CANADA ECONOMICS
CANADA - CHINA / INFRASTRUCTURE / SECURITY
The Globe and Mail. 25 May 2018. Aecon deal threatened sovereignty, PM says. Concerns raised about state-owned Chinese firm’s involvement in critical infrastructure. Aecon: Company’s CEO expresses disappointment over decision.
ROBERT FIFE, STEVEN CHASE
The Aecon deal represented by far the biggest attempt by a state-owned Chinese company to invest in Canada outside of the Canadian oil patch.
OTTAWA - Prime Minister Justin Trudeau says his cabinet vetoed a Chinese stateowned conglomerate’s takeover of one of Canada’s largest construction companies because of concerns it could control critical infrastructure projects and threaten Canadian sovereignty.
Mr. Trudeau declined to outline the details of the national-security threats that led Ottawa to block the proposed $1.5-billion acquisition of Aecon Group by China Communications Construction Co. (CCCC), but cited Australia’s fear of losing sovereignty over its electrical grid as one factor.
“One can easily look at the example from similar investments in Auswhere the Australians suddenly realized they had a significant portion of their energy grid … owned and controlled by a government that is not their own,” he told reporters on Thursday in La Malbaie, Que. “There are always going to be concerns about the ability of a country to continue to protect and deliver essential services to its citizens in a way that enhances and maintains their own sovereignty.”
In the end, Australia blocked a Chinese state-owned enterprise and a Hong Konglisted firm from buying majority control of the country’s largest electricity distributor.
Mr. Trudeau indicated that Canadian security agencies had similar serious concerns about allowing CCCC − which is 63per-cent owned by Beijing and answers to the ruling Communist Party − to be involved in critical infrastructure in Canada.
“We take seriously the work that our intelligence and security agencies do … and they made a very clear recommendation that proceeding with this transaction was not in the national-security interests of Canada,” Mr. Trudeau said.
Aecon is a partner in the the $2.7-billion refurbishment of Ontario’s Darlington Nuclear Generating Station, is building the massive Site C hydroelectric dam in B.C., and until recently was bidding with a team to construct and operate the $4.8-billion Gordie Howe International Bridge connecting Windsor and Detroit. The Trudeau government said it could not allow Aecon to bid on that project because of U.S. objections over the proposed Chinese takeover.
In the wake of the Aecon decision, the Chinese government has warned Canada to abandon “prejudice” against Chinese companies.
“We are opposed to political interference under the pretext of national security,” said Lu Kang, a spokesman for the Chinese foreign ministry. “We hope that Canada would cast aside its prejudice and ensure a fair and sound environment for Chinese enterprises.”
Mr. Lu also delivered a veiled threat that China could consider reprisals, saying “if things come to a stage where our interests are hurt, we will definitely take necessary measures to safeguard our lawful interests.”
The Aecon deal is only the fifth foreign takeover or investment blocked by a Canadian government on security grounds in the past 10 years: Others include the U.S. acquisition of MacDonald Dettwiler and Associates’ satellite division in 2008; an Egyptian billionaire’s bid to buy a division of Manitoba Telecom Services Inc. in 2013; a 2014 effort by a Chinese firm to build a factory too close to the Canadian Space Agency’s headquarters; and a 2015 purchase by a Chinese company of a Montreal fibre-laser company, ITF Technologies. In this last case, the Harper government blocked the deal but the Trudeau government later reversed the decision and allowed it.
Mr. Trudeau said Canada is nevertheless keen to broaden economic ties with China and said any free-trade deal needs to include rules that involve state-owned activities in sensitive areas of the economy.
“This is perhaps an example of something we would want to address within a trade deal,” he said. “We would certainly want to address security concerns and protect Canadian nationalsecurity interests as we move forward.
The decision to block the
Aecon sale amounts to a significant change in the Liberal government’s approach to China. The Trudeau government came into office with a strategy of embracing China and pursing free trade with the world’s second-largest economy.
Wenran Jiang, a senior fellow at the University of British Columbia’s Institute of Asian Research, pointed out that the Trudeau government had previously allowed two companies with sensitive technology – ITF Technologies and a Vancouver satellite-technology maker – to be purchased by Chinese companies. In the second case, the purchase of Norsat, the Liberals did not even conduct a formal national-security review.
“I would say this is a change of the overall attitude and concern within the Liberal government,” he said. “It was [previously] definitely a much more open … Trudeau government, more optimistic about relations with China.”
Cabinet’s decision to block the deal came as a surprise to Aecon chief executive John Beck, who declined interviews on Thursday after issuing a statement late Wednesday night expressing disappointment over the rejection. Aecon and CCCC were willing to spin off divisions involved in the nuclear industry and to avoid bidding on Canadian military contracts or other sensitive infrastructure, but Ottawa made no attempt to negotiate with Mr. Beck, sources say.
Earlier this year, senior officials indicated that Ottawa was leaning toward approving the acquisition. Officials told The Globe and Mail that Aecon was a construction company that simply poured concrete and that there was no need for a fullscale national-security review.
Amid fears that CCCC was beholden to Beijing, public pressure built against the deal when Richard Fadden and Ward Elcock, two former directors of the Canadian Security Intelligence Service, and Canada’s former ambassador to Beijing, David Mulroney, called for an in-depth security review because Aecon was involved in critical sectors of the economy.
University of Alberta China Institute director Gordon Houlden said the concerns raised by Mr. Elcock and Mr. Fadden were an early indication to him that the deal might be quashed.
“I was not surprised, given the comments by former CSIS directors. With those indications, one can be reasonably confident that the security agencies would take a negative view of the interpretation, although under the Canada Investment Act, there are many official agencies that take part in the deliberations.”
Behind the scenes, U.S. officials were also voicing concerns about the Chinese takeover and warned that the company would not be allowed to bid on the Gordie Howe bridge or other bilateral infrastructure. U.S. authorities had already raised concerns when Ottawa approved the sale of Vancouver-based Norsat, which makes satellites for the U.S. Defence Department, to a Chinese firm.
Michael Wessel, a member of the congressional U.S.-China Economic and Security Review Commission, also publicly warned that the United States would not allow a China-owned Aecon to bid on infrastructure projects in the U.S.
“Right decision. Aecon is engaged in critical infrastructure and no way U.S. could allow Chinese SOE [state-owned enterprises] to bid on U.S. projects,” Mr. Wessel said via Twitter on Thursday.
The Aecon deal represented by far the biggest attempt by a state-owned Chinese company to invest in Canada outside of the Canadian oil patch.
Mr. Jiang, who has advised Western governments on China, predicted this rejection by Ottawa will have lingering effects.
“They will remember this,” he said of Beijing. “It will definitely make potential free-trade-agreement negotiations with China more difficult.”
The Globe and Mail. 25 May 2018. Where does Trudeau draw the line with Beijing?
CAMPBELL CLARK
OTTAWA - The Chinese state has no business in the infrastructure of this nation, Justin Trudeau now says.
In rejecting a Chinese takeover of construction firm Aecon, Mr. Trudeau told us that any potential for Chinese state interests creeping into control of significant Canadian infrastructure has to be cut short as a threat to national security.
What he hasn’t told us is how far that threat goes. Is it just Chinese state control of infrastructure that must be averted? Or resources, or sensitive technology? Or does Chinese state ownership of any significant economic interest in Canada constitute a threat?
That’s the national-security question Canada, and its Prime Minister, must answer.
On Thursday, Mr. Trudeau indicated that rules governing investment by Chinese state-owned enterprises, or SOEs, could be hammered out in potential free-trade negotiations with China.
But while investment rules can be negotiated, you don’t bargain over national security.
The Prime Minister has now accepted the idea that Chinese SOEs serve the Chinese state, rather than pure commercial interests, and have to be treated with a measure of suspicion. That’s realistic. The question is where Beijing’s businesses will not be allowed to go.
With the Aecon case, Mr. Trudeau has drawn a wide circle around Canadian infrastructure.
The problem was not simply that by swallowing Aecon, the proposed buyer, China Communications Construction Co. Ltd., would be able to pass on information on sensitive projects it is working on, or get control of sensitive infrastructure. The problem was that once CCCC had a Canadian subsidiary in that kind of business, it could eventually get involved in all kinds of infrastructure.
Just look at Australia, the PM told reporters, a country that one day suddenly realized that a foreign government owned a big chunk of its electricity grid.
While the Australian experience was a little more complicated – in 2016, it blocked a Chinese SOE, State Grid, which had several smaller power-industry interests, from buying into major electricity distributor Ausgrid – Mr. Trudeau’s example was notable. It implied that once a Chinese SOE gets into your country’s infrastructure, it can creep into more influence – and that has to be stopped before it starts.
That’s not an entirely novel warning. Ward Elcock, the former director of the Canadian Security Intelligence Service, had expressed a similar concern: Once a Chinese state firm owns Aecon, the government can’t really control the projects they work on.
He may be right – but that fear of what might come can apply to a lot of foreign takeovers. The definition of critical infrastructure might cover roads, waterworks, shipping and on and on.
In Aecon’s case, Canada’s security services, and Mr. Trudeau’s cabinet, could have considered national security as a pretty narrow matter. They might have instead asked only if it gave CCCC access to classified info, or the blueprints to military bases, or restricted technology. They went broader.
Yet, they might have gone broader still. Chinese SOEs are fundamentally arms of the Chinese state, with a Communist Party unit at its core, Brock University China expert Charles Burton said. They might be able to call on the resources of the Chinese state, like espionage intel or surveillance, to help them with bidding on projects in Canada.
And, Mr. Burton said, there’s also the general concern about Chinese economic influence leading to political influence in Canada. Once a Chinese SOE becomes a major player in the Canadian economy, it has influence to lobby for China’s strategic interests, whether opening the Canadian north to Chinese mining, or support for China’s geopolitical interests, and can hold out the threat of closing operations, laying off workers or withdrawing investment. “Is it desirable for a foreign state to have economic leverage in a Western democracy?” Mr. Burton asked.
Those questions apply to just about any takeover by a Chinese SOE. In this case, approving Aecon was politically risky by the time the Liberal government decided. Polls show Canadians are against takeovers by Chinese SOEs; security experts like Mr. Elcock had warned against the Aecon deal; the United States had qualms. But China, the world’s second-largest economy, isn’t disappearing. What’s our national-security policy next time?
We now know that Mr. Trudeau sees takeovers by Chinese state enterprises as a broad security threat to Canada. So tell us, Prime Minister, is it because of what they’re buying, or what they might do – or because of what they are?
The Globe and Mail. 25 May 2018. Editorial. Trudeau is right. Baffled by Aecon.
The federal government has blocked the sale of Aecon Group Inc., a giant Canadian construction firm, to Chinese interests for reasons of national security. It’s a surprising decision that raises the question of where Canada is going when it comes to its relations with China.
Not that it wasn’t also the right thing to do. Beijing has already made the accusation that the decision was rooted in “prejudices,” but that’s hogwash. It was, in fact, a direct result of the way the Chinese government has structured companies like China Communications Construction Co. Ltd, which sought to buy Aecon.
State-owned enterprises like CCCC are de facto offshoots of the ruling Communist Party. They are the instruments of an aggressively expansionist global economic strategy and have a vexing habit of trampling local laws.
It doesn’t help matters that China is, by any reasonable definition, a surveillance state. It is also an enthusiastic sponsor of industrial espionage. The $1.5-billion Aecon takeover would have given the Chinese government control over a sprawling concern involved in all manner of critical public infrastructure projects, including nuclear energy.
There is nothing wrong with using commerce to engage with nations that don’t share our interests or values. We do, and must continue to do, lots of business with China. But when Prime Minister Justin Trudeau says “we don’t want trade with China at any cost,” he’s right.
The question is, why did Ottawa block this transaction based on a full-scale security review when last year it approved the sale of Norsat, a technology firm and military contractor, to a Chinese state-owned firm without the benefit of the same kind of review.
Perhaps Canada’s more pugnacious stance is a response to Chinese President Xi Jinping’s strengthening grip on power; he is now in office for life, a worrisome development. Or to Mr. Trudeau’s fateful mission to China late last year, during which he was embarrassed when he failed to secure the commencement of formal free-trade talks.
It hasn’t always been easy to divine the Trudeau government’s intentions regarding China. One hopes the Aecon decision signals a new, more consistent approach.
The Globe and Mail. 25 May 2018. Why Ottawa’s Aecon rebuff was our only choice
WESLEY WARK, Director of the Security and Policy Institute for Professional Development at the University of Ottawa
Ottawa has made a bold, but nerve-tinged, decision to deny the takeover of one of Canada’s major construction and critical infrastructure builders, Aecon. Prime Minister Justin Trudeau said Thursday that “we don’t want trade with China at any cost,” underlining that the denial was based on national security considerations, the details of which will remain secret.
The boldness of the decision is rooted in the important signal it sends that the government is serious about protecting significant critical infrastructure in Canada, including cross-border infrastructure, from potentially harmful foreign investment. Boldness may come at a cost, in terms of the future of Canada-China economic relations, but on that front we shall have to wait. The Chinese embassy in Ottawa has, predictably, decried the decision and warned that it may harm future cooperation.
The Aecon decision could not have been an easy one. There were grounds for much nervousness and anxiety, and not just in regard to the reaction of China. The government had to be sensitive to reactions from allies and trading partners and had to uphold existing Canadian and Canada-U.S. critical infrastructure protection strategies, which rely heavily on close cooperation between the government and the private sector. Ottawa was also rightly worried that Canada might have appeared as a pliable Western bridgehead for a broader Chinese global investment and influence strategy.
The fact that the Conservative Party opposed the deal probably had little impact on government thinking. Not much daylight seems to exist between Conservative and Liberal approaches to the China investment file.
To help negotiate between boldness and worry, the government had a regulatory process at hand. The national security review of foreign investments was instituted only in 2009. The process has since been used in a mere handful of cases – 13 between 2012 and 2017. The results can be outright denial (as with Aecon), approval or approval with conditions around divestiture or operating restrictions. The process combines professional national-security judgments advanced by Canadian security and intelligence agencies, such as CSIS and CSE, with an ultimate call made by cabinet ministers. The combination of political responsibility and (hopefully) independent and sound security judgment is vital. The experience of wading through this fraught process with Aecon should give current and future governments confidence that this is a regulatory instrument that works.
The national security review under the Investment Canada Act was originally established to ring-fence sensitive defence technologies from foreign takeovers; later, that was extended to the oil sands. The new frontier is critical infrastructure and the Aecon decision is a signal that Canada recognizes this.
The Aecon test was made starker by the nature of the bidder. Aecon’s intended master was a Chinese company with close ties to the Chinese government and engaged in global infrastructure projects – including controversial defence installations – on a massive scale, sometimes with a dubious record. The deal did not smell sweet, however much its backers attempted to dismiss concerns about the takeover.
The Aecon takeover came at a moment when Canada, as with many of its Western partners, is trying to navigate a new global economic landscape, in which Chinese power and reach is on the rise and the exercise of U.S. power is unpredictable and problematic.
In particular, and this is where the Aecon takeover was another kind of test bed, the government must figure out a strategic response to China’s massive Belt and Road Initiative, launched by President Xi Jinping in 2013. This initiative seeks to extend Chinese trade and influence globally through massive infrastructure projects that will link China to Western Europe through a new so-called Silk Road and open up global maritime trade routes. China has even announced an Arctic policy, signalling its interest in opportunities for new trade routes, infrastructure projects and resource extraction via Arctic waters open to shipping and commercial exploitation owing to climate change.
Against this global backdrop, the Aecon takeover was a non-starter.
In the future, not only will Canadian governments have to stick to their guns in protecting sovereign critical infrastructure, but Canadian companies seeking foreign investment deals, and their advisers, will have to get smarter about the new and fast-changing global economic landscape.
The Globe and Mail. 25 May 2018. Aecon pledges independence. Construction giant says it now has record backlog of work, new project opportunities. Aecon vows independence after blocked takeover deal
ANDREW WILLIS
Its planned marriage to a Chinese suitor blocked, construction company Aecon Group Inc. pledged on Thursday to remain independent and capitalize on a string of recently awarded contracts.
The federal government ended a $1.5-billion takeover of Aecon by state-controlled China Communications
Construction Co. Ltd. (CCCC) on Wednesday, citing national-security concerns.
CCCC won a bidding war for Aecon last October after the Torontobased company put itself up for sale. Aecon formally ended the auction late on Wednesday and chief executive officer John Beck said the company emerged from the process in a position of strength.
“Over the past several months, Aecon has secured numerous largescale projects, has a record backlog and a significant pipeline of opportunities,” Mr. Beck said.
Analysts concurred with the CEO’s upbeat view. CIBC World Markets Inc.’s Jacob Bout said in a report: “The outlook for Aecon has improved substantially since it announced that it was up for sale in August, 2017.”
Aecon’s share price dropped on Thursday after Ottawa terminated the CCCC takeover, falling more than 15 per cent to close at $14.67 in Toronto. The CCCC offer was for $20.37 a share and CIBC’s Mr. Bout predicted Aecon stock will hit $20 in the next 12 to 18 months. Aecon currently has a record backlog of work, with $4.6-billion in projects on its books. In recent months, the company won roles on transit projects in Montreal and Toronto. It is currently bidding to build light-rail networks in Hamilton and Ottawa that, together, are worth more than $3billion. Aecon is also a leading contender on coming contracts to refurbish two Ontario nuclear power plants.
Aecon also pulled out of bidding on the Gordie Howe International Bridge between Windsor, Ont., and Detroit while working on the CCCC takeover, citing capacity issues. Security experts had raised concerns over a statecontrolled Chinese company working on the link. Analysts said Aecon may now opt to re-enter the competition for the $4.8-billion project.
The federal Liberals turned down CCCC’s bid for Aecon after swiftly approving last year’s takeover of satellite technology company Norsat International Inc. by Chinese rival Hytera Communications Co. Ltd.
Canadian and U.S. intelligence services objected to the Norsat takeover, according to sources close to Norsat, CCCC and Aecon. The sources said Prime Minister Justin Trudeau and his cabinet subsequently revised their view on state-owned Chinese companies and heightened the scrutiny applied to the bid for Aecon, which works on power plants, military bases and telecom networks.
Several Canadian construction firms, including PCL Constructors Inc., Ledcor Group and P.W. Graham & Sons Construction, sent representatives to Ottawa to lobby against the CCCC takeover, in part because they claimed a statecontrolled company would undercut rivals on prices in order to boost its market share.
While the CCCC takeover failed to get government approval, and Aecon now says it plans to remain independent, takeover experts said another foreign or domestic construction company could launch a bid. Lawyers and bankers also said that Chinese companies are still potential buyers of Canadian businesses.
“No indication has been given that this decision signals a change in Canada’s overall approach to foreign investment, including foreign investment from China,” law firm Osler Hoskin & Harcourt LLP said in a report. “To date, the federal government has exercised its national-security review power judiciously.”
When Aecon put itself up for sale last year, its bankers at BMO Capital Markets Corp. reached out to 16 potential buyers. Along with CCCC, three companies made formal offers, according to regulatory filings Aecon made last year. On Wednesday, the company said “while Aecon’s board considers strategic options … from time to time, Aecon is no longer actively pursuing a sale process.” That language leaves the door open to another offer. CIBC’s Mr. Bout said: “There were other bidders as part of the Aecon sale, but an immediate bid appears unlikely.” A new boss is expected at Aecon. Mr. Beck is 76 years old and previously announced plans to retire, then put his departure on hold while the takeover was pending. Aecon’s board said it restarted the search for a new CEO after the CCCC offer was blocked and Mr. Beck is expected to continue in the role until his successor is selected. AECON (ARE) CLOSE: $14.67, DOWN $2.67
The Globe and Mail. 25 May 2018. As shares tumble, some see a buying opportunity. Some see appeal in Aecon’s low stock price
David Berman
As shares tumble amid blocked takeover, industry experts forecast a comeback
Aecon Group Inc. didn’t work as a short-term takeover target. Perhaps the stock will look better as a longterm investment.
The construction firm had seen its share price soar to a 10year high of $20 in April, ahead of a proposed $1.5-billion takeover by the financing unit of China Communications Construction Co. Ltd. (CCCC), which is majority-owned by the Chinese government.
But on Thursday, the shares tumbled to levels seen 41⁄2 years ago, down 15.4 per cent for the day, after the Canadian government blocked the deal on Wednesday, citing national security.
If CCCC saw a compelling price at $20.37 a share – the proposed takeover price – investors should be intrigued now that the shares are trading significantly lower, even with another takeover deal looking unlikely, given the government’s decision.
“The fundamentals are much better than when the [CCCC] bid was first announced,” Jacob Bout, an analyst at CIBC World Markets, said in a note.
Although the proposed merger was touted as an opportunity to give Aecon access to bigger infrastructure projects globally, the Canadian company was certainly not struggling to find business before the Chinese suitors came calling. Known for its work on the CN Tower, St. John’s Harbour, Vancouver Ferry Terminal and, ugh, Toronto’s Gardiner Expressway, Aecon’s order book remains strong.
In the first quarter, this pipeline of projects had expanded to $4.6-billion, which included a light-rail transit project in Montreal and a hydroelectric dam and generating station in British Columbia. Since then, it has secured an LRT project in Toronto, which will raise the company’s backlog to a record-high $5.5-billion in the second quarter.
Desjardins Securities analyst Benoit Poirier, in a note to investors, says he believes the shares are a buying opportunity and could return to the $20 range, a view shared by at least four other analysts since the takeover deal was quashed.
The reason: With Aecon’s backlog growing amid strong spending on transit, energy infrastructure and power-distribution projects, many analysts believe the shares are looking cheap.
Aecon’s EV/EBITDA multiple (or enterprise value to earnings before interest, taxes, depreciation and amortization, which essentially compares a company’s takeover value relative to its earnings) was a lofty 9.2 last year when CCCC announced its takeover intentions.
The valuation retreated to 7.3 before the government issued its final decision and has since fallen even more with Thursday’s selloff. But some analysts believe that if Aecon’s EV/EBITDA multiple, based on estimates for 2019 earnings, stays in line with its peers in the construction sector, the shares should be worth considerably more.
“Although we are disappointed by the outcome, we remain bullish on Aecon based on its solid fundamentals. Consequently, we would view any share-price weakness as a nice buying opportunity for long-term investors,” Mr. Poirier said in his note.
However, any rebound in the share price won’t happen quickly. Given that 99 per cent of shareholders approved the takeover deal at a recent shareholder meeting, it is likely that current investors are dismayed by the deal’s reversal – not to mention the slump in the share price.
Now, Aecon will need to attract a new long-term mindset among investors, or perhaps a new set of investors altogether, at a time when the company is also looking for a new chief executive to replace interim CEO John Beck.
“While we are not concerned about the company’s long-term future, given substantial backlogs, solid balance sheet and expected earnings profile, we believe the disruption and dislocation of the shareholder base coupled with uncertainty around the company’s future strategic direction, particularly with a CEO search under way is likely to weigh on share price substantially,” Chris Murray, an analyst at AltaCorp Capital, said in a note released before Thursday’s downturn.
So expect a rough ride.
For sure, existing shareholders who had been expecting a takeover deal to go through are now writhing in pain. But investors who are willing to bet on infrastructure, rather than Chinese money, will be in a better position.
The Globe and Mail. MAY 24, 2018. EXPLAINER. The doomed Aecon deal: Why it fell through and why it matters
By MATT LUNDY
FULL DOCUMENT: https://www.theglobeandmail.com/business/article-the-doomed-aecon-deal-why-it-fell-through-and-why-it-matters/
NAFTA
The Globe and Mail. 25 May 2018. Ottawa, auto industry assail move by U.S. to probe whether imports are security threat. Trump: Shares of Linamar, Magna and Martinrea fall
GREG KEENAN, TORONTO
ADRIAN MORROW, WASHINGTON
Section 232 tariffs on light vehicles made in Canada are going to punish American companies, American suppliers and American customers. That’s not smart.
FLAVIO VOLPE, PRESIDENT OF THE AUTOMOTIVE PARTS MANUFACTURERS ASSOCIATION OF CANADA
The Canadian government, companies in the auto sector and a leading U.S. business group have condemned the Trump administration for launching an investigation into whether vehicles imported from Canada, Mexico and other countries represent a security threat to the United States.
The move by the U.S. government targets autos imported from all countries, noting that vehicles made outside the United States captured almost half the U.S. market last year.
The investigation, using legislation from the 1960s that allows the United States to impose tariffs if national security is under threat, has also been used to target imports of steel and aluminum and could lead to tariffs of 25 per cent on vehicles and auto parts shipments to the United States.
If put in place, such tariffs would cause a substantial increase in the costs of the approximately 1.7 million vehicles and the more than $17billion worth of parts shipped out of Canada to the United States annually.
“It’s absurd to think that Canada in any way could pose a national security threat to the United States,” Minister of Foreign Affairs Chrystia Freeland said in Ottawa, noting that Canada will resist auto tariffs as it has fought 25 per cent tariffs on steel and 10 per cent levies on aluminum entering the United States from Canada. Canada has an exemption from those tariffs that expires next Friday.
Prime Minister Justin Trudeau told reporters he believes the U.S. threat is related to negotiations to transform the North American freetrade agreement, where Canada and Mexico have forced U.S. negotiators to drop some automotive demands and reduce others.
But the talks are deadlocked in part on Mexico’s refusal to agree a certain percentage of vehicles be made in high-wage regions in order to qualify for duty-free shipment within North America.
“Obviously trying to find what would be the link between the national security of the United States and cars that would be made in Ontario, it is starting to be less and less relevant or justified in terms of logic and intellectual rigour,” Mr. Trudeau said with an audible sigh.
Linda Hasenfratz, chief executive of Linamar Corp., Canada’s second-largest auto parts company by revenue, said the suggestion that vehicles from Canada and Mexico are a security threat is “ludicrous.”
Tariffs will add cost, which will drive up prices, reduce demand and potentially lead to a recession, Ms. Hasenfratz said in an emailed statement.
“President [Donald] Trump needs to stop playing games and start supporting the American economy with positive action.”
Shares of Linamar, and Canada’s other large publicly traded auto-parts makers, Magna International Inc. and Martinrea International Inc., fell on the news.
A sport utility vehicle Magna assembles for Mercedes-Benz in Austria would be subject to the tariff. Five auto makers – two based in Japan, two in Detroit and one in Italy – assembled 2.18 million vehicles in Canada last year. They exported about 85 per cent of those to the United States, although the number varies by company.
Toyota Motor Corp. which is the largest vehicle assembler by volume in Canada, said the threat of tariffs has not changed its plans to invest $1.4-billion in assembly plants in Cambridge, Ont. and Woodstock, Ont.
Toyota has invested more than US$23-billion in the United States, so a determination that its vehicles harm U.S. national security seems “implausible,” a spokeswoman said in an e-mail from the company’s North American headquarters in Plano, Tex.
There was no comment from the Detroit-based companies Ford Motor Co. and General Motors Co. or from Fiat Chrysler Automobiles NV or their Canadian organization, the Canadian Vehicle Manufacturers Association.
But such companies, which have large assembly operations in Mexico and Canada, will be harmed if their imports from the two countries are subject to tariffs, said Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada.
“Section 232 tariffs on light vehicles made in Canada are going to punish American companies, American suppliers and American customers,” Mr. Volpe said. “That’s not smart.”
The U.S. Chamber of Commerce blasted the move, saying the President’s national security powers were being “abused” purely to ratchet up the pressure at the bargaining table.
“The administration has already signalled its true objective is to leverage this tariff threat in trade negotiations with Mexico, Canada, Japan, the European Union, and South Korea,” chamber President Thomas Donohue said in a statement.
Daniel Ujczo, an Ohio-based international trade lawyer at the firm Dickinson Wright, said the tariff threat is purely about turning up the pressure in NAFTA talks and pleasing Mr. Trump’s protectionist supporters.
“The investigation into autos is pure pressure and politics. While the administration has discussed this since the 2016 campaign, it was launched only after it became clear NAFTA was at an impasse and the President was facing strong criticisms from his base on China,” Mr. Ujczo said.
The Globe and Mail. MAY 25, 2018. OPINION. Trump and the art of how not to do trade deals
BARRIE MCKENNA, Columnist
OTTAWA - Forget the art of the deal. U.S. President Donald Trump has become the master of the non-deal.
Nearly a year and a half into his administration, Mr. Trump has demonstrated a knack for threatening trade wars, shredding some agreements and forcing open others.
But he’s made scant progress toward his goal of permanently rewriting the rules of global trade in favour of the United States.
He has pulled the U.S. out of the Trans-Pacific Partnership trade deal, dragged Canada and Mexico into an unwanted renegotiation of the North American Free Trade Agreement and threatened much of the rest of the world with various sanctions.
Mr. Trump has thrown the world into a vortex of uncertainty. But even he doesn’t seem to know where it’s all headed. There is no apparent endgame to the U.S.-induced trade turmoil.
Mr. Trump’s new go-to line on such matters is: “We’ll see what happens.” His verbal shrug-of-the-shoulders applies to the U.S. trade showdown with China, recently imposed U.S. tariffs on steel and aluminum imports, the possibility of the U.S. getting back into the TPP and whether there will be a NAFTA deal.
What the Trump administration wants from NAFTA is also in flux now that talks have reached an apparent impasse. Canada, the United States and Mexico are far from agreement on most of the controversial demands put on the table by the Trump administration, including an end to independent settlements of disputes, restricting access to the U.S. government purchasing market, an end to Canada’s protected dairy, poultry and egg sectors, plus a five-year sunset clause on any new NAFTA deal.
U.S. Treasury Secretary Steve Mnuchin suggested this week that the U.S. might be open to the idea of a “skinny” NAFTA deal, centred around new minimum North American content requirements for vehicles built in the three countries.
A more likely scenario is that the current negotiations drag on into next year, or beyond looming elections in Mexico and the U.S.
Mr. Trump’s oft-repeated threat to pull the U.S. out of NAFTA seems to be off the table for now.
Also put on hold this week was the threatened trade war with China. The U.S. has suspended its threats to impose billions of dollars in duties on Chinese goods, apparently getting virtually nothing in return beyond vague promises to buy more U.S. goods.
Mr. Trump’s 1987 book, The Art of the Deal, seems prescient when you look at the U.S. administration’s shifting trade stance. Flexibility, he wrote, is key to striking a deal. Who knew?
“I never get too attached to one deal or one approach,” Mr. Trump wrote. “For starters, I keep a lot of balls in the air, because most deals fall out, no matter how promising they seem at first.”
Mr. Trump may also be learning the hard way that the rest of the world isn’t willing to just roll over in the face of his unilateral “America First” mantra. Agreeing to major trade concessions would be buying into Mr. Trump’s ludicrous notion that the large U.S. trade deficit is a measure of how other countries are taking advantage of the United States.
Canadian Foreign Affairs Minister Chrystia Freeland has said she’s ready to agree to a “win win win” outcome of the NAFTA negotiations. Unsaid, of course, is that Canada will never accept a win-lose-lose deal.
The same goes for China, the European Union and the rest of the trading world. Most countries can be bullied to the negotiating table with trade threats. But that’s not the same as submitting to punishment for misdeeds they haven’t committed.
The Art of the Deal also offers some insight into Mr. Trump’s style when it comes to threats and bluster.
“You can’t con people, at least not for long,” he wrote in one remarkably lucid passage. “You can create excitement, you can do wonderful promotion and get all kinds of press, and you can throw in a little hyperbole. But if you don’t deliver the goods, people will eventually catch on.”
America’s trading partners, it seems, are catching on to the way Mr. Trump plays the negotiating game. And they’re calling his bluff.
The Globe and Mail. Reuters. MAY 25, 2018. Mexican minister says 40-per-cent chance of NAFTA deal before July election
DAVE GRAHAM, MEXICO CITY
There is about a 40-percent chance of concluding the renegotiation of the North American Free Trade Agreement (NAFTA) before Mexico’s presidential election on July 1, Mexican Economy Minister Ildefonso Guajardo said on Friday.
The United States, Mexico and Canada have been bogged down in trade negotiations for the past nine months, with progress held up by U.S. demands to impose tougher minimum content requirements for autos built in the region.
For a deal to be struck to rework the 24-year-old accord, U.S. negotiators would need to show flexibility, Guajardo said.
“I think there’s a 40 percent probability of being able to conclude it before (July 1),” he told Mexican television.
If not, there was about an 80 percent chance of finishing the renegotiation before the U.S. mid-term congressional elections in November, Guajardo added.
U.S. President Donald Trump wants to change the auto rules to create more manufacturing jobs in the United States. He blames lower-cost Mexico for the loss of U.S. employment.
Guajardo said it was important to agree a new NAFTA deal as quickly as possible, but not at the expense of quality.
On Thursday, Mexican President Enrique Pena Nieto expressed optimism about the process after a phone call with Canadian Prime Minister Justin Trudeau. Still, talks were complicated this week by a U.S. probe looking at auto tariffs.
Canada’s government said that during the call, the two discussed their “strong concerns” about the so-called Section 232 investigation by the United States into whether imports from around the world were harming the U.S. automobile industry.
Guajardo said talks should not be distracted by the U.S. probe, which he noted had been lampooned in the United States, describing the initiative as a “fireworks display.”
Mexico has proposed that 70 percent of overall content of a vehicle made in North America come from the region, countering a U.S. proposal of 75 percent for high-value parts.
The United States also wants 40 percent of auto content to be sourced from areas paying at least $16 hour. Mexico has proposed that 20 percent of any auto made in the region be from high-wage areas, an industry source briefed on it said.
Guajardo also denied there was a rift between him and Foreign Minister Luis Videgaray over the NAFTA talks. He was responding to media reports that Videgaray was pushing for a quick deal, while he was holding out for a better one.
Guajardo also addressed suggestions by the front runner in the presidential election, leftist Andres Manuel Lopez Obrador, that the NAFTA negotiation should be postponed until the next Mexican government takes office in December.
In reality, whoever was the next president did not want to have to take office faced with NAFTA, he said. “Deep down, what they want is for this problem to be taken from them.”
BOMBARDIER
The Globe and Mail. 25 May 2018. Montreal supplier casualty of Bombardier’s South Africa delays. Bombardier: If project delays continue, factory will begin a shutdown process within next 10 days, IEC Holden head says
GEOFFREY YORK, JOHANNESBURG
We are confident that we will find a solution to the current contractual issues, that serves to protect jobs and capability within South Africa, and we look forward to successfully delivering the project for our customer.
OLIVIER MARCIL, VICE-PRESIDENT OF EXTERNAL RELATIONS AT BOMBARDIER
It was one of the most ambitious projects in South African history: a huge locomotive purchase that aimed to create 30,000 jobs and transform the freight sector, with Bombardier Inc. winning a quarter of the US$5-billion deal and a Canadian agency providing a big chunk of the financing.
Four years later, the project is in disarray. Bombardier has completed only 13 of the 240 locomotives that it was originally scheduled to have provided by now. A Canadian supplier is laying off 150 workers in Johannesburg and bracing for losses that threaten his company’s survival. And the entire deal is under investigation for corruption and soaring costs.
“Honestly, if we had known any of this going in, there’s not a chance we would have invested,” said Rob Briscoe, president and chief executive of Montrealbased IEC Holden Inc., which had opened a factory in Johannesburg to produce traction motors for Bombardier’s locomotives in the South African project.
Because of the lengthy delays in the project, he is issuing layoff notices to the entire force of 150 workers at his Johannesburg factory on Friday. He expects a loss of US$20-million to US$25-million as a result of the delays and turmoil.
“That absolutely destroys our balance sheet and puts at risk our company globally,” he told The Globe and Mail in an interview.
“I’m not sure we can survive that kind of loss. That’s the cost of corruption and political uncertainty. It’s terrible. If we had known there would be any doubt about corruption or the validity of the contract, we would have stayed away from this.”
Canada’s federal export agency, Export Development Canada, provided US$450-million in financing to support Bombardier’s US$1.2-billion share of the project. The agency says it is “following developments closely” in the locomotive project.
Bombardier is asking IEC Holden to stop producing motors for the locomotives for up to a year, because the project is so far behind schedule, Mr. Briscoe said. “We’re caught in the crossfire and we’ll be collateral damage in all of this,” he said.
He is hoping that South Africa’s state-owned freight company Transnet, which awarded the locomotive contracts in 2014, will step into the breach and ask his company to keep producing the motors for the project. If not, he says, the losses and layoffs will damage South Africa’s reputation as a foreign investment destination.
The prolonged delays in the project are partly due to South Africa’s attempt to create jobs and expertise at a Durban-based Transnet subsidiary. The manufacturers were asked to do the final assembly of their locomotives at the relatively inexperienced Durban facility, instead of a more experienced Pretoria factory.
“That move to do this in Durban has just been absolutely killing the program,” Mr. Briscoe said. “It was a flaw in the contract.”
But the project has also faced new uncertainty because of mounting political questions about corruption allegations and rising costs. An internal investigation by a law firm hired by Transnet has called for the suspension of the locomotive project, including Bombardier’s contract.
The project was originally estimated to cost 38 billion rand in 2013, but the cost soared to 54 billion rand (about US$5-billion at the time) when the contracts were awarded in March, 2014.
Internal investigations and media reports have raised questions about suspected bribery in the locomotive project. One of the four manufacturers, China South Rail, paid about US$320million in “consulting fees” to a company controlled by the politically connected Gupta family, according to leaked e-mails.
Under the original contract schedule, Bombardier should have produced its 240 locomotives by March of this year.
Olivier Marcil, vice-president of external relations at Bombardier, confirmed that Bombardier has completed 13 locomotives so far.
“Bombardier Transportation and IEC Holden are both committed to minimizing the impact of the current delays,” Mr. Marcil told The Globe in an e-mail.
“We are confident that we will find a solution to the current contractual issues, that serves to protect jobs and capability within South Africa, and we look forward to successfully delivering the project for our customer. Bombardier and IEC Holden have a positive commercial relationship.”
The delays have nothing to do with the South African government’s current review of the locomotive contract, Mr. Marcil said.
A spokesman for South Africa’s department of public enterprises, which is responsible for Transnet and other state-owned companies, said the department was unable to comment on the layoffs caused by the delays in the Bombardier contract.
Under the terms of its contract, Bombardier had promised that 60 per cent of its components would be purchased in South Africa. As part of that promise, it ordered motors from Mr. Briscoe’s factory in Johannesburg – the first in Africa to make electric locomotive motors. The factory has provided much-needed jobs and technical training for 150 workers, while helping Bombardier meet its localization targets.
But if the project delays continue, the factory will begin a shutdown process within the next 10 days, Mr. Briscoe said.
“We have a world-class operation with incredible skills transfer and great people, and to lose that would be an absolute shame.” BOMBARDIER (BBD.B) CLOSE: $12.93, UP 3¢
INTERNATIONAL TRADE
StatCan. 2018-05-25. Trade by exporter characteristics: Goods, 2017
- Number of exporting enterprises: 43,480; 2017; 191 increase (annual change)
- Source(s): CANSIM table 228-0070: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=2280070&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
The number of Canadian enterprises exporting goods abroad rose by 191 firms in 2017 to 43,480. This change mainly reflected an increase in the number of exporting enterprises in the manufacturing sector. That strength was largely offset by a decline in the retail trade sector.
Canadian enterprises exported $483.6 billion worth of goods in 2017, up $30.0 billion from 2016. Small and medium enterprises accounted for 54.4% of the increase, mainly from firms in the energy sector.
Large enterprises still accounted for 2.6% of all exporters in 2017, but were responsible for 58.1% of all export values. These firms are more likely to export to non-US countries than small and medium enterprises.
The energy sector leads the increase in export values
Exporter characteristics can also be analyzed on an establishment basis. The establishment better reflects the primary industrial activity and the province of the exporter. One enterprise can have multiple establishments operating in different provinces and industries.
The most significant increase in export values in 2017 was in the mining, quarrying, and oil and gas extraction industry, up $19.4 billion in 2017 to $70.9 billion, following two consecutive annual declines. Establishments from Alberta accounted for three-quarters of this gain, due to higher crude oil prices and increased export volumes.
Chart 1: Export values by sector and province
Other sectors contributing to the rise in export values were wholesale trade (+$7.4 billion) and, to a lesser extent, manufacturing (+$2.2 billion). The increase in manufacturing was led by primary metal and petroleum and coal products. This increase was partially offset by a decline in transportation equipment.
More Canadian enterprises are involved in importing than exporting activities
The number of importing enterprises greatly exceeded that of exporting enterprises for all of Canada's major trading partners from 2010 to 2017.
In 2017, 154,225 enterprises imported goods from abroad, with 113,517 importing from the United States. This was over three times the number of enterprises exporting goods to the United States. Likewise, there were more enterprises importing from major partners such as China, Germany, Mexico and the United Kingdom than exporting to these countries.
Chart 2: Number of importers and exporters by main trading partners, 2017
Of all the enterprises that traded goods in 2017, 29,349 were both importers and exporters. These two-way traders were responsible for most of Canada's export (95.2%) and import (84.0%) values, reflecting the importance of these firms in the global value chain.
Chart 3: Share of trade by trader type, number of enterprises and values, 2017
Enterprises that engaged in exports are also more likely to import goods than importers are likely to export goods. In 2017, 67.5% of all exporters were also engaged in import activities, while 19.0% of importers were engaged in exporting activities.
Table 228-0070
Trade by Exporter Characteristics - Goods; value of domestic exports and number of exporting enterprises, by enterprise employment size and number of partner countries, Canada
annual (dollars unless otherwise noted)
Data table
The data below is a part of CANSIM table 228-0070. Use the Add/Remove data tab to customize your table.
Selected items [Add/Remove data]
Geography = Canada
| Estimates | Enterprise employment size 2 | Partner countries 4 | 2013 | 2014 | 2015 | 2016 | 2017 |
|---|---|---|---|---|---|---|---|
| footnotes | |||||||
| Value of exports (x 1,000) 1, 5 | All enterprise employment sizes | All partner countries | 423,614,361 | 469,270,980 | 464,754,175 | 453,686,071 | 483,644,366 |
| 1 partner country | 99,425,974 | 113,209,330 | 84,448,642 | 77,545,580 | 99,848,696 | ||
| 2 partner countries | 17,216,476 | 18,200,641 | 37,289,732 | 26,210,584 | 21,912,152 | ||
| 3 to 5 partner countries | 71,549,509 | 63,216,935 | 76,956,631 | 93,371,589 | 79,510,852 | ||
| 6 to 9 partner countries | 51,798,373 | 66,096,810 | 37,419,250 | 52,974,170 | 52,727,554 | ||
| 10 to 14 partner countries | 24,300,848 | 33,209,101 | 45,816,172 | 21,633,168 | 32,830,743 | ||
| 15 to 19 partner countries | 25,565,717 | 24,392,583 | 22,994,011 | 32,149,017 | 28,550,341 | ||
| 20 or more partner countries | 133,757,465 | 150,945,579 | 159,829,737 | 149,801,964 | 168,264,028 | ||
| Small and medium-sized enterprises (0 to 499 employees) 3 | All partner countries | 159,744,816 | 195,595,026 | 192,338,059 | 186,240,634 | 202,549,931 | |
| 1 partner country | 59,172,563 | 83,310,039 | 72,544,559 | 66,282,504 | 83,618,961 | ||
| 2 partner countries | 12,544,532 | 12,817,634 | 15,454,625 | 21,270,254 | 13,909,193 | ||
| 3 to 5 partner countries | 24,584,806 | 28,077,043 | 28,142,315 | 24,387,887 | 24,934,447 | ||
| 6 to 9 partner countries | 22,509,856 | 27,144,483 | 13,379,612 | 28,321,448 | 18,498,569 | ||
| 10 to 14 partner countries | 12,072,760 | 12,777,077 | 26,891,212 | 12,299,533 | 24,747,008 | ||
| 15 to 19 partner countries | 7,422,199 | 7,326,702 | 10,502,399 | 8,769,857 | 10,557,774 | ||
| 20 or more partner countries | 21,438,100 | 24,142,048 | 25,423,336 | 24,909,149 | 26,283,978 | ||
| Large enterprises (500 or more employees) | All partner countries | 263,869,545 | 273,675,955 | 272,416,116 | 267,445,438 | 281,094,435 | |
| 1 partner country | 40,253,411 | 29,899,292 | 11,904,083 | 11,263,075 | 16,229,735 | ||
| 2 partner countries | 4,671,944 | 5,383,008 | 21,835,106 | 4,940,329 | 8,002,959 | ||
| 3 to 5 partner countries | 46,964,702 | 35,139,892 | 48,814,316 | 68,983,702 | 54,576,405 | ||
| 6 to 9 partner countries | 29,288,517 | 38,952,327 | 24,039,638 | 24,652,722 | 34,228,984 | ||
| 10 to 14 partner countries | 12,228,088 | 20,432,024 | 18,924,960 | 9,333,635 | 8,083,735 | ||
| 15 to 19 partner countries | 18,143,518 | 17,065,881 | 12,491,612 | 23,379,160 | 17,992,567 | ||
| 20 or more partner countries | 112,319,365 | 126,803,531 | 134,406,401 | 124,892,815 | 141,980,050 | ||
| Number of exporting enterprises | All enterprise employment sizes | All partner countries | 41,759 | 43,530 | 43,959 | 43,289 | 43,480 |
| 1 partner country | 28,959 | 30,649 | 30,931 | 30,452 | 30,491 | ||
| 2 partner countries | 4,616 | 4,640 | 4,774 | 4,665 | 4,718 | ||
| 3 to 5 partner countries | 4,224 | 4,221 | 4,124 | 4,093 | 4,154 | ||
| 6 to 9 partner countries | 1,718 | 1,733 | 1,795 | 1,733 | 1,729 | ||
| 10 to 14 partner countries | 928 | 952 | 934 | 964 | 956 | ||
| 15 to 19 partner countries | 478 | 499 | 533 | 525 | 529 | ||
| 20 or more partner countries | 836 | 836 | 868 | 857 | 903 | ||
| Small and medium-sized enterprises (0 to 499 employees) 3 | All partner countries | 40,617 | 42,368 | 42,779 | 42,160 | 42,351 | |
| 1 partner country | 28,439 | 30,128 | 30,416 | 29,968 | 30,004 | ||
| 2 partner countries | 4,500 | 4,513 | 4,623 | 4,539 | 4,600 | ||
| 3 to 5 partner countries | 4,066 | 4,063 | 3,964 | 3,914 | 3,968 | ||
| 6 to 9 partner countries | 1,625 | 1,634 | 1,690 | 1,638 | 1,635 | ||
| 10 to 14 partner countries | 864 | 891 | 877 | 908 | 906 | ||
| 15 to 19 partner countries | 432 | 445 | 489 | 482 | 487 | ||
| 20 or more partner countries | 691 | 694 | 720 | 711 | 751 | ||
| Large enterprises (500 or more employees) | All partner countries | 1,142 | 1,162 | 1,180 | 1,129 | 1,129 | |
| 1 partner country | 520 | 521 | 515 | 484 | 487 | ||
| 2 partner countries | 116 | 127 | 151 | 126 | 118 | ||
| 3 to 5 partner countries | 158 | 158 | 160 | 179 | 186 | ||
| 6 to 9 partner countries | 93 | 99 | 105 | 95 | 94 | ||
| 10 to 14 partner countries | 64 | 61 | 57 | 56 | 50 | ||
| 15 to 19 partner countries | 46 | 54 | 44 | 43 | 42 | ||
| 20 or more partner countries | 145 | 142 | 148 | 146 | 152 | ||
Footnotes:
Data may not add to totals due to rounding.
For additional information and definitions related to the employment variable, refer to Survey of Employment, Payrolls and Hours (SEPH).
This employment category includes enterprises who reported 0 employees as well as those who did not report employment data.
Partner country refers to any country an enterprise exported goods to during the reference year.
Total value of exports refers to the part of annual domestic export value (customs basis) that can be linked to specific entities in the Business Register each year. Annual domestic export values (customs basis) can be obtained from CANSIM table 228-0060. For additional information and definitions related to merchandise domestic exports, refer to Canadian International Merchandise Trade (Custom Basis).
Source: Statistics Canada. Table 228-0070 - Trade by Exporter Characteristics - Goods; value of domestic exports and number of exporting enterprises, by enterprise employment size and number of partner countries, Canada, annual (dollars unless otherwise noted), CANSIM (database). (accessed: )
FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180525/dq180525a-eng.pdf
StatCan. 2018-05-25. Trade by importer characteristics: Goods, 2017
- Number of importing enterprises: 154,225; 2017; 5,339 increase (annual change)
- Source(s): CANSIM table 228-0100: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=2280100&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
In 2017, 154,225 enterprises in Canada imported goods from abroad, up 5,339 from 2016. The growth was widespread among every sector of the economy.
Small and medium importing enterprises (SMEs) accounted for 98.6% of all importers in the country in 2017. These firms were responsible for 47.3% of total Canadian imports by value. From 2010 to 2017, imports by SMEs grew by 43.6% compared with 34.1% for large enterprises.
Canadian enterprises diversified their markets for imports from 2010 to 2017, with 59.4% of all Canadian importers purchasing goods from both US and other foreign countries in 2017, up from 56.6% in 2010.
Geographical diversification of imports also differs depending on the size of the importing enterprise. In 2017, 89.9% of all large enterprises imported goods from both US and non-US markets, compared with 58.9% of all SMEs.
More enterprises import from Asia and Europe and fewer from North America
More Canadian firms were drawing their imports from Asian and European markets in 2017 than they did in 2010. On a country basis, specifically the last country from which the good is exported before entering the Canadian economy (referred to as the country of export basis), there were 10,402 more enterprises importing from Asia in 2017 than in 2010, and 5,472 more enterprises importing from Europe. Meanwhile, the number of enterprises importing from North America was down by 9,646 in 2017 compared with 2010.
Despite the changes, North America remained the most important market for Canadian importers in 2017, accounting for 67.4% of all imports in terms of value. This share was up from 65.0% in 2010, reflecting the higher-value products imported from this region, such as vehicles, parts and petroleum products.
Chart 1: Number of importing enterprises by region, 2010 and 2017
Imports from Switzerland, Japan and Mexico mostly conducted between related parties
Imports can be broken down based on the nature of the two parties involved in the transaction. If one party holds 5% or more of the voting shares of the firm it is dealing with, the import transaction is deemed to take place between two related parties.
Each year since 2010, over 40% of all Canadian imports have been conducted between related parties. In 2017, imports from related parties reached a record high $234.3 billion, accounting for 44.5% of total imports. Among all sectors, wholesale was the lone sector which imported more from related parties than from unrelated parties.
On a country of export basis, 46.7% of all imports from the United States were between related parties. Switzerland (77.5%), Japan (74.3%) and Mexico (68.8%) had the highest shares of imports between related parties. Conversely, Italy, China and the Netherlands had the lowest shares.
On a commodity basis, imports from related parties in Switzerland were led by pharmaceutical products and supplies. For Japan, the main products imported from related parties were motor vehicles and parts, while for Mexico, vehicles and tractors dominated.
Chart 2: Share of imports by related and unrelated parties, by main trading partners, 2017
Ontario, Quebec and British Columbia continue to lead importing activity
Ontario firms continued to lead the importing activity in the country in 2017. In Ontario, 62,651 establishments imported $335.6 billion worth of goods, accounting for 39.7% of all importers, and 63.8% of all imports in Canada. The wholesale sector accounted for 52.9% of Ontario's total import values, followed by the manufacturing sector (32.2%).
In Quebec, 28,885 importers purchased $82.4 billion worth of goods from abroad in 2017. Manufacturing was the largest sector, with the transportation equipment subsector accounting for 36.5% of the manufacturing sector imports.
British Columbia saw the largest increase in the number of importers from 2010 to 2017. The province added 1,085 importers over this time, mainly reflecting more firms purchasing goods manufactured in Asia and Europe.
Chart 3: Number of importers by province, 2010 and 2017
Table 228-0100 1
Trade by Importer Characteristics - Goods; value of imports and number of importing enterprises, by enterprise employment size and number of partner countries, country of origin basis, Canada
annual (dollars unless otherwise noted)
Data table
The data below is a part of CANSIM table 228-0100. Use the Add/Remove data tab to customize your table.
Selected items [Add/Remove data]
Geography = Canada
| Estimates | Enterprise employment size 3 | Partner countries 5 | 2013 | 2014 | 2015 | 2016 | 2017 |
|---|---|---|---|---|---|---|---|
| footnotes | |||||||
| Value of imports (x 1,000) 2, 6 | All enterprise employment sizes | All partner countries | 447,700,973 | 481,082,999 | 501,938,379 | 497,232,335 | 526,000,049 |
| 1 partner country | 9,635,756 | 9,155,327 | 6,070,607 | 6,523,677 | 6,134,193 | ||
| 2 partner countries | 6,011,091 | 5,808,542 | 4,703,002 | 4,554,118 | 5,930,643 | ||
| 3 to 5 partner countries | 18,841,861 | 20,734,728 | 15,560,466 | 15,182,113 | 15,290,827 | ||
| 6 to 9 partner countries | 22,703,230 | 21,840,230 | 24,044,600 | 23,882,611 | 25,486,125 | ||
| 10 to 14 partner countries | 35,614,069 | 35,409,884 | 31,179,153 | 32,033,967 | 29,513,038 | ||
| 15 to 19 partner countries | 25,846,059 | 27,843,724 | 24,751,398 | 25,700,222 | 28,373,576 | ||
| 20 or more partner countries | 329,048,906 | 360,290,565 | 395,629,153 | 389,355,628 | 415,271,648 | ||
| Small and medium-sized enterprises (0 to 499 employees) 4 | All partner countries | 204,513,278 | 224,341,656 | 228,426,036 | 232,315,134 | 248,692,739 | |
| 1 partner country | 9,536,391 | 9,145,890 | 6,061,475 | 6,515,046 | 6,126,323 | ||
| 2 partner countries | 5,980,411 | 5,758,715 | 4,642,654 | 4,508,328 | 5,832,781 | ||
| 3 to 5 partner countries | 18,591,821 | 20,147,539 | 15,175,924 | 14,828,437 | 15,155,195 | ||
| 6 to 9 partner countries | 21,561,809 | 20,013,513 | 23,599,778 | 23,443,237 | 25,168,913 | ||
| 10 to 14 partner countries | 29,445,542 | 33,159,706 | 27,357,316 | 30,068,155 | 27,120,763 | ||
| 15 to 19 partner countries | 23,399,132 | 23,171,781 | 21,717,390 | 22,284,280 | 25,938,757 | ||
| 20 or more partner countries | 95,998,172 | 112,944,512 | 129,871,500 | 130,667,651 | 143,350,007 | ||
| Large enterprises (500 or more employees) | All partner countries | 243,187,695 | 256,741,343 | 273,512,343 | 264,917,201 | 277,307,310 | |
| 1 partner country | 99,365 | 9,437 | 9,132 | 8,631 | 7,870 | ||
| 2 partner countries | 30,680 | 49,826 | 60,349 | 45,790 | 97,861 | ||
| 3 to 5 partner countries | 250,040 | 587,189 | 384,542 | 353,676 | 135,632 | ||
| 6 to 9 partner countries | 1,141,422 | 1,826,717 | 444,822 | 439,374 | 317,212 | ||
| 10 to 14 partner countries | 6,168,527 | 2,250,178 | 3,821,837 | 1,965,812 | 2,392,275 | ||
| 15 to 19 partner countries | 2,446,928 | 4,671,942 | 3,034,008 | 3,415,941 | 2,434,819 | ||
| 20 or more partner countries | 233,050,734 | 247,346,053 | 265,757,653 | 258,687,977 | 271,921,641 | ||
| Number of importing enterprises | All enterprise employment sizes | All partner countries | 157,771 | 156,785 | 150,739 | 148,886 | 154,225 |
| 1 partner country | 70,129 | 67,568 | 59,698 | 60,161 | 62,688 | ||
| 2 partner countries | 24,923 | 24,705 | 23,826 | 23,487 | 24,248 | ||
| 3 to 5 partner countries | 30,279 | 30,499 | 30,077 | 29,338 | 30,094 | ||
| 6 to 9 partner countries | 14,785 | 15,060 | 15,652 | 15,132 | 15,410 | ||
| 10 to 14 partner countries | 8,052 | 8,463 | 9,145 | 8,794 | 9,122 | ||
| 15 to 19 partner countries | 4,019 | 4,251 | 4,757 | 4,669 | 4,736 | ||
| 20 or more partner countries | 5,584 | 6,239 | 7,584 | 7,305 | 7,927 | ||
| Small and medium-sized enterprises (0 to 499 employees) 4 | All partner countries | 155,798 | 154,803 | 148,805 | 146,860 | 152,047 | |
| 1 partner country | 69,931 | 67,363 | 59,557 | 59,984 | 62,468 | ||
| 2 partner countries | 24,763 | 24,581 | 23,690 | 23,342 | 24,066 | ||
| 3 to 5 partner countries | 29,991 | 30,202 | 29,806 | 29,050 | 29,784 | ||
| 6 to 9 partner countries | 14,581 | 14,861 | 15,474 | 14,921 | 15,180 | ||
| 10 to 14 partner countries | 7,879 | 8,294 | 8,979 | 8,638 | 8,952 | ||
| 15 to 19 partner countries | 3,864 | 4,103 | 4,605 | 4,503 | 4,583 | ||
| 20 or more partner countries | 4,789 | 5,399 | 6,694 | 6,422 | 7,014 | ||
| Large enterprises (500 or more employees) | All partner countries | 1,973 | 1,982 | 1,934 | 2,026 | 2,178 | |
| 1 partner country | 198 | 205 | 141 | 177 | 220 | ||
| 2 partner countries | 160 | 124 | 136 | 145 | 182 | ||
| 3 to 5 partner countries | 288 | 297 | 271 | 288 | 310 | ||
| 6 to 9 partner countries | 204 | 199 | 178 | 211 | 230 | ||
| 10 to 14 partner countries | 173 | 169 | 166 | 156 | 170 | ||
| 15 to 19 partner countries | 155 | 148 | 152 | 166 | 153 | ||
| 20 or more partner countries | 795 | 840 | 890 | 883 | 913 | ||
Footnotes:
The country of origin is the country of production or the country in which the final stage of production or manufacture occurs, as reported on the import declaration form. For additional information and definitions related to the country of origin variable, refer to Canadian International Merchandise Trade Database Concepts.
Data may not add to totals due to rounding.
For additional information and definitions related to the employment variable, refer to Survey of Employment, Payrolls and Hours (SEPH).
This employment category includes enterprises who reported 0 employees as well as those who did not report employment data.
Partner country refers to any country an enterprise imported goods from during the reference year.
Total value of imports refers to the part of annual import value (customs basis) that can be linked to specific entities in the Business Register each year. Annual import values (customs basis) can be obtained from CANSIM table 228-0060. For additional information and definitions related to merchandise imports, refer to Canadian International Merchandise Trade (Custom Basis).
Source: Statistics Canada. Table 228-0100 - Trade by Importer Characteristics - Goods; value of imports and number of importing enterprises, by enterprise employment size and number of partner countries, country of origin basis, Canada, annual (dollars unless otherwise noted), CANSIM (database). (accessed: )
FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180525/dq180525b-eng.pdf
Canadian International Trade Tribunal. May 25, 2018. Tribunal Finds Injury — Copper Pipe Fittings from Vietnam
Ottawa, Ontario — The Canadian International Trade Tribunal (the Tribunal) today found that the dumping and subsidizing of copper pipe fittings originating in or exported from the Socialist Republic of Vietnam have caused injury to the domestic industry. Anti-dumping and countervailing duties will therefore be collected by the Canada Border Services Agency. The complainant in this case was Cello Products Inc. of Cambridge, Ontario.
The Tribunal will issue the reasons for its finding on June 11, 2018.
The Tribunal is an independent quasi-judicial body that reports to Parliament through the Minister of Finance. It hears cases on dumped and subsidized imports, safeguard complaints, complaints about federal government procurement and appeals of customs and excise tax rulings. When requested by the federal government, the Tribunal also provides advice on other economic, trade and tariff matters.
FULL DOCUMENT: http://www.citt-tcce.gc.ca/en/whats-new
Canada Border Services Agency. 2018-05-25. The CBSA launches investigations into cold-rolled steel from China, South Korea and Vietnam
The Canada Border Services Agency (CBSA) announced today that it is launching an investigation into whether or not certain cold-rolled steel in coils or cut lengths originating in or exported from China, South Korea and Vietnam is being sold at unfair prices in Canada. It will also investigate whether or not subsidies are being applied to cold-rolled steel originating in or exported from China, South Korea and Vietnam.
The investigations are the result of a complaint filed by ArcelorMittal Dofasco G.P., located in Hamilton, Ontario. The complainant alleges that the Canadian industry is facing declining market shares, loss of sales, price undercutting, price depression, declining production and utilization rate, which is hindering new investment projects.
Currently, there are 99 special import measures in force, covering a wide variety of industrial and consumer products, from steel products to refined sugar. These measures have directly helped to protect the Canadian economy and jobs in Canada.
Quick facts
- These investigations will examine cold-rolled steel commonly used in the production and manufacture of a range of goods including household appliances, drums, tubing, furniture and strapping. These investigations do not cover cold-rolled steel used for automobile production.
- The CBSA and the Canadian International Trade Tribunal (CITT) both play a role in investigations. The CITT will begin a preliminary inquiry to determine whether the imports are harming Canadian producers and will issue a decision by July 24, 2018.
- Concurrently, the CBSA will investigate whether the imports are being sold in Canada at unfair and/or subsidized prices, and will make preliminary decisions by August 23, 2018.
- A copy of the Statement of Reasons, which provides more details about these investigations, will be available on the CBSA’s website at www.cbsa.gc.ca/sima-lmsi within 15 days.
- To address the evolving nature of trade and to ensure the well-being of industries like steel that are essential to the Canadian economy, Canada is modernizing its trade remedy system. As part of our commitment, the CBSA is working with its trading partners, the United States and Mexico, to strengthen our trade remedy systems, improve transparency and coordinate our efforts against unfair trade practices.
- 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.
Canadian International Trade Tribunal. May 24, 2018. Tribunal Initiates Expiry Review—Carbon Steel Welded Pipe from China
Ottawa, Ontario — The Canadian International Trade Tribunal (the Tribunal) today initiated an expiry review of its order made on August 19, 2013, in Expiry Review No. RR-2012-003, to determine if the continued or resumed dumping and subsidizing of certain carbon steel welded pipe from the People’s Republic of China are likely to result in injury.
On October 22, 2018, the Canada Border Services Agency will determine if there is a likelihood of resumed or continued dumping and/or subsidizing. In the event of a positive determination, the Tribunal will determine, on April 1, 2019, whether the continued or resumed dumping and/or subsidizing are likely to result in injury.
The Tribunal is an independent quasi-judicial body that reports to Parliament through the Minister of Finance. It hears cases on dumped and subsidized imports, safeguard complaints, complaints about federal government procurement and appeals of customs and excise tax rulings. When requested by the federal government, the Tribunal also provides advice on other economic, trade and tariff matters.
Any interested person, association or government that wishes to participate in the Tribunal’s expiry review may do so by filing a Notice of Participation.
FINANCE
Department of Finance Canada. May 25, 2018. Department of Finance Canada Launches Consultations on the Review of the Canadian Payments Act
Ottawa, Ontario – The Government of Canada supports well-functioning payment systems that foster innovation, enable competition, and allow the Canadian economy to function smoothly. Innovation is particularly valuable—it's not only a major driver of economic growth, it has also led to the development of new technologies that make financial transactions more convenient and efficient for Canadians.
Every day, Canadians use various payment systems when making purchases in-store and on-line—everything from groceries to clothing to school supplies. Ensuring that payment systems are fast, secure, reliable and flexible builds confidence in Canadians that the payment methods they use are both efficient and safe.
At the same time, the payments ecosystem continues to innovate and evolve. Mobile platforms, e-commerce, and new players introducing new technology are changing the way Canadians want to pay for their purchases. Payments Canada, which owns and operates Canada's core payment systems, must be positioned to respond effectively to this changing environment, and its systems must keep up with the pace of change.
In 2015, the Government made several changes to the Canadian Payments Act to reform the governance structure of Payments Canada, with an aim to ensure that core systems are operated for the benefit of Canadians, and support competition and innovation in the payments space. Following these changes, Payments Canada launched a multi-year modernization initiative of its payments infrastructure.
Today, the Department of Finance Canada launched consultations to seek views on whether the 2015 governance changes have been effective in achieving the intended public policy objectives of efficiency, safety and soundness, and user interests. As required under the Act, the launch of this review follows through on a commitment to review the Act three years after the changes were made. Feedback is also sought on how best to adapt Payments Canada's membership structure to ensure access to its systems is open and risk-based, and reflects developments in the payments ecosystem. Feedback will help determine whether further improvements are needed.
The Government will table a report in both Houses of Parliament based on feedback from stakeholders on these consultations.
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