as the Trump administration threatens to invoke national-security motives and slap tariffs on imported steel and aluminum.

Gary Cohn, U.S. President Donald Trump’s top economic adviser, said on Tuesday that he would resign, becoming the latest in a series of high-profile departures from the Trump administration.

White House officials insisted there was no single factor behind the departure of Mr. Cohn, who heads the National Economic Council. But his decision to leave came after he seemed poised to lose an internal struggle over Mr. Trump’s plan to impose large tariffs on steel and aluminum imports. Mr. Cohn had warned last week that he might resign if Mr.

Trump followed through with the tariffs, which he had lobbied against internally.

“Gary has been my chief economic adviser and did a superb job in driving our agenda, helping to deliver historic tax cuts and reforms and unleashing the American economy once again,” Mr. Trump said in a statement to The New York Times.

“He is a rare talent, and I thank him for his dedicated service to the American people.” Mr. Cohn is expected to leave in the coming weeks. He will join a string of recent departures by senior White House officials, including Mr. Trump’s communications director and a powerful staff secretary.

Yet the departure of Mr. Cohn, a free-trade-oriented Democrat who fended off a number of nationalist-minded policies during his year in the Trump administration, could have a ripple effect on the President’s economic decisions and on the financial industry.

It leaves Mr. Trump surrounded primarily by advisers with strong protectionist views who advocate the types of aggressive trade measures, such as tariffs, that Mr. Cohn fought. Mr. Cohn was viewed by Republican lawmakers as the steady hand who could prevent Mr. Trump from engaging in activities that could trigger a trade war.

Even the mere threat, last August, that Mr. Cohn might leave sent the financial markets tumbling. On Tuesday, news of Mr. Cohn’s plan to resign rattled markets, and trading in futures pointed to a decline in the U.S. stock market when it opened on Wednesday.

In a statement, Mr. Cohn said he had been pleased to work on “pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform.” White House officials said that Mr. Cohn was leaving on cordial terms with the President and that they planned to discuss policy even after his departure.

Mr. Cohn is among the most senior officials to leave the administration to date.

Mr. Trump’s announcement last week that he would levy tariffs on aluminum and steel imports was the most immediate catalyst for Mr. Cohn’s departure, according to people familiar with his thinking. A long-time proponent of free trade, Mr. Cohn believed the decision could jeopardize economic growth.

The President, urged to consider the risks of losing Mr. Cohn by several advisers, has appeared unconcerned, insisting that he could live without him as he makes a more aggressive return to the nationalist policies that helped sweep him into office as the 2018 midterm elections approach.

Mr. Trump had dismissed talk of chaos in his White House on Tuesday even as he acknowledged that he deliberately fostered a fractious atmosphere. “I like conflict,” he said at a news conference with the visiting Prime Minister of Sweden. “I like having two people with different points of view. And I certainly have that. And then I make a decision. But I like watching it. I like seeing it. And I think it’s the best way to go.”

But he insisted that he had no trouble recruiting or retaining people to work for him, despite widespread reluctance among Republicans to join his staff.

“Believe me, everybody wants to work in the White House,” he said. “They all want a piece of the Oval Office. They want a piece of the West Wing.”

People close to Mr. Cohn said that he had planned to stay for roughly a year, and that he had accomplished a number of things he cared about, including the US$1.5-trillion tax cut.

A onetime silver trader who eventually became the president of Goldman Sachs, Mr. Cohn was an unlikely addition to the administration. A lifelong Democrat known for having progressive social views, he had no political expertise and barely knew Mr. Trump. But during an unconventional job interview, Mr. Trump was impressed with Mr. Cohn’s knowledge of economics and the markets, say people who were briefed on the discussion.

As his chief economic adviser, Mr. Cohn quickly ingratiated himself to the President. He gave blunt, practical advice, say people familiar with their interactions, and built a team of experts on issues such as infrastructure and taxes. At one point, he was part of a moderate-minded coalition of staffers – including Mr. Kushner and Ms. Trump, also an adviser – who pushed for the preservation of workplace rights for gay, lesbian, bisexual and transgender people. He also pushed Mr. Trump to remain in the Paris climate accord, a battle he ultimately lost.

BLOOMBERG. 7 March 2018. Cohn’s Exit Leaves Hard-Liners Ascendant in Trump White House
By Justin Sink, Jennifer Jacobs and Margaret Talev

  • Economic adviser departing after a showdown over tariffs
  • Wilbur Ross, Peter Navarro expected to gain influence on trade

Gary Cohn’s departure from the White House is a victory for the protectionists and immigration hawks who have sought to push President Donald Trump to fully embrace their views.

The former Goldman Sachs Group Inc. president said Tuesday he would resign after what had become a bitter and personal dispute within the White House over Trump’s plan to slap steep tariffs on imported steel and aluminum. His departure is a victory for figures who have sought to expunge the Trump administration of advocates for free trade and globalization, principles that have long been a hallmark of the Washington establishment.

A registered Democrat, Cohn was regarded as one of the few political moderates close to the president. His absence will amplify voices like Commerce Secretary Wilbur Ross and trade adviser Peter Navarro who back the president’s impulses to buck convention and pick trade fights on a global stage.

Cohn also served as a counterbalance to figures like senior adviser Stephen Miller and chief of staff John Kelly, who have pushed Trump to the right on immigration -- and worked to keep him there -- and have encouraged the president’s forays into the culture wars.

The impact of Cohn’s departure was only magnified by the exceptional month of West Wing turnover and turmoil that preceded it.

Porter, Hicks

Rob Porter, the establishment Republican staff secretary who controlled the flow of paper to the Resolute Desk, left after his two ex-wives publicly accused him of abuse. Hope Hicks, the longtime Trump whisperer, resigned as communications director. National security adviser H.R. McMaster has held discussions about returning to the Pentagon. And son-in-law and senior adviser Jared Kushner has seen his influence curtailed because of his inability to gain a permanent security clearance and the departure of top aides earlier this year.

Investors, spooked by Cohn’s exit, were seen bracing for the impact Wednesday as U.S. equity futures slumped, while most government bonds climbed. The prospect of escalating protectionism earlier depressed stock markets in Asia, and the Stoxx Europe 600 Index headed for the first drop in three days, led by mining and auto shares.

House Ways and Means Chairman Kevin Brady said during an interview on Fox News on Wednesday that Trump will have a long list of potential replacements. Brady named Mick Mulvaney, director of the White House Office of Management and Budget, and Larry Kudlow, economist and CNBC contributor, as possible solid choices. Navarro, the White House Trade Council Director, said in a Wednesday interview with Bloomberg TV that he’s not on Trump’s shortlist of candidates.

Officials familiar with Cohn’s departure said his resignation was the culmination of his aggressive campaign to persuade Trump to abandon his proposed steel and aluminum tariffs, even after the president made his snap announcement last Thursday.

Canceled Meeting

Joined by McMaster, Cohn had argued repeatedly and passionately to Trump that the tariffs on imported metals would damage the relationship between the U.S. and its closest allies while threatening to erase some of the benefits of $1.5 trillion tax cut legislation the president signed into law late last year.

Cohn had organized a meeting at the White House later this week where he planned for the president to hear directly from executives of industries that consume the metals, such as automakers. The meeting was canceled after Cohn announced his resignation. The meeting will go forward, but with Vice President Mike Pence instead of Trump, according to a person familiar with the executives’ communications.

The gulf between the president and Cohn was made plain in a dramatic trade policy meeting on Tuesday in the Oval Office.

As aides discussed the logistics of making the president’s proposed 25 percent tariff on steel and 10 percent tariff on aluminum official, Trump sought confirmation from his advisers that he had their support.

According to two people with knowledge of the exchange, Trump specifically asked Cohn: We’re all on the same team, right? He then asked if Cohn supported the decision.

Cohn didn’t answer, the people said. A senior White House official disputed that Trump asked directly for Cohn’s support and didn’t recall Trump’s remark about being on the same team.

Cohn agreed with Trump that the U.S. should take a tougher stance toward China, but believed metals tariffs that also hit Canada, Mexico and the European Union are counterproductive, the official said.

The senior official said that Cohn had told the president in February that he felt underused and that he should have a larger role in the White House -- and if that wasn’t possible, he would consider leaving. Cohn plans to stay until the end of the month to help Trump choose a new economic adviser, and would consider returning to the administration for a larger role such as a Cabinet post, the official said.

On Tuesday evening, Trump wrote on Twitter that he would soon make a decision on a replacement. "Many people wanting the job -- choose wisely," he said.

Trump’s Frustrations

The episode is the latest indication that the president is frustrated by those in his administration whom he perceives as attempting to forestall or delay his aspirations.

Less than a week ago, Trump lashed out at Attorney General Jeff Sessions for asking the Justice Department inspector general to investigate claims of surveillance abuse that Trump regards as validation that the investigation into possible collusion between his campaign and Russia is politically motivated. Trump called the move “DISGRACEFUL!” on Twitter and questioned why Sessions hadn’t referred the case to criminal investigators.

The previous month, the president reacted sharply when Kelly said he had “changed his attitude” on whether Mexico would directly pay for a wall spanning the entirety of the southern U.S. border. A tentative deal with congressional Democrats to protect those who immigrated to the U.S. illegally as children -- called “Dreamers” by their advocates --collapsed after the president tacked on a string of conservative demands, at the urging of Kelly and Miller.

And Trump has been similarly frustrated when foreign policy aides have pushed him to embrace the NATO principle of collective defense, preserve the Iran nuclear deal, or tread lightly on decisions such as his announcement to move the U.S. embassy in Israel from Tel Aviv to Jerusalem.

Energy Secretary Rick Perry said Cohn was also probably tired after spending a year as one of Trump’s senior advisers.

“Anyone who’s worked at the White House for a year is probably getting a little burned out,” Perry told reporters in Houston. “And not just this administration, but every administration. It’s hard work.”

Nafta Talks

Trump began Wednesday with a call to reverse a trend he said has cost the U.S. more than 55,000 factories, 6 million manufacturing jobs and trade deficits totaling more than $12 trillion since President George H.W. Bush was in office. "Last year we had a Trade Deficit of almost 800 Billion Dollars. Bad Policies & Leadership. Must WIN again!" he said on Twitter.

It won’t take long to see the impact of the rising nationalist tide within the West Wing. The U.S. is hoping to complete renegotiation of the North American Free Trade Agreement before Mexico’s elections in July, and with major issues still outstanding, the president may be more inclined to walk away from the trilateral trade pact.

“Our time is running very short,” U.S. Trade Representative Robert Lighthizer said Monday.

Other crucial policy challenges loom on the horizon.

The deadline for a congressional deal to secure the fate of the young undocumented immigrants known as Dreamers passed Monday, meaning only ongoing legal proceedings stand to prevent their potential deportation.

At the same time, South Korea on Tuesday announced that North Korea had signaled a willingness to enter into high-stakes negotiations over its nuclear weapons program.

Lawmakers in both parties are also watching for Trump to retreat from his stated desire for Congress to pass substantial new gun-control legislation. Administration officials are already signaling Trump may adopt a less aggressive approach after intervention by the National Rifle Association.

The wave of departures in the West Wing is also likely to weigh heavily on a White House staff that has seen more than its fair share of tumult.

Shortly before Cohn’s departure was announced, Trump said in a news conference that he enjoys conflict in his administration, that work there could be “tough,” and that more departures could come.

“There will be people that change -- they always change,” Trump said. “Sometimes they want to go out and do something else.”

— With assistance by Joe Deaux, Terrence Dopp, and Tina Davis

The Globe and Mail. 7 Mar 2018. U.S. tariffs throw a wrench in what was supposed to be the aluminum industry’s turning point. For the aluminum sector, this year was supposed to be a turning point. Expansion plans are now on hold
KONRAD YAKABUSKI

After a decade in the dumps, this was supposed to be the year the Canadian aluminum industry finally dared to dream again. China had been curtailing production, prices had been rising and Rio Tinto had even been talking about boosting capacity at its Canadian smelters by a third.

It was a sea change from the previous few years, which had been rife with speculation about Rio Tinto getting out of the aluminum business altogether. Its disastrous US$38-billion takeover of Canadian aluminum icon Alcan in 2007 had been labelled one of “worst decisions ever” in the mining industry, leading to US$25-billion in writedowns at the Anglo-Australian mining giant.

As recently as December, however, Rio Tinto Aluminium head Alfredo Barrios was buoyantly telling investors the company was considering new investments.

Mr. Barrios said the investments were to increase annual capacity at two Quebec smelters by 650,000 tonnes, boosting Rio Tinto’s Canadian output to 2.5 million tonnes.

But that was before U.S. President Donald Trump started tweeting about trade wars and threatening to slap tariffs on aluminum imports, including 2.3 million tonnes of primary aluminum from Canada. Suddenly, the Canadian industry is back in a holding pattern.

It will take months if not years for the dust to settle as the Trump administration threatens to invoke national-security motives and slap tariffs on imported steel and aluminum. U.S. production of both metals has contracted massively, but the U.S. aluminum industry has been hit hardest. Aluminum prices fell by half after the 2008 crash and remained in the trough for a decade as China ramped up production. The expiry of long-term power-supply contracts, forcing U.S. smelters to pay more for electricity, further sapped the U.S. industry’s competitiveness.

A 10-per-cent tariff on imports won’t suddenly make the U.S. aluminum industry great again, but it might lead domestic producers, including Alcoa, to restart currently idled capacity or opt to invest in U.S. smelters in anticipation of further import restrictions by Mr. Trump in the future. Alcoa produced about 850,000 tonnes of primary aluminum at its Quebec smelters in 2017. But the company has about 500,000 tonnes of unused capacity at its U.S. smelters.

Indeed, the U.S. aluminum industry operated at only around 40 per cent capacity in 2017, producing 785,000 tonnes of primary aluminum, down from two million tonnes in 2013. Canada’s 10 smelters, meanwhile, ran at full speed, churning out more than 3.2 million tonnes of aluminum last year. A lockout at the Bécancour, Que., smelter 75 per cent owned by Alcoa has reduced Canada’s overall monthly output by about 10 per cent since January.

The Canadian primary aluminum industry employs more than 10,000 workers at nine smelters in Quebec and Rio Tinto’s Kitimat, B.C., facility, which underwent a $6-billion upgrade that was initiated under ex-Alcan chief executive officer Richard Evans but took a decade to complete. Mr. Evans also oversaw the 2007 takeover that made plenty of Alcan’s shareholders rich. But even he later conceded that Rio Tinto had made one of the “worst decisions ever, the largest metals and mining transaction in the history of the world at the high point in the commodity cycle.”

It took Rio Tinto a full decade to recover. Higher demand helped support price increases in 2017. And China’s move to crack down on illegal smelters – and even close several legal ones around Beijing, in a bid to reduce air pollution – has had analysts predicting even better times ahead.

Earnings in Rio Tinto’s primary aluminum operations more than doubled to US$954-million in 2017 as the aluminum price on the London Metals Exchange averaged US$1,969 a tonne, a 23per-cent increase from 2016. When market premiums are included, Rio Tinto said it realized an average aluminum price of US$2,231 last year. That is approaching the US$2,500 threshold at which Mr. Barrios said in December the company would consider undertaking new investments in Quebec.

Rio Tinto, he said then, was looking at adding another 250,000 tonnes of capacity at its Alma, Que., smelter and 400,000 tonnes at its leading-edge AP60 facility in Saguenay. Under Mr. Barrios, a former BP executive who took the helm of Rio Tinto’s Montreal-based aluminum division in 2014, the company has sold or is about to sell smelters in Scotland, France and Iceland to focus on its core Canadian and Australian ones.

Aluminum production is energy intensive and Rio Tinto produces its own hydroelectricity at decades-old generating stations in Quebec and British Columbia. That has not only ensured that its Canadian smelters remain in the lowest-cost quartile globally. It provides environmental bragging rights over U.S., Chinese and Middle Eastern smelters that rely on coal- or natural gas-generated power.

“This is a turning point for the aluminum industry for which we are uniquely positioned with our hydro-powered Canadian smelters,” Mr. Barrios told an investor conference in Sydney in December. “It’s having access to a stranded supply of electricity. And those blocks are not easily available [elsewhere] and that’s where we see our position in Canada as being very privileged.”

It’s still not clear how U.S. tariffs or quotas would affect Rio Tinto’s Canadian operations. Mr. Barrios is still seeking to exempt them from any U.S. restrictions. But if new investments in Canada are not entirely off the table now, Mr. Trump may just have ensured their indefinite postponement.

The Globe and Mail. REUTERS. 7 Mar 2018. Canada will be under pressure to act immediately – regardless of what the rules say. In trade retaliation, Canada won’t wait for WTO’s blessing
TEVEN CHASE, OTTAWA
GREG KEENAN, TORONTO

Politics will drive this. Governments, including Canada, will be forced to respond immediately. That’s the dangerous precipice we’re facing, thanks to Mr. Trump.
LAWRENCE HERMAN, INTERNATIONAL TRADE LAWYER

Canada will need to either bend or break international trade rules to take quick retaliatory action should the United States slap hefty tariffs on Canadian-made steel and aluminum, but experts say Ottawa has been forced into this position by an exceptionally protectionist White House.

Canadians should expect to pay more for iconic U.S.-produced goods if a trade war breaks out. Ottawa could slap import charges on goods from California wine to Vermont maple syrup – the sort of items that Canada has targeted in previous trade conflicts with Washington.

Canada has not released any lists of products – and the Trudeau government is staying mum on possible retaliation while it continues to seek an exemption from the Trump action. But experts suggest looking back at past trade spats with the United States – such as a 2014 dispute over meat labelling – to see what Canada has been prepared to hit.

Canada will be in good company in this trade fight, however, because more than 20 other countries or trading blocs will be taking similar countermeasures.

The European Union has already outlined a list of U.S. exports it would target after President Donald Trump said he will levy a tax of 25 per cent on imported steel and 10 per cent on aluminum.

Normally, Canada is supposed to seek retaliatory authority from the World Trade Organization to impose countermeasures on foreign countries but this process can take years. But, unlike past quarrels with the United States, Canada will be hard-pressed to act immediately – regardless of what the rules say.

“I don’t believe any countries affected by these tariffs will wait for WTO procedures to be completed before acting,” international trade lawyer Lawrence Herman said.

“Politics will drive this. Governments, including Canada, will be forced to respond immediately. That’s the dangerous precipice we’re facing, thanks to Mr. Trump.”

Colin Robertson, a former Canadian diplomat, writing in The Globe and Mail, says Canada and other countries threatened by the Trump tariffs should be drawing up a common list of U.S. exports that they could target with retaliatory action.

The EU has already warned it plans to target key Republican leaders with import taxes on items such as Kentucky bourbon – a product from the home state of Senate Majority Leader Mitch McConnell – as well as cranberries and dairy products from Wisconsin, home to House Speaker Paul Ryan.

Mr. Trump threw cold water on hopes for a Canadian exemption this week when he warned Canada would not be spared unless it agrees to U.S. demands for changes to the North American free-trade agreement – a series of protectionist U.S. requests that both Ottawa and Mexico City have characterized as unreasonable.

He said Tuesday that the tariffs will be applied in a “loving way.”

Mr. Ryan, the most powerful member of the U.S. House of Representatives, said the proposed tariffs are too broad and open the country to possible retaliation. Mr. Ryan named China, rather than Canada, as a problem.

The steel tariffs will be raised Wednesday at a meeting between auto industry leaders and officials in Prime Minister Justin Trudeau’s office, said Jerry Dias, president of Unifor, who will attend the meeting.

Auto industry executives sought the meeting to urge Mr. Trudeau to halt Canada’s participation in the Trans-Pacific Partnership trade agreement, which will eliminate Canada’s 6.1 per cent tariff on vehicles imported from Japan.

One U.S. trade expert estimates the annual cost to Canada of the steel and aluminum tariffs could be US$3.2-billion. Chad Bown, a trade adviser to former president Barack Obama, wrote in an article for the Peterson Insitute for International Economics that this amount would be roughly what Canada could justifiably expect to seek compensation for in retaliatory action against the United States.

Former Canadian government officials have said it’s very difficult to pick retaliatory targets. In 2005, when Canada was angry at a U.S. law that funnelled cash collected from tariffs on foreign goods to U.S. companies, Ottawa drew up a list that targeted the states where U.S. politicians voted for the legislation. In that case, Ottawa was forced to abandon some retaliatory targets – such as U.S. motorboats – because of push-back from Canadian industry. Its final list was narrowed down to a few items, such as tropical fish.

Laura Dawson, director of the Canada Institute at the Wilson Center in Washington, said Canada’s best bet to head off the tariffs may be to wait for the U.S. system of checks and balances to run its course, including a likely court challenge of steel tariffs by companies that buy steel.

“People are already talking about how court challenges will be launched, what would the courts be asked to adjudicate; would they be asked to adjudicate what constitutes a national security threat?” Ms. Dawson said.

The Globe and Mail. 7 Mar 2018. Algoma’s production of shield for U.S. military to offer no protection against tariffs. Algoma: U.S. accounts for 48% of company’s sales
GREG KEENAN, STEEL INDUSTRY REPORTER

While U.S. President Donald Trump appears to regard steel from Canada as a threat to the national security of the United States, the people who work at Algoma in Sault Ste. Marie, Ont., can offer a strong counterargument.

That’s because in Algoma’s plate mill, a onequarter scale replica of an armoured gunner’s shield is a reminder that a grateful U.S. Defence Department presented the steel maker with an award in 2004 for speeding up production of an armoured plate that protected the doors and underbodies of Humvees used in Iraq.

The plate helped reduce the numbers of U.S. soldiers being killed and wounded by improvised explosive devices.

“It was a huge moment for that mill back then that we actually had this special recognition from the Pentagon,” said Armando Plastino, a former chief executive officer of Algoma, who was vicepresident of operations at the time.

Mr. Plastino said he remembers vividly the comments made by military brass as they presented the award at the mill in Sault Ste. Marie. “‘The supply of that plate was ‘saving the lives of our boys,’ ” he recalls the Pentagon officials as saying. “‘You’re saving the lives of our boys.’ They kept repeating that.”

That contribution – and the importance of trade with Canada to the U.S. economy as a whole – appears to have been forgotten as Mr. Trump singles out the decline of the U.S. steel industry as a threat to national security and gets set to slap tariffs of 25 per cent on steel imports and 10 per cent on aluminum, citing an obscure provision of the 1962 Trade Expansion Act.

“It is pretty ironic,” Mr. Plastino said.

It’s not as though Algoma and other steelmakers in Canada have been basking in boom times while their U.S. counterparts suffered.

Algoma, officially Essar Steel Algoma Inc., is well into its third year of financial restructuring under the Companies’ Creditors Arrangement Act. Stelco, now Stelco Holdings Inc., emerged last summer from an almost two-year run in CCAA protection – its second this century.

The same wave of cheap imported steel that has damaged U.S. steel makers played a role in pushing the two companies into creditor protection in Canada.

The trip through the CCAA process is also a repeat performance for Algoma, which has been on a roller-coaster ride since 2004, the year the U.S. military said thanks.

The company, which operates the closest major steel mill to the U.S. border, had the best financial performance in its history that year with profit of $344-million and considered bidding for Stelco during the Hamilton-based company’s first CCAA journey.

Algoma abandoned that idea and was eventually snapped up by India-based Essar for $1.85-billion in 2007 during the global steel-industry consolidation that swept aside Canadian ownership of all four of Canada’s largest steelmakers.

Essar talked about boosting capacity in Sault Ste. Marie to four million tonnes annually from about 2.5 million, but falling steel prices and a battle with the U.S. company that supplies Algoma with iron ore led to its CCAA filing in November, 2015.

At it stands now, Algoma’s lenders want to buy the company and are in negotiations with the United Steelworkers union about a new contract that would remove the last roadblock to their purchase of the steelmaker.

Monetary issues are on the bargaining table now, said Mike Da Prat, president of USW local 2251, which represents workers in the mills.

Recent court filings show that Algoma generated revenue of $1.2-billion in the six months ended Sept. 30 and $218-million in earnings before interest, taxes, depreciation and amortization.

In court filings made in 2015, Algoma said 48 per cent of its sales were to the U.S. market. That would leave about half its sales exposed to the 25-per-cent tariff if Canada can’t convince the U.S. government to exempt Canadian steel.

Stelco appears less vulnerable. Chief executive officer Alan Kestenbaum said on the company’s financial-results conference call last month that about 10 per cent of Stelco’s shipments are to U.S. markets.

Still, a 25-per-cent tariff could blunt its efforts to try to increase its share of steel sold to auto makers in North America.

Apart from a possible exemption, union leaders and industry executives argue that Canada also needs to match U.S. actions on imported steel or risk being the conduit by which other countries continue to dump cheap steel into the United States.

“Trump is going to say: ‘If you’re not closing your borders, we’re closing ours to you,’ ” Mr. Da Prat said.

The Globe and Mail. 7 Mar 2018. Five principles for a response to U.S. tariffs. Canada must focus on minimizing supply-chain disruption while maximizing political impact
GLEN HODGSON,  Senior Fellows at The Conference Board of Canada.
DANIELLE GOLDFARB,  Senior Fellows at The Conference Board of Canada.

If Canada cannot get an exemption [from U.S. tariffs], the government needs to be careful in how it responds.

The tariffs on steel and aluminum announced by U.S. President Donald Trump last week are uncalled for. Mr. Trump has announced that the tariffs are being imposed based on national-security considerations. The Canadian government should strive to negotiate an exemption to the tariffs on the grounds that Canadian steel and aluminum does not pose a security threat. However, if Canada cannot get an exemption, the government needs to be careful in how it responds.

As Canada is the leading exporter of both products to the United States, Canadian firms would be severely affected if these tariffs go into effect. Canada’s response needs to be highly targeted to maximize political impact, minimize the effect on Canada and reduce the risk of an all-out trade war. We recommend a response strategy with five elements.

Use an arrow, not a hammer: A broad-based approach of implementing retaliatory tariffs could hurt Canada, since Canada’s economy is highly integrated with the United States. Even though Mr. Trump has also stated that steel and aluminum tariffs will only be removed after a new North American free-trade agreement is signed, Canada should not withdraw from NAFTA talks. Instead, a highly selective and targeted strategy has greater chances of political success in the United States, while minimizing the effect on Canadians. The strategy should also comply with world trade rules.

Minimize supply-chain disruption: Canada and the United States make products together. Responsive tariffs will need to avoid highly integrated manufacturing sectors, such as auto manufacturing or the aerospace industry.

Imposing tariffs in these industries would be self-defeating.

Maximize political impact: Responsive tariffs might focus on products and services from states and regions that are strongly pro-Trump. These regions would include the Rust Belt and the South – but not California or New York. Or retaliatory tariffs could focus on highprofile brands, as the European Union has suggested. The EU has already singled out American brands including Harley-Davidson (headquartered in Wisconsin), Kentucky Bourbon and blue jeans.

Minimize Canadian content: Responsive tariffs should focus on U.S. goods and services with little Canadian content, to minimize the pain for Canadian suppliers to U.S. industry. The highly integrated nature of the two economies will make these difficult, but necessary, to identify.

Don’t target key Canadian imports: Canada should avoid applying tariffs on key imported inputs into Canadian production processes. We should also avoid targeting products that Canadian consumers tend to import. We might even identify products that have non-U.S. alternatives, and Canadian consumers can then try comparable products from other places.

U.S. business interests and most Republicans are already largely opposed to these tariffs. Canada should support their efforts in the hopes that Mr. Trump will backtrack. If the government of Canada decides to reluctantly apply highly selective retaliatory tariffs, it should proceed along the lines outlined above.

The tariffs Mr. Trump has announced signal that he is keen to grant trade protection to industries that ask, with little due process. Canada needs to respond to deter future threats, but carefully, without risking further supply chain disruption and limiting the scope of a major global trade war.

The Globe and Mail. REUTERS. 7 Mar 2018. As Canadian investors steel for trade wars, transit, mattress stocks get nod
FERGAL SMITH

Canadian fund managers are crunching numbers to tradeproof their portfolios, as the threat of U.S. tariffs boosts the appeal of domestic-focused names and shares of companies that have production capacity in the United States.

The prospect of a trade war has rattled global financial markets, including the shares of Canada’s many export-driven companies such as those in the autoparts, railway and resource industries.

Canada’s benchmark share index has dropped 4 per cent this year, compared with a 0.5-percent gain for the MSCI World Index.

“Whatever we own we try to make sure that they won’t be too disrupted by trade,” said Steve Belisle, senior portfolio manager at Manulife Asset Management. “In some cases, because they have [production] capacity in the U.S.”

Mr. Belisle name-checked transit bus and motor coach company New Flyer Industries Inc., which manufactures in the United States.

Rather than plunge into defensive sectors such as utilities and telecom, investors are sticking with companies that will benefit from global economic strength and looking for ETFrelated arbitrage opportunities. They are weeding out stocks that could be hurt most if the outlook for free trade does worsen.

“We have been holding slightly elevated levels of cash, and have been deploying selectively on big down days in the past month,” said Mike Archibald, associate portfolio manager at AGF Investments, adding that Canadian autos continue to represent a risky part of the market.

Stocks that Mr. Archibald has bought include mattress retailer Sleep Country Canada Holdings Inc., which targets the domestic market. Its shares jumped after reporting strong fourth-quarter results last week.

A number of countries, including Canada, have threatened to retaliate against planned U.S. import tariffs on steel and aluminum. Canada, the largest supplier of both metals to the United States, is also contending with the potential collapse of the North American free-trade agreement.

REUTERS. MARCH 7, 2018. Trump piles pressure on China over trade, to push ahead with tariffs
Makini Brice, Philip Blenkinsop

WASHINGTON/LUXEMBOURG (Reuters) - U.S. President Donald Trump looked set on Wednesday to authorize steep tariffs on imported steel and aluminium this week as he stepped up pressure against China to develop a plan to reduce its trade imbalance with the United States by a billion dollars.

A day after the resignation of his economic adviser, Gary Cohn, and despite strong push back from Republican lawmakers, the White House said Trump was ready to move forward with his tariffs plan by the end of the week.

Some reports suggested he could sign the presidential proclamation as soon as Thursday.

Trump’s plan would impose a duty of 25 percent on steel and 10 percent on aluminium to counter cheap imports, especially from China, that he says undermine U.S. industry and jobs.

The action risks retaliatory tariffs on U.S. exports - not least by Canada and Europe - and complicates already difficult talks on the North American Free Trade Area with Canada and Mexico.

The departure of Cohn, seen as a bulwark against Trump’s economic nationalism, clears the way for greater influence by trade hardliners like Peter Navarro, Trump’s trade policy adviser, and Commerce Secretary Wilbur Ross.

White House spokeswoman Sarah Sanders said the president was considering several candidates to fill Cohn’s position, while Navarro said he was not in the running for the job.

“The president’s got a number of people that could potentially fill that role,” Sanders told reporters.

The increased likelihood of tit-for-tat trade measures and its impact on global growth hit shares, oil and the dollar.

Adding to the tensions over the tariffs, Trump doubled down on China, which he accuses of unfair trade practices.

“China has been asked to develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States,” Trump tweeted, mistakenly referring to a deficit where Beijing runs a surplus.

He did not give details on how such a request had been conveyed.

In his first tweet on Wednesday, the U.S. President showed no sign of backing down, saying the United States had lost more than 55,000 factories and 6 million manufacturing jobs and let its trade deficit soar since the first Bush administration.

“Bad policies & leadership. Must win again!” he tweeted, a day after saying he did not fear a trade war.

“When we’re behind on every single country, trade wars aren’t so bad,” he told reporters.

CONCERNS OF TRADE WAR

Meanwhile, Europe and the IMF issued strong warnings to Washington to step back from the brink of a trade war.

“In a so-called trade war ... nobody wins, one generally finds losers on both sides,” International Monetary Fund head Christine Lagarde said on Wednesday, adding that a trade war would take a “formidable” toll on global economic growth.

In Geneva, China raised its concerns at the World Trade Organization where 17 other WTO members also voiced misgivings.

“Many said they feared tit-for-tat retaliation which could spiral out of control, damaging the global economy and the multilateral trading system,” WTO spokesman Keith Rockwell said.

A trade official quoted Canada’s WTO ambassador as saying: “We fear that the United States may be opening a Pandora’s Box that we would not be able to close.”

European Council President Donald Tusk, who will chair a summit on March 22-23 where EU leaders will discuss the threat of a “serious trade dispute”, said Trump’s view that trade wars were good and easy to win was wrong.

“The truth is quite the opposite. Trade wars are bad and easy to lose,” Tusk told reporters.

He was speaking after the EU executive met to discuss a list of 2.8 billion euros ($3.5 billion) worth of U.S. products - from bourbon to Harley Davidson motorbikes - on which Europe could apply a 25-percent tariff if Trump goes ahead.

“We are eager not to escalate this,” EU trade commissioner Cecilia Malmstrom said.

“We do not want this to go out of proportion, but ... if it does happen we will have to take measures to protect European jobs.”

For those who fear a trade war, the candidates to replace Cohn as Trump’s adviser do not bode well: Peter Navarro, the White House National Trade Council head who wrote a book called “Death by China: Confronting the Dragon — A Global Call to Action”, and conservative commentator Larry Kudlow.

German Economy Minister Brigitte Zypries said: “I hope Trump changes his mind ... It’s very important that there are advocates for this in the White House. That’s why I’m worried about the latest signals coming from the USA.”

Britain, keen to foster global trade relations as it prepares to leave the EU, said it was “very disappointed” by Trump’s plan.

Additional reporting by Philip Blenkinsop in Brussels, Tom Miles in Geneva and Susan Heavey in Washington; Writing by Robin Pomeroy and Lesley Wroughton; Editing by Hugh Lawson and Nick Zieminski

REUTERS. MARCH 7, 2018. U.S. Energy Secretary Rick Perry says unsure if Trump's views on tariffs are final

HOUSTON (Reuters) - U.S. Energy Secretary Rick Perry said on Wednesday that he is “not sure” President Trump has finished making up his mind on levying tariffs on imported steel and aluminum.

The President wants to protect American workers against countries that engage in unfair trade practices, Perry said, in remarks on the sidelines of the CERAWeek energy conference. He added: “I’m not sure he has made up his mind” on the tariffs.

The proposal has been criticized by Republicans and U.S. trade allies since the president first tweeted his plan last week.

Reporting by Gary McWilliams



AVIATION



The Globe and Mail. 7 Mar 2018. Questions mount over Bombardier’s deals with notorious Gupta family. As Canada’s export bank works to repossess a jet it cannot find, attention is turning to the relationship between the Montreal-based plane and train maker and a South African family under investigation
GEOFFREY YORK

I had no doubt that the books would be cooked.
LUCKY MONTANA, FORMER CEO OF THE PASSENGER RAIL AGENCY OF SOUTH AFRICA, TESTIFYING TO A PARLIAMENTARY INQUIRY ON JAN. 30

Four years ago, a senior executive of Bombardier Inc. flew to Johannesburg to negotiate a deal with Ajay Gupta, the eldest of the powerful Gupta brothers, whose business empire was closely linked to the family of Jacob Zuma, president of South Africa at the time.

It was a successful trip. Bombardier sold a US$52-million luxury jet to the Guptas, financed by a US$41-million loan from Canada’s export credit agency, and the sale was followed later by discussions on a second aircraft deal.

But today, Ajay Gupta is a fugitive from justice, dodging an arrest warrant from the South African police. Canada’s export bank is trying to repossess the Bombardier jet, but cannot find it. And Mr. Zuma, facing a mountain of Gupta-related corruption allegations, has been forced to resign.

As the criminal and judicial investigations into the corruption scandal widen, The Globe and Mail has obtained new information that raises further questions about the relationship between Bombardier and the Guptas.

A leaked e-mail from Bombardier to Ajay Gupta in 2014 suggests Bombardier wanted to expand its Gupta business into other industries. A spokesman for Bombardier says the e-mail was purely a courtesy, but some South African politicians and anti-corruption activists have asked whether the Canadian company was using the aircraft deal to seek an advantage on a massive South African locomotive contract that it later obtained from a state company controlled by Gupta allies.

The Globe has also interviewed a businessman who says he attended a meeting in which Gupta representatives demanded a discount on a Bombardier aircraft in exchange for the locomotive contract. Bombardier says it has no record of such a meeting. South African police have confirmed that they have issued an arrest warrant for Ajay Gupta, although they have not yet disclosed what criminal charges it contains.

The media have reported that arrest warrants have been issued for all three Gupta brothers, who are believed to have fled the country.

In mid-February, after a police raid on the Johannesburg mansion where the Gupta brothers lived, five senior executives in Gupta-owned companies appeared in court on fraud charges. Prosecutors have frozen some of the Guptas’ assets and bank accounts in a widening criminal investigation into allegations that the Guptas and their associates stole US$20-million in government funds that were intended for impoverished farmers.

The Guptas, long-time business partners of Mr. Zuma’s son, are the main focus of a judicial inquiry into state corruption that will begin later this year. An earlier investigation by a South African ombudsman, the Public Protector, heard testimony that the Guptas offered bribes to politicians and used their influence to ensure that their political favourites got cabinet posts.

The Guptas are also facing investigations by the police, by parliamentary committees and by the state-owned enterprises from which they earned millions of dollars from dubious contracts.

THE LUXURY JET

With financial interests ranging from coal mining and computers to uranium and mass media, the Indian-born Gupta brothers – Ajay, Atul and Rajesh – had ascended into the ranks of the wealthiest individuals in South Africa by 2016, according to a survey by a South African newspaper.

The latest investigations – political, judicial and criminal – are bringing new attention to the Gupta family’s covert influence over billions of dollars in state contracts from 2012 to 2015, a time when Bombardier sold the luxury private jet to the Guptas and then won a US$1.2-billion locomotive contract from South Africa’s state-owned freight company, Transnet.

The Globe and Mail reported last year that Bombardier sold the airplane to the Guptas for US$52-million, nearly 20 per cent below the list price. The Canadian company first offered the discount to the Guptas in February, 2014, just a month before the locomotive deal was announced.

Bombardier says the two deals are not connected. It also says the discount was a normal practice in the business-aircraft market.

Leaked e-mails obtained by The Globe show that a vice-president in Bombardier’s aircraft division, Trevor Lambarth, flew to Johannesburg and visited Ajay Gupta in early 2014.

Shortly after the meeting, a Bombardier sales director contacted the Guptas to offer them a Global 6000, the company’s top-of-the-line corporate jet. He promised to help them secure “the best-priced Global in the market.”

In an e-mail to Ajay Gupta on Feb. 18, 2014, Mr. Lambarth laid out the terms of Bombardier’s aircraft offer. In addition to the discounted price, he offered two credit memos, worth US$1.35-million, and free training sessions for the jet’s pilots.

Perhaps most crucially, he assured Ajay Gupta that there were “suitable finance offers” to ensure that the Guptas would not need to provide cash for most of the purchase price.

Bombardier then persuaded the federal government’s export bank, Export Development Canada (EDC), to provide a loan to the Guptas for 80 per cent of the jet’s price.

Bombardier, however, was interested in more than just aircraft business with the Guptas.

At the end of his e-mail,

Mr. Lambarth suggested Bombardier could co-operate with the Guptas in the infrastructure sector if the jet deal was completed. “We hope that a successful conclusion will lead to further opportunities for our organizations to explore working together, whether on infrastructure or aviation-related business,” he told Ajay Gupta.

Bombardier’s vice-president of external relations, Olivier Marcil, confirmed the existence of the e-mail in response to questions from The Globe. He said this comment by Mr. Lambarth was “simply a routine, courteous phrase and reflected no concrete plans or implications of any kind.”

THE LOCOMOTIVE CONTRACT

Almost exactly a month later, on March 17, 2014, Transnet announced that Bombardier would receive one-quarter of one of the biggest infrastructure contracts in South Africa’s post-apartheid history: a US$5-billion contract to supply 1,064 locomotives. The contract was partly financed with a US$450-million loan from Export Development Canada.

The price of the locomotive contract was dramatically larger than earlier estimates. The contract – which was divided among Bombardier, General Electric and two Chinese companies – was almost 40 per cent more expensive than the amount recommended by an independent consultant, McKinsey & Co., just a few months earlier.

Asked about the price increase, a Bombardier spokesman said the locomotive price was adjusted purely because of “commercial conditions” Transnet imposed.

South African media, citing leaked e-mails from the Guptas, have reported that a Gupta-linked company received about US$320-million in “consulting fees” as part of a Chinese company’s share of the locomotive deal. These fees amounted to 20 per cent of the value of the Chinese share of the contract, the reports say. Investigations by South African media and independent inquiries have documented how Transnet had fallen under the heavy influence of the Guptas by 2014. At the time of the locomotive contract, the Guptas enjoyed substantial power over Transnet through their allies on the company’s board of directors and the highest ranks of its management.

Brian Molefe, a prominent friend of the Guptas, was appointed as Transnet’s chief executive officer in 2011.

He remained at Transnet until March of 2015, when he moved to a similar job at Eskom, the state-owned electricity monopoly.

An investigation in 2016 by South Africa’s Public Protector, a constitutionally empowered anti-corruption watchdog, concluded that there was evidence of a long-standing “cozy relationship” between Mr. Molefe and the Guptas. In a detailed report on Gupta-related corruption allegations, the Public Protector described a “firm line of communication” between Mr. Molefe and Ajay Gupta. This included 58 phone calls between the two men from August, 2015, to March, 2016, along with many other phone calls and text messages between Mr. Molefe and other executives in the Gupta business empire.

Within days of the report disclosing his Gupta connections, Mr. Molefe resigned from Eskom.

Another key official in the locomotive deal was Transnet’s chief executive officer, Anoj Singh, a member of the contract negotiation team. He later moved with Mr. Molefe to Eskom. At a parliamentary inquiry last month, the inquiry’s leaders confronted Mr. Singh with documents showing that the Guptas had regularly paid for his US$475-a-night room at the luxury Oberoi hotel in Dubai in 2014 and 2015, along with massages and meals at the hotel, often on days when the Guptas were also there.

Opposition MPs have accused Mr. Molefe and Mr. Singh of corruption, which they deny.

The MPs have alleged that the two men helped the Guptas make huge profits by gaining control of a coal company and then winning lucrative coal contracts from Eskom.

Mr. Molefe and Mr. Singh were key decision-makers on the locomotive contract at Transnet in 2014, although media reports have also identified several other Transnet board members and executives as associates of the Guptas.

David Fine, a senior partner at McKinsey, which had been hired by Transnet, produced the original calculation in 2013 that the locomotives could be bought much more cheaply. He told the parliamentary inquiry that he asked Mr. Singh for an explanation of the higher price in 2014, and Mr. Singh replied that the increase was due to “funding costs, exchange rates and inflation.” Mr. Fine’s original estimate had included those factors.

“THE SHOCK OF MY LIFE”

The Gupta influence over rail contracts can be traced back to 2012. At that time, Transnet and the Passenger Rail Agency of South Africa (PRASA), were separately beginning processes to procure new locomotives and coaches. These were ambitious multibillion-dollar contracts at a time when the Guptas were beginning to exercise influence over both of the stateowned agencies.

Lucky Montana, former CEO of PRASA, testified to the parliamentary inquiry on Jan. 30 that he knew that the Transnet locomotive contract would be corrupt as soon as he learned that Gupta associates were involved. “I had no doubt that the books would be cooked,” he told the inquiry.

In September of 2012, he said, he was approached by Rajesh Gupta and Mr. Zuma’s son, Duduzane, a long-time business partner of the Guptas. Meeting him at the home of South Africa’s Transport Minister, they told him they wanted a slice of the contract to supply rail equipment to PRASA.

Bombardier was among the front-runners at that point.

Shortly afterward, Mr. Montana attended a major rail conference in Berlin. He testified that a number of train manufacturers complained to him there that the Guptas were extorting money from them.

He said the manufacturers told him the Guptas claimed to represent Mr. Zuma and other senior officials, and they instructed the manufacturers to pay money into a bank account in Dubai if they wanted the PRASA contract. The manufacturers also said they were summoned to a meeting in Zurich to meet a Gupta associate to discuss the details of the kickback deal.

“It was the shock of my life,” Mr. Montana told the inquiry. “I was so furious.”

In separate testimony, former transport minister Ben Martins confirmed that Mr. Montana had told him the Guptas were demanding money from the manufacturers.

Mr. Montana and Mr. Martins both testified that they reprimanded Rajesh Gupta and Duduzane Zuma for their conduct – but did not report them to the police or other authorities.

“They were arrogant,” Mr. Montana testified. “They even suggested that I could work with them and get my money in Dubai as well. I made it clear that what they were doing was unlawful and that they could not collect monies in our names.”

The Guptas wanted a Chinese supplier to win the PRASA contract, and they accused Mr. Montana of favouring Bombardier, he testified. “I rejected the accusation very strongly.”

After the meeting, he said, a Gupta associate gave him a cheap anonymous cellphone to use for discussions with the associate about the Chinese supplier, but he refused to use it.

The Guptas then pushed aggressively for the appointment of a new board of directors at PRASA to ensure that the contract would be awarded to the Chinese. In the end, the contract went to a French-led consortium, which sparked fury from the Guptas and several senior South African officials, Mr. Montana said.

The train manufacturers are “not innocent” in these contracts, Mr. Montana testified. He said they routinely include a “marketing fund” in their contract bids. “It’s about paying bribes.”

Mr. Montana’s testimony about a Gupta-organized meeting with rail manufacturers in Zurich in 2012 matches a similar account by a South African businessman who spoke to The Globe last year.

The businessman, who owns a well-established South African company, said he was invited to a meeting between Bombardier, Transnet and Gupta associates in Zurich in the fall of 2012 and heard some eye-opening demands from the Gupta associates.

The businessman does not want to be identified publicly because he could lose his government contracts – a substantial portion of his revenue.

But he has given the same account of the Zurich meeting, consistent in its details, to several people in South Africa over the past two years. He told The Globe he wants the Zurich meeting to be exposed because of his concern about the Guptas and their relationship with the government.

At the Zurich meeting, he said, the Gupta associates told a Bombardier executive that the Canadian company had lost an earlier locomotive contract in South Africa because it was not connected to the “right crowd.”

He said they told Bombardier that they controlled the procurement budget of several state-owned companies, including Transnet, and they wanted a commission worth 20 per cent of the value of the Transnet locomotive contract in exchange for funnelling the contract to Bombardier.

The Bombardier executive was shocked, he said, describing him as nearly falling off his chair at the demand and insisting it was impossible. According to the businessman, the Gupta associates then asked for a substantial discount on a luxury jet from Bombardier’s aviation division in exchange for the Transnet contract. He said the Bombardier executive did not accept or reject this proposal at the Zurich meeting.

The Guptas did not respond to messages from The Globe seeking comment on these allegations.

Bombardier officials, responding to questions from

The Globe, have said that they cannot find any record of the Zurich meeting. They deny any influence by intermediaries in the Transnet contract.

“Bombardier Transportation was awarded Transnet’s contract following an open and proper competitive process,” said Mr. Marcil, the Canadian company’s vice-president of external relations. “Bombardier Transportation won that contract solely on the basis of our proposal, which included fair pricing and our unmatched technical ability to deliver a high-quality product and fully meet the local content requirements.”

On the question of the Zurich meeting, Mr. Marcil said rail manufacturers “meet with hundreds of people in trade shows, in both formal and casual settings with potential clients, transit authorities, current or potential investors” and it would be irresponsible to “draw any conclusions from these possible encounters.”

He said Bombardier’s code of ethics is one of the strictest in its industry. “Bombardier has zero tolerance for unethical or improper behaviour in our business dealings,” he said.

“We do not participate or tolerate any sort of kickback schemes in any market where we are conducting business or operations. When we confront these circumstances on occasion, we reject and report them.”

MULTIPLE INVESTIGATIONS

About 18 months after the Zurich meeting, Bombardier met the Guptas in Johannesburg and formally offered the discount on the luxury jet. That deal was finalized in early 2015.

The 13-passenger intercontinental jet, officially registered as ZS-OAK in honour of the Gupta holding company Oakbay Investments, has become a symbol of the wealth and influence of the Guptas. The jet has gained notoriety in the South African media for its many trips from Johannesburg to Dubai and Zurich, often with cabinet ministers or other state officials on board.

More than a year after the aircraft deal, according to the leaked e-mails obtained by The Globe, Bombardier was negotiating the sale of a second jet to a prominent Gupta associate. The second jet was also a Global 6000, although the price is not known.

The e-mails suggest the second jet was to be acquired by Salim Essa, a senior Gupta lieutenant. But the deal fell through for unknown reasons.

Despite Bombardier’s repeated insistence that its conduct was above board, the locomotive contract is already included in the scope of several South African investigations and is likely to be included in others.

Transnet is conducting its own internal investigation of all media reports of alleged kickbacks in its procurement processes, including the reported “consulting fees” from the Chinese company in the locomotive deal. It says it views the allegations “in a serious light” and vows to take “corrective measures” if there was any misconduct.

In a separate review, Transnet hired a law firm to investigate a number of contracts, including the entire 2014 locomotive contract that was divided among Bombardier, General Electric and the Chinese companies.

In mid-February, Transnet said the law firm’s locomotive investigation was still “incomplete.” It said it would refer the issue to the judicial inquiry into state corruption. But a cabinet minister, Lynne Brown, ordered Transnet to report the law firm’s findings to law-enforcement agencies.

A parliamentary committee, meanwhile, plans to investigate the locomotive contract because of reports that the suppliers failed to meet their promises to procure local components for the locomotives.

Dean Macpherson, a parliamentarian from the opposition Democratic Alliance, is a member of a parliamentary committee that is probing the locomotive deal. He wants the committee to investigate the possibility of a link between the Transnet contract and the Gupta jet acquisitions from Bombardier.

“I have no doubt that there could be a link there,” he told The Globe. “I want that information, I need that information, to assist our investigation.”

The Public Protector’s report in 2016 called for a judicial inquiry into the allegations of corruption involving the Guptas and state-owned enterprises such as Transnet and Eskom.

For more than a year, Mr. Zuma used legal tactics to stall the recommendation, but in January he agreed to authorize the judicial inquiry, which will be headed by the deputy chief justice of South Africa’s highest court.

The Public Protector’s office recommended in January that the judicial inquiry should examine the alleged kickbacks by the Chinese manufacturer in the Transnet locomotive deal.

It also urged the inquiry to examine all “role players” in the entire locomotive deal.

Other investigations are also likely. Ms. Brown, who was minister of public enterprises until a recent cabinet shuffle, said on Jan. 30 that she has asked Mr. Zuma to accelerate the authorizing of an investigation into Transnet and Eskom contracts by the Special Investigating Unit, a state agency that has the power to recommend criminal charges.

David Lewis, executive director of Corruption Watch, an independent non-profit watchdog that has been providing evidence for South African and international investigations into Gupta-related allegations, says Bombardier is among the many companies that should be investigated.

In an interview, he told The Globe that the e-mail from the Bombardier executive to Ajay Gupta – which suggested that the Guptas could work together with Bombardier on infrastructure business if the aircraft deal is finalized – is a “smoking gun” that should be investigated.

He said the “modus operandi” of the Guptas in all of their South African deals, including the locomotive contract, was to insert themselves as an intermediary between the state-owned enterprise and its suppliers.

“It all looks too familiar,” he said. “So often a facilitator is part of the business. It’s consistent with the way the Guptas have done business.”



OVERNIGHT RATE



BANK OF CANADA. March 7, 2018. Bank of Canada maintains overnight rate target at 1 1/4 per cent

Ottawa, Ontario - The Bank of Canada today maintained its target for the overnight rate at 1 1/4 per cent. The Bank Rate is correspondingly 1 1/2 per cent and the deposit rate is 1 per cent.

Global growth remains solid and broad-based. In the United States, new government spending and previously-announced tax cuts are anticipated to boost growth in 2018 and 2019. However, trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks.

In Canada, the national accounts data show that the economy grew by 3 per cent in 2017, bringing the level of real GDP in line with the projection in the Bank’s January Monetary Policy Report (MPR). In the fourth quarter, GDP growth was slower than expected, largely due to higher imports, while exports made only a partial recovery from their third-quarter decline. The gain in imports mainly reflected stronger business investment, which adds to the economy’s capacity.

Strong housing data in late 2017, and softer data at the beginning of this year, indicate some pulling forward of demand ahead of new mortgage guidelines and other policy measures. It will take some time to fully assess the impact of these, as well as recently announced provincial measures, on housing demand and prices. More broadly, the Bank continues to monitor the economy’s sensitivity to higher interest rates. Notably, household credit growth has decelerated for three consecutive months. The implications of the recent federal budget for the outlook for growth and inflation will be incorporated in the Bank’s April projection.

Inflation is running close to the 2 per cent target and the Bank’s core measures of inflation have edged up, consistent with an economy operating near capacity. Wage growth has firmed, but remains lower than would be typical in an economy with no labour market slack. Inflation is fluctuating because of temporary factors related to gasoline, electricity, and minimum wages.

In this context, Governing Council maintained the target for the overnight rate at 1 1/4 per cent. While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target. Governing Council will remain cautious in considering future policy adjustments, guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.

FULL DOCUMENT: https://www.bankofcanada.ca/wp-content/uploads/2018/03/fad-press-release-2018-03-07.pdf

THE GLOBE AND MAIL. MARCH 7, 2018. INTEREST RATES. Cautious Bank of Canada warns on trade uncertainty, borrowing slowdown
BARRIE MCKENNA

OTTAWA - Canada's central bank is taking a go-slow approach to raising interest rates as it weighs the fallout from new U.S. protectionist threats and a slowdown in household borrowing.

As widely expected, the Bank of Canada kept its key interest rate unchanged at 1.25 per cent Wednesday. The bank has raised rates three times since June 2017, forcing up the rates commercial banks charge on mortgages and other loans.

The bank said it remains "cautious" about its next rate move as it ponders various downside risks to the economy.

"While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target," according to a statement from the bank's governing council.

The statement could temper expectations that the central bank will raise rates three more times this year. A growing number of analysts now say that a more likely scenario is just one more hike in 2018 – raising the overnight rate to 1.5 per cent. The Canadian dollar fell sharply in the wake of the announcement, trading down about half a cent at 77.05 US cents by late morning.

Canada's economy was slowing at the end of 2017, with annualized growth of 1.7 per cent in the fourth quarter. That's down sharply from the 3-per-cent pace for the year as a whole.

Wednesday's interest rate pause comes as U.S. President Donald Trump's threat of imminent tariffs on steel and aluminum imports is spreading fear of a global trade war. Canada is the largest exporter of both commodities to the U.S. It and other countries have vowed to retaliate if hit with U.S. tariffs.

Canada is also facing uncertainty over the fate of the North American free trade agreement. The U.S. is demanding deep concessions from both Canada and Mexico in ongoing renegotiation talks.

The central bank acknowledged these growing trade problems in its statement.

"Trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks," the bank said, even while acknowledging that global growth remains solid.

The other main preoccupation for the bank is the housing sector, particularly in B.C. and Ontario, as higher interest rates and various government-led measures cool housing activity.

The Bank of Canada pointed out that household credit growth has "decelerated for three consecutive months" – in November, December and January.

The bank said it will take "some time to fully assess" the effect of new restrictions on access to federal mortgage insurance as well as measures by the B.C. and Ontario governments to discourage housing speculators and foreign buyers.

Toronto's housing market is showing clear signs of cooling, with resale activity down sharply in recent months. But the Vancouver market remains much hotter, with prices still rising.

"The bank continues to monitor the economy's sensitivity to higher interest rates," according to the statement.

Meanwhile, the bank said inflation is "running close" to the bank's 2 per cent target. The bank said its various measures of core inflation have "edged up, consistent with an economy operating near capacity," according to the statement.

The bank cautioned that while wage growth has "firmed," it "remains lower than would be typical in an economy with no labour market slack."

"Cooling growth left little reason for central bankers to rush another rate hike, but US steel and aluminum tariffs sealed the deal," CIBC Capital Markets economist Royce Mendes said in a research note.

The bank's next rate announcement is slated for April 18, when the bank releases its second quarterly economic forecast of 2018.

The Globe and Mail. BLOOMBERG. 7 Mar 2018. Trade threats may amplify BoC’s caution on rate hikes
THEOPHILOS ARGITIS NEWS

Bank of Canada Governor Stephen Poloz’s preoccupation with uncertainty probably means a longer pause on interest rates, in a world of fraying trade alliances and volatile markets.

The central banker is expected to leave his benchmark borrowing cost unchanged at 1.25 per cent at a rate decision on Wednesday at 10 a.m., according to all 21 economists surveyed by Bloomberg News, with forward contracts pricing in just a 13-per-cent chance of a hike.

Investors have been paring back the odds of rate hikes in recent weeks on the back of a run of soft economic data, global market turmoil and growing geopolitical concerns that are expected to heighten Mr. Poloz’s already-elevated levels of caution with tightening monetary policy further.

“This one is likely to be a maintenance statement with a more cautious spin that buys time to assess developments,” Derek Holt, an economist with Bank of Nova Scotia, said in a report. “There are some rather compelling reasons to pause the hike cycle.”

These include, according to Mr. Holt, uncertainty around trade policy that has worsened with U.S. President Donald Trump’s threats to impose tariffs on steel and aluminum, weaker growth numbers, and sluggish investment plans by businesses.

Mr. Poloz’s next interest-rate increase – which would be the fourth in the rate-hike cycle – isn’t being fully priced in until July, swaps trading suggests. A month ago, investors were pricing in at least one increase by May, with a good chance of an April hike.

Investors are expecting the Federal Reserve to outpace the Bank of Canada on rate hikes over the next 12 months, with at least three hikes in the United States over that time versus two for Canada. The rate divergence has been a drag on the Canadian dollar, which has lost 4 per cent since Mr. Poloz’s most recent rate hike on Jan. 17.

Growing geopolitical concerns could be particularly meaningful to a central banker such as Mr. Poloz, who has put uncertainty at the forefront of his economic analysis.

That focus was on display last week when Mr. Poloz travelled to London to receive an award from Central Banking, a trade publication. In his acceptance speech, he chose to highlight the Bank of Canada’s efforts to be “open and honest” about uncertainty in its policy making.

Mr. Poloz’s narrative boils down to something like this: There is more uncertainty in the world today. This heightened uncertainty is the sort you can’t measure or estimate. Geopolitics is an important factor, but so is growing uncertainty about the reliability of models to prescribe policy. Because of this, policy makers are injecting more “realism” and judgment into the narrative and nudging the decisionmaking process toward something that looks less like a mechanical exercise akin to engineering and more like risk management. More art, less science, in Mr. Poloz’s words. This is important since the Bank of Canada’s “mechanical” models are probably telling it to raise interest rates faster than it has, as the country runs up against capacity.

Gradualism is simply the inevitable outcome of a world view that puts a greater emphasis on uncertainty.

“We have been working on the theme of uncertainty since the global financial crisis revealed the limits of our models and our knowledge,” Mr. Poloz said in his speech. “And we have learned that it is far better to be open and honest about the uncertainty we face, as well as how we deal with it, rather than to just assume the uncertainty away and project a false sense of confidence.”

Not everyone is fully bought into Mr. Poloz’s focus on risk management. One critique is that the Bank of Canada’s emphasis on uncertainty generates blurry economic analysis, gives officials too much discretion in setting policy and makes it difficult for market players to pin down intentions and form expectations. In other words, it could end up fuelling “policy uncertainty” and result in unnecessary volatility.

REUTERS. MARCH 7, 2018. Bank of Canada holds rates steady, cites trade uncertainty

OTTAWA (Reuters) - The Bank of Canada held interest rates steady on Wednesday, as expected, saying that while trade policy is an “important and growing source of uncertainty,” inflation is running close to 2 percent and the economy is near capacity.

Reiterating its key January phrasing word-for-word, the bank said that while more hikes are probably warranted, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target, and pledged caution in considering future rate moves.

Nodding to the dual influences of policy decisions in the United States, Canada’s largest export market, the bank said that new U.S. government spending and tax cuts are anticipated to boost American growth in 2018 and 2019.

“However, trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks,” the bank said.

U.S. President Donald Trump said last week he would impose global tariffs on steel and aluminum, later adding that Canada could get a better deal if it agrees to U.S. terms in the renegotiation of the North American Free Trade Agreement. Canada is hoping for an exemption from the tariffs. NAFTA spans the United States, Canada and Mexico.

Disruptions to trade would sideswipe Canada’s export-led economy and make it difficult for the Bank of Canada to continue hiking rates, even as inflation pressures are beginning to build.

In holding rates steady after three rate hikes since last July, the bank acknowledged that fourth-quarter GDP growth was slower than expected, largely due to higher imports, while exports made only a partial recovery from their third-quarter decline.

The gain in imports mainly reflects stronger business investment, which adds to the economy’s capacity, the bank said.

“Inflation is running close to the 2 percent target and the bank’s core measures of inflation have edged up, consistent with an economy operating near capacity,” the bank said.

It noted that while wage growth has firmed, it “remains lower than would be typical in an economy with no labor market slack.”

Turning to Canada’s precarious housing market, the bank said strong data late in 2017 and softer data this year suggests that some demand was pulled forward ahead of new mortgage rules that have made it harder for some buyers to get financing.

It also noted that household credit growth has decelerated for three straight months, and reiterated that policymakers continue to monitor the economy’s sensitivity to higher borrowing costs.

Reporting by Andrea Hopkins; Editing by Will Dunham

BLOOMBERG. 7 March 2018. Bank of Canada Flags Trade Policy Risks in Holding Rates Steady
By Theophilos Argitis

  • Recent trade developments are source of uncertainty to outlook
  • Central bank says it will take time to assess housing trends

The Bank of Canada kept borrowing costs on hold Wednesday and indicated it’s no rush to pursue aggressive interest rate hikes amid growing global trade tensions and softer housing data.

The statement, which left the benchmark rate at 1.25 percent, repeated dovish language about moving cautiously in an economy that will require continued stimulus. The broader trade comment was new, though policy makers made no explicit mention of U.S. President Donald Trump’s threats to impose tariffs on steel and aluminum.

While global growth is “solid and broad-based,” recent developments in trade policy have become “an important and growing source of uncertainty” for the Canadian economic outlook, the central bank said.

Investors have pared bets on rate hikes after a run of soft economic data, turmoil in global equity markets and growing geopolitical concerns. That may increase Bank of Canada Governor Stephen Poloz’s caution about any decision to tighten monetary policy further. While the Bank of Canada has been highlighting risks to the North American Free Trade Agreement for months, the latest language suggests those concerns have evolved.

Wednesday’s statement didn’t mention Nafta.

Paring Bets

Traders aren’t fully pricing in the next rate increase -- which would be the fourth in the cycle -- until July, according to Bloomberg calculations on overnight index swaps. A month ago, traders were pricing in at least one increase by May, with a good chance of an April hike. The market expects two to three more hikes later this year, with the odds of two being higher.

The Canadian dollar traded 0.7 percent weaker at C$1.2963 against the U.S. dollar at 10:42 a.m. Toronto time, down 2.9 percent this year, the worst performing currency among 16 majors tracked by Bloomberg.

Rates fell slightly across the curve, with the yield on the country’s two-year bonds down two basis points to 1.75 percent to match a seven-week low reached earlier this week. The yield on 10-year debt was down three basis points to 2.21 percent.

The statement was “modestly dovish” for flagging trade policy developments, John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in Hellerup, Denmark, said in an inteview.

By the central bank’s own measure, interest rates are still about 2 percentage points below what it would consider “neutral” and the central bank did repeat it expects borrowing csots to continue going higher.

Dovish Language

But the key policy-related language at the end of Wednesday rate statement was almost word-for-word what it was in the January statement, with a dovish tone:

“While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating closed to potential and inflation on target,” policy makers said. “Governing Council will remains cautious in considering future policy adjustments, guided by incoming data in assessing the economy’s sensitivity to interest rets, the evolution of economic capacity, and the dynamics of both wage growth and inflation.”

Housing

Policy makers had more to say about housing though, dedicating a full paragraph in the brief statement to the issue. The Bank of Canada said it will “take some time to fully assess” the impact of regulatory tightening, including tougher mortgage qualification rules that came into effect Jan. 1. In addition, the central bank said it continues to monitor the economy’s sensitivity to higher rates, and highlighted a recent deceleration in household credit.

The central bank’s assessment of recent economic developments was largely neutral. While policy makers highlighted slower than expected growth in the fourth quarter, they pointed out that it was driven by higher imports that were fueled by business investment, which they said adds to the economy’s capacity.

Inflation running at close to their 2 percent target suggests an economy operating near capacity, but wage growth levels are lower than what would be consistent with no labor slack. That too is largely a repeat.

More Highlights

  • New U.S. government spending and tax cuts should provide a boost to growth
  • 3 percent Canadian growth in 2017 was in line with projection in January monetary policy report
  • Strong housing data at end of 2017 indicates “some pulling forward of demand ahead of new mortgage guidelines and other policy measures”
  • Implications of recent federal budget will be incorporated into April monetary policy report
  • Inflation is fluctuating because of temporary factors

— With assistance by Erik Hertzberg, Lananh Nguyen, and Maciej Onoszko



BUDGET



Fisheries and Oceans Canada. 2018-03-06. Minister LeBlanc to discuss Budget 2018 with Canadians in Halifax

Dartmouth, Nova Scotia – The Honourable Dominic LeBlanc, Minister of Fisheries, Oceans and the Canadian Coast Guard, on March 7, 2018, 2:30pm ET, will visit a community centre to highlight Budget 2018 measures to enhance support for low-income workers.

Canadian Heritage. March 6, 2018. Budget 2018: Investing in Canada’s Innovators, Scientists and Researchers

MONTRÉAL - Today, the Honourable Mélanie Joly, Minister of Canadian Heritage, visited Polytechnique Montréal to highlight how the Government is taking significant steps, through Budget 2018, to support leading-edge science by investing in the new generation of research and researchers, including women, visible minorities and Indigenous Peoples. The Government is investing in the people behind the ideas that will change the way we live our lives—through new investments of nearly $4 billion over five years to support the next generation of Canadian research and researchers.

To transform government innovation programs to better meet the needs of Canadian businesses, Budget 2018 builds on the Government’s Innovation and Skills Plan, increasing its funding while consolidating business innovation programs, making them easier to navigate and more responsive to the challenges and opportunities businesses face today and in the future.

In Budget 2018, the Government is also introducing the Women Entrepreneurship Strategy, which focuses on skills and access to capital, mentorship and networking to help empower women to fully participate in and benefit from a growing economy. These investments will help more women-owned companies grow into world-class businesses so that they continue driving economic growth that benefits all.

With Budget 2018 the Government proposes to:

  • invest in the next generation of Canadian research and researchers by providing more than $1.7 billion over five years to:
    • support granting councils and research institutes by providing increased support and training opportunities for the work of some 21,000 researchers, students and high-quality personnel every year, including funding targeted specifically for research that promotes collaboration and is international and interdisciplinary
    • ensure researchers have the necessary space and support to undertake high-quality multidisciplinary research by providing funding for the Research Support Fund, which provides universities with resources to cover the indirect costs of research
    • attract and retain leading, young and early-career researchers at post-secondary institutions across the country by proposing new funding for the Canada Research Chairs program
  • invest $1.3 billion over five years to ensure researchers have access to the world-class research laboratories and equipment they need at Canadian universities, polytechnics, colleges and research hospitals, including $763 million for the Canada Foundation for Innovation and $572.5 million for a Digital Research Infrastructure Strategy
With Budget 2018, the Government also proposes to renew its commitment to supporting scientific research by:

  • enhancing the National Research Council to reinforce its research strengths and its role as a trusted partner with large-scale national teams committed to explore disruptive technologies and cutting-edge innovation
  • bringing together federal scientists and researchers across the country by proposing $2.8 billion on a cash basis over five years to build collaborative federal science and technology facilities

Through Budget 2018, the Government also proposes to provide $2.6 billion over five years in additional support to make it easier for Canadians to do business and for entrepreneurs to access the resources they need to innovate, scale up, create jobs and reach new customers around the world.

Quotes

“Montréal is home to some of the most talented researchers and cutting-edge technological facilities in the country and in the world. With Budget 2018, our government is making historic investments to drive innovation, support good jobs and help the next generation of scientists meet the challenges of the changing economy. This includes empowering girls and women to pursue careers in the sciences, which will help ensure that these industries better represent and can benefit from diverse voices and perspectives, while growing our economy and supporting the middle class.”

—The Honourable Mélanie Joly, Minister of Canadian Heritage

Quick facts

  • Budget 2018 builds on the Government’s Innovation and Skills Plan.
  • In Budget 2018, the Government is also introducing the Women Entrepreneurship to help empower women to more fully participate in and benefit from a growing economy.
  • With Budget 2018, the Government also proposes to renew its commitment to supporting scientific research.

FULL DOCUMENT: https://www.canada.ca/en/canadian-heritage/news/2018/03/budget-2018-investing-in-canadas-innovators-scientists-and-researchers.html

Employment and Social Development Canada. March 7, 2018. Budget 2018: More help for those who need it with the new Canada Workers Benefit

Montreal, Québec - The Government of Canada’s plan to build a strong middle class is working. It is creating jobs and economic growth and building confidence. In Budget 2018, the Government is taking the next step to ensure that all Canadians have the opportunity to contribute to, and benefit from, a growing economy. The Government proposes to strengthen programs that make the biggest difference in people’s lives, and is making those programs easier to access.

Today, the Honourable Jean-Yves Duclos, Minister of Families, Children and Social Development was in Montreal to highlight Budget 2018 investments and speak to the new Canada Workers Benefit (CWB), a strengthened version of the Working Income Tax Benefit (WITB). The CWB will allow more low-income workers to keep more of their paycheque while they work, encouraging more Canadians to join the workforce.  It offers real help to more than two million Canadians who are working hard to join the middle class and will raise around 70,000 Canadians out of poverty by 2020.

With almost $1 billion in new funding starting in 2019, the proposed CWB will increase both maximum benefits and the income level at which the benefit is entirely phased out. As a result, a low-income worker earning $15,000 could receive up to almost $500 more from the CWB in 2019 than under the WITB in 2018 to invest in the things that are important to them. Unlike the WITB, starting in 2019, everyone who can benefit from the CWB will receive it even if they do not claim it when they file their taxes.

Canada’s prosperity depends on making sure every Canadian has an equal and fair chance at success. That is why in Budget 2018, the Government is putting gender at the heart of its decision-making, working to help support women and girls, reduce the gender wage gap, and increase the participation of women in the labour force—which helps boost economic growth for all Canadians. Advancing women’s equality in Canada will drive economic growth, while boosting the income of Canadian families. More women in leadership positions won’t just grow the economy, create jobs, and strengthen communities, it will also lead to innovation and change in the workplace that will benefit everyone.

Budget 2018 plans continue to invest in the middle class and take significant steps to ensure everyone has the opportunity to fully contribute to the growth of the Canadian economy.

Quotes

“Providing Canadians with the opportunity to realize their full potential isn’t just the right thing to do, it’s the smart thing to do for our economy. An enhanced Canada Workers Benefit will expand opportunities for low-income working Canadians to benefit from their efforts. By helping those who need it keep more of their paycheque to put toward the things they need, the Government is helping to build a stronger economy that benefits all Canadians.”

– The Honourable Jean-Yves Duclos, Minister of Families, Children and Social Development

FULL DOCUMENT: https://www.canada.ca/en/employment-social-development/news/2018/03/budget-2018-more-help-for-those-who-need-it-with-the-new-canada-workers-benefit.html

The Globe and Mail. 7 Mar 2018. Canadians say Ottawa’s deficit approach is ‘wrong’: survey
BILL CURRY, With files from James Bradshaw

The federal government’s own internal surveys found Canadians believe Ottawa is getting it “wrong” on deficits and spending, but that didn’t stop the Liberals from releasing a third consecutive deficit budget with no timeline for balancing the books.

The Finance Department also tested Canadians’ appetite for a national sugar tax, but the Liberal budget ultimately took a pass on the controversial proposal for tackling obesity.

The fact that Finance Minister Bill Morneau’s Feb. 27 budget contained no timeline for returning to balanced budgets was one of the biggest sources of criticism the minister faced.

Mr. Morneau’s department hired Quorus Consulting Group to conduct a mix of focus groups and phone surveys over the summer and fall of 2017. A final report is dated Nov. 24, 2017, and it was recently made public under federal disclosure rules.

The 2018 budget focused on gender equality in the work force and increased funding for scientific research. It also devoted relatively small amounts of new spending to a large number of areas, including regional development, addressing opioid abuse and increased funding for Canada’s spy agencies.

The budget projects an $18.1billion deficit for 2018-19. The size of the deficit is projected to decline to $12.3-billion in 2022-23. Each of the annual projected deficits during that five-year projection period represent less than 1 per cent of Canada’s gross domestic product.

The size of the federal debt is projected to grow from $669.6billion in 2018-19, to $730.1-billion in 2022-23. When measured as a percentage of GDP, the size of the debt would decline during that same five-year period, from 30.1 per cent to 28.4 per cent.

The scale of deficit spending is at odds with a key Liberal election promise. The Liberals’ 2015 campaign platform pledged to keep annual deficits under $10billion and to balance the books by 2019.

The government’s new fiscal track is currently the subject of considerable debate among politicians and economists. While some economists say the size of the federal debt is far from being a concern, critics say the higher cost of financing that debt as interest rates rise leaves Ottawa with less money for other priorities, such as new spending or tax cuts.

Scotiabank economists Jean-François Perrault and Mary Webb, for instance, said in a postbudget note that it would have been “more prudent” to focus on lowering the deficit so that those savings are available in the event of an economic downturn.

The chief executive of Canada’s largest bank also took issue with the government’s spending plans on Tuesday. Royal Bank of Canada CEO Dave McKay said he’s concerned that government largesse, combined with high consumer spending among Canadians, “particularly on housing,” is “overdriving the economy.”

“We’re running significant deficits in the country to continue to spur growth at a time when maybe we should be running a surplus given the economic strength out there,” he said at a conference in New York.

The government’s publicopinion research suggests most Canadians share that view.

The polling report states that focus group participants “felt the government has been getting the following wrong” over the past year, listing “deficits and spending,” followed by not doing enough for First Nations, abandoning electoral reform, legalizing marijuana and “taking care of who is crossing our border into Canada from the U.S.”

The research included 10 small focus groups across the country in August with a total of 71 individuals. Focus groups are used to allow for more in-depth discussions, but their small sample size means the results should not be considered representative of a lager population.

The report is also based on a telephone survey of 2,000 Canadians conducted between Sept. 6 and Oct. 1, 2017. A survey of that size has a margin of error of plus or minus 2.2 per cent, 19 times out of 20.

The phone survey found that more than six in 10 Canadians believe reducing the federal deficit should be a priority, but other issues presented to participants ranked higher. Creating jobs was the top priority, with 87-per-cent support, followed by increasing economic growth, making the richest Canadians pay their fair share in taxes and making the tax code fairer.

The survey breaks down the views of Canadians on the deficit, finding that Quebec residents are by far the least concerned by the federal deficit. Men are slightly more likely than women to list the deficit as a priority,

The issue of taxing sugary drinks was raised during the focus groups, but not in the telephone survey. The report said “many were in favour of the tax.”

Canada has faced pressure from the World Health Organization, the Heart and Stroke Foundation and Diabetes Canada to follow the lead of other countries – such as Britain – in adopting a sugar tax. The 2018 federal budget made no reference to a sugar tax.


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LGCJ.:
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