CANADA ECONOMICS
VENEZUELA
Global Affairs Canada. May 29, 2018. Canada welcomes report on possible crimes against humanity in Venezuela
Ottawa, Ontario - The Honourable Chrystia Freeland, Minister of Foreign Affairs, today issued the following statement regarding the report by the Panel of Independent International Experts on possible crimes against humanity in Venezuela:
‘‘Canada welcomes the release of the report on possible crimes against humanity in Venezuela and thanks the panellists for their diligent work. The report will provide valuable information to support the preliminary examination into the situation in Venezuela, opened by the Chief Prosecutor of the International Criminal Court [ICC] earlier this year.
“We are appalled, though not surprised, by the evidence the panel found supporting the allegation that crimes against humanity have been committed in Venezuela. Canada is a strong supporter of the fight against impunity for serious international crimes and the ICC’s role in bringing perpetrators to justice.
“It is because of the Maduro regime’s ongoing abuse of its people and attacks on democracy that Canada has taken a series of punitive actions, including imposing targeted sanctions.”
Quick facts
- In his third report on the situation in Venezuela, published on July 19, 2017, Luis Almagro, Secretary General of the Organization of American States (OAS), stated there was evidence that crimes against humanity may have been committed in Venezuela and the matter should be brought to the attention of the ICC for further consideration.
- On September 14, 2017, the OAS Secretary General appointed a Panel of Independent International Experts, including Canadian jurist Professor Irwin Cotler, to analyze whether there is a reasonable basis for believing that crimes against humanity may have been committed in Venezuela and to assess whether the situation should be submitted to the Prosecutor of the ICC for consideration.
- On February 8, 2018, Fatou Bensouda, Prosecutor of the ICC, announced that the ICC had opened a preliminary examination into the situation in Venezuela.
FULL DOCUMENT: https://www.canada.ca/en/global-affairs/news/2018/05/canada-welcomes-report-on-possible-crimes-against-humanity-in-venezuela.html
OECD
Global Affairs Canada. May 29, 2018. Minister Champagne to lead the Canadian delegation to the Organisation for Economic Co-operation and Development Ministerial Council Meeting in Paris, France
Ottawa, Ontario - Canada believes that an effective multilateral trading system is vital to provide equal opportunity and ensure all can benefit from trade and investment.
On May 30 and 31, 2018, the Honourable François-Philippe Champagne, Minister of International Trade, will be Canada’s lead of delegates to the 2018 Organisation for Economic Co-operation and Development (OECD) Ministerial Council Meeting in Paris, France.
On the margins of the OECD ministerial meeting, Minister Champagne will hold meetings with his Ministerial counterparts, to discuss ways to advance key bilateral, regional and multilateral interests.
While in Paris, Minister Champagne will reinforce the Government of Canada’s expectations for when Canadian companies do business abroad in a socially and environmentally responsible manner.
Quotes
“This ministerial meeting will provide me with an opportunity to promote Canada’s role in building a resilient economy through inclusive and sustainable growth. Canada has been a key supporter of the OECD’s work to better understand the gender impact of trade. I look forward to working with my counterparts as we further develop and advance progressive approaches to trade.”
- François-Philippe Champagne, Minister of International Trade
Quick facts
- As one of the 20 founding members of the OECD, Canada contributed to its creation with the goal of promoting economic growth as a path to stability.
- The primary purpose of the OECD is to provide a forum to discuss and identify constructive approaches to economic and social issues to ensure sustainable economic growth.
- Canada’s merchandise trade with other OECD countries was $919.1 billion in 2017.
- OECD countries accounted for 89.6% of Canada’s merchandise exports and 76.5% of Canada’s merchandise imports in 2017.
- The annual OECD Ministerial Council Meeting includes ministers from the 35 member states of the OECD, who act as the organization’s governing board. As such, the meeting provides strategic direction on the OECD’s future agenda and relations with non-members.
FULL DOCUMENT: https://www.canada.ca/en/global-affairs/news/2018/05/minister-champagne-to-lead-the-canadian-delegation-to-the-organisation-for-economic-co-operation-and-development-ministerial-council-meeting-in-par.html
NAFTA
REUTERS. MAY 29, 2018. Delays and 'poison pills': team Trump runs out of road in NAFTA talks
David Lawder, David Ljunggren
WASHINGTON (Reuters) - President Donald Trump is running out of time to deliver a revamp of the North American Free Trade Agreement (NAFTA) he promised for this year and people involved in the talks say the crunch is largely of his administration’s own making.
Negotiators, industry lobbyists, trade experts and lawmakers briefed on the talks described how precious months passed before the U.S team presented its proposals and how the talks stalled because the demands far exceeded what Canada and Mexico had expected and Washington signaled no readiness to compromise.
In the end, an unusually tight timetable allowed little space to bridge differences on the core issues, such as U.S. and regional content requirements for the auto industry.
Talks started last August with a goal to conclude in just four months, but as a May 17 notification deadline to allow the current Republican-led U.S. Congress to approve a new agreement before year end passed, U.S. Trade Representative Robert Lighthizer warned a deal was “nowhere near close.”
TIME PRESSURE SHIFTS
Up until a few weeks ago, Lighthizer thought Mexico faced the biggest time pressure to wrap up the talks before its July 1 presidential elections, a Mexican source close to the talks told Reuters.
In early May, however, Mexican Economy Minister Ildefonso Guajardo told Lighthizer in Washington that he would be able to negotiate a NAFTA agreement up until the Dec. 1 transition to a new government - even if an opposition candidate won.
Suddenly, it was the United States running against the looming congressional deadline, the Mexican source said.
The Trump administration's negotiating goals submitted to Congress in July 2017 talked of shrinking trade deficits with Mexico and Canada and boosting U.S. auto production. (Graphic:tmsnrt.rs/2oYClp2)
In contrast, the U.S. neighbors saw the talks more as a “modernization” exercise, proposing, for example, chapters on digital trade that did not exist when NAFTA took effect in 1994.
Broadly, both were fine with the status quo, so when it took Washington two months to present specific demands the delay played into their hands.
“How can you launch talks to update a treaty and then make everyone wait months before you explain what you want,” asked one Canadian official briefed on the talks.
Lighthizer’s office said he was clear all along about aiming to “rebalance” NAFTA trade in U.S. favor.
“The United States has been very clear and specific from the start about what we hope to see in a new NAFTA and has worked at an unprecedented pace to negotiate a better deal for America,” the office’s spokesman said.
When Lighthizer’s team presented the demands in October, Canadian and Mexican officials said they amounted to surrendering decades of trade benefits, which they could not accept.
U.S. business groups labeled those demands “poison pills” that threatened to derail the talks and prompt Trump to quit the pact. The key ones were: a steep increase in regional automotive content requirements, a demand for half the value of North American vehicles to originate in the United States and a requirement to renegotiate the pact every five years.
All remain unresolved, despite nearly eight weeks of marathon negotiations in Washington in April and May, focused mainly on autos.
Canada and Mexico had their role in running down the clock. It has taken Ottawa and Mexico three months to produce counterproposals, drawing criticism from Lighthizer they were failing to “engage.”
Canadian and Mexican negotiators argued they needed time to understand the logic of U.S. demands because they came without customary backup evidence and analysis. U.S. negotiators said it was the consequence of the extremely tight timetable.
But U.S. chief negotiator John Melle privately complained to U.S. colleagues that Ottawa was deliberately wasting time on less essential matters, such as proposed new chapters on women’s and indigenous people’s rights, a U.S. source close to the talks said. Canadian officials deny trying to drag out negotiations.
Speaking at a business event early this year, Canada’s veteran chief negotiator, Steve Verheul, described the talks as the “most unusual negotiation” he had ever been involved in, because of Washington’s winner-takes-all approach.
“They are looking to strengthen the U.S. and by doing that weaken Canada and Mexico.”
WHICH LIGHTHIZER?
Trump’s threats to quit NAFTA and Washington’s uncompromising stance made some involved in the talks wonder whether its goal was to blow up the pact or improve it.
“My boss thinks 40 percent of Lighthizer wants a deal, 60 percent doesn’t, and you see both Lighthizers, sometimes in the same conversation,” one NAFTA diplomat told Reuters.
Lighthizer frequently told reporters and lawmakers that he was negotiating for “an audience of one,” and it was ultimately Trump’s call whether to accept or reject a deal.
Talks seemed to gain some momentum in early April, when U.S. negotiators toned down their automotive demands - cutting the proposed regional content threshold by 10 percentage points to 75 percent, but with a $16 minimum wage component for 40 percent of autos. Mexico responded with 70 percent and 20 percent, respectively, though Guajardo on Friday still put chances of a deal before July 1 at about 40 percent.
However, with Washington waging trade battles on other fronts it has been hard to sustain that momentum.
For example, when the United States threatened to hit Chinese imports with tariffs because of intellectual property concerns and talks reached a critical phase in late April, a trade mission to Beijing took Lighthizer away from NAFTA for a week.
And last week, his office launched a national security investigation that could lead to tariffs on vehicle and auto parts imports from North America, Europe and Asia. Canadian Prime Minister Justin Trudeau told Reuters on Thursday the move was intended to pressure Canada and Mexico in the NAFTA talks.
Whether they will yield to that pressure is another matter and in the meantime the probe could end tying up Lighthizer’s stretched resources.
Even with a deal on autos, it could take time to work out other issues, such as intellectual property safeguards for drugmakers, said former U.S. trade negotiator Wendy Cutler.
“Sometimes there’s just not enough time to come up with creative solutions.”
Additional reporting by Anthony Esposito and Dave Graham; Writing by David Lawder; Editing by David Chance and Tomasz Janowski
INFRASTRUCTURE
The Globe and Mail. 29 May 2018. Morneau addresses China, NAFTA in CanInfra summit speech
JACQUELINE NELSON
Finance Minister Bill Morneau says that several major economic issues are contributing to a broad sense of anxiety in the business community, and resolving these challenges is important to Canadian competitiveness.
Mr. Morneau sent the message that Canada would take a firm stand on several key issues, including the building of the Trans Mountain pipeline expansion in Western Canada, the protection of its security interests when courting foreign investors and in the continuing North American free-trade agreement negotiations.
“You can’t potentially change trade relationships with your largest partner, face effectively a constitutional crisis between a couple of provinces and see tax rates significantly change in that largest partner without having people say, ‘What does this mean for me?’ ” Mr. Morneau said at a dinner event as part of the CanInfra Transformational Infrastructure Summit on Wednesday in Toronto.
Mr. Morneau stressed that the government’s months of discussions on how to ensure Kinder Morgan Canada Ltd.’s Trans Mountain pipeline expansion project is completed had become particularly important, not only as a piece of infrastructure to transport landlocked oil, but as an indicator of how the country can ensure that large, ambitious projects get built.
The remarks come as Kinder Morgan is negotiating with the government ahead of the deadline it set to reach a deal on the planned pipeline project.
With B.C. and Alberta still at odds over whether construction should go ahead, the federal government said it would offer Kinder Morgan “indemnity,” or protection against losses on the project to help ensure the pipeline is completed.
“We really do … see it as an issue of the rule of law in our country. We’ve got a project that was federally approved after the most robust environmental assessment that has gone on in this country,” he said at the event.
Mr. Morneau also addressed Ottawa’s recent decision to block the proposed $1.5-billion acquisition of Aecon Group Ltd. by China Communications Construction Co (CCCC). He stressed that Canada’s relationship with China is still strong, but that the two countries have some fundamentally different approaches to trade and foreign investment to overcome.
The Globe and Mail. 29 May 2018. Aecon’s backlog position is encouraging, says Gordon Pape, but investors should stay on the sidelines. Aecon appears tempting, but serious issues remain.
GORDON PAPE, is editor and publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to buildingwealth.ca.
Given the financial numbers the company is generating and the uncertainty over a new CEO, I think it will be a while before we see the stock at $17 again.
Recent underwhelming results and uncertainty over management should not be ignored
As everyone knows by now, the federal government has turned thumbs down on a deal to sell construction giant Aecon Group Inc. (ARE-TSX) to a subsidiary of China Communications Construction Co. Ltd. (CCCC).
Prime Minister Justin Trudeau cited national security as the reason for the rejection, without going into specific details. So the $1.5-billion deal, announced last October, is down the tubes. Acting chief executive John Beck expressed disappointment, saying the deal “offered considerable benefits to Aecon and its various stakeholders.” It certainly did. The takeover bid valued the shares at $20.37 each, up 23 per cent from the closing price on the day before the bid was made public. Investors stood to make a tidy profit if the deal went through.
However, doubts that the plan would be approved have been growing for several weeks. You can see that reflected in the stock’s performance. It traded around the $20 level for most of the late fall and through January. But in early February, it started to sink, dropping below $19 and then $18 as wary investors sold. It closed at $17.34 on the day before Ottawa dropped the hammer. The next day, the stock fell more than 15 per cent to close at $14.67.
Aecon was first recommended in my Internet Wealth Builder newsletter in February, 2014, at $15.48. The shares moved to more than $18 in the summer of 2016, but then sank to below the $14 mark in the late fall of that year. By the time the Chinese offer was made public on Oct. 26, 2017, they had recovered to the $16.50 range. They shot up to near $20 on the news.
At the time, I warned that the deal was by no means a sure thing. The federal government had to approve it and there was no guarantee it would do so. Accordingly, I advised selling at $19.56. It turned out to be a good call.
So what now? Mr. Beck has indicated the company will not seek another buyer, at least for now. Rather, he said the company plans to move forward “from a position of strength.”
Aecon reported a backlog of $4.6-billion at the end of the first quarter ended March 31. That included $910-million of new contract awards booked in the quarter. Subsequent to the end of the quarter, Aecon announced that a partnership in which it has a 24per-cent interest finalized a $5billion contract for the Montreal light-rail transit project. It will add $1.2-billion to Aecon’s backlog in the second quarter. In another deal, a consortium in which Aecon has significant interests, the company secured the contract for the Finch West light-rail transit project in Toronto, which will add $400-million to Aecon’s backlog in the second quarter.
The backlog position is encouraging, but Aecon’s first-quarter results were underwhelming. The company reported revenue of $543.3-million, down more than 19 per cent from the same period in 2017. The bottom line was a loss of $19.2-million (32 cents a share) compared with a loss of $18.3-million (also 32 cents) in the first quarter of last year. For fiscal 2017, Aecon reported a profit of $28.2million (46 cents a share, fully diluted) compared with a gain of $46.8-million (77 cents) in 2016. These numbers are not trending in the right direction.
There is also concern about top management. Mr. Beck has been holding the position on a temporary basis, pending the approval of the CCCC deal. The board of directors, chaired by former cabinet minister Brian Tobin, has now launched a search for a new permanent CEO.
The drop in the share price may be overdone. RBC Dominion Securities sees $17 as fair fundamental value and RBC analyst Derek Spronck suggests that if the shares trade materially below that level, it should be seen as a buying opportunity. But at the same time, he lowered his target on the price by $3 to $17.
Given the financial numbers the company is generating and the uncertainty over a new CEO, I think it will be a while before we see the stock at $17 again. Aecon has to improve its financials significantly before it’s worthy of that price. Tempting as the sell-off may be, I suggest staying on the sidelines for now and seeing how this plays out.
AECON (ARE) CLOSE: $15.31, UP 34¢
The Globe and Mail. 29 May 2018. OPINION. We need to be better at balancing national security and Chinese investment
STEPHANIE CARVIN, Assistant professor at the Norman Paterson School of International Affairs at Carleton University
Last week, the Canadian government rejected the takeover of Aecon Group Inc. – a major construction firm that contributes to the building of critical infrastructure in Canada – by China Communications Construction Co. Ltd, a stateowned infrastructure firm. This was the correct decision, albeit surely a difficult one that had to balance Canada’s need for foreign investment with security concerns over access to Canada’s critical infrastructure.
The mantra of Justin Trudeau’s government has been to encourage investment in Canada and it was no doubt aware that rejecting this takeover bid was sending a message not in line with its stated goals.
This will hardly be the last difficult case – tough foreign-investment decisions are likely to become more frequent. A Globe and Mail investigation revealed last week that Chinese corporate giant Huawei Technologies is being aided by Canadian universities, governments and phone companies to develop its 5G mobile technology. Indeed, the scale of Chinese interest in Canadian technology research only appears to be growing.
From a national-security perspective, Chinese investment raises at least three concerns. The first relates to intellectual property and technology transfers. This is an obvious problem when the technology is sensitive and may have military or national-security applications. Already, we have seen ferocious debate over takeovers such as Norsat, a satellite company that produced sensitive military technology.
However, even with civilian technology, a second issue arises – namely, that the Chinese government could be using its close ties with its large telecommunications companies as a way to clandestinely collect strategic information and intelligence that could pass through their systems and equipment. This concern is behind recent controversies regarding firms such as Huawei and ZTE. Britain.’s cybersecurity watchdog, the National Cyber Security Centre (NCSC), has gone so far as to blacklist ZTE as it “poses a risk to U.K. security.” There have been similar claims in the United States, with the Pentagon banning Huawei and ZTE phones from retail stores on military bases.
The third issue is more nebulous and challenging from a national-security perspective. Chinese companies are seeking the knowledge and know-how of Western technology, including Canadian companies, in order to improve upon their patents and then produce these goods at a far cheaper rate. This is hardly a secret plan – President Xi Jinping’s declared “Indigenous Innovation” and “Made in China 2025” policies are aimed at using the technology of other countries to upgrade and enhance the country’s manufacturing capabilities, bolster innovation and establish dominance of key technological sectors.
But if Chinese companies are legitimately funding research and purchasing firms and technologies on the open market, to what extent can this really be considered a national-security threat? With its relatively small population, Canada is dependent on foreign investment in order to grow its economy. Simply blocking Canada off from one-sixth of the world’s population is not feasible.
Herein lies the challenge for Canada: What should the response of the government be if Chinese companies are engaging in legitimate transactions that may cumulatively create a negative impact on the Canadian economy?
With more than 150,000 Chinese state-owned enterprises (SOEs), not all engage in behaviour that might be problematic from a national-security perspective. However, the issue with certain SOEs, as well as companies with close links to the Chinese state, is that they are not subject to the pressures of the market. With government loans, funds and, occasionally, clandestine forms of support, these companies may engage in predatory pricing to drive competitors out of business or to gain market dominance in ways that skew our economic landscape.
Some might say the answer is for Canadian companies to become more competitive, innovative and business-savvy. But this misses the point – Canada needs to develop a strategy for dealing with companies that at best are immune to the pressures of the market and at worst cannot fail – and the impact that this may have on our economy. While the Investment Canada Act (ICA) review process decides on individual cases, it seems that a broader strategy is needed.
A starting point could be government officials, academics, business leaders and Canadians starting a conversation about the relationship between national security and the economy. What aspects of our economy does the government have a legitimate security interest in and how should it address them?
The mantra of the 1980s was that, as a capitalist society, the Canadian government should get out of the market and denationalize. Today, the challenge of foreign investment from states that can also act in an adversarial manner means that we need to rethink this relationship once more. While no one is calling for a massive renationalization in the name of security, it is also true that the government may have to take new and creative steps to protect the well-being of our economy.
INTELLECTUAL PROPERTY
The Globe and Mail. 29 May 2018. Ottawa urged to reform intellectual-property rules. Huawei: Canada needs intellectual-property plan, Balsillie says. Revelations that universities, public money are helping China’s Huawei prompts former RIM co-CEO Balsillie to call for strategy that benefits national economy
STEVEN CHASE
SEAN SILCOFFROBERT FIFE
OTTAWA - Former Research in Motion Ltd. coCEO Jim Balsillie says Canada must “utterly reform” how this country retains intellectual property generated by publicly funded research in the wake of a Globe and Mail investigation of how universities and public money are helping China become a global telecom superpower.
The Globe reported Saturday that Chinese corporate giant Huawei Technologies has established a network of relationships with universities to create a pipeline of intellectual property that will aid its development of next-generation mobile technology. University professors have transferred full rights to their inventions to Huawei in 40 instances.
“Our publicly funded university and granting agencies are failing to generate and retain intellectual property for the benefit of Canada’s economy,” Mr. Balsillie said. Mr. Balsillie is one of Canada’s most vocal and persistent advocates for government to step up efforts to equip Canadians with the tools necessary to operate in a global economy increasingly shaped by patented technological advances.
He said intellectual property is being transferred away even though Canadians will require it to create more private and public wealth that will fund future research at Canadian universities – where much of the infrastructure and staff is underwritten by billions of public dollars.
“What’s needed is an honest conversation to unpack the root of this failure so that the hundreds of billions of taxpayer dollars can begin yielding innovation outcomes for Canada,” he said.
“Canada should have a strategy that governs these kinds of relations so there is a structural benefit to the national economy. That will guide the response to the Huawei situation and other foreign companies feasting [on] publicly funded Canadian intellectual property.”
National security experts are troubled that Canadian institutions are willingly advancing the economic and geopolitical interests of Huawei, a firm regarded as a corporate arm of the Chinese state. Huawei has spent about a quarter of its $600-million research and development budget for 5G in Canada – and almost nothing in the United States, where it is viewed as a security concern.
In the House of Commons on Monday, Conservative deputy public safety critic Glen Motz called on the Trudeau government to launch a full review of Huawei’s activities in Canada, saying that “Canadian and American intelligence and security officials continue to warn that [the firm] is a significant cybersecurity risk because of its connections with Communist China.”
Innovation Minister Navdeep Bains did not respond to this request but said he believes the Liberal government is “playing a leadership role when it comes to our national interests.”
He said the federal government recently launched a new strategy to ensure “intellectual property generated in Canada benefits Canadians.”
Mr. Balsillie said the Chinese government is not as generous as Canada when it comes to taking intellectual property (IP) out of China. “China has rules that you can’t transfer IP out of the country. They have rules and a strategy. What’s our strategy?”
Huawei spokesman Scott Bradley said in an e-mailed statement that “Huawei is not being given any specific advantage in Canada” and that it operates “in a highly competitive 5G research environment.”
Mr. Bradley noted countries around the world “constantly lobby the major anchor players to locate research operations in their countries” and that federal and provincial governments have provided supports to all three major players in the 5G space, including Sweden’s Ericsson, which recently received more than $100-million in federal and provincial support for its ENQOR 5G research initiative.
Mr. Bradley said most countries including Canada “do not have the size and scale to dictate their own approach on technology … for countries like Canada, the U.K. and Germany, it’s a careful balance … but having Huawei compete with Ericsson and Nokia in Canada in research and business has paid huge dividends” for Canadians.
Intellectual property experts say Canadian universities have struggled for years to turn on-campus inventions into valuable intellectual property. The issue dates at least to the 1990s when government granting agencies pushed universities to focus more on licensing patented work by their academics to industry through on-campus technology transfer offices.
But most of those offices were “chronically underfunded” and universities didn’t put enough emphasis on their output, Ottawa patent prosecutor Natalie Raffoul said.
In turn, said Luc Lalande, a director with Carleton University’s technology transfer office from 1996 to 2011, universities were “ill-equipped” to legally pursue those who infringed on their patents because of the volume and cost involved.
By the late 2000s, Mr. Lalande said, after the anticipated windfall from patented university research “didn’t quite materialize the way [granting bodies and] other policy folk anticipated,” Ottawa abandoned that drive. Industry groups pushed instead for companies to work directly with academics based on the premise universities lacked the skills to successfully commercialize their ideas, which led to the kinds of broad research agreements Huawei has struck.
Those deals have suited universities, as they view the primary role of their oncampus research is “to ensure that it gets applied and that it benefits society,” said Vivek Goel, vice-president of research and innovation with University of Toronto. In addition, industry partners have the resources to advance early academic research into more valuable intellectual property, he said. With U of T among those universities who retain ownership of their patents, “the value that will come back to us will be as these products get developed,” he said.
However, he said, foreign companies are the likeliest to undertake those relationships with universities here. “We don’t have companies of that scale operating in Canada and able to do that kind of work,” Mr. Goel said.
McGill University law professor Richard Gold warned universities “need to be careful about sponsored research contracts” that several, including Carleton University, have signed with Huawei where institutions give up rights to their research in exchange for money. While they pay for university resources, “the advantages are too often skewed to the firm, especially when they are foreign,” Prof. Gold said.
INTERNATIONAL TRADE
US. CHINA. The Globe and Mail. REUTERS. 29 May 2018. China denies U.S. charge of ‘forced technology transfer’ at WTO
TOM MILES
The fact is, nothing in these regulatory measures requires technology transfer from foreign companies.
ZHANG XIANGCHEN, CHINESE AMBASSADOR TO THE WTO
China told the World Trade Organization’s dispute-settlement body on Monday that U.S. accusations that Beijing forced companies to hand over technology as a cost of doing business in China were groundless.
U.S. President Donald Trump has accused China of stealing American ideas and announced a plan for a US$50-billion tariff penalty against Chinese goods. Both sides launched legal complaints at the WTO over the issue earlier this year.
“There is no forced technology transfer in China,” Chinese ambassador Zhang Xiangchen told the meeting, according to a copy of his remarks provided to Reuters.
“According to the U.S.’s view, China forces the U.S. companies to transfer technologies by imposing joint-venture requirements, foreign-equity limitations and administrative licensing procedures,” Mr. Zhang said.
“But the fact is, nothing in these regulatory measures requires technology transfer from foreign companies.”
Mr. Zhang said the U.S. argument involved a “presumption of guilt.” The U.S. trade representative believed U.S. companies in
China faced an obligation to hand over technology, while failing to produce a single piece of evidence.
Technology transfer was a normal commercial activity that benefited the United States most of all, he said, while Chinese innovation was driven by “the diligence and entrepreneurship of the Chinese people, investment in education and research, and efforts to improve the protection of intellectual property.”
Legal experts say Washington needs WTO backing to implement its tariffs as far as they relate to WTO rules, while China has rejected the tariff plan wholesale and resorted to WTO action to stop it.
Under WTO rules, if disputes are not settled amicably after 60 days, the complainant can ask for a panel of experts to adjudicate, escalating the dispute and triggering a legal case that takes years to settle.
US. CHINA. REUTERS. MAY 29, 2018. U.S. to continue trade actions against China: White House
WASHINGTON (Reuters) - The United States said on Tuesday that it will continue pursuing action on trade with China, days after Washington and Beijing announced a tentative solution to their dispute and suggested that tensions had cooled.
By June 15, Washington will release a list of some $50 billion worth of Chinese goods that will be subject to a 25 percent tariff, the White House said in a statement. The United States will also continue to pursue litigation against China at the World Trade Organization.
In addition, by the end of June, the United States will announce investment restrictions and “enhanced export controls” for Chinese individuals and entities “related to the acquisition of industrially significant technology,” it said.
In mid-May, China agreed to increase purchases of U.S. agriculture and energy products, and last week, the U.S. Commerce Department told lawmakers it had reached a deal to put Chinese telecommunications firm ZTE Corp (0763.HK) (000063.SZ) back in business.
ZTE Corp
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0763.HKHONG KONG STOCK
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0763.HK
0763.HK000063.SZ
While the announcements eased worries about the possibility of a trade war between world’s two largest economies, U.S. President Donald Trump also said last week that any deal between Washington and Beijing would need “a different structure,” fueling uncertainty over the talks.
Trump has threatened to impose tariffs on up to $150 billion of Chinese goods to combat what he has labeled unfair trade practices on the part of Beijing. Meanwhile, China has warned of equal retaliation, including duties on some of its most significant U.S. imports, like aircraft, soybeans and vehicles.
Reporting by Makini Brice; Editing by Doina Chiacu and Andrea Ricci
US. EU. The Globe and Mail. REUTERS. 29 May 2018. U.S., EU continue trade spat over Airbus subsidies
The EU said last week it had taken steps to comply with the WTO ruling on subsidies for its A350 … and the A380.
The European Union told the World Trade Organization’s dispute settlement body on Monday that it had acted within days of a WTO ruling to bring its funding of plane maker Airbus into line with WTO rules, a trade official who attended the meeting said.
The United States won a partial victory on May 15 against EU support for Airbus at the WTO, clearing the way for possible U.S. sanctions in a 14-year-old dispute over claims of illegal handouts for aircraft makers.
The EU said last week it had taken steps to comply with the WTO ruling on subsidies for its A350,
Europe’s newest long-haul jet, and the A380, the world’s largest airliner, and reiterated its efforts at a closed-door WTO meeting on Monday.
But a U.S. representative at the meeting said it was hard to give credence to the EU’s assertion and called for serious discussions to resolve the long-running dispute, although Washington was prepared to seek countermeasures on EU products if necessary, the official said.
Canadian International Trade Tribunal. May 28, 2018. Tribunal Initiates Inquiry—Cold-Rolled Steel From China, Korea and Vietnam
Ottawa, Ontario — The Canadian International Trade Tribunal today initiated a preliminary injury inquiry into a complaint by ArcerlorMittal Dofasco G.P., of Hamilton, Ontario, that it has suffered injury as a result of the dumping and subsidizing of cold-rolled steel in coils and strip from the People’s Republic of China, the Republic of Korea and the Socialist Republic of Vietnam. The Tribunal’s inquiry is conducted pursuant to the Special Import Measures Act as a result of the initiation of dumping and subsidizing investigations by the Canada Border Services Agency (CBSA).
On July 24, 2018, the Tribunal will determine whether there is a reasonable indication that the alleged dumping and subsidizing have caused injury. If so, the CBSA will continue its investigations and, by August 20, 2018, will issue preliminary determinations. If these preliminary determinations indicate that there has been dumping or subsidizing, the CBSA will then continue its investigations and, concurrently, the Tribunal will initiate a final injury inquiry. Anti-dumping and/or countervailing duties will be imposed only if the Tribunal finds that dumped or subsidized products are injuring or threatening to injure the Canadian producers.
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 inquiry may do so by filing a Notice of Participation.
AVIATION
The Globe and Mail. 29 May 2018. Bombardier lands C Series deal ahead of airliner takeover by Airbus. Bombardier: Order makes Air Baltic the largest European C Series customer
NICOLAS VAN PRAET
Bombardier Inc. has struck a deal to sell at least 30 C Series planes to Air Baltic Corporation, a vote of confidence from a repeat customer ahead of the commercial airliner’s takeover by Airbus SE.
The European carrier has put in a firm order for 30 larger CS300 planes with options and purchase rights on another 30 aircraft, Bombardier said in a statement on Monday. The sale is worth US$2.9-billion based on the list price of the aircraft, although discounts are common.
The agreement marks an endorsement for Bombardier’s flagship commercial airliner from an early customer at a time when the plane program is poised to fall under Airbus control. Air Baltic has been flying CS300 planes for more than a year as it phases out an older fleet and buying more now will send a message to other potential buyers that the aircraft can deliver proven low operational costs and fuel savings in real-world conditions.
Bombardier’s widely-traded Bclass shares jumped 3 per cent to $4.52 in afternoon trading in Toronto. They’ve gained about 49 per cent this year.
Montreal-based Bombardier ceded majority control of the C Series airliner to Airbus last fall for no cash consideration in exchange for the European plane maker’s marketing and procurement power.
The deal is expected to close within days, bringing an end to the Canadian company’s ambitious but risk-filled effort to go it alone and break the Airbus-Boeing Co. duopoly in 100-seat-plus, singleaisle aircraft.
Airbus is believed to be planning to market the C Series under its own branding. Bombardier has said it will use the equity method to account for the C Series investment after the agreement is finalized, meaning it will report income earned from the program based on its minority stake and provide no other details. Together, the two partners believe there is a market for about 6,000 planes seating 100 to 150 people over the next 20 years and that they can capture at least half of the orders with the C Series.
“It seems to me that after all those years of promise, at last we’re seeing something” for Bombardier, said Addison Scholand, analyst at boutique aerospace consultancy AirInsight. “As for Air Baltic, they’re saying, ‘I don’t care if it’s an Airbus A200 or a C Series by the time it comes to me. I want this thing.’ ”
With the new sale, Bombardier’s C Series order book swells to more than 400 planes. The backlog includes big-name customers such as Delta Air Lines, EgyptAir and Lufthansa AG unit Swiss. But it also includes more shaky orders from customers including Republic Airways Holdings, Gulf Air and Odyssey totalling about 60 planes, according to research by Leeham Co.
Bombardier spokeswoman Nathalie Siphengphet said the company is happy with the quality of its C Series order book, which includes orders from the most reputable airlines in the world and ensures deliveries beyond 2020. “We are in a good place,” she said.
When Airbus closes its partnership with Bombardier, analysts speculate that many of the C Series sales campaigns that are currently under way could come to fruition. Ethiopian Airlines has narrowed its choice for a small plane between the Embraer E195 E-2 and the CS300, Leeham notes, while JetBlue and Spirit Airlines are both said to be weighing a C Series order.
Air Baltic is anticipating that new interest in the aircraft and guaranteeing its place in line as a result, Desjardins Capital Markets analyst Benoit Poirier says. “We believe Air Baltic placed its order to secure early-slot deliveries ahead of upcoming orders from other airlines,” he said in a note.
With its latest order, Air Baltic becomes the biggest European C Series customer and second biggest worldwide. The airline is expanding operations in all three Baltic countries, namely Latvia, Estonia and Lithuania.
BOMBARDIER (BBD.B) CLOSE: $4.56, UP 19¢
HOUSING
The Globe and Mail. 29 May 2018. Vancouver’s other housing crisis. Deplorable conditions are routine in many rental buildings in the city, including those owned by the Sahota family. While officials have issued fines and court injunctions to force necessary repairs, a steady stream of bylaw violations continues
WENDY STUECK
MIKE HAGER
It’s a travesty that [singleroom occupancy hotels] have been allowed to continue to rot.
JOHN SHAYLER HOUSING ADVOCATE
VANCOUVER - Shelly Ingram says she never gets used to the sound of mice falling through the gaping hole in her bathroom ceiling and landing with a thump in her empty bathtub.
When one drops, her partner, John, will rush across their tiny bachelor suite to try to catch the creature, but most times the rodent has already bounded up over the side of the aging clawfoot tub and scurried into a hole in the wall at the base of the sink.
Thankfully, they’ve never been hit by a mouse while taking a bath, perhaps because they rarely wait the three hours it takes to draw enough tepid water to fill the tub from the aging hot water pipe.
“We’re supposed to be able to use it,” says Ms.
Ingram, who moved into the dingy suite in Vancouver’s Regent Hotel last summer after a months-long search for affordable accommodation. But water comes out of the tap “sporadically,” she says, and some days, not at all.
Still, she and her partner consider themselves lucky: They don’t have to use the communal washrooms down the hall, where toilets are often jammed with paper and feces or discarded needles. Shower drains also get blocked and tubs are unavailable, taken over by residents washing dishes or people sneaking in off the street in search of a few hours of sleep in relative warmth and safety.
Bathrooms aren’t the only problem at the Regent, a single-room occupancy (SRO) hotel on Vancouver’s Downtown Eastside owned by the Sahota family, three reclusive, elderly siblings who own and operate some of the city’s most derelict housing. Bedbugs and rats are constant concerns. In some rooms, walls are damp to the touch, hinting at leaks behind them. Such decrepit, unsanitary housing might seem in stark contrast with the image of Vancouver, which routinely tops global livability rankings and is known for its verdant parks and majestic mountain views. But these deplorable conditions are routine in many SROs – particularly those owned by the Sahota family, some housing advocates say – and are well known to city officials. Last December, citing its continuing efforts to step-up enforcement in SROs, the city flagged 426 bylaw violations against the owners of the Regent.
Yet it’s unlikely the citations will change much. In a pattern dating back decades, the family, who owns five Vancouver SROs, tends to respond slowly, if at all. Many repair orders are followed by fines for bylaw violations. City officials have touted various efforts to bring the Sahota-owned buildings into line over the past 20 years, including fines and court injunctions to force necessary repairs. More recently, the city has stepped up the frequency of inspections in an attempt to identify problems early and address them. But the steady stream of bylaw violations has continued.
“It’s a travesty that they [SROs] have been allowed to continue to rot … for at least four or five decades,” says John Shayler, who worked with the Downtown Eastside Residents’ Association, a housing advocacy group, in the 1970s and 80s.
Mr. Shayler says that owners get away with providing reprehensible living conditions because the city ultimately doesn’t want to shut down their buildings, potentially displacing hundreds of residents who would otherwise be on the street.
With support from housing advocates, tenants of two Sahotaowned SROs, the Regent and the Balmoral, have launched proposed class-action lawsuits that name the Sahotas and the City of Vancouver as defendants and allege that municipal officials have ignored problems with properties owned by the family. (The Sahotas have challenged the suits, arguing that the proper venue to hear such disputes is B.C.’s Residential Tenancy Branch and a decision on that jurisdictional matter is pending.)
A non-profit housing organization struck a deal with the Sahotas in February to manage the Regent and, given its dilapidated condition, has been boarding up rooms and quietly moving tenants out of the building.
Ms. Ingram and her partner don’t know when – or whether – they’ll be asked to move. All they know is that, for now, living conditions at the Regent remain grim, as they do at other Sahota properties in Vancouver. And the Sahotas, who keep a low profile in Vancouver and who refused to talk to The Globe and Mail for this piece, show no sign of loosening their grip on the city’s SRO market.
“THIS IS A SAHOTA BUILDING”
Parkash, Gurdyal and Pal Sahota aren’t the city’s only landlords with problem buildings. Other SRO owners, as well as non-profit agencies and the province’s own rental units, show up on the city’s database of bylaw violations for issues such as blocked fire escapes, rats and missing smoke alarms.
But the number of SRO units the Sahota family controls – more than 500, or about 16 per cent of the roughly 3,000 privately held units in the city’s stock – and the volume of violations, make the Sahotas stand out. A large portion of Vancouver’s poorest residents live cheek-tojowl in these rooming houses, many of which were built a century ago for single loggers and fishermen – blue-collar workers who adorn either side of the city’s official coat of arms.
The Sahota family entered the SRO business in the 1970s, at a time when single-resident units were emerging as one of the few housing options available to the city’s most vulnerable residents: pensioners, people on social assistance and individuals living with mental illness or substanceabuse issues. (A 2013 study of about 3,000 SRO tenants in the Downtown Eastside found 95 per cent had substance dependence and nearly half suffered from psychosis.)
Family patriarch Ranjit Sahota, who died in 1999, launched the business by buying distressed assets and renting them to tenants at the lowest rung of the market.
In addition to five SRO hotels – composed primarily of threemetre by three-metre units that typically feature a sink, a table and a bed – the Sahotas have accumulated a portfolio of singlefamily homes and apartment blocks over the years, all of which have skyrocketed in value as Vancouver housing has turned into a global commodity. The family’s holdings – about 40 properties in and around the city, worth an estimated $218-million – are controlled by a network of companies that all trace back to the address of the home shared by siblings Parkash, 88, Gurdyal, 80 and Pal, 79.
As their portfolio has grown, the Sahotas have embraced the buy-and-hold philosophy. To cite two examples, The Regent, which the family bought in 1989 for $1.5million, today has an assessed value of $12.2-million; another property, Rosemary Mansion in tony Shaughnessy, was acquired for $2.1-million in 1999 and sold five years later for $11-million. Yet, despite the value of their holdings, they appear to spend little on their properties.
At City Hall, where records document hundreds of complaints against Sahota properties, the family’s name has become entwined with problems.
“As you are well aware, we have been dealing with the 140unit Balmoral for quite some time,” city manager Sadhu Johnston wrote in a May 26, 2017, email to Mayor and Council. “This is a Sahota building.”
Yet despite their poor condi- tions, demand for the Sahotas’ SROs has grown, largely owing to dwindling supply. Development in downtown Vancouver and rising real estate prices have been pushing SROs out of the market for decades, dating back to the lead-up to Expo 1986, when some owners evicted long-term tenants in the hope of landing higher-paying guests.
In 2003, with the 2010 Olympics on the horizon, the city passed a bylaw designed to prevent the loss of low-income housing by fining landlords $5,000 for each room taken out of existing SRO stock. In 2007, the city raised the fee to $15,000, then hiked it again in 2015 to $125,000.
But the fines haven’t prevented some landlords from quietly doing so-called “stealth” conversions and offering lightly improved units to students and young working people in Vancouver’s overheated rental market. And rents in remaining SROs have edged up, reflecting tight vacancy rates in the city and the shortage of lower-cost affordable housing.
Wendy Pedersen, a long-time community activist who has fought to keep SROs affordable for people on social assistance – the monthly shelter allowance for a single person is currently set at $375 – feels the city has failed to use the tools at its disposal to hold landlords of problem buildings accountable and allowed them to profit at tenants’ expense.
“Decades and decades of … not taking people’s complaints seriously, not answering their police calls, their cries for help in every which way,” is how she described the city’s response to the continuing deterioration of housing in the low-income neighbourhood, home to about 15,000 people.
MAINTENANCE ON THE CHEAP
Most days, the three elderly Sahota siblings can be found visiting their various rental buildings or working in the garden of the ramshackle home they share in Vancouver’s upscale Kerrisdale neighbourhood. Dressed in thrift-store clothes, they could easily be mistaken for their tenants.
Since they began amassing properties, the Sahotas have appeared to skimp on long-term maintenance. When they’ve done repairs to buildings, they’ve often relied on tenants or unqualified contractors to do the work.
A front-page story in the Vancouver Sun in 1987 reported that Pal Sahota had exploited refugees by hiring them to do repair and maintenance jobs at the Balmoral Hotel, another of the family’s SROs, for wages of 32 cents an hour. He pleaded guilty to five counts of violating the Immigration Act and was fined $2,500.
In 1999, a lawyer for the city recommended near-constant vigilance over repair and maintenance issues with three low-rent apartment buildings in East Vancouver that the Sahotas had owned since 1976. But she advised against revoking the Sahotas’ business licence because doing so could put “a large number of people out on the street.” In an inter-office memo, she referred to potential political fallout if enforcement were to result in buildings being closed and people losing their homes.
In 2007, long-time residents of the 50-unit Sahota-owned Pandora SRO were forced to grab everything they could and flee their homes after the roof collapsed and flooded hallways and several rooms. The tenants were awarded $170,000 in total damages, which was upheld by a B.C. Supreme Court judge who found the Sahotas’ actions “transcended simple negligence and amounted to a reckless disregard for the welfare of the tenants.”
Ten years later, in June, 2017, city officials grew so alarmed by fire and structural problems at the Balmoral, they deemed it unsafe to occupy, giving tenants 12 days to vacate. That move triggered a scramble by the city, nonprofit housing groups and the province to find new homes for about 150 people who had been living in the crumbling building.
The Sahotas’ lack of responsiveness to maintenance concerns places city officials in a bind. Under Vancouver bylaws, the city could do the necessary repairs to their SROs and bill the family, but it has avoided doing so out of concern that the bills wouldn’t be paid. That would leave the city with a portfolio of aging, neglected buildings – and city taxpayers on the hook for repair bills.
City managers recognize Sahota-owned buildings are in poor shape and say they are trying to work with the owners to tackle.
The Globe and Mail. 29 May 2018. OPINION. Tackling house-price inequality should be top priority for politicians and policy makers. High house prices blight lives – and widen the inequality gap.
MARGARET WENTE
How high are house prices in Toronto? So high that even lawyers can’t afford to buy a house. At least one law firm has considered mortgage subsidies for its junior lawyers so that they won’t quit and move to somewhere cheaper. Tenants are getting hammered, too. The average monthly rent for a one-bedroom apartment in Toronto has topped $2,000 – and the vacancy rate, at 1.1 per cent, is vanishingly small. According to a recent poll of young professionals by the Toronto Region Board of Trade, 42 per cent of respondents said they’re likely to leave the city because of high housing costs.
The impact of high house prices extends far beyond young adults. They are among the chief drivers of wealth inequality and increasing social stratification. And they’ve almost certainly driven down the birth rate as young couples postpone their families while they save up for a place to own.
High house prices also stunt upward mobility. They create a vast opportunity gap – especially between those who can afford to live in the booming city with its vibrant job creation and those who are stuck in stagnant smaller cities and towns where goodpaying jobs have dried up. No wonder people in Windsor or Northern Ontario are stubbornly immobile. They can’t afford to move. The equity in their house won’t even buy them a garage in Toronto.
Toronto and Vancouver have become what urban-affairs expert Joel Kotkin calls “exclusionary regions” for all but the most affluent new buyers. There’s no mystery about why. It’s a supply problem. There’s not enough housing to meet the demand. Governments have strangled supply through overly strict zoning rules and land-use regulations. In a new research paper, Benjamin Dachis and Vincent Thivierge of the C.D. Howe Institute have quantified just how much it’s costing us. “[Restrictions] and extra costs on building new housing – such as zoning regulations, development charges and limits on housing development … are dramatically increasing the price of housing,” they assert.
Between 2007 and 2016, they found, home buyers in Canada’s eight most restrictive cities, including Toronto, paid an extra $229,000 for each house. Meanwhile, in that same period, house prices in Canada’s biggest cities approximately doubled. In Vancouver (the worst case), the regulatory burden amounts to an astonishing $600,000 for every house. That’s $300 for every square foot – enough to double the cost of an average new home. In other words, half the price that buyers are paying for their homes have nothing to do with the actual cost of building the house.
The fix isn’t hard to find. The C.D. Howe study says municipal governments and provinces should take steps such as “easing restrictions on developing agricultural land, simplifying and updating zoning bylaws and reducing development charges.” Even modest fixes could shave house prices by tens of thousands of dollars.
So, why don’t they do it? One reason is that progressive land planners in cities such as Vancouver and Toronto (and provinces such as Ontario) have preferences in housing that are the opposite of the public’s preferences. They want density and multi-unit dwellings. Meanwhile, home buyers want single-family houses with backyards. The other reason is that current homeowners are strong supporters of restrictive land-use regulations. They love high house prices.
Canada’s problems are not unique. The housing crisis plagues cities across North America. Perhaps the worst example is the ultraprogressive city of San Francisco, the world capital of NIMBYism, where the median price of a single-family house has reached US$1.61-million ($2.09-million). The city has more dogs than children, for the obvious reason that people with children can’t afford to live there. California’s NIMBY problem is so bad that the state has finally passed a law that allows local development to be fasttracked if it meets certain criteria. We could use some laws like this.
For politicians and policy makers, tackling house-price inequality should be on top of the to-do list. If we don’t do it, the middle class will gradually lose out on its single most effective means of wealth accumulation. The upper middle class will keep pulling away from everybody else. Our biggest cities will increasingly become places where teachers, nurses and people who aspire to move up the mobility ladder simply can’t afford to live. If you don’t think this hurts us, consider this: U.S. housing economists calculated that stringent housing restrictions – along with what they call the “spatial misallocation of labour” – have lowered aggregate U.S. growth by 36 per cent from 1964 to 2009.
That’s a lot of growth. If we’d been smarter about housing, we’d all be a lot richer than we are. And your kids wouldn’t be priced out of the market.
FINANCE
Department of Finance Canada. May 28, 2018. Canada Takes Next Step in Fight Against Aggressive International Tax Avoidance
Ottawa, Ontario – To ensure that all Canadians pay their fair share of taxes, and to safeguard the Government's ability to invest in the programs and services that help the middle class and people working hard to join it, the Government of Canada is taking the next step in the fight against aggressive international tax avoidance.
Today, Finance Minister Bill Morneau tabled a Notice of Ways and Means Motion in the House of Commons formalizing the Government's intention to introduce legislation that would enact the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting—also known as the Multilateral Instrument or MLI—into Canadian law. A global initiative developed by over 100 jurisdictions, the MLI is aimed at countering tax avoidance strategies that lead to base erosion and profit shifting (BEPS), in which businesses and wealthy individuals use tax treaty loopholes to inappropriately shift profits to low-tax or no-tax locations, to avoid paying taxes.
The MLI will build on actions that the Government has already taken to enhance the integrity of Canada's tax system—both at home and abroad—and give Canadians greater confidence that the system is fair for everyone. These actions include more funding for the Canada Revenue Agency to support its efforts to crack down on tax evasion and combat tax avoidance. These investments have helped to identify billions of dollars that can be recovered and invested in the programs and services that Canadians rely on.
Quotes
"The MLI is an important tool in combatting aggressive international tax avoidance. By making sure that everyone pays their fair share, we can safeguard our ability to invest in the programs and services that help the middle class and people working hard to join it."
- Bill Morneau, Minister of Finance
Quick facts
- The Organisation for Economic Co-operation and Development's (OECD's) Inclusive Framework on BEPS brings together over 100 countries and jurisdictions to collaborate on the implementation of the OECD/G20 BEPS package.
- The MLI is intended to allow participating jurisdictions to modify their existing tax treaties to include measures developed under the OECD/G20 BEPS project without having to individually renegotiate those treaties.
- Canada signed the MLI on June 7, 2017, and expressed its intention to adopt the BEPS minimum standards on treaty abuse and improving dispute resolution, as well as mandatory binding arbitration in relation to tax treaty disputes.
Backgrounder
Canada's economy won't work for everyone, if everyone doesn't pay their fair share.
By ensuring that all Canadians pay their fair share of taxes, and by taking the next step in the fight against aggressive international tax avoidance, the Government of Canada will safeguard its ability to invest in the programs and services that help the middle class and people working hard to join it. At the same time, the Government recognizes that these actions cannot be done in isolation. Ensuring tax fairness is a complex process, requiring ongoing engagement with a wide range of partners both at home and internationally.
One important part of that process is the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (also known as the Multilateral Instrument, or MLI). The MLI is the product of a global initiative involving over 100 jurisdictions. It allows participating jurisdictions to implement treaty-based measures developed through the Organisation for Economic Co-operation and Development (OECD) and the G20's project to counter base erosion and profit shifting (BEPS).
BEPS refers to tax avoidance strategies in which businesses and wealthy individuals can use tax treaty loopholes to inappropriately shift profits to low-tax or no-tax locations, to avoid paying taxes. In some cases, this includes transactions designed to shift taxable profits to a lower-tax jurisdiction, and away from the jurisdiction where the underlying economic activity has taken place, in order to avoid paying the full and fair share of taxes owed.
In its efforts to address BEPS, the OECD identified a number of specific instances in which the terms of current tax treaties could give rise to potential abuse. Accordingly, the OECD developed countermeasures that countries could choose to incorporate into their tax treaties to effectively close these loopholes. However, given the large number of tax treaties in existence, and the extended period of time that bilateral renegotiation of each of those agreements would entail, a new approach was developed so that these changes could be implemented in a more timely and efficient manner. That new approach is the MLI.
The MLI will allow signatory nations to swiftly modify their bilateral tax treaties to incorporate the OECD's anti-BEPS provisions, and to work more effectively together in the fight against aggressive international tax avoidance. It was developed and negotiated by more than 100 countries and jurisdictions, including Canada, and is the first multilateral convention to modify the application of bilateral tax treaties. At the same time, the MLI will improve the functioning of the international tax system, and provide greater certainty for Canadian taxpayers by improving dispute resolution under Canada's tax treaties.
Some of the MLI provisions are mandatory, and others are optional. The mandatory provisions relate to the minimum standards established by the OECD (standards that all participating countries have agreed to adopt). Countries are free to choose among the optional provisions.
Consistent with the Government's expressed intentions when Canada signed the MLI on June 7, 2017, the Government proposes to adopt the BEPS minimum standards on treaty abuse and improving dispute resolution, as well as mandatory binding arbitration in relation to tax treaty disputes. In addition, Canada proposes to adopt a number of the optional provisions in the MLI upon ratification. This will foreclose opportunities for taxpayers to avoid or reduce taxation in inappropriate circumstances.
By tabling legislation in the House of Commons to implement the MLI, the Government of Canada will be taking the next step in the fight against aggressive international tax avoidance, safeguarding the Government's ability to invest in Canadians, and ensuring that the benefits of economic growth are felt by more people, not just the wealthy few.
Technical Details on Implementing the MLI
Minimum Standards
Assuming that Parliament approves the implementing legislation, Canada intends, at the time of depositing its instrument of ratification, to confirm its commitment to the minimum standards on treaty abuse and to improving dispute resolution.
The minimum standard to address treaty abuse consists of the inclusion of a new tax treaty preamble and a substantive anti-abuse rule:
- The preamble, which is a statement of the aims or purposes of a treaty, clarifies that the covered tax treaty is intended to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance.
- The anti-abuse rule is based on the principal purpose of transactions or arrangements. It has the effect of denying a benefit under a tax treaty where one of the principal purposes of any arrangement or transaction was to obtain that benefit, unless the granting of that benefit is in accordance with the purpose and object of the relevant provisions of the treaty.
Canada will also confirm its commitment, under the MLI, to implement the minimum standard with respect to the dispute resolution features of its tax treaties. As well, Canada will confirm its commitment to adopt mandatory binding arbitration as a mechanism to ensure the effective and timely resolution of treaty-based disputes.
Mandatory binding arbitration is a mechanism that obligates the parties to a tax treaty to submit unresolved cases to an independent and impartial decision maker—an arbitration panel. The decision reached by the arbitration panel is binding on the parties. The mandatory binding arbitration procedure adopted through the MLI will be substantially the same as the mandatory binding arbitration procedure under the Canada-United States Tax Convention.
Optional Provisions
Canada intends to adopt a number of the MLI's optional provisions for the purposes of Canada's tax treaties. Three of the provisions of the MLI that Canada intends to adopt on ratification will foreclose opportunities for taxpayers to avoid or reduce taxation in inappropriate circumstances.
In respect of the tax treaties to which they apply, these provisions will:
- impose a 365-day holding period for shares of Canadian companies held by non-resident companies. The holding period will ensure that the lower treaty-based rate of withholding tax on dividends will not be available to non-resident companies that engage in certain short-term share acquisitions;
- impose a 365-day test period for non-residents who realize capital gains on the disposition of shares or other interests that derived their value from Canadian immovable property. The test period will guard against certain transactions designed to obtain a treaty-based exemption from Canadian taxes on capital gains; and
- incorporate the MLI provision for resolving dual resident entity cases. This provision employs an effective approach to resolving dual resident cases to prevent potential double taxation, while providing protection against companies and other entities that attempt to manipulate their tax residence to avoid or reduce their taxes.
A party to the MLI may expand the scope of its commitment under the MLI but it cannot subsequently narrow its commitment in respect of those provisions that it has agreed to adopt. As such, Canada is committing to the adoption of provisions relating to the minimum standards and the optional provisions described above. Canada also has the flexibility, if it so chooses, to adopt additional provisions of the MLI after ratification.
The adoption of the optional measures described above, along with the treaty-based minimum standards for preventing treaty abuse and the measures to improve the dispute resolution process, will significantly enhance Canada's ability to protect its tax base and support the international effort to address BEPS.
CANADA - UAE
Global Affairs Canada. May 29, 2018. Canada and United Arab Emirates agree to enhance cooperation
Ottawa, Ontario - Canada and the United Arab Emirates (U.A.E.) have a deeply rooted relationship, and today the Honourable Chrystia Freeland, Minister of Foreign Affairs, hosted a successful bilateral meeting with Sheikh Abdullah bin Zayed Al Nahyan, the U.A.E.’s Minister of Foreign Affairs and International Cooperation.
The ministers discussed their desire to build on existing relations to expand trade and investment between Canada and the U.A.E. They also discussed Middle East regional security issues.
In addition, Minister Freeland and Sheikh Abdullah discussed the need to coordinate a global response to the Rohingya crisis. Minister Freeland debriefed Sheikh Abdullah on Canada’s strategy, unveiled on May 23, 2018, to respond to the Rohingya crisis.
The ministers also noted the conclusion of a memorandum of understanding (MOU) to increase cooperation on consular affairs. The MOU will establish a joint committee comprising representatives of the two countries who will meet regularly to discuss consular matters and help to resolve ongoing consular issues and cases.
Quotes
“I was glad to hold constructive discussions today with His Highness Sheikh Abdullah to find solutions to global and regional crises. Canada and the United Arab Emirates have a strong and long-standing relationship, and I look forward to continuing to build on this important friendship and to cooperating even more closely with the U.A.E. in the near future.’’
- Hon. Chrystia Freeland, P.C., M.P., Minister of Foreign Affairs
Quick facts
- During the U.A.E. delegation’s visit to Canada this week, discussions between Canadian officials and the delegation also touched on cooperation in the areas of innovation, education, youth and space.
- During this visit, the Government of Canada also announced its intention to lift the visa requirement for U.A.E. citizens on June 5, 2018. This decision is based on a comprehensive and rigorous evaluation of the U.A.E. against Canada’s visa policy criteria, which found that the U.A.E. meets Canada’s criteria for a visa exemption.
- In December 2017, Canada and the U.A.E. signed a defence cooperation arrangement to help advance shared interests, including increased personnel training opportunities, defence engagement and the promotion of regional stability.
- The U.A.E. is home to an estimated 40,000 Canadians, and 150 Canadian companies have an operational presence there.
- The U.A.E. is Canada’s largest export market in the Middle East and North Africa and is Canada’s 16th-largest export market globally.
- On May 24, Canada announced its intention to become a member of the International Renewable Energy Agency, which is hosted in Abu Dhabi. The U.A.E. is recognized as a regional leader in efforts to combat climate change.
Global Affairs Canada. May 29, 2018. Canada and United Arab Emirates announce successful conclusion of foreign investment promotion and protection agreement negotiations
Ottawa, Ontario - Creating the right conditions for Canadian companies to compete internationally is an important part of the Government of Canada’s progressive trade agenda. Expanding and diversifying Canada’s trade and investment relations contributes directly to the economy and benefits hard-working Canadians.
The Honourable François-Philippe Champagne, Minister of International Trade, and His Highness Sheikh Abdullah bin Zayed Al Nahyan, Minister of Foreign Affairs and International Cooperation of the United Arab Emirates (U.A.E.), are pleased to announce the successful conclusion of negotiations toward a bilateral foreign investment promotion and protection agreement (FIPA) between Canada and the U.A.E.
The economic relationship between the U.A.E. and Canada has deepened over the last 12 months, with increased investments, transportation links and ties between peoples. The FIPA is another step in further developing Canada’s strategic relationship with the U.A.E.
During the visit of Sheikh Abdullah, on which he was accompanied by four other U.A.E. cabinet ministers, ministers and officials from both Canada and the U.A.E. discussed how this new agreement, once in force, will deepen economic ties and expand investment opportunities for businesses in both countries.
A bilateral FIPA will provide greater predictability and certainty for Canadian investors considering investments in the U.A.E. and for U.A.E. investors in Canada, while also ensuring that Canada’s progressive trade agenda is supported. In the coming months, Canada and the U.A.E. will take the necessary domestic procedures to prepare for signing and entry into force of the agreement.
Quotes
“The conclusion of the negotiations toward a foreign investment promotion and protection agreement will further strengthen the economic partnership between Canada and the U.A.E. and is another important step in solidifying our growing bilateral relationship. Diversifying our trade and investment ties with a strategic partner such as the U.A.E. is central to Canada’s progressive agenda and will contribute to the growth and prosperity of both our countries.”
François-Philippe Champagne, Minister of International Trade
Quick facts
- On July 8, 2014, Canada and the U.A.E. agreed to begin negotiations toward a foreign investment promotion and protection agreement.
- In 2017, bilateral merchandise trade between Canada and the U.A.E. totalled $1.8 billion.
- Foreign direct investment is a key area of common interest with the U.A.E., with investments in Canada totalling $3.9 billion in 2017.
- The U.A.E. is Canada’s largest export market in the Middle East and North Africa, and is Canada’s 21st-largest export market globally.
CONSULAR ISSUES
Global Affairs Canada. May 29, 2018. Statement by Minister Freeland in response to the 2018 Spring Report of the Auditor General of Canada on Consular Services to Canadians Abroad
Ottawa, Ontario - Following the tabling of the 2018 Spring Report of the Auditor General of Canada on Consular Services to Canadians Abroad, the Honourable Chrystia Freeland, Minister of Foreign Affairs, today issued the following statement:
“The Government of Canada is committed to providing the best consular services to Canadians abroad. We thank the Auditor General and his staff for their spring 2018 report and their recommendations to help us provide better services to Canadians travelling or living abroad.
“As Minister of Foreign Affairs, there is nothing more important to me than the safety and security of Canadians. Global Affairs Canada takes the provision of consular services seriously: expert staff are ready to assist Canadians abroad at more than 260 locations in 150 countries worldwide with the help of the 24/7 Emergency Watch and Response Centre in Ottawa.
“Right now, about 2.8 million Canadians currently live outside the country, and Canadians made almost 52 million trips abroad in 2016.
“I agree with the Auditor General’s recommendations and I am pleased to see the report recognize the strong consular response to emergencies. This report recognizes the hard work of the many staff and volunteers who ensure Canadians receive a timely response and support regarding their situations. We know that there remains work to be done. Many of the recommendations are in line with the consular services modernization already underway. Global Affairs Canada is working to:
- standardize its lessons-learned reports and action plans after crises;
- expand its communications and outreach strategy;
- keep Travel Advice and Advisories up to date and ensure they are reviewed regularly;
- strengthen processes and training specific to arrest-and-detention cases;
- examine performance variations in passport delivery and improve data quality;
- enhance monitoring of urgent document delivery; and
- review and update service standards and resource allocation.
CANADA - Organisation of Islamic Cooperation Council of Foreign Ministers
Rohingya / Crisis in Myanmar and Bangladesh
Global Affairs Canada. May 23, 2018. Speech. Address by Minister Freeland to the Organisation of Islamic Cooperation Council of Foreign Ministers
Ottawa, Canada - Today, we are announcing the new steps Canada will take to address the Rohingya crisis in Myanmar and Bangladesh and to defend the rights of this community, which has suffered too much.
Before giving you the details, I would like to speak to you briefly about what I saw in the refugee camps that I visited in Bangladesh in early May. First, the Rohingya are living in the most horrific conditions. Refugees in the camps described the brutality of the exile and the dehumanization that they have endured. But the most chilling stories were the ones about rape being used as a weapon of conflict. It was truly terrible.
This violence did not begin recently. Rather, over the past few years, Myanmar’s army and the militias have used the most repugnant sexual violence to oppress these people. The refugee women told us that their latrines had been destroyed, forcing them to relieve themselves in the bushes, where their attackers could easily lie in wait for them. The stories of the people who had arrived over the past two weeks were essentially the same as the stories of those who had been arriving since August 2017. These atrocities must end. Justice must be done. And we along with the international community must mobilize to say, “Enough.”
When I was in Bangladesh earlier this month, refugees described the brutality with which they were treated. This is ethnic cleansing. These are crimes against humanity. We heard of families ripped apart, of husbands and wives, brothers and sisters, children and parents, friends and neighbours who have not seen each other in years. Most chillingly of all, we heard harrowing accounts of the use of rape as a weapon in conflict. Women told us that their toilets had been destroyed, forcing them to use outdoor latrines, where they would be easier targets for their attackers. They described covering their faces in mud to be less attractive as prey.
Many Rohingyas are still being forced to flee every day. The stories of people who had arrived just two weeks before my visit to Bangladesh are much the same as those who have been arriving since August of 2017. These tragic stories highlight the importance of making every effort to help these people—among the most vulnerable in the world.
The Rohingya crisis requires a comprehensive response. That is why Canada is today launching a strategy that addresses four distinct aspects of the situation: the humanitarian crisis, which my amazing colleague, Marie-Claude Bibeau, who has also been to the camps, will speak about in a moment, as well as the political situation, the question of accountability and impunity, and the importance of effective international coordination and cooperation. These are the pillars that Special Envoy Bob Rae, my friend and neighbour, identified and has asked the government to address.
I agree with the United Nations High Commissioner for Human Rights, Zeid Ra’ad Al Hussein, who has described the campaign against the Rohingyas as a textbook case of ethnic cleansing and has said that he has strong suspicions that acts of genocide may have taken place in Rakhine state since August. The Government of Myanmar has failed in its essential duty to protect human rights and to ensure the security and dignity of vulnerable and marginalized people, particularly women and girls.
Without justice, equity and respect for fundamental rights in Myanmar, there can be no peace. We continue to advocate for the unimpeded access to Rakhine state by the UN and international organizations and the voluntary, dignified, safe and sustainable return of refugees, with the support of the UNHRC [United Nations Human Rights Council] on both sides of the border. The Rohingya have the right to return to their homes. We know, however, that the conditions for return currently do not exist.
On the question of accountability and impunity, we must ensure that those responsible for the atrocities and human rights violations committed in Rakhine state, including sexual and gender-based violence, are brought to justice. Canada strongly supports the work of the UN Human Rights Council’s fact-finding mission on Myanmar, which will report back to the council this September. We call on the Government of Myanmar to provide the mission with full and unhindered access.
We sanctioned Myanmar’s Major General Maung Maung Soe in February under the Justice for Victims of Corrupt Foreign Officials Act, for his role in the human rights violations against the Rohingya minority in Myanmar. Canada will continue to work with like-minded partners to enhance the effectiveness of targeted sanctions against perpetrators of gross human rights violations. We urge the United Nations Security Council to incorporate systematic sexual violence as specific criteria in UN sanctions regimes.
Many of the people I met in Bangladesh, the people who have faced persecution, spoke with great passion about their personal desire for justice and accountability. And I think that is something we can all understand and sympathize with. They spoke about wanting the world to know what they have endured and of wanting the world to know who is responsible. For this legitimate desire to be realized, the survivors’ stories need to be documented. We need to keep working in a clear and fact-based way to collect and preserve evidence so that it can be presented to a relevant authority to establish accountability. The funds we are announcing today will support ongoing efforts to document and protect evidence of the atrocities that have been committed.
There can be no impunity for the perpetrators of these horrific crimes. Canada will lead the call for justice and will work with like-minded countries to explore all avenues for holding perpetrators to account, including the establishment of an accountability mechanism akin to the international impartial and independent mechanism for Syria, known as the IIIM. Canada is also working with partners on the next steps toward a referral of the situation in Myanmar by the United Nations Security Council to the International Criminal Court.
Canada is committed to working with domestic, regional and international partners and the governments of Myanmar and Bangladesh to address the impact of this continuing human tragedy. This will guide all actions and initiatives outlined in Canada’s strategy. As part of this strategy, Canada will establish an international working group of like-minded countries to better coordinate assistance, align advocacy efforts and mobilize support for our key initiatives.
We also commit to continuing to work with the Government of Bangladesh and the UNHCR to determine the potential for resettlement of Rohingyas from within Bangladesh. Once resettlement is possible, Canada will work with the UNHCR to determine the appropriate timing and to identify the most vulnerable families and individuals. We know from our experience working with the Yazidi women that some survivors of sexual violence will need emergency resettlement.
Our government has been seized of this crisis since violence began last August. We will continue to push international partners to help seek an end to this crisis, as we have done at the UN General Assembly, the Human Rights Council, the Commonwealth and, most recently, the Organization of Islamic Cooperation. This issue was central to our G7 Foreign Ministers Meeting, which I hosted last month at my home in Toronto, and it will be on the agenda at the G7 Leaders’ Summit. Marie-Claude also has her G7 meeting with international development ministers coming up next week.
We and the international community have a grave responsibility to respond to the acute needs of the persecuted Rohingyas. We cannot be silent. We must hold perpetrators of violence to account and support all efforts toward building lasting peace and reconciliation in Myanmar. I believe very sincerely that history will judge what we do today, and history will record that Canada stood up today for these most persecuted people.
DEFENCE / PEACE OPERATION
Global Affairs Canada. 2018-05-29. Canada continues to invest in modernizing and enhancing peace operations
Canada announces funding for peacekeeping training
The Honourable Chrystia Freeland, Minister of Foreign Affairs, today announced new funding to help train UN peacekeepers.
As Canada marks 70 years of UN peacekeeping, the country is supporting its commitment to UN peacekeepers around the world by allocating $2 million to strengthen training.
This new funding will help prepare peacekeepers for the complex environments of today’s peace operations through training in peacekeeping, peacebuilding and crisis management, as well as human rights and the protection of civilians.
Quotes
“Through our ‘smart pledges’ of military contributions to UN peace operations, and through the Vancouver Principles on child soldiers and the Elsie Initiative on Women in Peace Operations, Canada is working closely with partners worldwide to ensure peacekeeping meets the needs of the 21st century. The funding announced today will help offer peacekeeping personnel the training they need to function most effectively in peace operations.”
- Hon. Chrystia Freeland, P.C., M.P., Minister of Foreign Affairs
Quick facts
- Canada launched the Peace and Stabilization Operations Program (PSOPs) in August 2016 with a budget of $450 million over three years.
- Through PSOPs, Canada works with allies and partners to help stop violence, provide security and create space for dialogue and conflict resolution
- PSOPs supports the work of the United Nations and international, national and local organizations to prevent conflict, stabilize and build peace in fragile and conflict-affected states.
- “Smart pledges” are commitments made by two or more UN member states who partner to respond to a UN peacekeeping capability gap. Canada is promoting this approach to provide the UN with the predictability it needs to more effectively plan its operations and training.
FULL DOCUMENT: https://www.canada.ca/en/global-affairs/news/2018/05/canada-announces-funding-for-peacekeeping-training.html
Statement to mark International Day of United Nations Peacekeepers
The Honourable Chrystia Freeland, Minister of Foreign Affairs; the Honourable Harjit S. Sajjan, Minister of National Defence; the Honourable Ralph Goodale, Minister of Public Safety and Emergency Preparedness; and the Honourable Marie-Claude Bibeau, Minister of International Development and La Francophonie, today issued the following statement on the International Day of United Nations Peacekeepers:
“Today, Canada salutes the women and men of United Nations peacekeeping operations, past and present, who have devoted their lives to the pursuit of peace and security around the globe over the past 70 years.
“Canada has a long and proud tradition of international collaboration and leadership, including through its involvement in the UN. Peacekeeping has helped provide protection to millions of vulnerable people affected by conflict.
“As a long-standing partner for promoting peace, security and sustainable development in the world, Canada is proud of its announced smart pledges in support of UN peace operations, its commitment to ending the use of child soldiers, as evidenced by the Vancouver Principles, and the new Elsie Initiative on Women in Peace Operations.
“Canada has always supported the UN and continues to firmly believe that UN peacekeeping missions are an important tool for maintaining international peace and security.”
Backgrounder
Canada’s Peace and Stabilization Operations Program (PSOPs) invests in modernizing and enhancing peace operations. Canada’s support is also designed to advance the role of women and girls in all stages of peace and to protect the human rights of women and girls in fragile, conflict and post-conflict countries.
Overall, between 2016 and 2019, PSOPs is providing more than $100 million to support United Nations activities in peace and security.
The initiatives announced on May 29, 2018, by the Government of Canada through PSOPs have a value of over $2 million.
Strengthening peacekeeping training in francophone Africa
Funding announced: $1,000,000
Time frame: 2018 to 2019
Partner: École de Maintien de la Paix Alioune Blondin Beye de Bamako
The project supports the École de Maintien de la Paix Alioune Blondin Béye [Alioune Blondin Béye peacekeeping school]. The school provides specific training to officers in UN peacekeeping and delivers specific training modules designed to provide the essential, local knowledge required by military, police and civilian personnel to function effectively.
E-learning for peacekeepers
Funding announced: $1,039,338
Time frame: 2018 to 2019
Partner: Peace Operations Training Institute (POTI)
Canada is increasing support to large-scale e-learning programs in Africa, Latin America, the Caribbean and South Asia. This training increases the knowledge of military, police and civilian peacekeepers in areas such as human rights, the protection of civilians and international conflict resolution. This funding is in addition to the $567,880 announced for POTI in November 2017 to support these activities.
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LGCJ.:
