CANADA ECONOMICS
CANADA - US
PM. Canada Border Services Agency (CBSA) and Global Affairs Canada. April 26, 2018. Canada further strengthens trade enforcement to protect steel and aluminum workers and industries
Ottawa, Ontario - The Prime Minister, Justin Trudeau, today announced increased funding for the Canada Border Services Agency (CBSA) and Global Affairs Canada to further strengthen Canada’s trade enforcement.
This further bolsters Canada’s efforts to prevent transshipment and diversion of unfairly priced foreign steel and aluminum into the North American market. While Canada already has strong and effective enforcement, we are taking these additional steps to ensure our workers and industries are not harmed by unfair trade.
The new funding – more than $30 million over five years, starting immediately, and $6.8 million per year after that – will mean more than 40 new officers to investigate trade-related complaints, including those related to steel and aluminum.
This will also enable the gathering of more accurate data on imports to help us better monitor trade trends and better protect our industries and workers against unfair trade.
In addition to the new funding, the Government of Canada is:
- Further aligning Canada’s marking regime with that of our closest trading partner, the United States. Regulatory changes – subject to a 15-day consultation period through the Canada Gazette – will expand the scope of steel and aluminum products that need to be marked with their country of origin.
- Bringing into force the regulations announced by the Prime Minister on March 27, 2018. These include regulatory changes that allow the CBSA to identify and stop companies that try to avoid duties, and that give the CBSA greater flexibility to determine whether prices charged in the exporter’s domestic market are distorted. They also include measures to give unions standing to participate in trade remedy proceedings.
The Government of Canada is also consulting regularly with provincial-territorial representatives, as well as industry and union stakeholders, through recently established trade monitoring committees on steel and aluminum to ensure imports do not hurt Canadian and North American jobs.
Canada will continue to monitor the trade situation closely, and will take additional steps as needed to support our industries.
Quote
“Canadian workers and industries deserve a level playing field, and we will continue to protect them from unfair trade practices. Part of that includes making sure Canadian trade enforcement agencies have the resources they need to defend the competitiveness of our businesses and our important North American trading relationships. We will stand up for our workers and industries, and do what is needed to preserve the fair and open trading environment they depend on.”
—The Rt. Hon. Justin Trudeau, Prime Minister of Canada
Quick Facts
- Canada’s trade remedy system helps preserve a fair and open trading environment for our producers. It protects Canadian businesses from the impacts of foreign goods that have benefited from unfair subsidies or that are being sold in Canada at artificially low prices.
- There are currently 72 trade remedy measures in force on steel and aluminum imports, applied to 23 countries. Canada’s enforcement regime ensures that 100 per cent of steel shipments identified as potentially subject to trade remedy measures are verified by the CBSA in a timely and comprehensive manner.
- In 2017, the Canadian steel industry employed more than 23,000 Canadians and contributed $4.2 billion to Canada’s gross domestic product (GDP). The Canadian aluminum industry employed 10,500 workers while contributing $4.7 billion to Canada’s GDP. These industries are vital suppliers to the Canadian manufacturing, energy, automotive, and construction industries.
Canada acts to further prevent transshipment and diversion of steel and aluminum to protect North American workers against unfair trade
The transshipment and diversion of unfairly cheap foreign steel and aluminum is a threat to Canadian jobs and the North American market.
Canada already has one of the toughest enforcement regimes in the world to combat this practice. We currently have 71 trade remedy measures in force on steel and aluminum imports alone. And we are strengthening enforcement further to stop foreign exporters from avoiding duties meant to level the playing field.
The following regulatory changes will be brought forward and be subject to a 15-day consultation period through the Canada Gazette:
- New anti-circumvention investigations will allow the Canada Border Services Agency to identify and stop companies that try to dodge duties (for example, by slightly modifying products or assembling them in Canada or a third country).
- In calculating duties, the Canada Border Services Agency will have greater flexibility in determining whether prices charged in the exporter’s domestic market, which we use for comparison, are reliable or distorted.
- Unions will gain standing to participate in trade-remedy proceedings, including at the Canadian International Trade Tribunal, into whether foreign exports are hurting domestic producers.
In addition, the Government of Canada will:
- Coordinate more closely with our partners to strengthen enforcement at the border, including by increasing the frequency of meetings between border agencies. This will improve the sharing of information and enforcement action. We will also urgently undertake a review to make sure our enforcement agencies have all the resources they need to take action on unfair trade.
- Look to meet more often with the United States and Mexico to identify and discuss solutions to issues that harm all three countries, including transshipment, diversion, and global overcapacity.
- Participate in new federal-provincial-territorial-stakeholder committees, which will meet regularly to monitor steel and aluminum trade to ensure imports do not hurt Canadian and North American jobs.
We will always stand up for Canadian steel and aluminum workers and the Canadian steel and aluminum industry.
Quote
“Canada is a trading nation, and we will not allow North American industries to be hurt or threatened by unfair trade practices, like the diversion of steel and aluminum. Our businesses and workers rely on our integrated industries, and we will take strong action to defend and protect our most important trade relationships. Canada will not be used as a backdoor into other North American markets. Our people have worked hard to be competitive in this global economy, and they deserve a level playing field.”
—The Rt. Hon. Justin Trudeau, Prime Minister of Canada
Quick Facts
- Canada’s trade remedy system helps preserve a fair and open trading environment for our producers. It protects Canadian businesses from the impacts of foreign goods that have benefited from unfair subsidies or that are being sold in Canada at artificially low prices.
- Our trade remedy system includes a robust compliance regime to impose duties. Currently, we have imposed trade remedies against 17 different steel products and 23 countries.
- In Budget 2017, the Government of Canada announced measures to strengthen and modernize our trade remedy system. Changes to the Special Import Measures Act received Royal Assent in June 2017 as part of the Budget Implementation Act, 2017, No. 1, and regulatory changes are being proposed to support and fully implement these measures in the weeks to come.
- In 2017, the Canadian steel industry employed more than 23,000 Canadians and contributed $4.2 billion to Canada’s gross domestic product (GDP). The Canadian aluminum industry employed 10,500 workers while contributing $4.7 billion to Canada’s GDP. These industries are vital suppliers to the Canadian manufacturing, energy, automotive, and construction industries.
- The North American Steel Trade Committee, established in October 2003, provides a venue for the North American steel industry and governments to exchange information on the steel market, and for governments to discuss and coordinate policies and activities that may have an impact on trade in steel.
- During the 2016 North American Leaders’ Summit, Canada, the United States, and Mexico agreed to establish a trilateral Customs Steel Enforcement Dialogue to help coordinate compliance efforts and information sharing regarding the enforcement of anti-dumping and countervailing measures on steel products. Since its creation, the Dialogue has held three meetings, which facilitated a number of joint enforcement operations.
NAFTA
EDC. April 26, 2018. Weekly Commentary. Will sales be up, down or sideways?
Peter Hall, Vice-President and Chief Economist
The auto industry is a headline-grabber these days, for multiple reasons. Technology is revolutionizing the entire space. Globalization is altering the production base. Protectionism is threatening to upend the rules of the game. And at the same time, sales are sky-high, especially in the US. That’s leading to speculation about future direction. Some see an imminent recession; will sales be up, down or sideways?
The auto industry recovered long ago
First, a little perspective. Things today are a long way from the Detriot-3’s near-death experience in 2009. Back then, if it wasn’t apparent before, average people quickly got an appreciation of the vast and substantial linkages of the auto sector to the rest of the North American economy. Well, the sector has handily put those dark days behind it, becoming one of the first – and for awhile the only – sector to fully recover, an experience that was shared in the US, Canada and Mexico.
Sales are now about as high as they get in the US, and they are holding firm there – by all appearances, they’re on auto pilot. At the same time, the trend in Canada and Mexico has mostly been up. Combine these three, and the industry is going full-tilt to meet demand. Capacity utilization is way beyond pre-recession levels, and investment seems to be badly needed. But expansion plans have been thrown into confusion by neo-protectionism. ‘America-first’ policies threaten to change content rules, and in the meantime there’s heavy pressure to invest stateside.
This is a huge dilemma for any firm needing and intending to invest in the short term, and it clearly poses a much greater threat to smaller-scale or niche producers. Projects that are already in the works are being carried out, but where there are no shovels in the ground yet, from what we can tell, there is a lot of hesitation. Firms that were planning to invest in either Mexico or Canada are now worried about future access to the dominant US market. But for them, shifting investment into the US is no simple solution; that, too, may not be viable, as currency, labour and capacity costs could well be prohibitive, even allowing for recent US corporate tax reductions. What’s dangerous is that the negative effects on future plans are being masked by current investment activities that were planned some time ago.
US auto sales are red-hot
Sales have every reason to continue robust performance. The US auto market is highly correlated with activity in the housing market, where potential near-term growth is solid. Layer on the millions of millennials being lured into the work force by low unemployment conditions, and the new, higher incomes they are earning, and consumption activity is looking up. From today’s high auto sales levels, there is actually an upside.
Auto sales in Mexico not as hot
As noted Mexico has been doing well, but unit vehicle sales have now plunged in the wake of economic uncertainty. It’s sad that just as per capita incomes are rising to the point that Mexico is becoming a decent auto sales target, it’s being trade-targeted in a way that’s snuffing out the opportunity to export vehicles there. Canada’s situation is different; we are riding a credit bubble, so recent sales levels are not seen to be sustainable.
NAFTA talks are accelerating
Thankfully, it looks like NAFTA negotiators are moving toward resolution of the impasse. The US is reportedly lowering the North American content requirement from 85 to 75 per cent, and it seems that the requirement of 50 per cent US content has been scrapped. That’s a huge move in the right direction, and at present, the pressure is on to conclude the matter, with high-level talks now accelerating. We may soon be back to a clearer investment picture – and a more stable sales environment all around.
This couldn’t come soon enough, as higher interest rates are a headwind the industry is already dealing with, and there is more to come. This should be more than manageable with current employment growth, deep-pocketed corporations and peak levels of confidence. Onward ho!
The bottom line?
Sales may look smooth on the surface, but underneath, the industry has seen a fair amount of turmoil. If the policy rancor is resolved, the industry will be able to move back into a groove that promises a good few years of growth yet.
REUTERS. APRIL 26, 2018. NAFTA autos origin rules could hurt U.S. sales and exports: study
Nick Carey
DETROIT (Reuters) - U.S. proposals on rules of origin that govern what percentage of a car needs to be built in the NAFTA region to avoid tariffs would hurt American consumers, lead to lower U.S. vehicle sales and hurt U.S. car exports, according to a study released on Thursday.
According to the study, compiled by the Michigan-based Center for Automotive Research (CAR), the current proposals on rules of origin for autos could force some U.S. automotive and parts manufacturing to move to lower-cost regions outside North America.
In talks to renegotiate the North American Free Trade Agreement between the United States, Canada and Mexico, U.S. President Donald Trump’s negotiators initially demanded that North American-built vehicles contain 85 percent content made in NAFTA countries by value, up from 62.5 percent now.
But industry officials say that has been cut to 75 percent, with certain components coming from areas that pay higher wages.
The rules have become a pivotal issue in talks on overhauling the 24-year-old trade pact.
Canadian Foreign Minister Chrystia Freeland said on Wednesday that good progress has been made at NAFTA trade talks on the key issue of auto rules, though they have been overshadowed by proposed U.S. steel and aluminum tariffs coming into force next week.
Setting “very stringent” rules of origin “with the goal of bringing manufacturing back to the United States and the NAFTA region could have the opposite effect if the content targets are set too high, or the rules are too onerous,” the study says.
CAR estimates that tariffs on vehicles that fail to meet the proposed new rules of origin would mean a minimum tax of between $2.1 billion and $3.8 billion on U.S. consumers and if manufacturers passed on the entire cost it could reduce annual vehicle sales by up to 150,000 units.
The study states that the United States currently exports 2.4 million vehicles annually, which represents just over a fifth of U.S. production.
“The U.S. proposal would raise the cost of production, incur tariffs on U.S. vehicle exports that do not meet the higher NAFTA content threshold and result in fewer U.S. vehicle exports,” the study says.
CAR also says in the study the proposal is aimed at boosting U.S. and NAFTA automotive production capacity, but the U.S. market is not growing to support new capacity.
“Global overcapacity poses financial risks to the companies, and automakers and suppliers are cautious about investment decisions since overcapacity compounded the industry’s financial problems in the recent recession,” the study says.
Reporting By Nick Carey; Editing by Susan Thomas
REUTERS. APRIL 26, 2018. Canada's Freeland extends stay in Washington for NAFTA talks
WASHINGTON (Reuters) - Canadian Foreign Minister Chrystia Freeland will stay in Washington all day Thursday for talks on updating NAFTA and no longer plans to attend a NATO summit in Brussels on Friday, a spokesman said.
Freeland is in Washington for intensive negotiations with her Mexican and U.S. counterparts as they try to strike a quick deal on the North American Free Trade Agreement.
Reporting by Jason Lange, writing by David Ljunggren
AVIAÇÃO
The Globe and Mail. REUTERS. 26 Apr 2018. Airbus, Bombardier aim to close C Series deal early: sources
ALLISON LAMPERT
Completion of the venture could kick-start orders from airlines sitting on the sidelines at a time of industry consolidation.
MONTREAL - Airbus SE and Bombardier Inc. aim to close a deal giving the European planemaker a majority stake in the Canadian company’s CSeries jetliner program by the end of May, ahead of an initial timetable, two people familiar with the matter said this week.
An early closing of the deal would accelerate orders and efforts to reduce costs, the people added. A third source said the finalization is now “very close.” The deal was originally expected to close in late 2018, and then midyear, pending regulatory approval.
The companies have almost completed the process of seeking clearances which must span multiple jurisdictions, the persons added.
All of the sources spoke on condition of anonymity because the talks are private.
An Airbus spokesman cited comments by chief executive Tom Enders who said this month the deal would close by midyear.
Bombardier could not immediately be reached for comment.
In October last year, Airbus agreed to buy a majority stake in Bombardier’s CSeries jetliner program, grabbing control of a struggling competitor.
Completion of the venture could kick-start orders from airlines sitting on the sidelines at a time of industry consolidation, the people added.
Bombardier said in February there had been a “bit of a pause” in orders for its narrowbody jets as airlines waited for the company to complete the partnership deal. Separate talks aimed at a tie-up between planemakers Boeing Co. and Embraer SA are also said to be advancing.
U.S. carrier JetBlue Airways Corp. has said these developments prompted it to put off a decision whether to replace its fleet of about 60, 100-seater E-190 jets, in a campaign that pits the CSeries against its Brazilian rival’s latest model, the E190-E2. “The timing of the review moved a little based on what was happening out in the market with the OEMs,” JetBlue chief financial officer Steve Priest said in an April interview.
REUTERS. APRIL 26, 2018. Airbus heads for dogfight with UTC over CSeries costs
Tim Hepher, Allison Lampert
PARIS/MONTREAL (Reuters) - Airbus is preparing to cross swords with United Technologies over the price of components and services for the Bombardier CSeries in a bid to make it easier to market the jet it agreed to bail out last year, people close to the matter said.
Airbus (AIR.PA) is concerned about an increased share of the Canadian project that would be controlled by United Technologies (UTX.N) after it completes its $23 billion acquisition of Rockwell Collins, they said, asking not to be named.
Together, the pair will have by far the largest share of CSeries parts and systems by value, placing it at the center of efforts by Airbus to reduce the plane’s cost and echoing a broader power struggle between planemakers and suppliers.
A key part of the acquisition is “muscling the supply chain down on price”, said Richard Aboulafia, vice president of analysis at Virginia-based Teal Group.
“Bombardier couldn’t do that, they just didn’t have the leverage. And Airbus has more than enough leverage.”
Airbus and UTC declined to comment. A Bombardier spokeswoman said UTC was the largest CSeries supplier even before completion of the Rockwell Collins merger, but declined to comment further.
Airbus agreed last October to buy the struggling CSeries for a token one Canadian dollar, with both sides reckoning its global sales presence and clout with suppliers would make the plane more competitive and easier to sell.
The deal came weeks after United Technologies teamed up with Rockwell Collins with plans to create a new super-supplier.
Among shared components, United Tech supplies engines for the CSeries and Rockwell Collins supplies cockpit systems. Aboulafia said pre-merger UTC supplied about a quarter of CSeries content.
Items up for negotiation are likely to include the cost of parts, spares and services like repairs, sources said.
MARKETING DILEMMA
Costs are not the only factor as the CSeries seeks a fresh start. Airbus is also studying how to use its marketing weight.
One proposal is to drop the 14-year-old CSeries name and call it the A200, indicating a smaller cousin of the Airbus product line that stretches from the A318 to the mammoth A380.
But the possible change, first reported by Bloomberg News, could upset politicians in Quebec who fear losing a key brand and jars with some in Europe who say it harks back to the first A300 Airbus or even the troubled A400M.
The debate over what to call it mirrors deeper questions over how Airbus will market the plane, a decision that would send a message on how it views its new Canadian partner.
Airbus is trying to decide whether to integrate it into the Airbus sales force or set up a new dedicated team, sources said.
Airbus SE
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A separate structure would give it strong attention but shift the emphasis away from cross-selling with Airbus models.
Having one sales force would highlight the opportunity for package deals across the Airbus portfolio, but risk distraction from key priorities like reviving weak sales of the A330neo.
“It doesn’t much matter what you call the CSeries if you are not selling A330s,” a senior industry source commented.
Reporting by Tim Hepher; editing by Andrew Roche
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