CANADA ECONOMICS
G7
PM. Itinerary for Thursday, May 24, 2018 Ottawa, Ontario - May 23, 2018
Note: All times local
La Malbaie, Quebec
9 a.m. The Prime Minister will participate in a roundtable with stakeholders from the Charlevoix region ahead of the G7.
Public library of La Malbaie
395 rue Saint-Étienne
Notes for media:
Photo opportunity at beginning of the roundtable
Media are asked to arrive no later than 8:30 a.m.
12 p.m. The Prime Minister will hold a Q&A with regional media ahead of the 2018 G7 Summit.
Fairmont Le Manoir Richelieu
Murray room
181 rue Richelieu
Note for media:
Accredited media are asked to arrive no later than 11 a.m.
Baie-Saint-Paul, Quebec
1:50 p.m. The Prime Minister will meet with G7 Sherpas.
Le Germain Charlevoix Hotel
50 rue de la Ferme
Notes for media:
Photo opportunity at beginning of meeting
Media should arrive no later than 1:30 p.m.
Toronto, Ontario
7 p.m. The Prime Minister will attend the 2018 IDENTITY Gala, hosted by Egale Canada, and will receive the 2018 Egale Leadership Award.
Hilton Toronto
Toronto Ballroom
145 Richmond Street West
Notes for media:
Open coverage
Media are asked to arrive no later than 6:30 p.m.
NAFTA
ADRIAN MORROW, WASHINGTON
GREG KEENAN, TORONTO
Robert Fife, Ottawa
U.S. President Donald Trump is threatening to slap a 25-per-cent tariff on all imported vehicles, a move that would upend the global auto industry and cause serious damage to Canada’s manufacturing sector.
The idea, first reported Wednesday by the Wall Street Journal, comes as the renegotiation of the North American free-trade agreement remains deadlocked over automotive content rules. Such levies would likely cancel out the deal, making it prohibitively expensive to import vehicles into the U.S.
One U.S. industry source briefed on the administration’s internal trade deliberations confirmed the tariff plan has been under discussion for some time. But the source said it is meant only as a pressure tactic to push Canada and Mexico for a better deal on NAFTA and to press other countries that are currently negotiating exemptions from U.S. steel and aluminium tariffs. The source said it is unlikely such tariffs would ever materialize.
Mr. Trump took aim at Canada earlier in the day, saying his neighbour was “very difficult to deal with” and had been “very spoiled” under NAFTA. U.S. auto workers, he said, would be “very happy” with an upcoming announcement.
“NAFTA’s very difficult. Mexico has been very difficult to deal with. Canada has been very difficult to deal with. They have been taking advantage of the United States for a long time. I am not happy with their request. But I will tell you, in the end, we will win – and we’ll win big,” he told reporters on the White House lawn as he prepared to depart for an event in New York. “They’re very spoiled because nobody’s done this. But I will tell you, what they’ve asked for is not fair.”
The tariff move would make use of Section 232, an obscure piece of U.S. trade law that allows the government to hit products with levies for “national security” reasons. Under 232, the administration would first conduct an investigation before deciding whether to impose tariffs, creating months of mounting pressure on U.S. trading partners.
One Canadian official, speaking on condition of anonymity, said they had heard nothing of Mr. Trump’s plan for auto tariffs.
Mr. Trump used 232 earlier this year to hit steel and aluminium imports with levies of 25 per cent and 10 per cent.
The U.S. temporarily exempted Canada and Mexico from those tariffs pending the outcome of NAFTA talks. The exclusion, however, runs out on June 1, and Canada is lobbying furiously to get it extended. One possibility under discussion, said a source with knowledge of the NAFTA negotiations, is for the three countries to announce a high-level agreement on autos before June 1 – which would be enough for the U.S. to extend the exemption – and then keep negotiating the details.
A 232 investigation on vehicles would turn up the heat on Canada and Mexico even more.
“This guy is amazing. Wow,” said Flavio Volpe, president of the Automotive Parts Manufacturers of Canada, who added that he not heard of the idea.
If it applies to all countries, a vehicle tariff would penalize Ford Motor Co. and General Motors Corp., which have assembly plants in Canada that ship as much as 80 per cent of their production to the U.S. market, as well as Fiat Chrysler Automobiles NV and exports from its two assembly plants in Ontario.
It would also affect Honda Motor Co. Ltd., which assembles the Civic compact car and CR-V crossover in Alliston, Ont., and Toyota Motor Corp., which has begun a $1.4-billion investment in its Canadian plants in Cambridge and Woodstock, Ont., to boost production of its RAV-4 crossover, the best-selling vehicle in its lineup in Canada and the United States.
The Detroit-based companies – as well as many offshore-based auto makers such as BMW AG and Volkswagen AG – also have large vehicle assembly operations in Mexico that would be subject to such a tariff.
Autos are the Trump administration’s top priority in the NAFTA talks. His trade chief, Robert Lighthizer, has demanded more stringent rules on auto content to ensure that more components in North American-made cars – particularly steel, aluminium and glass – are sourced from within the NAFTA zone. He is also demanding that 40 per cent of the content of a vehicle come from plants where workers make at least US$15 an hour, a policy meant to move jobs back to the U.S. from Mexico, where auto workers make an average of US$4 an hour.
Both Canada and Mexico proposed deals this month that would have resolved the auto issue in exchange for the U.S. dropping other contentious demands. Mr. Lighthizer, however, rejected them both and has signalled he is prepared for a long negotiation.
Canadian Foreign Affairs Minister Chrystia Freeland said Wednesday that negotiators are still talking. She spoke Monday with Mr. Lighthizer and Mexican Economy Minister Ildefonso Guajardo. She is ready to meet them both, she said, whenever there is a possibility for a breakthrough.
“The three of us agreed to be in constant contact, to be available to one another at any time, and we all agreed that the three of us are ready to jump on a plane and meet anywhere to get this done,” she said. “My suitcase is packed.”
REUTERS. MAY 24, 2018. U.S. auto import probe fans tariff fears, riles Asia, Europe
David Shepardson, Jeff Mason
(Reuters) - A U.S. threat that it may introduce tariffs on foreign auto imports drew strong criticism on Thursday from the country’s main business lobbying group, which warned of a “staggering” blow to the industry and the prospect of a global trade war.
President Donald Trump’s administration opened a trade investigation on Wednesday into whether vehicle imports had damaged the American auto industry. That could lead to tariffs of up to 25 percent on the same “national security” grounds used to impose U.S. steel and aluminum duties in March.
U.S. Commerce Secretary Wilbur Ross said on Thursday the investigation was still in its early stages but that other countries’ high, artificial barriers, such as tariffs and other interventions, have skewed the marketplace.
“Now it’s very difficult to get back to a reciprocal arrangement,” Ross said in an interview on CNBC, a day after announcing the probe, which could lead to new U.S. tariffs on imported vehicles.
The probe, launched under Section 232 of the Trade Expansion Act of 1962, will look at whether vehicle and parts imports are threatening the industry’s health and ability to research and develop advanced technologies, Ross said on Wednesday.
The U.S. Chamber of Commerce said it strongly opposes the move.
“If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war,” chamber President and Chief Executive Officer Thomas Donohue said in a statement. He urged the government to reverse course.
Canadian Prime Minister Justin Trudeau said the U.S. move was based on flimsy logic and clearly linked to talks to modernize the North American Free Trade Agreement (NAFTA). NAFTA partner Canada is the largest exporter of auto products to the United States.
Germany’s DIHK Chambers of Industries and Commerce dismissed as farfetched the national security justification for a probe. “We almost have to take this as a provocation,” DIHK President Eric Schweitzer said.
Together German carmakers BMW (BMWG.DE), Daimler AG (DAIGn.DE) and Volkswagen AG control more than 90 percent of the North American premium auto market.
Tariffs would hit Germany particularly hard and shave 0.16 percent off the economic output of Europe’s largest economy, the influential Ifo think tank said. “No other country has higher absolute losses to fear than Germany,” said Gabriel Felbermayr, foreign trade expert at Ifo.
German Finance Minister Olaf Scholz said the European Union should be united in its response to the threat of U.S. tariffs.
The probe comes ahead of midterm elections in the United States in November that will determine whether Republican President Donald Trump’s party retains control of Congress. It is seen as part of Trump’s “America First” promise to win back manufacturing jobs lost to overseas competitors.
United Auto Workers President Dennis Williams said he supports Trump’s trade policies and his efforts to protect American workers from competition from low-wage countries.
But that did not mean the UAW was ready to support Republicans running for Congress in the midterms. “The Republican Congress and Senate, they have totally ignored the needs of working men and women in this country,” Williams said.
U.S. Senate Finance Committee Chairman Orrin Hatch said possible auto tariffs are “deeply misguided,” and urged the administration “to remain focused on addressing China’s trade practices.”
Pointing to a mixed bag of effects on U.S. producers after the metals tariffs, analysts were cautious about predicting major gains for U.S. companies and workers from the process.
“Measures like this are ultimately about protecting American manufacturing jobs in states that voted for Trump rather than national security,” Morningstar analyst David Whiston said in a note.
“We don’t see these tariffs (if proposed) lasting forever and we think (they) will ultimately cost American jobs.”
Shares of General Motors Co (GM.N) rose 1.5 percent and Ford Motor Co (F.N) was up 1.7 percent in early afternoon trading.
In Europe, BMW (BMWG.DE) and Daimler (DAIGn.DE) shares dropped as much as 3.5 percent during the session, while Volkswagen AG (VOWG_p.DE) closed down 2.5 percent. Together the three automakers control more than 90 percent of the North American premium auto market.
Renault SA (RENA.PA), exposed to the U.S. market via its 43.4 percent stake in Nissan, fell as much as 2.1 percent. Europe’s auto sector index .SXAP lost 2 percent and was on track for its worst day in 10 months.
Higher tariffs could be particularly painful for Asian automakers, including Toyota Motor Corp (7203.T), Nissan Motor Co (7201.T), Honda Motor Co (7267.T) and Hyundai Motor Co (005380.KS), which count the United States as a key market. The probe sparked a broad sell-off in automakers’ shares across the region. [MKTS/GLOB]
Toyota dropped 3 percent and Honda slid 3.4 percent.
Toyota, which has 10 U.S. plants and 1,500 U.S. dealers, said in a statement that any tariffs “could hurt American jobs” and raise costs for consumers.
The governments of Japan, China and South Korea said they will monitor the situation, while Beijing, which is increasingly eyeing the United States as a potential market for its cars, added that it would defend its interests.
In addition to tariffs, Commerce Secretary Ross cited other non-tariff barriers such as standards, licensing and “all kinds of other games.”
“The stupidity is that we let ourselves get into this box of extremely low rates,” he told CNBC.
Bayerische Motoren Werke AG
89.0
BMWG.DEXETRA
-1.83(-2.01%)
BMWG.DE
BMWG.DEDAIGn.DEGM.NF.NVOWG_p.DE
The United States imported 8.3 million vehicles in 2017 worth $192 billion, including 2.4 million from Mexico, 1.8 million from Canada, 1.7 million from Japan, 930,000 from South Korea and 500,000 from Germany, according to U.S. government statistics.
At the same time, the United States exported nearly 2 million vehicles worldwide worth $57 billion.
(This refiled version restores dropped word “of” in first paragraph)
Reporting by David Shepardson, Jeff Mason and Susan Heavey in Washington, Rachit Vats in Bengaluru, Edward Taylor in Frankfurt and Laurence Frost in Paris, Esha Vaish in Stockholm, Phil Blenkinsop in Brussels and Michelle Martin in Berlin; writing by Susan Thomas; editing by Jeffrey Benkoe and Jonathan Oatis
REUTERS. MAY 24, 2018. Exclusive: Canada PM raps possible U.S. auto tariffs, says linked to NAFTA
Andrea Hopkins, David Ljunggren
LA MALBAIE, Quebec (Reuters) - A move by the United States to explore tariffs on auto imports is based on flimsy logic and is part of the pressure from Washington to renegotiate the NAFTA trade pact, Canadian Prime Minister Justin Trudeau said on Wednesday.
In an interview with Reuters, Trudeau said that while U.S. President Donald Trump had raised the idea of punitive measures, there was no guarantee they will happen.
Trudeau also predicted talk of tariffs would likely disappear if slow-moving negotiations to update the North American Free Trade Agreement - currently stuck on autos issues - are successful.
The Trump administration said on Wednesday it had launched a national security investigation into car and truck imports that could lead to new tariffs similar to those imposed on imported steel and aluminum recently. Canada rejects any idea it could be a threat to the United States.
“I am - even more than I was with steel and aluminum - trying to figure out where a possible national security connection is,” Trudeau said at the luxurious riverside hotel that will be the site of a Group of Seven summit in June.
“Taking that a step further into autos seems to me to be on even flimsier logical grounds,” Trudeau said. “But we know that this is very much linked to ongoing negotiations around moving forward on NAFTA.”
Imposing tariffs could cause chaos for a Canadian auto industry that is heavily integrated into the North American economy. Canada is home to major plants operated by General Motors, Ford, Fiat Chrysler, Honda and Toyota.
In Ottawa, Foreign Minister Chrystia Freeland told reporters the idea that Canadian-made autos posed a security threat was “frankly absurd and that is a point we are making very clearly to our U.S. partners and allies.”
Talk of tariffs and potential trade wars will be on the agenda when Trump comes to La Malbaie for the G7 summit on June 8-9. Prominent G7 members such as Germany and France are also unhappy about what they see as Trump’s protectionist rhetoric.
Trudeau says Canada needs to diversify its trade flows away from the United States, which takes 75 percent of all Canadian goods exports, and has identified China as a prime target.
Talks between NAFTA partners the United States, Canada and Mexico have been stalled over a series of U.S. demands to rework the 24-year-old accord, in particular proposals to impose tougher regional content requirements on the auto industry in a bid to create more jobs in the United States.
AECON DEAL
Yet despite his criticism of the United States for arguing that auto imports might be a national security issue, Trudeau defended Canada’s decision to block a proposed C$1.51 billion ($1.18 billion) takeover of construction company Aecon (ARE.TO) by a Chinese state builder, also on national security grounds.
“Our intelligence and security agencies came back with a very clear recommendation that they didn’t feel the transaction should proceed for national security reasons,” Trudeau said, declining to elaborate on the reasoning.
Trudeau, who visited Beijing last December and raised the prospect of exploratory talks on a free trade deal, said Canada did not “want trade with China any which way at any cost”.
Trudeau has said his government had concerns about the Aecon deal’s implications for intellectual property protections.
Trudeau reiterated his government’s commitment to ensure a hotly contested Kinder Morgan Canada (KML.TO) pipeline expansion project would be built, but said little about how that could be achieved if the firm walked away as it is threatening to do unless Ottawa deals with opposition to the plan.
“We are going to make sure the pipeline gets built and we are going to do it responsibly and in a way that upholds the national interest and we’re working very hard to do just that and when we have more to say, we will say more,” he said.
The prime minister also defended his government’s efforts to cope with a swell of irregular arrivals by asylum seekers at the U.S.- Canada border, saying those who are not genuine refugees will be sent back.
Aecon Group Inc
17.34
ARE.TOTORONTO STOCK EXCHANGE
+0.09(+0.52%)
ARE.TO
ARE.TOKML.TO
More than 27,000 asylum seekers have walked across the frontier since Trump took office and some say they left the United States because of his policies and rhetoric toward immigrants.
“There is a very high likelihood that if they are not actually fleeing the kinds of things that make you a refugee — which is war, persecution, terror, violence ... then they are going to be sent back home,” Trudeau said.
Reporting by David Ljunggren and Andrea Hopkins; Editing by Amran Abocar and Alistair Bell
CANADA - CHINA / INFRASTRUCTURE
Ottawa — The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, made the following statement on the proposed acquisition of Aecon Group Inc. (Aecon) by China Communications Construction Company International Holding Limited (CCCI):
“In accordance with the Investment Canada Act, the Government of Canada reviewed the proposed acquisition of Aecon by CCCI.
“As is always the case, we listened to the advice of our national security agencies throughout the multi-step national security review process under the Investment Canada Act.
“Based on their findings, in order to protect national security, we ordered CCCI not to implement the proposed investment.
“Our government is open to international investment that creates jobs and increases prosperity, but not at the expense of national security.”
The Globe and Mail. 24 May 2018. Ottawa blocks Chinese takeover of Aecon after security review
ROBERT FIFE
STEVEN CHASE
THE DECISION Federal inquiry finds sale is not in Canada’s national interest
THE BACKGROUND Deal was opposed by construction rivals, former CSIS directors
THE FALLOUT Halt of $1.5-billion acquisition raises concerns of Beijing retaliation
OTTAWA - The federal cabinet has invoked national security threats to block the proposed $1.5-billion takeover of Canadian construction giant Aecon Group Inc. by a Chinese state-owned enterprise − a decision that is likely to cause a rift with Beijing.
The sale of Toronto-based Aecon – the builder of critical infrastructure and the iconic CN Tower – to China Communications Construction Co. Ltd. (CCCC) was opposed by Canadian construction rivals and two former directors of the Canadian Security Intelligence Service.
Sources with knowledge of the cabinet decision said Ottawa accepted the findings of a national security review that determined the acquisition was not in the country’s national security interest.
Intelligence agencies in both Canada and the United States have warned that companies owned or partly owned by the Chinese government are not merely profit-seeking operations; they are also prone to passing on information or technology to Beijing and making business decisions that could conflict with Canadian interests but serve the agenda of the authoritarian Communist Party of China.
Innovation Minister Navdeep Bains, whose department oversaw the investment review, said in a statement Wednesday: “Our government is open to international investment that creates jobs and increases prosperity, but not at the expense of national security.”
In a note to investors Wednesday evening, Aecon said it is reviewing the decision and will have a “more detailed response in due course.”
“While we are disappointed with the government’s decision, Aecon is and will continue to be a leading player in the Canadian construction and infrastructure market,” John Beck, Aecon’s chief executive, said in a statement.
“While we have been prevented from pursuing the transaction, we are moving forward from a position of strength.”
Charles Burton, a former Canadian diplomat who served in Beijing, lauded the cabinet decision but warned China is likely to retaliate.
“We could probably see a renewal of objections to Canadian exports of canola seeds, to start, and possibly other areas where China can sanction Canada.
“They could restrict tourism as they did with South Korea and start to challenge Canadian investment in China,” he said.
Last month, China’s envoy to Canada, Lu Shaye, waded into the debate over Aecon, saying it was “immoral” for Canadians to criticize Chinese state-owned enterprises as recipients of subsidies and submissive to the Chinese government, adding that these entities are pillars of his country’s economy and must be accepted as such. Ward Elcock, a former CSIS director who had urged for the deal to be rejected, welcomed Ottawa’s decision.
“A state-owned company will always do the bidding of China,” Mr. Elcock said in an interview Wednesday. “At the end of the day, China is not an ally of Canada. It is a trading partner – and a crucial one. … But having said that, the interests of China are not always going to be the interests of Canada.”
He said the problem with allowing Aecon to be purchased by a Chinese state firm is that the Canadian company plays a significant role in major infrastructure projects, from the refurbishment of nuclear facilities to British Columbia’s massive Site C hydro-electric dam. Mr. Elcock said he thinks the difficulty facing federal decision-makers was that they couldn’t fashion a workable constraint on Aecon’s future activities under Chinese state ownership.
“The problem, I suspect, is there is really no way to put in a restriction that prevents a company that simply pours concrete one day from undertaking a major infrastructure project on another day,” he said.
The Chinese embassy in Ottawa said the decision will hurt Canada’s economy.
“There is no doubt that the decision made by Canadian government is by no means a good news for the investment co-operation between China and Canada,” the embassy said in a statement. “This will seriously undermine the confidence of Chinese investors.”
Aecon, led by Mr. Beck, had downplayed concerns that have been raised about its involvement in critical infrastructure projects – contracts that would pass on to CCCC if the transaction had been approved by Ottawa.
The Aecon transaction would have been the largest purchase outside of Canada’s oil patch by a Chinese state-owned enterprise, according to the University of Alberta’s China Institute. The bid represented a trend in Canada where Chinese firms are moving beyond the Canadian petroleum sector into other industries in provinces such as Ontario and British Columbia.
Several of Aecon’s largest competitors had asked Ottawa to block the takeover on the grounds that CCCC – which is one of the world’s largest infrastructure companies – had a poor track record when it comes to safety and corruption, and that a state-controlled Chinese entity is not suited to work on projects with security concerns.
Critics of the Aecon deal also expressed concern that China’s one-party state may be able to influence corporate decisions in Canada. Beijing has ordered Communist Party units be placed in all state-owned enterprises.
CCCC obeyed the ruling and recently set up a “Communist Party of China Committee” within its corporate hierarchy. The firm has also helped China assert sovereignty by building artificial islands in the disputed South China Sea.
Mr. Elcock and another former CSIS director, Richard Fadden, who also served as national security adviser to Justin Trudeau and Stephen Harper, had taken the rare step of publicly opposing the takeover as not being in Canada’s strategic interest.
“There is a significant question about whether we should tolerate Chinese state-owned companies, which are essentially under the thumb of the Chinese government, that we should tolerate Chinese companies buying into the Canadian market,” Mr. Fadden said.
Cabinet ordered a full national security review of the takeover bid last month under Section 23.5 of the Investment Canada Act, a measure invoked when the federal government believes an investment could be “injurious to national security.”
Aecon was put up for sale last August and was sold to CCCC in October. The Fortune 500 giant is China’s second-largest engineering construction firm and is owned 63 per cent by the oneparty state.
In the original auction of Aecon, which played out from August to October of last year, there was an offer for the company from a rival Canadian construction firm, backed by a domestic private equity fund. That offer was for less than $20 a share and the Canadians were outbid by the Chinese, who were willing to pay $20.37 a share for Aecon.
The Globe and Mail. MAY 23, 2018. Trudeau cabinet blocks Chinese takeover of Aecon over national security concerns
ROBERT FIFE AND STEVEN CHASE
OTTAWA - The federal cabinet has invoked national security threats to block the proposed $1.5-billion takeover of Canadian construction giant Aecon Group Inc. by a Chinese state-owned enterprise − a decision that is likely to cause a rift with Beijing.
The sale of Toronto-based Aecon – the builder of critical infrastructure and the iconic CN Tower – to China Communications Construction Co. Ltd. (CCCC) was opposed by Canadian construction rivals and two former directors of the Canadian Security Intelligence Service.
Sources with knowledge of the cabinet decision said Ottawa accepted the findings of a national security review that determined the acquisition was not in the country’s national security interest.
Intelligence agencies in both Canada and the United States have warned that companies owned or partly owned by the Chinese government are not merely profit-seeking operations; they are also prone to passing on information or technology to Beijing and making business decisions that could conflict with Canadian interests but serve the agenda of the authoritarian Communist Party of China.
Innovation Minister Navdeep Bains, whose department oversaw the investment review, said in a statement Wednesday: “Our government is open to international investment that creates jobs and increases prosperity, but not at the expense of national security.” In a note to investors Wednesday evening, Aecon said it is reviewing the decision and will have a “more detailed response in due course.”
“While we are disappointed with the government’s decision, Aecon is and will continue to be a leading player in the Canadian construction and infrastructure market,” John Beck, Aecon’s chief executive, said in a statement.
“While we have been prevented from pursuing the transaction, we are moving forward from a position of strength.”
Charles Burton, a former Canadian diplomat who served in Beijing, lauded the cabinet decision but warned China is likely to retaliate.
“We could probably see a renewal of objections to Canadian exports of canola seeds, to start, and possibly other areas where China can sanction Canada.
“They could restrict tourism as they did with South Korea and start to challenge Canadian investment in China,” he said.
Last month, China’s envoy to Canada, Lu Shaye, waded into the debate over Aecon, saying it was “immoral” for Canadians to criticize Chinese state-owned enterprises as recipients of subsidies and submissive to the Chinese government, adding that these entities are pillars of his country’s economy and must be accepted as such.
Ward Elcock, a former CSIS director who had urged for the deal to be rejected, welcomed Ottawa’s decision.
“A state-owned company will always do the bidding of China,” Mr. Elcock said in an interview Wednesday. “At the end of the day, China is not an ally of Canada. It is a trading partner – and a crucial one. … But having said that, the interests of China are not always going to be the interests of Canada.”
He said the problem with allowing Aecon to be purchased by a Chinese state firm is that the Canadian company plays a significant role in major infrastructure projects, from the refurbishment of nuclear facilities to British Columbia’s massive Site C hydro-electric dam. Mr. Elcock said he thinks the difficulty facing federal decision-makers was that they couldn’t fashion a workable constraint on Aecon’s future activities under Chinese state ownership.
“The problem, I suspect, is there is really no way to put in a restriction that prevents a company that simply pours concrete one day from undertaking a major infrastructure project on another day,” he said.
Our government is open to international investment that creates jobs and increases prosperity, but not at the expense of national security.
— Innovation Minister Navdeep Bains
The Chinese embassy in Ottawa said the decision will hurt Canada’s economy. “There is no doubt that the decision made by Canadian government is by no means a good news for the investment co-operation between China and Canada,” the embassy said in a statement.
“This will seriously undermine the confidence of Chinese investors.”
Aecon, led by Mr. Beck, had played down concerns that have been raised about its involvement in critical infrastructure projects – contracts that would pass on to CCCC if the transaction had been approved by Ottawa.
The Aecon transaction would have been the largest purchase outside of Canada’s oil patch by a Chinese state-owned enterprise, according to the University of Alberta’s China Institute. The bid represented a trend in Canada where Chinese firms are moving beyond the Canadian petroleum sector into other industries in provinces such as Ontario and British Columbia.
Several of Aecon’s largest competitors had asked Ottawa to block the takeover on the grounds that CCCC – which is one of the world’s largest infrastructure companies – had a poor track record when it comes to safety and corruption, and that a state-controlled Chinese entity is not suited to work on projects with security concerns.
Critics of the Aecon deal also expressed concern that China’s one-party state may be able to influence corporate decisions in Canada. Beijing has ordered Communist Party units be placed in all state-owned enterprises.
CCCC obeyed the ruling and recently set up a “Communist Party of China Committee” within its corporate hierarchy. The firm has also helped China assert sovereignty by building artificial islands in the disputed South China Sea.
Mr. Elcock and another former CSIS director, Richard Fadden, who also served as national security adviser to Justin Trudeau and Stephen Harper, had taken the rare step of publicly opposing the takeover as not being in Canada’s strategic interest.
“There is a significant question about whether we should tolerate Chinese state-owned companies, which are essentially under the thumb of the Chinese government, that we should tolerate Chinese companies buying into the Canadian market,” Mr. Fadden said. Cabinet ordered a full national security review of the takeover bid last month under Section 23.5 of the Investment Canada Act, a measure invoked when the federal government believes an investment could be “injurious to national security.”
Aecon was put up for sale last August and was sold to CCCC in October. The Fortune 500 giant is China’s second-largest engineering construction firm and is owned 63 per cent by the one-party state.
In the original auction of Aecon, which played out from August to October of last year, there was an offer for the company from a rival Canadian construction firm, backed by a domestic private equity fund. That offer was for less than $20 a share and the Canadians were outbid by the Chinese, who were willing to pay $20.37 a share for Aecon.
With a report from Andrew Willis
The Globe and Mail. MAY 24, 2018. China warns Canada to ‘abandon prejudices’ after Ottawa blocks Aecon deal
NATHAN VANDERKLIPPE, ASIA CORRESPONDENT
BEIJING - The Chinese government has warned Canada to “abandon prejudices” against Chinese companies, after Ottawa blocked the acquisition of construction company Aecon Group Inc. by China Communications Construction Co. Ltd, a state-owned firm.
“We are opposed to political interference under the pretext of national security,” said Lu Kang, a spokesman for the Chinese foreign ministry.
“We hope the Canadian side can abandon prejudices and create a level playing field for Chinese enterprises.”
Read more: Trudeau cabinet blocks Chinese takeover of Aecon over national security concerns
Ibbitson: Whatever opportunities China has to offer, Canada has drawn its line in the sand
Opinion: It’s back to figuring out what Canada truly wants from China
Mr. Lu also delivered a veiled threat that China could consider reprisals, saying “if Chinese interests are undermined, we will take necessary actions to safeguard our rights and interests.”
Ottawa’s rejection of the $1.5-billion deal came after a national security review concluded the acquisition would not be in Canada’s national security interest, sources told The Globe and Mail.
The deal’s rejection comes amid a rising reconsideration in many foreign capitals of China’s intentions as its deep-pocketed companies, many of them state-controlled, spread across the world in search of assets and technology. In the last two years alone, Chinese companies spent US$290-billion on non-financial foreign investments, according to official statistics, a sum that significantly exceeds overseas investment into China during that period.
Now, governments in countries like Australia and Germany are questioning the links between Beijing’s spending and its assertion of political influence. Last year, Germany strengthened its foreign investment laws, giving Berlin more power to block overseas acquisitions of firms engaged in “critical infrastructure.“ The White House, meanwhile, has raised global fears of a trade war as it seeks to extract greater trade concessions from China.
On Thursday, Chinese scholars decried what Wang Huiyao, director of the Center for China and Globalization, likened to a spreading “flu” of global skepticism toward China.
“It’s a sentiment that’s not healthy,” he said.
He took particular aim at the blocking of the Aecon deal, which did not involve sophisticated technology or manufacturing expertise. Infrastructure construction “is one of the strongest strengths that China has,” he added, and “construction-wise, China can offer a lot to Canada.”
Blocking the deal “doesn’t sound very positive for Sino-Canadian trade relations,” he said.
Lu Jianzhong, president of the Hong Kong investment arm of CCCC, in a brief e-mailed comment, said: “What’s important is not the message the Canadian government conveys, it’s the way market and investors interpret it.”
Canadian observers have raised alarm that Aecon’s involvement in building critical projects provides it with access to sensitive information that could be of interest to the Chinese government.
But Zhou Chunsheng, a finance scholar at Cheung Kong Graduate School of Business, pointed to the Canadian decision on Aecon as part of a broader pattern of “discrimination” against China. “Of course this is not a good signal. It means that China and Canada, or sometimes with the United States and Australia — we do not have mutual trust,” he said.
“Most of these countries always want China to import more from them. But they don’t want China to invest in their countries,” he added. “I don’t think this is fair.”
Beijing has shown a willingness to strike back against countries that resist its ambitions. Chinese spending on South Korean goods, including cars and K-pop, fell dramatically during a dispute with Beijing over Seoul’s installation of an anti-missile system. China has similarly acted against Japan and the Philippines during disputes with those countries, and Chinese state media has called for retribution against Australia as that country debates the political influence Beijing has attained.
In the more recent trade frictions with the U.S., China has taken retaliatory steps that have matched measures taken by the White House.
Mr. Lu, the foreign ministry spokesman, said Thursday that China “will pay close attention” to what happens around the Aecon transaction.
“The nature of China-Canada economic and trade relations should be mutually beneficial,” he said. Beijing encourages its companies “to obey the regulations and laws of countries where when going abroad,” he said, and hopes that in return they receive “good treatment.”
But China under president Xi Jinping “is a very different type of China,” a country that “is very clearly becoming more assertive, and you could even say aggressive, in terms of its international behaviour,” said Peter Jennings, a former top-level Australian strategic advisor who is now executive director of the Australian Strategic Policy Institute.
As a result, “there’s a greater sense of caution globally about how do we deal with this,” he said.
Worry is particularly acute on the issue of critical infrastructure, he said.
“That’s informed by a concern that if you allow your grid, or your gas pipelines or ports and airports to be owned by Chinese companies, then you create a risk that the operations of these facilities might be damaged or shut down at moments when countries might find themselves being coerced by China — or, worse still, in conflict situations,” he said.
“Countries are asking, ‘can we really rely on China to be just another business presence in our country?’ And I think quite often the answer to that is no. There’s strings attached that link Chinese businesses back to the Communist party and to Chinese intelligence services that worry western governments.”
The Globe and Mail. 24 May 2018. Whatever opportunities China has to offer, Canada has drawn its line in the sand
JOHN IBBITSON
This will anger a great many people in China and some in Canada. But it is the right move.
China may soon be the world’s largest economy. Canada is a trading nation that seeks foreign investment. For decades, now, Liberal governments have courted Chinese favour, have sought access to its market of more than a billion people, have welcomed its capital. Canada is typical of Western nations in looking upon China this way.
But attitudes are changing. For China is not simply an opportunity; it is also a challenge; it might even be a threat. Xi Jinping, President and now ruler for life, asserts that the
Middle Kingdom’s statemanaged capitalism and one-party rule is preferable to liberal democracy. This is the latest in a century of challenges to the West − German militarism, German fascism, Soviet communism. This challenge arrives as the West struggles with its own crisis of confidence, brought on by political polarization in Europe and North America, and personified by the rogue presidency of Donald Trump.
But with Wednesday’s cabinet decision to prohibit the sale of Canadian construction firm Aecon by a Chinese state-owned enterprise, Canada has said enough. Whatever the opportunities presented by China, the challenges of intellectual property theft and compromised security are too great. If the Chinese want to rule the world, they must get there on their own, not by buying or stealing Western knowledge or innovation.
This will anger a great many people in China and some in Canada. But it is the right move.
Those who are made angry will say that Canada is demonstrating hostility to Asia’s most powerful state. But that state makes contentious claims over control of the South China Sea and then builds military bases on atolls to enforce its will. It, along with other challengers, launches cyberattacks against Western governments and Western businesses. It seeks co-operation with the international community while ignoring international laws and norms at its convenience.
This does not mean China, its government, its businesses or its people should be shunned by Westerners.
But it should be watched carefully, which is why Ottawa launched a national security review of the proposed acquisition and chose to block that acquisition once the review was complete.
There may be other, more permissible, investments down the road. But not this investment. Not this time.
The Canadian government’s approach to China is largely bipartisan.
When he was prime minister, Stephen Harper permitted the acquisition of the Alberta energy firm Nexen by a Chinese stateowned company. But he took forever to make that decision, personally announced that this was a special case and warned the Chinese not to expect favourable treatment if a state-owned enterprise came knocking at the door again.
In the Harper years, the Liberals criticized the Conservatives for their cautious, even hostile approach to China.
But as with so many other aspects of Canada’s foreign policy, once in power they followed the Conservative precedent.
This will, of course, not bode well for Canada-China free trade talks, which were to be underway by now, at least at the exploratory stage. But Wednesday’s decision may actually be helpful on that front as well.
In investment, in trade, in protecting intellectual property, the Western standard is the global standard. To fully integrate into, even one day lead, that global order, China must abide by its rules.
In any case, Chinese supremacy is anything but inevitable. The government’s disastrous onechild policy, even though it has been abandoned, has produced a demographic time bomb that simply can’t be defused. In a few years, India will surpass China in population. In a decade or so, the Chinese population will actually start to decline. China will lose hundreds of millions of people in this century because its fertility rate is so far below replacement rate.
An aging, declining population will challenge Chinese efforts to continue growing its economy. Restlessness and discontent will increase among the young who are burdened with caring for the old.
Some of us believe that the great challenge of this century will not be accommodating Chinese growth, but preventing a billion angry, distressed Chinese people chasing after too little wealth and burdened with so many elderly dependents from lashing out, putting the stability of the region and the world at risk.
It need not come to that. Canada, the West, the world can treat peacefully and happily with a China at peace with itself and everyone else.
But only if the rest of the world speaks to China from a position of firmness and strength. Allowing Beijing’s willing corporate helpers to acquire technology and knowledge in order to then become a competitor is not strength.
This is something that the Chinese nation may soon be hearing from others as well.
The Globe and Mail. MAY 24, 2018. OPINION. It’s back to figuring out what Canada truly wants from China
JEFFREY JONES
It could well be that Canada never decides what it really wants from China.
With its decision to block a $1.5-billion takeover of Aecon Group Inc., the construction company, by China Communications Construction Co. Ltd. (CCCC), the federal government has shown that its frequent assertions that it welcomes Chinese investment have some rather crucial caveats.
They are: Subject to fears about foreign state control and foreign state spying to be decided at a later date. Canadian companies seeking investments to compete against global majors, as Aecon did, will now be as reluctant to invite such bids from Chinese multinationals as those firms will be to make them.
It’s been a very long and confusing process to get to this outcome. It leaves Aecon shareholders with no shortage of uncertainty regarding the value of their stock. Even before Ottawa announced its decision on Wednesday, the shares had slumped well below the CCCC offer of $20.37 on growing worries about just such an outcome.
To recap: Aecon, known for major construction projects across Canada as well as nuclear power plant refurbishment, agreed to be acquired by state-controlled CCCC, one of the world’s largest infrastructure companies, following an auction last October.
Aecon’s chief executive officer, John Beck, said the company had been hamstrung in its ability to win major contracts. By becoming part of a global heavyweight, it would mean it could be in the running to win more big construction jobs and hire more workers. For that reason, Canada’s Building Trades Unions supported the takeover.
A similar deal by CCCC – its takeover of John Holland Group Pty Ltd. in 2015 – went swimmingly and more Australians keep getting hired, Mr. Beck said.
The deal drew fire from several quarters, including rival construction companies, which raised corruption, safety and national security concerns, especially related to the nukes. Major competitors PCL Constructors Inc., Ledcor Group and P.W. Graham & Sons Construction met with senior bureaucrats to press their case.
In a bizarre episode of guerilla theatre, a man called Michael Beattie made the rounds in Ottawa to fire shots at the transaction, only to be revealed, not as the successful construction executive he claimed to be, but as a flimflam man who had previously been convicted of fraud and perjury.
After months of being coy on whether the takeover would be subject to a full security review under the Investment Canada Act, The Liberals decided one was warranted, and the research was prolonged.
In a last-ditch attempt to win over government and public support early this month, Mr. Beck and CCCC President Lu Jianzhong wrote an op-ed in The Globe and Mail to blast the “false claims” of their opponents, which they said were based on “political opinion and a desire to limit competition.”
Now, the deal’s history and for Canada, it’s back to figuring out what it actually wants from China amid frets about intellectual property theft and spying – plus general trade angst as it relates to the Communist country, where human rights abuses still get swept under the rug. Indeed, in the hours following the Ottawa’s bombshell on Wednesday, warnings sounded that China will mount some form of retaliation.
These decisions by Ottawa defy prediction. Just last year, Ottawa approved the acquisition of Vancouver high-tech firm Norsat International Inc. by China’s Hytera Communications Corp. It received a routine screening in Canada. That rankled the U.S. Defence Department, for which Norsat had contracts.
It’s not just the Trudeau Liberals sending mixed messages to the trading partner that’s often touted as the biggest opportunity to expand exports beyond the United States. Recall the gnashing of teeth among the governing Conservatives of Stephen Harper that accompanied the review of CNOOC Ltd.’s $15.1-billion takeover of Calgary-based Nexen Inc. in 2012. Mr. Harper approved the sale, which included Nexen’s Long Lake oil sands project in Alberta. But he slammed the brakes on state-owned enterprises buying control of any more oil sands projects, fearing foreign governments could take all the spoils.
As it happened, the Chinese SOEs took Ottawa’s restrictions as a cue to refrain from buying other types of energy projects as well, and the deal flow dried up. The death of the Aecon deal shows that it’s still very much a toss-up whether Canadian companies should bother trying to woo Chinese capital.
REUTERS. MAY 23, 2018. Canada blocks Chinese takeover of Aecon on national security grounds
(Reuters) - Canada has blocked a proposed C$1.51 billion ($1.18 billion) takeover of construction company Aecon (ARE.TO) by a Chinese state builder on national security grounds, underscoring rising wariness of Chinese firms buying up assets in Western countries.
Aecon’s takeover by overseas investment and financing arm of China Communications Construction Co Ltd (601800.SS) was scheduled to close in February. But this was delayed after Canada extended a national security review.
Aecon, which has helped build Canadian landmarks including the CN Tower and the Saint Lawrence Seaway, saw its shares tumble 15 percent to a 10-month low on the Toronto Stock Exchange on Thursday.
The Canadian government has now ordered CCCC International Holding Ltd not to implement the proposed investment to protect national security, Canadian Innovation Minister Navdeep Bains said in a statement on Wednesday.
“Our government is open to international investment that creates jobs and increases prosperity, but not at the expense of national security,” Bains said.
Canadian Prime Minister Justin Trudeau said earlier his government would closely monitor security issues when it decided whether to allow the deal, examining the implications for intellectual property protections.
China’s foreign ministry said it hoped Canada could “abandon its prejudices” and provide a level playing field for Chinese enterprises in response to a question about the Aecon deal.
“In principle, China always opposes the politicization of this kind of trade and investment activity and we oppose the mistaken method of carrying out political interference on the basis of so-called national security reasons,” ministry spokesman Lu Kang said on Thursday.
Aecon said it was disappointed with the government’s decision and was no longer pursuing a sale process.
“We believe ... uncertainty around the company’s future strategic direction, particularly with a CEO search underway, is likely to weigh on share prices substantially,” AltaCorp Capital analyst Chris Murray said.
An executive from CCCC’s investor relations team in Beijing told Reuters the company had yet to receive relevant documents from the Canadian government.
Ottawa’s move comes as Canada is in exploratory trade talks with China as the country seeks to diversify its export markets.
Chinese interests in overseas assets has worried governments elsewhere such as in Denmark, whose officials have expressed concern over Greenland courting Chinese firms, including CCCC, to expand three airports.
The Committee on Foreign Investment in the United States (CFIUS), which scrutinizes foreign purchases of U.S. assets to protect national security interests, has also been tightening scrutiny of Chinese companies’ acquisitions of American firms.
Earlier this month, Chinese conglomerate HNA Group dropped its bid for most of SkyBridge Capital.
In January, Ant Financial’s plan to acquire U.S. money transfer company MoneyGram International collapsed after CFIUS rejected it over national security concerns.
Aecon Group Inc
14.655
ARE.TOTORONTO STOCK EXCHANGE
-2.68(-15.48%)
ARE.TO
ARE.TO601800.SSAVGO.OQCOM.O
U.S. President Donald Trump has also blocked microchip maker Broadcom’s (AVGO.O) $117 billion bid to buy Qualcomm (QCOM.O) on national security grounds, ending what would have been the technology industry’s biggest deal ever amid concerns that it would give China the upper hand in mobile communications.
Reporting by Taenaz Shakir and Rama Venkat Raman in Bengaluru, Leah Schnurr in Ottawa and Brenda Goh in Shanghai; Additional reporting by Michael Martina in Beijing; Editing by Peter Cooney and Himani Sarkar
CIB
The Globe and Mail. 24 May 2018. Infrastructure bank finds CPPIB veteran to fill CEO role, clearing path for long-awaited investments
ANDREW WILLIS
The infrastructure bank is a new concept, and I hope it turns into a made-in-Canada success that mirrors what we’ve achieved with Canada’s public-sector pension plans, which are seen as model organizations around the world.
PIERRE LAVALLÉE INCOMING, CEO OF THE CANADA INFRASTRUCTURE BANK
The Canada Infrastructure Bank landed veteran pension plan investor Pierre Lavallée as its first chief executive on Thursday, paving the way for the $35-billion agency to begin breaking ground on long-promised projects.
The Liberal government has committed to spend a total of $180-billion on infrastructure spending over 12 years and the bank is a cornerstone of its strategy. Mr. Lavallée, who was a senior executive at the Canada Pension Plan Investment Board, will be charged with helping to deliver on that promise by forging partnerships between governments, Indigenous groups and deep-pocketed private-sector investors such as pension plans.
Earlier this year, Parliament’s spending watchdog said only half the $14.4-billion the Liberals had earmarked for the first phase of the infrastructure projects had actually been committed. The Parliamentary Budget Office warned the slowerthan-expected roll-out could weigh on the entire Canadian economy
The new bank was formally launched 11 months ago and conducted a lengthy CEO search; sources say a number of candidates turned down the job because the government-owned agency doesn’t pay on the scale of Bay Street. Mr. Lavallée will begin a five-year term as the bank’s president and CEO on June 18.
The Toronto-based bank is expected to put up $35-billion of government money and bring in capital from outside investors to kickstart projects that might otherwise not get built. The focus will be on investments that generate revenue in three sectors: public transit, such as toll roads; transport systems, including pipelines; and green infrastructure such as water-treatment plants.
The bank’s incoming CEO said his first priorities are to hire a team, put a process in place for making investment decisions, draw up an initial list of projects and line up possible partners. When asked about potentially investing in Kinder Morgan Canada Ltd.’s Trans Mountain pipeline expansion from Alberta to British Columbia, which the federal government has said it is willing to backstop to overcome opposition from the B.C. provincial government, Mr. Lavallée said it is too early to comment on specific projects.
“This is a once-in-a-lifetime opportunity to build an organization that will deliver infrastructure that benefits all Canadians,” Mr. Lavallée, a 54-year-old native of Drummondville, Que., said. Mr. Lavallée spent six years at the CPP Investment Board, most recently overseeing the fund’s $94billion portfolio of partnerships with external asset managers and businesses. He also ran a public company as a senior executive at Montreal-based clothing retailer Reitmans (Canada) Ltd. and spent 18 years at consultant Bain & Co. Mr. Lavallée started his career working for the federal government as a trade commissioner in Ottawa and Japan.
“Mr. Lavallée is a talented and highly qualified professional who will play a key role in setting the course and direction of the bank as it makes investments in the transformational infrastructure projects,” federal Infrastructure Minister Amarjeet Sohi said in a news release.
The search for a CEO at the bank took longer than expected, in part owing to the Crown corporations’s approach to compensation. Top jobs at the agency are expected to pay between $400,000 and $600,000 annually, in line with compensation at Canada Post, Via Rail and other government-owned businesses. In contrast, senior executives at the CPP Investment Board and other large public-sector funds make approximately $3-million a year.
Mr. Lavallée declined to discuss his compensation, which will eventually be disclosed in government filings, but said he took the job because he wanted to launch an important national agency that potentially inspires similar initiatives in other countries.
“The infrastructure bank is a new concept, and I hope it turns into a made-in-Canada success that mirrors what we’ve achieved with Canada’s public-sector pension plans, which are seen as model organizations around the world,” he said.
Candidates for the top job were also leery of a governance structure that gives the federal cabinet a veto on the bank’s investments. However, Mr. Sohi and other federal ministers have repeatedly stated that the bank will operate at arm’s length from the government, and pension executives say the bank’s decision-making process is similar to what’s been used successfully for many years at public-sector plans.
One of the first jobs Mr. Lavallée needs to fill is that of chief investment officer at the bank. Bruno Guilmette, who has filled the position on an interim basis since December, announced Thursday that he will return to the bank’s board of directors on June 1. In April, the bank hired Annie Ropar as its chief financial and chief administrative officer; she had been CFO of stock exchange operator Aequitas Innovations Inc.
REUTERS. MAY 24, 2018. Canada infrastructure bank appoints first chief executive
TORONTO (Reuters) - Canada’s infrastructure bank said on Thursday it had appointed former pension fund executive Pierre Lavallee as its first chief executive, taking charge of the new body set up to facilitate private investment in infrastructure projects.
Over the past six years, Lavallee has held various roles at the Canada Pension Plan Investment Board, Canada’s biggest public pension plan, where he was most recently global head of investment partnerships. Lavallee left CPPIB earlier this month as part of a management shake-up.
The infrastructure bank is courting pension funds in Canada and overseas and other investors such as sovereign wealth funds to supplement government investment in projects such as new roads and bridges.
The government advisory panel that recommended the bank’s creation had said it could look to raise C$4 to C$5 of private funding for every C$1 provided by taxpayers to fund projects.
The infrastructure bank, set up in 2017, has yet to facilitate funding for any projects.
Reporting by Matt Scuffham; Editing by Tom Brown
US - CHINA
The Globe and Mail. 24 May 2018. OPINION. Why the United States and China called a truce in their trade war
WENRAN JIANG, Senior fellow at the Institute of Asian Research, University of British Columbia, and a global fellow at the Woodrow Wilson International Centre for Scholars in Washington
Among U.S. President Donald Trump’s one-against-all global trade war rhetoric and practices, China is by far No. 1 on the hit list. From the campaign trail to the White House, Mr. Trump has accused China of “raping” the United States, of accumulating large trade surpluses, of imposing barriers to market access and stealing intellectual-property rights.
When the gloves came off recently, with the United States unilaterally announcing tariffs on US$50-billion worth of Chinese imports followed by another US$100-billion, Beijing reacted swiftly with similar countermeasures. Most observers expected a prolonged showdown between the world’s two largest economies that, in the end, would produce no winners.
Yet barely two months later – and after just two rounds of negotiations – Washington and Beijing issued a joint statement that is conciliatory and without hard targets and specific commitments. The trade war is “on hold,” as U.S. Treasury Secretary Steven Mnuchin first put it, and he even went back to correct himself by saying the confrontation “was never a trade war” but a “trade dispute.” The Chinese side simply called it what it is: a ceasefire.
So, what drove both parties to compromise from the brink of a full-blown trade war?
First, the initial exchanges of punches bruised both sides and neither appeared to want the injuries to become more painful. The United States delivered a potential death sentence on ZTE by imposing sanctions against one of China’s largest and most successful telecom companies, which relies on 35 per cent of its core chip components coming from U.S. sources. Washington said the measure is all about reinforcing legal actions related to ZTE’s violations of sanctions against Iran and North Korea. Beijing sees it as a hostage in the looming trade war.
In retaliation, the Chinese put out a tariff list targeting a range of U.S. exports and key U.S. soybean-producing states, such as Indiana, Ohio and Michigan – all battlegrounds for both the midterm elections this year and presidential election in 2020. Without even applying the tariffs, Chinese orders of U.S. soybeans have virtually stopped in the past few months, a well-timed blow to Mr. Trump and the Republicans fighting to win coming elections in those states.
Second, the moderates and the moderate-minded have prevailed, for now. Behind Mr. Trump’s harsh words on China, he has never said anything negative about Chinese President Xi Jinping, a tactic that leaves him plenty of room as the ultimate deal maker. And when Peter Navarro, the White House trade adviser and most hawkish China critic clashed with his own team during the first round of talks, he was demoted to a supporting role in the second round, with Mr. Mnuchin and Commerce Secretary Wilbur Ross – both advocating a less hostile approach – taking centre stage.
On the Chinese side, vice-premier Liu He, a long-time friend of Mr. Xi, has presented himself as a mild and steady hand at the table with sweeping decisionmaking authority. He promised to work hard to resolve bilateral trade imbalances and other issues, and announced first-stage tariff reductions on U.S. auto imports from the current 25 per cent to 15 per cent. This is less than the 2.5 per cent the United States demanded but is viewed as moving in a positive direction. While Beijing proposed to import large quantities of U.S. agricultural goods, potentially worth US$60-$90-billion, Washington has hinted that if satisfactory conditions are met, it may resume supplying ZTE with U.S. chips. Thus, both have managed to instantly turn the stick into a carrot and claim victory at the same time.
Third, the United States still needs China’s help in Mr. Trump’s planned meeting with North Korean leader Kim Jongun. While Mr. Trump was launching a full assault on China with tariffs, he was beaming for a Nobel Peace Prize moment, assuming the summit is a done deal. But after Mr. Kim made not one, but two surprise visits to China in a short span of 40 days, his attitude hardened. Mr. Trump is now openly speculating that Mr. Xi might have gambled wisely to gain leverage. Whatever the case, Mr. Trump has recognized the summit may not be a sure thing and that he is not the only guy calling the shots on the future of North Korea. He needs to play nice with Beijing in the short term.
There are good reasons for both the United States and China to keep the truce in place while working for long-term solutions on a balanced economic partnership.
The Globe and Mail. REUTERS. 24 May 2018. Trump calls for new ‘structure’ on U.S.-China trade deal
SUSAN HEAVEY, WASHINGTON
Our trade deal with China is moving along nicely, but in the end we will probably have to use a different structure in that this will be too hard to get done and to verify results after completion.
DONALD TRUMP U.S. PRESIDENT
In an early morning post on Twitter, Mr. Trump said the current track appeared “too hard to get done” and cited difficulties such as verification, but he gave no other details about what he or his administration was looking for amid continuing negotiations.
Representatives for the White House did not respond to a request for more information about the President’s statement. Representatives for China’s Foreign Ministry did not immediately respond to a request for comment on Mr. Trump’s statement.
“Our trade deal with China is moving along nicely, but in the end we will probably have to use a different structure in that this will be too hard to get done and to verify results after completion,” Mr. Trump wrote in his post.
U.S. stocks slipped after his comments, with all three major indexes down less than 1 per cent in late morning trading as analysts anticipated a rocky session.
Mr. Trump’s statement comes amid the negotiations between the world’s two largest economies after potential tariffs on both sides raised fears of a trade war, even as some tensions have eased over signs of some possible progress.
Both sides claimed victory on Monday and pledged to continue talking after last week’s round in Washington produced pledges that China would import more U.S. energy and agricultural commodities, although there were no specifics.
U.S. Commerce Secretary Wilbur Ross was expected to visit
China next week to help finalize an agreement. U.S. Treasury Secretary Steven Mnuchin told
CNBC on Monday that Mr. Ross aimed to negotiate “a framework” that could then turn into
“binding agreements … between companies.”
Mr. Trump on Tuesday, however, told reporters he was not pleased with recent talks, calling them “a start.”
Any firm deal is likely to take a long time, according to most observers, and U.S. officials have threatened to return to tariffs, which prompted the current standoff, if needed.
Mr. Trump initially threatened to impose US$50-billion in tariffs on Chinese goods, prompting Beijing to retaliate with a levy on U.S. products, particularly agricultural goods. Mr. Trump then responded by threatening another US$150-billion in tariffs.
Trade talks have also been clouded by separate negotiations over the nuclear weapons program in North Korea, which counts China as its sole major ally.
Mr. Trump is seeking to win a major deal with Pyongyang to denuclearize and is eyeing a June 12 summit with North Korean leader Kim Jong-un. On Tuesday, however, Mr. Trump raised doubts the meeting would take place as planned, and suggested Mr. Kim’s recent meetings with Chinese President Xi Jinping had influenced Mr. Kim to harden his stance.
REUTERS. MAY 23, 2018. China says has not promised to cut trade surplus with U.S. by a certain amount
BEIJING (Reuters) - China’s Commerce Ministry said on Thursday that it had not pledged to cut the country’s trade surplus with the United States by a certain figure, and hopes the United States implements measures promised during trade negotiations as soon as possible.
Ministry spokesman Gao Feng made the comments at a weekly news briefing.
Reporting by Yawen Chen and Michael Martina; Editing by Kim Coghill
INTERNATIONAL TRADE
Global Affairs Canada. May 24, 2018. Minister Champagne in Toronto to highlight remarkable trade opportunities and benefits with key stakeholders
Ottawa, Ontario - Canada is rapidly connecting more hard-working Canadians and their families to more opportunities to grow their businesses and create well-paying jobs through trade. We believe robust, rules based, international trade is a key driver of economic growth for a prosperous middle class.
The Honourable François-Philippe Champagne, Minister of International Trade, will visit the Greater Toronto Area (GTA) on May 24 and 25, 2018, to continue his dialogue with Canadians on the Government's progressive trade and trade diversification agendas. The Minister will meet with business leaders from across the GTA to promote the benefits and opportunities from the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the recently signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The Minister will also consult with key stakeholders regarding the ongoing negotiations with Mercosur and the Pacific Alliance, two of Latin America’s largest regional trade organizations.
On May 24, Minister Champagne will participate in the opening of Samsung’s artificial intelligence (AI) lab at the MaRS Discovery District, which will leverage Canada’s unique R&D and machine learning expertise. That evening, the Minister will attend the Italian Chamber of Commerce of Ontario’s annual Business Excellence Awards ceremony.
On May 25, the Minister will engage with local manufacturers at a round table hosted by the Vaughan Chamber of Commerce. He will then visit the headquarters of Magna International Inc., a Canadian automotive manufacturer, before spending the afternoon with representatives of local small and medium-sized businesses and Vaughan community leaders to highlight Canada’s progressive trade agenda and the strong people-to-people ties between Canada and Italy.
Quotes
“There has never been a better time for hard-working Canadians to take advantage of new opportunities through landmark trade agreements. Now is the time to seize these new opportunities and reach new ambitious goals whether as a first-time exporter or opening a new market. There has never been a better time to diversify, and Canada is rapidly connecting Canadian businesses to more markets in more countries.”
- François-Philippe Champagne, Minister of International Trade
Quick facts
- With CETA’s provisional application, on September 21, 2017, 98 percent of Canadian and EU tariff lines became duty-free, creating new opportunities on both sides of the Atlantic.
- The CPTPP will provide new opportunities for Ontario exporters by eliminating tariffs on almost all of the province’s key exports to CPTPP markets, including crops like wheat, communications technologies, and minerals like diamonds and nickel.
- Mercosur, also known as the Southern Cone Common Market, is a customs union established by Argentina, Brazil, Paraguay and Uruguay in 1991. Together, Mercosur’s members have a GDP of Can$3.2 trillion and a population of 260 million people.
- The Pacific Alliance is a regional initiative created in 2011 by Chile, Colombia, Mexico and Peru that seeks the free movement of goods, services, capital and people. With a combined GDP of $2.4 trillion and nearly 221 million inhabitants, the Pacific Alliance constitutes an important market for Canada.
FULL DOCUMENT: https://www.canada.ca/en/global-affairs/news/2018/05/minister-champagne-in-toronto-to-highlight-remarkable-trade-opportunities-and-benefits-with-key-stakeholders0.html
EDC. May 24, 2018. WEEKLY COMMENTARY. Export outlook: The provincial perspective. Check out the provincial export growth standings!
Peter Hall, Vice-President and Chief Economist
Canadian exporters are being kept busy by strong world growth, new trade agreements – and unfortunately by the uncertainty of protectionism. I’m a week into my Let’s Talk Exports cross-Canada forecast tour, sharing thoughts on the global economy, and finding out how exporters are doing. Here’s a very quick hit of the key regional messages I am giving as I cross the country.
Newfoundland tops the growth charts
Newfoundland and Labrador will be the lone province to experience double-digit export growth in 2018. While commodity prices will play a role, the biggest growth contributor comes from a full year of production from the Hebron offshore oil platform and the ramp up of Vale’s Long Harbour nickel processing plant. The multi-year nature of these ramp-ups will continue to boost the province’s exports into 2019. We look for 11 per cent export growth this year, and 7 per cent in 2019.
Quebec claims second spot this year. While exports are highly diversified by industry, the significant increase in production of C Series aircraft by Bombardier, the expansion of key mining projects and expansion of electricity export capacity will help propel export growth of 8% in 2018.
In Alberta, the echo of investments made before the collapse in global oil prices will see exports expand in 2018 as the Fort Hills oil sands project and the Sturgeon Refinery start production. Additional export capacity growth from the energy sector and the startup of a $360-million Cavendish Farms potato processing plant in Lethbridge will support growth in 2019.
Higher global growth will ensure bustling activity at British Columbia ports this year and next. In addition, a stable currency and forestry prices are offsetting the negative impacts of U.S. countervailing duties on softwood lumber, supporting near-term growth. Mining exports will benefit from rising production at the Highland Valley and Mount Milligan copper mines.
Nova Scotia is well-positioned to benefit from trade diversification. Higher global growth together with the CETA agreement have increased opportunities for the Port of Halifax. Seafood is selling well in Asian markets, Finally, expanded mining production, notably the opening of the Touquoy gold mine, will help exports hit 6 per cent growth this year.
In 2018 Prince Edward Island will see 4 per cent growth, as the trade deal with the EU is expected to support diversification for agricultural and aquaculture products. Export gains will accelerate to 5 per cent in 2019, spurred by gains in the food and aerospace industries.
New Brunswick is highly exposed to the flourishing US market; however, growth will be constrained as higher wood product prices are largely offset by impacts from US softwood lumber and groundwood pulp duties. The province hopes to capitalize on the CETA agreement and robust Asian demand.
Peak US auto sales soften Ontario export growth
A booming North American auto sector is keeping Ontario exports at a high level, although growth will be modest, as the US market has peaked. Machinery and equipment exports should accelerate on higher US demand. However, investment in new export capacity will be constrained by NAFTA uncertainty.
Saskatchewan, Canada’s most internationally diversified province, will see limited growth as weak commodity prices and transportation bottlenecks crimp overall performance.
Manitoba will also be constrained by weaker commodity prices while lower mining sector output will further dampen exports. This comes in spite of brighter prospects for exports of manufactured goods, boosted by higher US and global growth.
The bottom line?
Key competing forces are tugging at the forecast from both sides this year and next. On balance, rising global growth, modest increases in commodity prices, shifting winds of protectionism from the United States and expansion of Canadian free trade agreements are together expected to produce more subdued export growth among the provinces for 2018 and 2019.
CANADA - ISRAEL
Global Affairs Canada. May 24, 2018. Minister Champagne to welcome Israel’s Minister of the Economy and Industry to Canada
Ottawa, Ontario - The promotion of trade and investment opportunities around the globe is a priority for the Government of Canada. Israel has long been an important market for Canadian goods and services and is also a prominent science, technology and innovation partner. Canada’s relationship with Israel is based on shared values of cooperation and strong people-to-people ties.
The Honourable François-Phillippe Champagne, Minister of International Trade, today announced that he will host Eli Cohen, Israel’s Minister of the Economy and Industry, in Montréal, Quebec, and Toronto, Ontario, from May 28 to 29, 2018.
During the visit, ministers Champagne and Cohen will engage in discussions on further enhancing trade ties between Canada and Israel. The ministers will meet with business leaders and members of the Jewish community in both Montréal and Toronto to further advance opportunities in key trade sectors, such as artificial intelligence, aerospace, and information and communications technologies.
The visit will serve as an opportunity for the two ministers to deepen the commercial relationship between Canada and Israel and to strengthen people-to-people ties between the two countries.
Quotes
“Israel is a key economic partner for Canada in the Middle East and offers a range of business opportunities for all Canadians. We look forward to continuing to strengthen our ties with Israel, by working together to promote the benefits of our shared interests, values and commitment to gender equality.”
- François-Philippe Champagne, Minister of International Trade
Quick facts
- Two-way merchandise trade between Canada and Israel was valued at more than $1.7 billion in 2017.
- In 2017, Canada welcomed 78,340 visitors from Israel.
- Nova Scotia, Saskatchewan, Ontario and Quebec have bilateral science, technology and innovation agreements with Israel.
Canada-Israel Free Trade Agreement: http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/israel/fta-ale/background-contexte.aspx?lang=eng
Country profile - Israel: http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/israel/country_profile-israel-profil_pays.aspx?lang=eng
Embassy of Canada to Israel: http://www.canadainternational.gc.ca/israel/index.aspx?lang=eng
Trade Commissioner Service—Israel: http://tradecommissioner.gc.ca/israel/index.aspx?lang=eng
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