CANADA ECONOMICS
INFLATION
StatCan. 2018-04-20. Consumer Price Index, March 2018
- Consumer Price Index, March 2018: 2.3% increase (12-month change)
- Source(s): CANSIM table 326-0020: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3260020&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
The Consumer Price Index (CPI) rose 2.3% on a year-over-year basis in March, following a 2.2% increase in February. This was the largest year-over-year increase since October 2014. Excluding gasoline, the CPI increased 1.8%, matching the gain in February.
Chart 1: The 12-month change in the Consumer Price Index (CPI) and the CPI excluding gasoline
12-month change in the components
Seven of eight major components increased on a year-over-year basis in March. The clothing and footwear index (-0.1%) was the lone major component to decline year over year.
Chart 2: Consumer prices increase in seven of eight major components
For the second consecutive month, energy prices rose more on a year-over-year basis. Gasoline prices were 17.1% higher compared with March 2017, and were the largest contributor to the gain in energy prices.
The price of services was up 2.7% year over year in March. Passenger vehicle insurance premiums rose 1.4% in the 12 months to March. Recent interest rate increases continue to impact the mortgage interest cost index (+2.8%), which posted its eighth consecutive year-over-year rise.
Consumers paid less on a year-over-year basis for food in March (+1.7%) than they did in February (+2.1%). Prices for fresh vegetables (-2.1%) and meat (-0.4%) fell month over month.
Prices for durable goods increased 0.3% in the 12 months to March, following a larger gain in February (+0.6%). The purchase of passenger vehicles index declined 1.5% on a month-over-month basis in March, reflecting higher rebates reported for various 2018 model-year vehicles.
12-month change in the provinces
Prices rose more on a year-over-year basis in four provinces in March when compared with the previous month. The rate of growth was strongest in Ontario, where consumer prices for passenger vehicle insurance premiums rose 1.3% year over year, following a 0.6% decline in February. Gasoline was a large contributor to the price change in all provinces, but prices increased at the fastest rate in Alberta.
Chart 3: Consumer prices rise at a faster rate in four provinces
Seasonally adjusted monthly Consumer Price Index
On a seasonally adjusted monthly basis, the CPI rose 0.1% in March, following a 0.2% increase in February. Four of eight major components rose, with the alcoholic beverages and tobacco products index (+0.9%) rising the most, following an increase in the federal tax on cigarettes. The clothing and footwear index (-0.6%) registered the largest decline.
Chart 4: Seasonally adjusted monthly Consumer Price Index
Table 326-0020 2, 9
Consumer Price Index (CPI)
monthly (2002=100)
Data table
The data below is a part of CANSIM table 326-0020. Use the Add/Remove data tab to customize your table.
Selected items [Add/Remove data]
Geography = Canada
| Products and product groups 15 | 2017 | 2018 | |||
|---|---|---|---|---|---|
| November | December | January | February | March | |
| footnotes | |||||
| All-items | 131.3 | 130.8 | 131.7 | 132.5 | 132.9 |
| Food 17 | 142.9 | 143.4 | 144.7 | 144.7 | 144.2 |
| Shelter 18 | 138.9 | 139.2 | 139.7 | 140.0 | 140.0 |
| Household operations, furnishings and equipment | 122.7 | 120.9 | 122.4 | 123.4 | 122.9 |
| Clothing and footwear | 95.3 | 92.4 | 91.7 | 93.3 | 95.0 |
| Transportation | 135.7 | 135.7 | 137.2 | 137.7 | 138.0 |
| Gasoline | 174.7 | 168.9 | 174.3 | 173.0 | 178.0 |
| Health and personal care | 124.2 | 124.4 | 125.1 | 125.6 | 126.3 |
| Recreation, education and reading | 113.0 | 111.2 | 111.8 | 114.1 | 116.4 |
| Alcoholic beverages and tobacco products | 162.5 | 162.2 | 163.2 | 164.1 | 166.0 |
| All-items excluding food and energy 25 | 126.2 | 125.6 | 126.2 | 127.1 | 127.6 |
| All-items excluding energy 25 | 129.2 | 128.7 | 129.5 | 130.3 | 130.6 |
| Energy 25 | 157.9 | 155.8 | 159.5 | 159.1 | 161.0 |
| Goods 27 | 119.9 | 119.4 | 120.2 | 120.7 | 120.9 |
| Services 28 | 142.8 | 142.3 | 143.3 | 144.3 | 144.9 |
Footnotes:
The Consumer Price Index (CPI) is not a cost-of-living index. The objective behind a cost-of-living index is to measure changes in expenditures necessary for consumers to maintain a constant standard of living. The idea is that consumers would normally switch between products as the price relationship of goods changes. If, for example, consumers get the same satisfaction from drinking tea as they do from coffee, then it is possible to substitute tea for coffee if the price of tea falls relative to the price of coffee. The cheaper of the interchangeable products may be chosen. We could compute a cost-of-living index for an individual if we had complete information about that person's taste and spending habits. To do this for a large number of people, let alone the total population of Canada, is impossible. For this reason, regularly published price indexes are based on the fixed-basket concept rather than the cost-of-living concept.
This table replaces CANSIM table 326-0001 which was archived with the release of April 2007 data.
With the introduction of the 1992 basket in January 1995, emphasis was shifted from city data to provincial data. City all-items series were continued since many users had come to rely on this service, but the method of calculation was changed. Shelter indexes are calculated for each city. This recognizes the importance of shelter in the basket, the significant and persistent differences in price movements between cities, and the availability of local data. For the other seven major components, the movement of the provincial counterpart is used except in the cases of Montréal, Toronto, and Vancouver, where a sub-provincial counterpart is used. The major components are aggregated using the city's expenditure pattern to arrive at each city's all-items index.
Formerly Ottawa (Ottawa-Gatineau, Ontario part), represents Ottawa only.
The relatively small size of the housing market in these two cities makes it difficult to construct reliable price indexes for new houses. To compensate, the price movements of rental accommodation are used to approximate the price movements of new houses. The rent information itself is collected using different pricing frequencies and collection methods than in the rest of the country. Because of these problems, the indexes for rented accommodation, and owned accommodation are not published for these two cities. Further, the all-items indexes published for these two cities are not strictly comparable with the same indexes for the provinces or the other 16 cities.
Data for Iqaluit are on a December 2002=100 base (200212=100) and the Standard Geographical Classification (SGC) 2001. Previous to April 1, 1999, the town of Iqaluit formed part of the Northwest Territories. On April 1, 1999, the town of Iqaluit formed part of the newly-created territory of Nunavut.
The goods and services that make up the Consumer Price Index (CPI) are organized according to a hierarchical structure with the "all-items CPI" as the top level. Eight major components of goods and services make up the "all-items CPI". They are: "food", "shelter", "household operations, furnishings and equipment", "clothing and footwear", "transportation", "health and personal care", "recreation, education and reading", and "alcoholic beverages and tobacco products". These eight components are broken down into a varying number of sub-groups which are in turn broken down into other sub-groups. Indents are used to identify the components that make up each level of aggregation. For example, the eight major components appear with one indent relative to the "all-items CPI" to show that they are combined to obtain the "all-items CPI". NOTE: Some items are recombined outside the main structure of the CPI to obtain special aggregates such as "all-items excluding food and energy", "energy", "goods", "services", or "fresh fruit and vegetables". They are listed after the components of the main structure of the CPI following the last major component entitled "alcoholic beverages and tobacco products".
Food includes non-alcoholic beverages.
Part of the increase first recorded in the shelter index for Yellowknife for December 2004 inadvertently reflected rent increases that actually occurred earlier. As a result, the change in the shelter index was overstated in December 2004, and was understated in the previous two years. The shelter index series for Yellowknife has been corrected from December 2002. In addition, the Yellowknife All-items Consumer Price Index (CPI) and some Yellowknife special aggregate index series have also changed. Data for Canada and all other provinces and territories were not affected.
About two thirds (4.7%) of the 7.4% decrease registered between September and October 2004 in the "Digital computing equipment and devices" index series represents a revision to source data.
From April 2006, Statistics Canada changed its implementation of the price index formula used for traveller accommodation. As a result, data from April 2006 are not strictly comparable to earlier time periods.
The special aggregate "energy" includes: "electricity", "natural gas", "fuel oil and other fuels", "gasoline", and "fuel, parts and accessories for recreational vehicles".
The 1986 basket content was divided into seven major components. With the introduction of the 1992 basket, the "housing" component from the 1986 basket definition was split into two components: "shelter" and "household operations, furnishings and equipment". This brought the number of major components to a total of eight. Also, the definition of "shelter" was changed. The traveller accommodation category, which was part of the 1986 definition of "shelter", was moved to "recreation" with the introduction of the 1992 basket. To provide some continuity certain aggregates were reconstructed using their 1986 basket definitions.
Goods are physical or tangible commodities usually classified according to their life span into non-durable goods, semi-durable goods and durable goods. Non-durable goods are those goods that can be used up entirely in less than a year, assuming normal usage. For example, fresh food products, disposable cameras and gasoline are non-durable goods. Semi-durable goods are those goods that may last less than 12 months or greater than 12 months depending on the purpose to which they are put. For example, clothing, footwear and household textiles are semi-durable goods. Durable goods are those goods which may be used repeatedly or continuously over more than a year, assuming normal usage. For example, cars, audio and video equipment and furniture are durable goods.
A service in the Consumer Price Index (CPI) is characterized by valuable work performed by an individual or organization on behalf of a consumer, for example, car tune-ups, haircuts and city public transportation. Transactions classified as a service may include the cost of goods by their nature. Examples include food in restaurant food services and materials in clothing repair services.
Revision of the methodology of the home insurance component of the Consumer Price Index (CPI) beginning with the February 2008 CPI - http://www23.statcan.gc.ca/imdb-bmdi/document/2301_D39_T9_V1-eng.pdf.
Revision of the methodology of the Internet access services component of the Consumer Price Index (CPI) beginning with the March 2008 CPI - http://www23.statcan.gc.ca/imdb-bmdi/document/2301_D40_T9_V1-eng.pdf.
In previous years, Statistics Canada updated, by province, the model year of passenger vehicles used in the calculation of the passenger vehicle insurance premiums index over a three month period. Since 2008, this quality adjustment exercise is reflected in the month of May for all provinces.
Revision of the methodology of the rent component of the Consumer Price Index (CPI) beginning with the July 2009 CPI - http://www23.statcan.gc.ca/imdb-bmdi/document/2301_D41_T9_V1-eng.pdf.
Revision of the methodology of the prescribed medicines component of the Consumer Price Index (CPI), beginning with the September 2012 CPI - http://www23.statcan.gc.ca/imdb-bmdi/document/2301_D50_T9_V1-eng.htm.
The timing for the introduction of new model year vehicles into the purchase of passenger vehicles index of the Consumer Price Index (CPI) has changed in 2012. Please consult http://www23.statcan.gc.ca/imdb-bmdi/document/2301_D51_T9_V1-eng.htm.
Source: Statistics Canada. Table 326-0020 - Consumer Price Index (CPI), monthly (2002=100 unless otherwise noted), CANSIM (database). (accessed: )
FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180420/dq180420a-eng.pdf
REUTERS. APRIL 20, 2018. Weaker-than-expected Canada inflation disappoints markets, C$ falls
David Ljunggren
OTTAWA (Reuters) - Canada’s annual inflation rate strengthened by less than expected in March and February retail sales showed signs of weakness, disappointing markets and helping to push down the Canadian dollar.
Statistics Canada said on Friday the annual rate had edged up to 2.3 percent from 2.2 percent in February, the second straight month it exceeded the central bank’s 2.0 percent target.
Still, the rate was slightly less than the 2.4 percent forecast of analysts polled by Reuters.
The Bank of Canada has raised interest rates three times since July 2017 amid a strengthening economy and near record low unemployment, and markets largely expect a hike by this July.
“I think for both these reports today they’re just a wee bit short of expectations ... it sort of added to the underlying softness we’ve seen in the currency since about the middle of the week,” said Doug Porter, chief economist at BMO Capital Markets.
The Canadian dollar dipped to C$1.2712 to the U.S. dollar, or 78.67 U.S. cents, from C$1.2666, or 78.95 U.S. cents.
The main contributor to the higher annual inflation rate in March was a 17.1 percent jump in gasoline prices. Seven of the eight major components increased on a year-over-year basis.
The Bank of Canada’s three measures of core inflation were little changed. CPI common, which the central bank says is the best gauge of the economy’s underperformance, remained at 1.9 percent.
CPI median, which shows the median inflation rate across CPI components, stayed at 2.1 percent, while CPI trim, which excludes upside and downside outliers, edged down to 2.0 percent from 2.1 percent.
“It was little bit lighter than expectations ... to market expectations it was a little bit more dovish than expected,” said Derek Holt, head of capital markets at Scotiabank.
The Bank of Canada flagged that more interest rate hikes would be coming after it held its benchmark rates steady on Wednesday, but said it did not know when or how aggressive it would need to be to keep inflation in check. It cited progress on inflation and wages.
Retail sales grew by 0.4 percent in February as higher sales at auto dealerships and general merchandise stores outweighed widespread weakness in other sectors, Statistics Canada said.
Overall, sales grew in just four of the 11 subsectors, representing 47 percent of retail trade. In volume terms, sales edged up 0.3 percent.
With additional reporting by Fergal Smith and Allison Martel in Toronto; Editing by Bernadette Baum
RETAIL SALES
StatCan. 2018-04-20. Retail trade, February 2018
- Retail sales — Canada: $49.8 billion, February 2018, 0.4% increase (monthly change)
- Source(s): CANSIM table 080-0020: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=0800020&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
Retail sales increased 0.4% in February to $49.8 billion. Higher sales at new car dealers and general merchandise stores were the main contributors to the gain.
Sales were up in 4 of 11 subsectors, representing 47% of retail trade. Excluding sales at motor vehicle and parts dealers, retail sales were unchanged.
After removing the effects of price changes, retail sales in volume terms increased 0.3%.
Chart 1: Retail sales increase in February
New car dealers lead gain
Motor vehicle and parts dealers (+1.4%) was the largest contributor in dollar terms to the increase in February. Both new (+1.8%) and used car (+3.0%) dealers reported gains after posting declines in January.
Sales at general merchandise stores (+2.0%) increased for the fourth time in five months.
After three consecutive monthly declines, sales at building material and garden equipment and supplies dealers rose 2.1%.
Gasoline stations (-0.9%) reported a decrease in sales for the first time since June 2017.
Sales at clothing and clothing accessories stores fell 1.4%, as all store types in this subsector posted declines.
Sales at food and beverage stores decreased 0.3%, largely due to lower sales at beer, wine and liquor stores (-2.2%). Lower sales at specialty food (-1.5%) and convenience (-1.0%) stores also contributed to the decline, while sales at supermarket and other grocery stores increased 0.4%.
Sales up in seven provinces
Higher sales in Ontario (+0.7%) accounted for the majority of the gain in February. Sales in the Toronto census metropolitan area (CMA) rose 0.4%, the first increase in four months.
Quebec (+0.5%), Nova Scotia (+3.2%) and British Columbia (+0.4%) all reported higher sales in February after three consecutive monthly declines. Sales in the Montréal CMA decreased 0.8%, while sales in the Vancouver CMA (-1.2%) fell for the fourth consecutive month.
In Manitoba (-1.9%), sales decreased for the third consecutive month, with the largest decline in dollar terms among the provinces in February.
E-commerce sales by Canadian retailers
The figures in this section are based on unadjusted (that is, not seasonally adjusted) estimates.
On an unadjusted basis, retail e-commerce sales totalled $1.1 billion, representing 2.7% of total retail trade. On a year-over-year basis, retail e-commerce increased 14.6%, while total unadjusted retail sales were up 3.9%.
Table 080-0020 2, 3, 4, 5, 6
Retail trade, sales by the North American Industry Classification System (NAICS)
monthly (dollars x 1,000)
Data table
The data below is a part of CANSIM table 080-0020. Use the Add/Remove data tab to customize your table.
Selected items [Add/Remove data]
North American Industry Classification System (NAICS) = Retail trade [44-45 ]
Adjustments = Seasonally adjusted
Adjustments = Seasonally adjusted
| Geography | 2017 | 2018 | |||
|---|---|---|---|---|---|
| October | November | December | January | February | |
| footnotes | |||||
| Canada | 50,691,543A | 50,140,781A | 49,514,859A | 49,572,697A | 49,760,248A |
| Newfoundland and Labrador | 804,603A | 773,746A | 767,739A | 757,215A | 756,761A |
| Prince Edward Island | 201,949A | 201,914A | 202,098A | 204,509A | 204,618A |
| Nova Scotia | 1,370,510A | 1,366,669A | 1,346,768A | 1,338,583A | 1,381,220A |
| New Brunswick | 1,100,540A | 1,091,248A | 1,082,176A | 1,065,524A | 1,065,601A |
| Quebec | 10,870,796A | 10,743,361A | 10,700,529A | 10,661,200A | 10,709,673A |
| Ontario | 18,636,847A | 18,467,013A | 18,103,287A | 18,211,367A | 18,332,669A |
| Manitoba | 1,719,175A | 1,721,445A | 1,695,248A | 1,678,689A | 1,646,546A |
| Saskatchewan | 1,668,558A | 1,652,748A | 1,644,867A | 1,640,439A | 1,649,907A |
| Alberta | 6,829,231A | 6,748,544A | 6,677,778A | 6,728,054A | 6,704,669A |
| British Columbia | 7,317,414A | 7,199,513A | 7,120,752A | 7,104,601A | 7,134,586A |
| Yukon | 70,616B | 72,879B | 73,078B | 73,296B | 70,003B |
| Northwest Territories | 64,715A | 65,567A | 66,537A | 67,825A | 65,945A |
| Nunavut | 36,591A | 36,134A | 34,001A | 41,393A | 38,048A |
Footnotes:
The total for retail trade excludes North American Industry Classification System (NAICS) 454.
Quality indicator: Code A=Excellent. Code B=Very good. Code C=Good. Code D=Acceptable. Code E=Poor, use with caution. Code F=Unreliable (data not published).
Data for Northwest Territories includes Nunavut, from 1991-01 to 1998-12.
Effective April 2018, data from 2004 onwards are based on the 2017 North American Industry Classification System (NAICS). Data prior to 2004 continue to be based on the 2007 North American Industry Classification System (NAICS).
Source: Statistics Canada. Table 080-0020 - Retail trade, sales by the North American Industry Classification System (NAICS), monthly (dollars), CANSIM (database). (accessed: )
FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180420/dq180420b-eng.pdf
REUTERS. APRIL 20, 2018. Canadian February retail sales rise 0.4 percent on autos
OTTAWA (Reuters) - Canadian retail sales grew by 0.4 percent in February as higher sales at auto dealerships and general merchandise stores outweighed widespread weakness in other sectors, Statistics Canada said on Friday.
Analysts polled by Reuters had expected a 0.3 percent gain. The month-on-month increase was the largest since the 3.3 percent jump seen in October 2017.
Overall, sales grew in just four of the 11 subsectors, representing 47 percent of retail trade. In volume terms, sales edged up 0.3 percent.
Sales at motor vehicle and parts dealers - which represented more than a quarter of all retail trade in February - posted a 1.4 percent gain from January. Excluding autos, retail sales were unchanged.
General merchandise stores posted a 2.0 percent gain, the fourth increase in five months. Sales at gasoline stations fell by 0.9 percent, the first decline since June 2017.
Graphic: Canada economic snapshot - tmsnrt.rs/2e8hNWV
(This version of the story makes clear in first paragraph that data is for February, not March.)
Reporting by David Ljunggren; Editing by Nick Zieminski
SPRING IMF AND WORLD BANK MEETING 2018
Department of Finance Canada. April 19, 2018. Minister Morneau Takes Canada's Plan for Competitiveness, Equality and Growth to G20, International Monetary Fund and World Bank Group
Washington, D.C. – The Government of Canada is committed to working with its international partners to ensure that the benefits of economic growth are shared by everyone, including the middle class and those working hard to join it.
Finance Minister Bill Morneau is in Washington for the Spring Meetings of the International Monetary Fund (IMF) and World Bank Group, where he will meet with his G20 colleagues to discuss global economic developments. Minister Morneau will call attention to the G7 themes of investing in growth that works for everyone, and advancing gender equality and women's empowerment—which are on Canada's agenda for meetings of G7 Finance and Development Ministers, and Central Bank Governors, taking place from May 31 to June 2 in Whistler, British Columbia.
While in Washington, Minister Morneau will share highlights from the Government of Canada's plan for equality and growth, Budget 2018, Equality + Growth: A Strong Middle Class. The Minister will underscore the importance of ensuring open international trade that is progressive and rules-based and that delivers benefits that can be felt by everyone. The Minister will emphasize that Canada is a great place to invest, create jobs and do business, due to its solid fiscal position, strong economic performance and openness to trade and the Government's plan to strengthen the middle class by promoting equality and investing in the economy of the future.
Quote
"The global economy must work for everyone, regardless of gender, and the benefits of growth must be shared with the middle class. Ensuring equality and investing in growth that works for everyone are key to Canada's global competitiveness and long-term prosperity. I look forward to making progress on these issues with my G20 colleagues here in Washington, as well as at upcoming G7 meetings in Whistler. It is important that we continue to work together as a global community to empower women and girls, to level the global playing field, and to prepare our citizens for the jobs and opportunities in the economy of tomorrow."
- Bill Morneau, Minister of Finance
Quick Facts
- In the last two years, the Canadian economy created almost 600,000 jobs, most of them full-time.
- Canada's unemployment rate is near its lowest level over the past 40 years.
- Since 2016, Canada has led the G7 in economic growth.
- Canada's federal debt-to-GDP (gross domestic product) ratio remains firmly on a downward track and the deficit-to-GDP ratio is projected to reach 0.5 per cent in 2022–23.
- Canada's total government net debt-to-GDP ratio is the lowest among G7 countries.
FULL DOCUMENT: https://www.fin.gc.ca/n18/18-030-eng.asp
G-7
Global Affairs Canada. April 19, 2018. G7 Foreign and Security Ministers’ Meeting on Building a More Peaceful and Secure World: Media Technical Briefing
Members of the media are invited to attend a technical briefing by teleconference on April 20, 2018, in advance of the G7 Foreign and Security Ministers’ meetings on Building a More Peaceful and Secure World.
Senior officials from Global Affairs Canada and Public Safety Canada will deliver remarks and answer questions. Information provided will be on background and for information purposes only, and not for attribution.
NAFTA
The Globe and Mail. 20 Apr 2018. NAFTA talks seek to break auto-file impasse amid push for deal
ADRIAN MORROW, WASHINGTON
GREG KEENAN, TORONTO
Ms. Freeland, Mr. Lighthizer and Mr. Guajardo planned to meet again on Friday.
NAFTA renegotiations remain deadlocked over the Trump administration’s demand for new rules to encourage automotive jobs in the United States at the expense of Mexico – even as Washington pushes for a deal by the end of the month.
Foreign Affairs Minister Chrystia Freeland hunkered down with U.S. trade representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo at Mr. Lighthizer’s office in the U.S. capital on Thursday in a bid to break the impasse.
Mexican Foreign Affairs Minister Luis Videgaray also flew to Washington for talks with Jared Kushner, U.S. President Donald Trump’s son-in-law.
The United States is demanding changes to the North American free-trade agreement’s “rules of origin” governing the automotive sector. Those rules will dictate how much NAFTA-zone content vehicles must contain to qualify for tariff-free shipping between the three countries.
The toughest proposal is one that would require some auto parts to be made in factories where workers earn above a specific threshold – between US$15 and US$17 an hour, depending on the part.
Mexico, where auto workers make an average of US$3 an hour, is resisting the demand.
Ms. Freeland struck a hopeful note as she emerged from Washington’s Winder Building near the White House around 3 p.m., saying the countries had made “good progress” on the auto file.
But she would not put a deadline on the conclusion of talks, saying Canada was willing to negotiate for “as long as it takes.”
“I believe very strongly, and I think this is a view shared by the two other countries, that rules of origin for autos, the highly integrated automotive sector, is really at the heart of the NAFTA negotiation,” she said. “It’s important for people to appreciate this is a fiendishly complex set of issues.”
Ms. Freeland, Mr. Lighthizer and Mr. Guajardo planned to meet again on Friday.
The U.S. government wants negotiations finished by the end of April or the middle of May so it can submit a deal for ratification before the current Congress term expires early next year. Under the U.S. system, a trade deal must clear months’ worth of procedural hurdles before going to Congress, meaning the window is rapidly closing.
Mr. Guajardo insisted before coming to Washington that within “the next two or three weeks” the three countries could find a “landing zone.” He conceded, however, that “the most complex issues are still pending.”
Also still unresolved are Mr. Lighthizer’s demand for tougher Buy American rules that would limit the amount of U.S. government contracting Canadian and Mexican firms could bid on, and a U.S. demand to end Canada’s protectionist supply management system that limits competition in the milk, egg and poultry sectors to keep prices high.
The three countries believe that if they can resolve the auto file – the Trump administration’s priority – the other issues will be easier, sources with knowledge of the negotiation have said.
Mr. Lighthizer’s wage demand would require that 30 per cent of every vehicle made in North America come from a factory where workers earn the average wage associated with making that car part, a threshold that could go as high as US$17 an hour, said one person briefed on the confidential details of the proposal.
The United States is also demanding other content rules on autos, including that at least 85 per cent of some core components – such as transmissions – and 75 per cent of steel, aluminium and glass used in vehicle construction, come from North America, two insiders said.
Negotiators from all three countries have been in continuous talks in Washington for the past two weeks. They will negotiate next week, with tentative plans for Ms. Freeland and Mr. Guajardo to return.
The trio tried to ease the tension Thursday by celebrating Mr. Guajardo’s 61st birthday: Ms. Freeland brought him a cake with a map of North America in the icing.Mr. Lighthizer presented a cake with “Modernized Ildefonso” – presumably a reference to Mexico’s insistence it wants only to “modernize,” rather than radically overhaul, NAFTA – in white icing.
REUTERS. APRIL 19, 2018. Canada hails progress on crucial autos file at NAFTA talks
Makini Brice, David Lawder
WASHINGTON (Reuters) - Canadian, Mexican and U.S. ministers seeking to revamp the North American Free Trade Agreement (NAFTA) have made good progress on the key question of autos, Canadian Foreign Minister Chrystia Freeland said Thursday as pressure for a deal intensified.
Freeland spoke after Washington talks with U.S. Trade Representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo in search of a breakthrough on NAFTA, which underpins some $1.2 trillion in annual trilateral trade.
Although the ministers are pressing for a quick deal to avoid clashing with a July 1 presidential election in Mexico, major differences remain on several U.S. demands.
In particular, Canada and Mexico have struggled with the U.S. insistence for tougher automotive rules of origin, which dictate how much North American content vehicles must contain to qualify for tariff-free access under NAFTA.
“I will say that we have been making good progress on the rules of origin in our conversations with the U.S., with Mexico, and in our trilateral conversation,” Freeland told reporters, but declined to give details.
Asked about a CNBC report that the United States wanted a deal in the next three weeks, she said, “Our commitment is to get a really good win-win-win outcome as quickly as possible and...we’ll work as long as it takes to get a great deal”.
The three ministers are due to meet again on Friday.
A deal on automotive content rules would remove one of the biggest sticking points to updating the 24-year-old pact.
The Trump administration had initially demanded that North American-built vehicles contain 85 percent content made in NAFTA countries by value, up from the current 62.5 percent.
Auto industry executives said last week that Washington had significantly softened this in an effort to move faster towards a deal in the next few weeks.
Stephen Biegun, Ford Motor Co’s vice president of international governmental affairs, said the talks could still result in a deal that makes automakers skip the tariff-free benefits of NAFTA and pay a 2.5 percent external duty.
“With a 2.5 percent external duty on automobiles, it’s a very narrow margin of cost that you can add to manufacturers before they simply opt out of NAFTA,” he said at a finance forum in Washington. That it was not yet the case, however, he added.
“In fact, there’s reason to believe we’re getting close to an acceptable NAFTA deal for all three governments, and we’re optimistic about that,” Biegun said.
ICING ON CAKE
For the three sides to reach an agreement quickly, the U.S. government cannot not maintain its hardline positions, said Jaime Serra, the former Mexican trade minister who negotiated the original accord with the United States and Canada in the 1990s.
“If they show a willingness that translates into flexibility in the negotiation, it’s doable,” he said, noting that it was unclear how far the U.S. position had shifted on other issues.
Among those contentious issues are U.S. proposals to overhaul dispute resolution mechanisms and introduce a clause that could automatically kill NAFTA after five years.
U.S. President Donald Trump, who has repeatedly threatened to walk away from NAFTA unless major changes are made, says the pact has cost many U.S. manufacturing jobs.
Canadian Prime Minister Justin Trudeau told reporters in London on Thursday that “we’ve seen an opportunity to make significant progress on the NAFTA file”.
Lighthizer gave fresh momentum to the talks in early March by floating the prospect of a quick deal “in principle,” though Mexican and Canadian officials say only an agreement covering the essential details would be viable.
Lighthizer’s team injected a note of levity into proceedings on Thursday that has often been missing in the grinding talks.
The USTR Twitter feed said the ministers were looking to agree a “rebalanced and ‘modernized’ NAFTA 2.0” and the three smiled for a photo next to a birthday cake for Guajardo, who turned 61 on Thursday.
“Happy Birthday Modernized Ildefonso!” read the icing on the cake.
Reporting by Makini Brice and David Lawder; Additional reporting by Dave Graham in Mexico City; Editing by Alistair Bell and Cynthia Osterman
BLOOMBERG. 20 April 2018. Mexico Says Still Work to Do on Nafta, Canada Sees Good Progress
By Eric Martin and Josh Wingrove
- Kushner, Videgaray, Telford among those expected to attend
- Latest talks are focused on auto sector, Freeland says
Mexico is warning there’s still a lot of work to do in Nafta negotiations as high-level talks continue Friday.
Economy Minister Ildefonso Guajardo, speaking to reporters as he headed into meetings in Washington, suggested a deal on the North American Free Trade Agreement isn’t imminent. “We are basically working very hard, but I think there’s still a lot of work to do,” he said.
The U.S., Canada and Mexico had a series of bilateral meetings Thursday and will hold trilateral talks Friday, according to Canadian Foreign Minister Chrystia Freeland, who said talks have been focused until now mostly on the crucial auto sector issue. Negotiators are “making good progress,” she said Friday.
The talks include Guajardo, Freeland, U.S. Trade Representative Robert Lighthizer, as well as White House adviser Jared Kushner, Mexican Foreign Minister Luis Videgaray and Katie Telford, the chief of staff to Canadian Prime Minister Justin Trudeau. The countries are pushing for a deal within weeks, as Mexican and U.S. elections loom.
The countries are said to have concluded the chapter on telecommunications, the seventh completed out of about 30 potential chapters. Freeland says the three countries are now in what she considers a continuous round of negotiations, and she cautioned she won’t rush the process. “We need to take the time it takes to get a good deal, to get details right on complicated issues like rules of origin” for the auto sector, she said Thursday.
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