CANADA ECONOMICS

VENEZUELA

Global Affairs Canada. May 30, 2018. Canada imposes further sanctions on Maduro regime in Venezuela

Ottawa, Ontario - In response to the illegitimate and anti-democratic presidential elections held in Venezuela on May 20, Canada today announces further sanctions on key figures in the Maduro regime.

Under the Special Economic Measures Act, the Honourable Chrystia Freeland, Minister of Foreign Affairs, is today announcing targeted sanctions against an additional 14 individuals responsible for the deterioration of democracy in Venezuela. The measures are consistent with Canadian principles and values and aim to maintain pressure on the Venezuelan government to restore constitutional democracy and respect for democratic and human rights.

Quotes

“These sanctions send a clear message that the Maduro regime’s anti-democratic behaviour has consequences. Today’s announcement is evidence of our commitment to defending democracy and human rights around the world and our rejection of Venezuela’s fraudulent presidential elections. Canada is as determined as ever to support the people of Venezuela as they seek a more peaceful, democratic and prosperous future.”

- Hon. Chrystia Freeland, P.C., M.P., Minister of Foreign Affairs

Backgrounder

Effective immediately, Canada is imposing further sanctions against members of the Maduro regime and those closest to it.

Canadian measures

The Special Economic Measures (Venezuela) Regulations impose asset freezes and dealings prohibitions on listed persons by prohibiting persons in Canada and Canadians outside of Canada from dealing in any property of these individuals or providing financial or related services to them.

The specific prohibitions are set out in the Regulations.

The names of the individuals targeted by these Regulations are:

• Tania Valentina DÍAZ GONZÁLEZ
• Fidel Ernesto VÁSQUEZ IRIARTE
• Carolys Helena PÉREZ GONZÁLEZ
• Cilia Adela FLORES DE MADURO
• Erika del Valle FARÍAS PEÑA
• Ramón Darío VIVAS VELASCO
• Christian TYRONE ZERPA
• Fanny Beatriz MÁRQUEZ CORDERO
• Malaquías GIL RODRÍGUEZ
• Indira Maira ALFONZO IZAGUIRRE
• Jhannett María MADRIZ SOTILLO
• Carlos Enrique QUINTERO CUEVAS
• Xavier Antonio MORENO REYES
• Carlos Alberto ROTONDARO COVA

FULL DOCUMENT: https://www.canada.ca/en/global-affairs/news/2018/05/canada-imposes-further-sanctions-on-maduro-regime-in-venezuela.html

REUTERS. MAY 30, 2018. New Cuba leader pays 'solidarity' visit to Venezuela

CARACAS (Reuters) - Cuba’s President Miguel Diaz-Canel arrived in Venezuela for his first foreign visit as head of state on Wednesday in a show of solidarity for counterpart Nicolas Maduro who is under fire in the West after a controversial re-election.

“We bring a message of fraternity and solidarity ... for the people and Bolivarian government of Venezuela, for President Nicolas Maduro,” Diaz-Canel said on arrival, congratulating Maduro for his “resounding success” at the May 20 vote.

The United States, the European Union and major Latin American nations condemned Maduro’s re-election as not meeting democratic standards. For example, two of his rivals were barred from standing and the election board is run by loyalists.

But China and Russia have warned against meddling in the socialist-run nation, and fellow leftist governments in the region from Cuba to Bolivia have offered warm support.

Maduro was the first foreign leader to meet with Diaz-Canel last month after he succeeded Raul Castro to become president of the communist-run island.

Venezuela, which holds the world’s largest oil reserves, exchanges crude for Cuban medical and other technical services, though deliveries have dropped over the past few years during an economic implosion in the OPEC member of 30 million people.

Diaz-Canel flew to Venezuela with his wife Liz Cuesta as first lady, in a break with custom during the nearly 60 years that the Castro brothers Fidel and Raul led Cuba. They generally traveled without their wives.

His visit came as Cuban authorities faced the chaos of flooding in the wake of subtropical storm Alberto that has killed four people and prompted the evacuation of tens of thousands..

Reporting by Nelson Acosta in Havana, Caracas newsroom; Writing by Andrew Cawthorne; Editing by Luc Cohen and Susan Thomas

INFRASTRUCTURE

The Globe and Mail. 30 May 2018. China’s ambassador to Canada accuses Ottawa of prejudice in rejection of Aecon takeover
ROBERT FIFE
STEVEN CHASE

OTTAWA - China’s envoy has accused the federal government of discrimination for blocking the takeover of a Canadian construction giant by a Chinese state-owned enterprise on national security grounds, calling on Canada to get rid of such “demons” of prejudice against his country.

In a column published in The Globe and Mail on Wednesday, Ambassador Lu Shaye said that the Liberal cabinet expanded and politicized the concept of national security when it cited threats to sovereignty in rejecting the $1.5billion sale of Toronto’s Aecon Group Inc. to China Communications Construction Company (CCCC).

The outspoken envoy did not threaten retaliation but made clear Beijing won’t put up with Canada questioning China’s oneparty rule and its state-owned enterprises that operate around the world.

“Canada’s rejection of Aecon shows that Chinese enterprises are suffering from unfair treatment – and it’s not the first time,” Mr. Lu wrote. “I hope Canadians can embrace China as simply a different country and not regard China as a threat just because of our differences. Only by getting rid of such kinds of demons can Canada relieve the burden, co-operate with China and come aboard the express train of China’s development.”

David Mulroney, a former Canadian ambassador to China, said Mr. Lu ignores that China closed off entire sectors of its economy to foreign investors without any reason given.

The Trudeau government has finally realized that many stateowned enterprises are beholden to President Xi Jinping’s political objectives, Mr. Mulroney said.

“Countries are going to react to that and worry that the party is playing a role in investment decisions and whether the party will seek to influence decisions in favour of China,” Mr. Mulroney said. “Other countries are reacting with increasing concern to large-scale Chinese investment. … So China will try to isolate each country and make it seem like it is an issue for them alone.”

Mr. Lu blamed the Canadian media for “demonizing Chinese state-owned enterprises” and “repeatedly hyped CCCC as one of the state-owned enterprises of China, which they described as monsters,” he complained.

Prime Minister Justin Trudeau says his cabinet vetoed a Chinese state-owned conglomerate’s takeover of Aecon because of concerns it could control critical infrastructure projects and threaten Canadian sovereignty.

Aecon is a partner in a $2.7-billion refurbishment of Ontario’s Darlington Nuclear Generating Station, is building the massive Site C hydroelectric dam in B.C. and, until recently, was bidding with a team to construct and operate the $4.8-billion Gordie Howe International Bridge connecting Windsor and Detroit.

Mr. Lu said Ottawa’s rejection of the deal will “result in much greater loss” for Aecon than China, saying the acquisition was a minor purchase for CCCC, which is one of the largest construction firms in the world.

“The acquisition offered by CCCC at a premium of $1.5-billion was definitely good news for Aecon,” he said. “But for CCCC, a world construction giant, the Canadian construction market is insignificant and being rejected for acquiring Aecon may only mean that it has saved $1.5-billion.”

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.

The Chinese envoy also denied that Beijing has been stealing Western technology – an accusation that has levelled against telecommunications giant Huawei Technologies in the aftermath Nortel’s bankruptcy.

The Globe and Mail reported Saturday that Huawei has established a vast network of relationships with Canadian universities to create a steady pipeline of intellectual property that will aid its development of next-generation 5G mobile technology. Canadian university professors and researchers have transferred full rights to their inventions to Huawei in 40 instances.

The Globe and Mail. 30 May 2018. OPINION. China is not a threat to Canada – and doesn’t deserve unfair treatment
LU SHAYE

Canada has always boasted diversity and multiculturalism. I hope Canadians can embrace China as simply a different country and not regard China as a threat just because of our differences.

Iregret that the Canadian government rejected the acquisition of the Canadian construction company, Aecon, by China Communications Construction Company (CCCC) on national-security grounds. China does not agree with politicizing and wantonly using the concept of national security and opposes adopting discriminatory policies against Chinese enterprises. Canada’s rejection of Aecon shows that Chinese enterprises are suffering from unfair treatment – and it’s not the first time.

The rejection will result in much greater loss for Canada than China. The acquisition offered by CCCC at a premium of $1.5-billion was definitely good news for Aecon. It would not only greatly improve Aecon’s international competitiveness and tap into its development potential, but also help increase employment opportunities and employee welfare, from which its shareholders would also benefit. Yet, the Canadian government made this impossible, leaving the employees and shareholders of Aecon disappointed. But for CCCC, a world construction giant, the Canadian construction market is insignificant and being rejected for acquiring Aecon may only mean that it has saved $1.5billion.

We have noticed that since CCCC reached an acquisition agreement with Aecon in October last year, the Canadian media have repeatedly hyped CCCC as one of the state-owned enterprises of China, which they described as monsters. These reports are neither objective nor fair. I have always stressed that China has no objection to Canada’s security review of acquisitions by foreign enterprises. But we oppose demonizing Chinese state-owned enterprises and abrasively smearing them. I have said that slandering Chinese state-owned enterprises in this way is immoral.

Still, some people are so full of imagination that they claim China’s development depends on stealing technologies from Western countries. I’d like to advise them to keep calm and think: How could a country such as China – with a population of more than one billion – develop by solely stealing technologies from other countries? It would be too arrogant for someone to think that innovation capacity is exclusive to western countries.

In fact, China has long been a major powerhouse of independent innovation. According to data released by the World Intellectual Property Organization, China was the largest holder of newly registered patents in the world in 2016 and 2017. These people are advised not to believe that developing countries will always lag behind the West. At present, it is an inevitable trend for countries to carry out international technological co-operation in the era of globalization. Being complacent and conservative are not only against the international trend, but also bound to be left behind. To maintain the leading position in technology fields, Western countries must run faster, instead of tripping other countries up and making dirty tricks. Some people also attack CCCC’s participation in construction on islands and reefs in the South China Sea. But this just proves that CCCC boasts advanced technology in the infrastructure field. Perhaps what they are really afraid of is the strong competitiveness of China’s stateowned enterprises.

And some people have said that Western standards are global standards in terms of investment, trade and protection of intellectual-property rights. Such logic seems domineering and centres around the idea that Westerners have the final say on international rules. On the contrary, I think that global standards are by no means Western standards. Using standards defined by the West that suppress the progress of developing countries runs counter to international morality.

The world is colourful – and Canada has always boasted diversity and multiculturalism. I hope Canadians can embrace China as simply a different country and not regard China as a threat just because of our differences. Only by getting rid of such kinds of demons can Canada relieve the burden, co-operate with China and come aboard the express train of China’s development.

INTERNATIONAL TRADE

The Globe and Mail. REUTERS. 30 May 2018. U.S. sets public hearings on auto-import tariff probe
DAVID SHEPARDSON

Less than a week after the Trump administration threatened to impose tariffs of up to 25 per cent on foreign-built automobiles, the U.S. government on Tuesday said it would hold public hearings on whether the import of vehicles and auto parts represents national-security risks.

The Commerce Department announced in the Federal Register that it would hold two days of public comments in July on its probe of auto imports. Already, the tariff proposal has drawn condemnation from Republican lawmakers and business groups. A group representing major automakers said last week that it was “confident that vehicle imports do not pose a national security risk.”

The administration launched an investigation to determine whether vehicle and parts imports were threatening the industry’s health and ability to develop advanced technologies. The probe could lead to new U.S. tariffs similar to those imposed on imported steel and aluminum in March.

The U.S. Chamber of Commerce noted U.S. auto production has doubled over the past decade, and said tariffs “would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war.”

The department’s notice sought written comments by June 22 with rebuttal comments due by July 6. Public hearings are planned for July 19-20 in Washington.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said in a statement last week, promising a “thorough, fair and transparent investigation.”

The notice said Commerce wants input on issues including “domestic production needed for projected national defense requirements” and how the analysis changes if it considers U.S.owned automotive capacity versus foreign-owned auto makers.

The department is also seeking comments on whether “innovation in new automotive technologies is necessary to meet projected national defense requirements” and on “displacement of any domestic automobiles and automotive parts causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity.”

Last week’s probe announcement sparked a broad sell-off in shares of Asian auto makers including Toyota Motor Corp., Nissan Motor Co., Honda Motor Co. and Hyundai Motor Co., which count the United States as a key market.

President Donald Trump had told auto makers this month he was considering tariffs of up to 25 per cent on imported passenger vehicles, up from 2.5 per cent currently.

The administration is also trying to renegotiate the North American free-trade agreement to return more auto production to the United States. Some officials say the auto tariff probe is aimed in part at prodding Canada and Mexico to reach agreement on new auto provisions. U.S. auto tariffs do not apply to vehicles assembled under NAFTA.

The Globe and Mail. MAY 29, 2018. Canada ‘very ready’ to fire back if U.S. imposes steel tariffs, Freeland says
ADRIAN MORROW, WASHINGTON
GREG KEENAN, AUTO AND STEEL AND AIRLINE INDUSTRY REPORTER, TORONTO

Foreign Affairs Minister Chrystia Freeland says Canada is “very ready” to retaliate if the Trump administration follows through on its threat to impose tariffs on Canadian steel and aluminium this week.

Ms. Freeland rushed to Washington Tuesday in a last-minute bid to avert the levies. She met for more than two hours with President Donald Trump’s trade chief, Robert Lighthizer.

“Our government always is very ready and very prepared to respond appropriately to every action. We are always prepared and ready to defend our workers and our industry,” she said outside Mr. Lighthizer’s office when asked if Canada would retaliate against tariffs. “Canadian steel companies, Canadian steel workers should absolutely know that the government of Canada has their back.”

Prime Minister Justin Trudeau, meanwhile, lobbied Vice-President Mike Pence by telephone on the levies. Mr. Trudeau also spoke with Mr. Trump Friday.

Mr. Trump slapped levies of 25 per cent on steel and 10 per cent on aluminium imported to the United States in March. He gave Canada and Mexico a temporary exemption that expires on Friday.

The Trump administration has said Canada and Mexico will only receive a permanent exclusion from the tariffs once they reach a deal with the U.S. on overhauling the North American free-trade agreement. The three countries have been renegotiating the continental free-trade pact since last summer.

Ms. Freeland and Mr. Lighthizer on Tuesday discussed the tariffs, as well as Mr. Trump’s top NAFTA demand: Stricter rules on the content of cars and trucks made in North America in a bid to move more manufacturing jobs to the United States.

One source briefed on the closed-door trade talks said the U.S. is considering granting Canada and Mexico an exemption from the tariffs in exchange for an agreement in principle to include more North American steel and aluminum in vehicles made in the NAFTA zone. Such an agreement would be fairly broad with the actual percentages of required steel and aluminum to be worked out later.

Another possibility under discussion is a quota, under which Canada would agree not to export more than a set amount of the metals to the U.S. every year, the source said. South Korea has received a permanent exemption from the tariffs in exchange for agreeing to a quota, while three other countries – Brazil, Argentina and Australia – have also reportedly discussed quota-based deals.

Tariffs would hit Canada hard, and could also take a bite out of the U.S.’s own manufacturing sector. Canada is the largest exporter of both metals to the U.S. and depends on the American market for the vast majority of its sales. It is also the largest destination for exports of U.S.-made steel.

Ms. Freeland did not spell out exactly how Canada would retaliate. The European Union, which is also trying to negotiate an exemption, has threatened a series of tariffs targeted at products from politically sensitive regions of the country: Kentucky bourbon, made in Senate Majority Leader Mitch McConnell’s home state, for instance, and Harley-Davidson motorcycles manufactured in House of Representatives Speaker Paul Ryan’s Wisconsin.

“My membership does certainly believe that if the U.S. proceeds with tariffs of steel and aluminum the Government of Canada should retaliate in a significant and meaningful way to defend our domestic interests,” Joseph Galimberti, president of the Canadian Steel Producers Association, said Tuesday.

There is no consensus among members on how the Canadian government should retaliate, Mr. Galimberti said.

Mr. Trump imposed the tariffs under section 232, an obscure rule that allows the President to bring in trade restrictions for national security reasons.

Ms. Freeland has argued that the tariffs should be considered completely separately from NAFTA.

“The idea that Canada – which is a U.S. partner in NATO, in NORAD, by U.S. law is part of the defence-industrial complex of the U.S. – the idea that we could in any way pose a national security threat is, frankly, absurd,” she said.

REUTERS. MAY 29, 2018. Canada's Freeland vows to defend workers against U.S. metals tariffs

WASHINGTON (Reuters) - Canadian Foreign Minister Chrystia Freeland vowed on Tuesday to defend Canada’s workers from U.S. steel and aluminum tariffs, signaling the potential for retaliation if the Trump administration fails to grant Ottawa a permanent exemption by Friday.

Canadian Foreign Minister Chrystia Freeland speaks to reporters after talks with senior U.S. legislators on Capitol Hill in Washington, DC, U.S., May 10, 2018. REUTERS/David Ljunggren
Speaking to reporters after meeting with U.S. Trade Representative Robert Lighthizer in Washington, Freeland said they discussed Friday’s expiration of a temporary exemption for Canada and Mexico from U.S. national security tariffs on steel and aluminum imports.

Freeland repeated her view that the metals tariff issue was “entirely separate” from negotiations to revamp the North American Free Trade Agreement and that quotas or tariffs for Canada based on national security concerns were “entirely inappropriate” given the high level of security cooperation and steel industry integration between the United States and Canada.

She declined to say, however, whether she expected President Donald Trump’s administration to extend the exemption or impose tariffs of 25 percent on steel imports from Canada and 10 percent on aluminum.

Asked if Canada were prepared to retaliate should Washington impose the tariffs, Freeland said: “Our government always is very ready and very prepared to respond appropriately to every action. We are always prepared and ready to defend our workers and our industries.”

Freeland also said she had held “very productive discussions” with Lighthizer on NAFTA rules of origin for autos, as well as other issues, but did not offer specifics.

The NAFTA talks have been hung up on disagreement over a U.S. proposal to boost regional value content requirements for North American-built motor vehicles to 75 percent from 62.5 percent currently, with 40 percent coming from areas paying average wages of $16 an hour.

“There is definitely a path forward and we are making progress,” Freeland said.

Mexican Economy Minister Ildefonso Guajardo did not travel to Washington, but Freeland said she had been in contact with him frequently in recent days.

Canadian Prime Minister Justin Trudeau told Bloomberg Television in Toronto that he had made clear to Trump that “no NAFTA is better than a bad deal.”

“We are their (the Americans’) number one customer and there is no question that any disruption of that flow of goods, yes, would be terrible for the Canadian economy but would also be pretty terrible for a lot of U.S. jobs,” Trudeau said.

Reporting by David Lawder in Washington and David Ljunggren in Ottawa; Editing by Peter Cooney

The Globe and Mail. REUTERS. MAY 30, 2018. China vows to protect its interests from ‘reckless’ U.S. trade threats
MICHAEL MARTINA, BEIJING
BRENDA GOH, SHANGHAI

China lashed out on Wednesday at renewed threats from the White House on trade, warning that it was ready to fight back if Washington was looking for a trade war, days ahead of a planned visit by U.S. Commerce Secretary Wilbur Ross.

In an unexpected change in tone, the United States said on Tuesday that it still held the threat of imposing tariffs on $50-billion (37.7 billion pounds) of imports from China unless it addressed the issue of theft of American intellectual property.

Washington also said it will press ahead with restrictions on investment by Chinese companies in the United States as well as export controls for goods exported to China.

Its tougher stance comes as President Donald Trump prepares for a June 12 summit with North Korean leader Kim Jong Un, whose key diplomatic backer is China, and as Washington steps up efforts to counter what it sees as Beijing’s efforts to limit freedom of navigation in the South China Sea.

The trade escalation came after the two sides had agreed during talks in Washington this month to find steps to narrow China’s $375-billion trade surplus. Ross is expected to try to get China to agree to firm numbers to buy more U.S. goods during a June 2-4 visit to the Chinese capital.

“We urge the United States to keep its promise, and meet China halfway in the spirit of the joint statement,” Chinese Foreign Ministry spokeswoman Hua Chunying told a daily news briefing, adding that China would take “resolute and forceful” measures to protect its interests if Washington insists upon acting in an “arbitrary and reckless manner”.

“When it comes to international relations, every time a country does an about face and contradicts itself, it’s another blow to, and a squandering of, its reputation,” Hua said.

China has said it will respond in kind to threats by Trump to impose tariffs on up to $150-billion of Chinese goods.

It was not clear if the developments would have any impact on the planned visit to China by Ross. China’s Foreign Ministry referred questions to the Commerce Ministry, which did not reply to a fax seeking comment.

Several U.S. officials arrived in Beijing on Wednesday for talks, according to a U.S. embassy spokeswoman, including Under Secretary of Agriculture Ted McKinney; the U.S. Trade Representative’s chief agricultural negotiator, Gregg Doud; and Commerce Department Deputy Assistant Secretary Alan Turley.

Trade war fears had receded after the Trump administration said it had reached a deal to put ZTE Corp back in business after banning China’s second-biggest telecoms equipment maker from buying U.S. technology parts for seven years.

The easing in tension had fuelled optimism that agreement was imminent for Chinese antitrust clearance for San Diego-based Qualcomm Inc’s $44-billion purchase of Netherlands-based NXP Semiconductors NV, which has been hanging in the balance amid the trade dispute.

A team of Qualcomm lawyers that is expecting to meet with Chinese regulators ahead of Ross’s arrival remained in San Diego as of late Tuesday, a source familiar with the matter said.

“On hold now,” another person familiar with Qualcomm’s talks with the Chinese government said on Wednesday, declining to be identified as the negotiations are confidential.

“Trump is crazy. Crazy tactics might work, though,” the person added.

TARIFFS AND TACTICS

William Zarit, chairman of the American Chamber of Commerce in China, said the U.S. threat of tariffs appeared to have been “somewhat effective”.

“I don’t think it is only a tactic, personally,” he told reporters on Wednesday, adding that the group does not view tariffs as the best way to address the trade frictions.

“The thinking became that if the U.S. doesn’t have any leverage and there is no pressure on our Chinese friends, then we will not have serious negotiations.”

The Global Times, an influential tabloid run by the ruling Communist Party’s official People’s Daily, said the United States was suffering from a “delusion” and warned that the “trade renege could leave Washington dancing with itself”.

State news agency Xinhua said China hoped that the United States would not act impulsively but stood ready to fight to protect its own interests.

“China will continue to hold pragmatic consultations with the United States’ delegation and hope that the United States will act in accordance with the spirit of the joint statement.”

Also on Tuesday, a White House official said the U.S. government plans to shorten the length of visas issued to some Chinese citizens as part of a strategy to prevent intellectual property theft by U.S. rivals.

Citing a document issued by the Trump administration in December, the official said the U.S. government would consider restrictions on visas for science and technology students from some countries.

REUTERS. MAY 29, 2018. China slams surprise U.S. trade announcement, says ready to fight
Brenda Goh, Michael Martina

SHANGHAI/BEIJING (Reuters) - China on Wednesday lashed out at Washington’s unexpected statement that it will press ahead with tariffs and restrictions on investments by Chinese companies, saying Beijing was ready to fight back if Washington was looking to ignite a trade war.

The United States said on Tuesday that it still held the threat of imposing tariffs on $50 billion of imports from China and would use it unless Beijing addressed the issue of theft of American intellectual property.

The declaration came after the two sides had agreed earlier this month to look at steps to narrow China’s $375 billion trade surplus with America, and days ahead of a visit to Beijing by U.S. Commerce Secretary Wilbur Ross for further negotiations.

William Zarit, chairman of the American Chamber of Commerce in China, said Washington’s threat of tariffs appeared to have been “somewhat effective” thus far.

“I don’t think it is only a tactic, personally,” he told reporters on Wednesday, adding that the group does not view tariffs as the best way to address the trade frictions.

“The thinking became that if the U.S. doesn’t have any leverage and there is no pressure on our Chinese friends, then we will not have serious negotiations.”

China’s Commerce Ministry reacted swiftly overnight with a short statement, saying it was surprised and saw it as contrary to the consensus both sides had reached recently.

The Global Times said the United States was suffering from a “delusion” and warned that the “trade renege could leave Washington dancing with itself”.

The widely read tabloid is run by the Communist Party’s official People’s Daily, although its stance does not necessarily reflect Chinese government policy.

“The Chinese government will have the necessary measures in place to deal with a U.S. withdrawal from any settled agreement. If the U.S. wants to play games, then China would be more than willing to play along and do so until the very end,” it said.

ZTE AND QUALCOMM

Fears of a trade war between the world’s two biggest economies had also receded after the administration of President Donald Trump said it had reached a deal that would put ZTE Corp back in business after banning China’s second-biggest telecoms equipment maker from buying U.S. technology parts.

Still hanging in the balance, however, is San Diego-based Qualcomm Inc’s proposal to acquire NXP Semiconductors NV - a $44 billion deal that requires clearance from China’s antitrust regulators. The recent easing in tensions had fueled optimism that an agreement was imminent.

“On hold now,” a person familiar with Qualcomm’s talks with the Chinese government said on Wednesday, declining to be identified as the negotiations are confidential.

“Trump is crazy. Crazy tactics might work, though,” the person added.

State news agency Xinhua said China hoped that the United States would not act impulsively but stood ready to fight to protect its own interests.

“China’s attitude, as always, is: we do not want to fight, but we are also not afraid to fight,” it said in a commentary.

“China will continue to hold pragmatic consultations with the United States’ delegation and hope that the United States will act in accordance with the spirit of the joint statement.”

‘INTENSE NEGOTIATIONS’

Commerce Secretary Ross is scheduled to visit Beijing from June 2 to June 4 to try and get China to agree to firm numbers for additional U.S. exports to the country.

The deal to reduce China’s trade surplus with the U.S. was separate from the U.S. probe into China’s alleged theft of intellectual property.

A White House official said on Tuesday that the U.S. government plans to shorten the length of visas issued to some Chinese citizens as part of a strategy to prevent intellectual property theft by U.S. rivals.

Citing a document issued by the Trump administration in December, the official said the U.S. government would consider restrictions on visas for science and technology students from some countries.

The China Daily newspaper said the repeated U.S. claim that Beijing had forced foreign firms to transfer their technologies to Chinese businesses was without evidence and was being used as an excuse to facilitate its trade protectionism.

It said technology transfers between U.S. companies and their Chinese partners were the result of normal business practices, not coercive policies.

Reporting by Brenda Goh in SHANGHAI and Michael Martina in BEIJING; Additional writing by Ryan Woo; Editing by Kim Coghill

REUTERS. MAY 30, 2018. Trump's auto tariff plan threatens GM's $7 billion South Korea rescue
Hyunjoo Jin

SEOUL (Reuters) - Fresh off a $7 billion rescue for its loss-making South Korean operation, General Motors (GM.N) faces a new threat as U.S. President Donald Trump considers higher vehicle import tariffs that could “make or break” its Asian subsidiary.

Earlier this month GM agreed on the bailout package with the South Korean government in return for a pledge to stay in the country for at least 10 years, purchase more Korean-made parts and produce two new models popular in the U.S. market.

But less than two weeks later, the Trump administration launched a national security investigation into car and component imports that could lead to new U.S. tariffs similar to those imposed on imported steel and aluminum in March.

Higher tariffs would be painful for Asian automakers whose shipments accounted for one third of U.S. vehicle imports last year through heavyweights such as Toyota Corp (7203.T) and Hyundai Motor (005380.KS).

They could also have a devastating impact on smaller players such as GM Korea and its plan to become a major export hub again.

“This is a matter that could make or break GM Korea,” a person familiar with GM’s situation told Reuters.

“The success of its restructuring plan hinges on more production for exports, and the two new models to be manufactured here are primarily targeted at the U.S. market to serve that purpose,” the person said, requesting anonymity because of the sensitivity of the subject.

GM Korea, GM’s biggest production base in Asia excluding China, exported about a quarter of its vehicle output to the United States last year, and the portion is set to rise further as it shifts production toward models popular in the U.S. market following a sales pullback in Europe.

“The tariff does not make sense,” said Ko Tae-bong, an analyst at HI Investment & Securities. “The (South Korean) government injected all the money into the unit, and there will be no other major markets to sell cars other than U.S. after Europe exit.”

GM Korea declined to comment.

COMPONENTS SOURCING

GM has abandoned several money-losing markets over the past three years as part of a broader strategy to boost production margins and conserve capital to fund electric and automated vehicles as well as new models for core markets in China, the U.S. and Latin America.

It also closed one of its four plants in South Korea this month, but decided to continue operating other plants to leverage the Korean unit’s core strength - R&D capability and a strong supplier network. That move now looks in jeopardy as Trump considers tariffs on parts imports.

South Korean suppliers provide parts worth nearly $2 billion to GM’s factories overseas, including the United States and Mexico, according to GM Korea.

GM has about 300 first-tier suppliers and 2,000 second-tier suppliers in South Korea, including some which GM may find it difficult to replace quickly, they said.

Korea has had the second largest number of winners in GM’s suppliers’ awards program for several years, following the United States. This year, 27 South Korean suppliers known for their high-quality, affordable products have won GM Supplier of the Year awards. That represents 22 percent of total winners globally.

Park Pyong-wan, a former GM Korea executive, said GM may shift production of the Trax to the United States or produce complete kits in South Korea for final assembly in the United States to avoid the tariffs.

“It would be difficult for Trump to slap high tariffs on auto parts, because that would hit its own industry, as it sources parts from all around the world,” Park said.

NO EXPORTS?

Speaking at a closed meeting with the industry ministry late last week, GM, Hyundai and other automakers have raised concerns that a 25 percent tariff, if implemented, may force them to stop U.S. exports, a person who was at the meeting told Reuters.

“We don’t know whether Trump will take action or not. We will consider measures based on different scenarios while closely monitoring the situation,” the person said, without identifying himself because it was a closed meeting.

South Korea, which has a free trade deal with the United States, is the fourth-biggest auto exporter to the United States after Mexico, Canada and Japan.

General Motors Co
37.67
GM.NNEW YORK STOCK EXCHANGE
+0.29(+0.78%)
GM.N

GM.N7203.T005380.KS

In March, South Korea made concessions in auto trade under a proposed revision of the deal in return for getting exempting from hefty steel tariffs, but with quotas.

“The auto sector may see the repeat of the patterns seen in the steel sector,” said Heo Yoon, an international trade professor at Sogang University. “I don’t think the U.S. will exempt Korea from auto tariffs for free. That would come with a cost, whether it is a quota or something else.”

(For graphic on vehicles sold in the U.S. by Asian automakers, click: tmsnrt.rs/2xpFNxL)

Reporting by Hyunjoo Jin; Editing by Miyoung Kim and Lincoln Feast.

REUTERS. MAY 29, 2018. U.S. sets public hearings on auto import tariff probe
David Shepardson

WASHINGTON (Reuters) - Less than a week after the Trump administration threatened to impose tariffs of up to 25 percent on foreign-built automobiles, the U.S. government on Tuesday said it would hold public hearings on whether the import of vehicles and auto parts represents national security risks.

The Commerce Department announced in the Federal Register that it would hold two days of public comments in July on its probe of auto imports. Already, the tariff proposal has drawn condemnation from Republican lawmakers and business groups. A group representing major automakers said last week that it was “confident that vehicle imports do not pose a national security risk.”

The administration launched an investigation to determine whether vehicle and parts imports were threatening the industry’s health and ability to develop advanced technologies. The probe could lead to new U.S. tariffs similar to those imposed on imported steel and aluminum in March.

The U.S. Chamber of Commerce noted U.S. auto production has doubled over the past decade, and said tariffs “would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war.”

The department’s notice sought written comments by June 22 with rebuttal comments due by July 6. Public hearings are planned for July 19-20 in Washington.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said in a statement last week, promising a “thorough, fair and transparent investigation.”

The notice said Commerce wants input on issues including “domestic production needed for projected national defense requirements” and how the analysis changes if it considers U.S.-owned automotive capacity versus foreign-owned automakers.

The department is also seeking comments on whether “innovation in new automotive technologies is necessary to meet projected national defense requirements” and on “displacement of any domestic automobiles and automotive parts causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity.”

Last week’s probe announcement sparked a broad selloff in shares of 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.

President Donald Trump had told automakers this month he was considering tariffs of up to 25 percent on imported passenger vehicles, up from 2.5 currently.

Toyota Motor Corp
6976.0
7203.TTOKYO STOCK EXCHANGE
--(--%)
7203.T

7203.T7201.T7267.T005380.KS

The administration is also trying to renegotiate the North American Free Trade Agreement to return more auto production to the United States. Some officials say the auto tariff probe is aimed in part at prodding Canada and Mexico to reach agreement on new auto provisions. U.S. auto tariffs do not apply to vehicles assembled under NAFTA.

Reporting by David Shepardson; Editing by David Gregorio

HOUSING

The Globe and Mail. 30 May 2018. Chinese billionaire said to be buying HBC’s key Vancouver property
RACHELLE YOUNGLAI

I can’t see how the Bay agrees to a 10-per-cent increase in rent every year. Historically, department stores pay low rent.

ROSS MOORE, ADVISER WITH CRESA COMMERCIAL REALTY

A Chinese billionaire has emerged as the buyer for Hudson’s Bay Co.’s key retail property in downtown Vancouver, a sign that some Chinese investors are able to make big foreign real estate purchases.

Zheng Jianjiang, the chairman of Chinese manufacturing firm Ningbo Sanxing Electric, is currently conducting due diligence to buy the six-storey HBC building, according to people familiar with the matter. Sources cautioned, however, that the acquisition is not a done deal.

The cream terracotta standalone building is considered prime real estate in Vancouver, where the economy is booming and demand for commercial property is strong. The department-store property is majority-owned by HBC through its real estate partnership with RioCan Real Estate Investment Trust.

An HBC spokesperson said it does not comment on rumour or speculation, and RioCan’s senior vice-president of investments and residential, Jonathan Gitlin, declined to comment. Ningbo Sanxing did not respond to a request for comment.

Mr. Zheng is listed as No. 1,756 on the Forbes billionaire list, with a net worth of US$1.28-billion. His company, which is not known for real estate, bought one of RioCan’s smaller retail stores in Vancouver early last year for $94-million.

But that was before China unveiled new rules last August to keep capital in the country that included restrictions on foreign real estate acquisitions.

The capital constraints, along with the Chinese government’s seizure of real estate buyer Anbang Insurance earlier this year, raised questions over whether Chinese investors would continue to buy Canadian commercial real estate.

It is not clear whether Mr. Zheng is purchasing the HBC Vancouver property as a private investment or whether it will be part of his company’s portfolio.

The property is under a so-called conditional contract, sources said, which means that the deal can still fall apart.

Sources said Mr. Zheng has offered to pay about $600-million. The expected rate of return or capitalization rate on the property is about 3 per cent, which is considered low for Vancouver.

“It is a great location. The issue is: How do you raise rents for a department store when we all know department stores are challenged?” said Ross Moore, adviser with Cresa commercial realty, who is not involved with the transaction. “I can’t see how the Bay agrees to a 10-per-cent increase in rent every year. Historically, department stores pay low rent.”

If the deal closes, it will be the first major Chinese real estate acquisition in Canada since Anbang’s $1-billion-plus acquisition of a British Columbia-based retirement home in early 2017.

When HBC announced last year that it was considering the sale of the Vancouver property, sources had suggested the department-store chain was seeking up to $900-million.

A price that high would have entailed redevelopment of the retail store, such as adding an office tower or apartment building to the site.

But there are a number of hurdles, including that the property is deemed a protected heritage site and the fact that HBC has stipulated that any sale will include the continued operation of the department store. Any development would have to keep the façade and build on top of the property, which would be impossible to do without disrupting the department store’s operations.

HBC plans to lease back the property, using the bottom four floors for retail and subleasing the top two floors to U.S.-based officesharing firm WeWork. Mr. Zheng is said to be taking the long view on the property.

The retailer – which runs Saks Fifth Avenue and its own eponymous department store chain, among others – has been under pressure to redevelop or sell some of its properties to bring in more revenue from its real estate.

HUDSON’S BAY (HBC) CLOSE: $9.60, DOWN 17¢

INTEREST RATE

BANK OF CANADA. May 30, 2018. Bank of Canada maintains overnight rate target at 1¼ per cent

Ottawa, Ontario - The Bank of Canada today maintained its target for the overnight rate at 1¼ per cent. The Bank Rate is correspondingly 1½ per cent and the deposit rate is 1 per cent.

Global economic activity remains broadly on track with the Bank’s April Monetary Policy Report (MPR) forecast. Recent data point to some upside to the outlook for the US economy. At the same time, ongoing uncertainty about trade policies is dampening global business investment and stresses are developing in some emerging market economies. Global oil prices have been higher than assumed in April, in part reflecting geopolitical developments.

Inflation in Canada has been close to the 2 per cent target and will likely be a bit higher in the near term than forecast in April, largely because of recent increases in gasoline prices. Core measures of inflation remain near 2 per cent, consistent with an economy operating close to potential. As usual, the Bank will look through the transitory impact of fluctuations in gasoline prices.

In Canada, economic data since the April MPR have, on balance, supported the Bank’s outlook for growth around 2 per cent in the first half of 2018. Activity in the first quarter appears to have been a little stronger than projected.  Exports of goods were more robust than forecast, and data on imports of machinery and equipment suggest continued recovery in investment. Housing resale activity has remained soft into the second quarter, as the housing market continues to adjust to new mortgage guidelines and higher borrowing rates. Going forward, solid labour income growth supports the expectation that housing activity will pick up and consumption will continue to contribute importantly to growth in 2018.

Overall, developments since April further reinforce Governing Council’s view that higher interest rates will be warranted to keep inflation near target. Governing Council will take a gradual approach to policy adjustments, guided by incoming data. In particular, the Bank will continue to assess the economy’s sensitivity to interest rate movements and the evolution of economic capacity.

Information note

The next scheduled date for announcing the overnight rate target is July 11, 2018. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

FULL DOCUMENT: https://www.bankofcanada.ca/wp-content/uploads/2018/05/fad-press-release-2018-05-30.pdf

The Globe and Mail. MAY 30, 2018. Bank of Canada clears way for July rate hike, warns of need to act to temper inflation
BARRIE MCKENNA

OTTAWA - Canada’s central bank has cleared the way for a July interest rate hike, warning that it will need to act soon to keep inflation from pushing past its 2-per-cent target.

The Bank of Canada kept its key interest rate unchanged at 1.25 per cent on Wednesday, citing the impact of trade uncertainty, a slowdown in housing activity and mounting “stress” in emerging markets.

Most telling, however, is what Governor Stephen Poloz and the members of the bank’s governing council didn’t say. The statement accompanying the rate decision dropped two key phrases that have been a staple of the bank’s recent communication. Gone is the reference to being “cautious” about future policy changes. Also absent is the qualifier that higher rates will be needed “over time.”

In their place is a new, more assertive language about where rates are headed now that the economy is running near full capacity.

“Over all, developments since April further reinforce the governing council’s view that higher interest rates will be warranted to keep inflation near target,” the statement said. “Governing council will take a gradual approach to policy adjustments, guided by incoming data.”

The Canadian dollar jumped in the wake of the announcement, rising more than 1 per cent to trade at 77.69 US cents by late morning.

The odds of a July rate hike shot up to roughly 80 per cent immediately after the announcement, up from slightly better than 50 per cent Tuesday, according to Bloomberg’s interest rate probability tracker.

“While we may need a grammarian to distinguish between ‘cautious’ and ‘gradual,’ the message was nevertheless clear: get ready for another rate hike,” Toronto-Dominion Bank economist Brian DePratto said in a research note.

Mr. Poloz has insisted in the past that the use of words such as “cautious” is not code for what the bank plans to do next. But Bank of Nova Scotia economist Derek Holt said the latest statement suggests the central bank has more confidence that it is “not making a mistake by tightening monetary policy.”

The bank identified several signs of emerging economic strength, including stronger than expected U.S. growth, higher oil prices, more “robust” exports and “solid” labour income growth. The bank also predicted that housing activity will recover and that consumption will boost growth through the rest of the year.

The bank’s next rate decision is on July 11, when it also releases its next quarterly economic forecast, the Monetary Policy Report. Many economists expect the bank to raise its key rate to 1.50 per cent on that date, with at least one more hike before the end of the year.

The Bank of Canada has raised its overnight rate three times since last June, each time by a quarter of a percentage point. It has been on hold since January, in large part because of the uncertainty swirling around the future of the North American free-trade agreement with the U.S. and Mexico.

The threat that President Donald Trump might pull the U.S. out of NAFTA has receded. But so too has the chance of a near-term agreement as the three countries remain far apart on several key issues, including North American content rules for autos and the dispute settlement regime.

The Canadian economy has been growing steadily in recent months and inflation is now at or above 2 per cent, based on the various price benchmarks the central bank tracks. Under its mandate, the central bank uses interest rates as a tool to keep inflation near 2 per cent, pushing rates higher when prices exceed that threshold.

“Inflation in Canada has been close to the 2-per-cent target and will likely be a bit higher in the near term than forecast in April, largely because of recent increases in gasoline prices,” according to the statement. “Core measures of inflation remain near 2 per cent, consistent with an economy operating close to potential.”

The bank’s April forecast had called for inflation to be running at a 2.1-per-cent annual pace in the first quarter, along with economic growth of 1.3 per cent. Both forecasts now appear a touch low.​

The Globe and Mail. MAY 30, 2018. MORNING BUSINESS BRIEFING. Canadian dollar bolts higher as Bank of Canada signals rate hike
MICHAEL BABAD, Columnist

Canadian dollar bolts higher. Bank of Canada signals rate hike. Loonie bolts higher

The Canadian dollar is bolting higher after a central bank signal that interest rates will soon rise again.

It’s far from a rebirth for the wounded currency, but the loonie still jumped sharply after the Bank of Canada statement, having sat below 77 US cents earlier in the day.

As The Globe and Mail’s Barrie McKenna reports, central bank governor Stephen Poloz, senior deputy Carolyn Wilkins and their colleagues held their benchmark overnight rate at 1.25 per cent.

But they also said that “higher interest rates will be warranted to inflation near target.” Notable, too, is that they dropped their previous reference to being cautious over future moves.

“Governor Poloz didn’t pull the trigger today, but the central bank did hint that the time could be nigh for another rate hike in Canada,” said Royce Mendes of CIBC World Markets.

“In removing the word ‘cautious’ from the sentence regarding future rate hikes it does appear the central bank is slightly more comfortable tightening policy in the months ahead.”

Economists now believe we could see a rate increase in July, which makes the loonie more attractive.

“For USDCAD, the primary takeaway is the bank has cemented the potential for a July rate hike,” said Mark McCormick, North American head of foreign exchange strategy at TD Securities, referring to the U.S. versus the Canadian dollar by their symbols.

“Market pricing has eased a touch on the hopes for July but the tone of the statement argues that July is likely a done deal,” he added.

“This is likely to offer the market some room to push USDCAD lower but the bank’s outlook for the next year still looks too aggressive to us. USDCAD has priced in a decent risk premium, leaving the market to consolidate a touch over the coming sessions.

In this case, pushing USDCAD lower means, of course, driving the loonie higher.

The central bank still cited uncertainty over trade, citing, too, the slump in the housing market amid provincial measures and new mortgage-qualification rules meant to cool things down.

Economic growth appears stronger than expected and “inflation in Canada has been close to the 2-per-cent target and will likely be a bit higher in the near than forecast in April, largely because of recent increases in gasoline prices.”

Bipan Rai, CIBC’s North America head of foreign exchange strategy, described today’s signal as about as strong as you can get.

“Some of the flags raised before in terms of capital investment have been eased to a degree here and the drop of the word ‘cautious’ implies that growth is stronger than originally envisaged,” Mr. Rai said.

“As for the CAD, the market was moving towards a dovish statement in the week before but that was largely driven by macro factors as opposed to Canada-specific,” he added, saying the range for the loonie is now between about 77 and 80 US cents.

“And outside of political headlines, there’s no reason to deviate.”

A 5000-year history of interest rates

20%

Short-term rates

Long-term rates

18

16

14

12

10

8

6

4

2

0

3000 BC

300 CE

1720

1755

1790

1825

1860

1895

1930

1965

2000

2035

THE GLOBE AND MAIL, SOURCE: BANK OF AMERICA

For the record, according to Bank of America Merrill Lynch, global interest rates are coming off the 5,000-year lows of a couple of years ago.

This chart takes you through everything from the Babylonian and Roman empires to Byzantium and early Bank of England times and, finally, to the yield on the 10-year U.S. Treasury.

“The current economic cycle suggests the destination of interest rates will be lower than in the past, but there is no doubt policy makers are pulling out all the stops to create what bond investors like the least … inflation,” Merrill Lynch investment strategists Michael Hartnett, Jared Woodard and Tommy Ricketts said in the report that contained that chart.

BALANCE OF PAYMENTS

StatCan. 2018-05-30. Canada's balance of international payments, first quarter 2018

• Current account balance: -$19.5 billion; First quarter 2018
• Source(s): CANSIM table 376-0105: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3760105&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=

Canada's current account deficit (on a seasonally adjusted basis) rose by $3.0 billion in the first quarter to $19.5 billion. Higher deficits on trade in goods and investment income were the main contributors to this increase.

In the financial account (unadjusted for seasonal variation), foreign direct investment activity was the largest contributor to the inflow of funds in the economy in the quarter.

Chart 1: Current account balances

Current account

Deficit on trade in goods and services expands

The deficit on international trade in goods and services increased by $1.2 billion to $15.2 billion in the first quarter, the largest deficit since the second quarter of 2016.

The goods deficit rose by $1.5 billion from the previous quarter to $9.0 billion. The goods surplus with the United States decreased by $2.7 billion on higher imports. Meanwhile, the deficit with non-US countries narrowed by $1.3 billion to $16.0 billion, mainly reflecting a higher surplus with United Kingdom and lower deficits with Korea and the Netherlands.

Chart 2: Goods balances by geographic area

Total exports of goods rose by $1.5 billion to $139.3 billion in the first quarter. Exports of energy products were up by $2.2 billion, on higher crude petroleum prices and volumes.

Total imports of goods were up $3.0 billion to $148.2 billion. Imports of motor vehicles and parts increased by $1.5 billion, led by higher volumes. Energy products (on higher prices) and basic and industrial chemical, plastic and rubber products (on higher volumes) both rose by $0.7 billion in the quarter.

The deficit on trade in services narrowed by $0.2 billion to $6.2 billion in the first quarter on a higher commercial services surplus. The surplus on commercial services increased by $0.3 billion as exports rose more than imports. These increases were led by stronger financial services. The travel deficit remained at $3.7 billion, as higher receipts from overseas travellers were offset by increased spending in the United States by Canadian travellers.

Primary income deficit increases

The deficit on primary income, which covers investment income and compensation of employees, widened by $1.9 billion to $3.8 billion in the first quarter.

Foreign direct investment was the main contributor to this activity. Receipts from Canadian direct investment abroad were down by $1.8 billion in the quarter, following record amounts in the fourth quarter of 2017. In addition, payments on foreign direct investment in Canada increased by $0.3 billion in the first quarter.

Financial account

Direct investment in Canada exceeds direct investment abroad

Direct investment in Canada reached $17.8 billion in the first quarter, the highest level since the third quarter of 2015. More than half of the investment occurred in the manufacturing sector. On a country basis, direct investment in Canada was primarily from the United States as well as from Switzerland and the Netherlands.

Direct investment abroad totalled $6.1 billion in the first quarter, the lowest level of investment since the second quarter of 2013. Merger and acquisition activity was at its lowest level since the first quarter of 2014. Canadian direct investment abroad was directed mainly towards the United States and Barbados.

As a result, foreign direct investment generated a net inflow of funds in the economy of $11.7 billion in the quarter, following nine consecutive quarters of net outflows of funds.

Chart 3: Foreign direct investment

 

Foreign investors significantly reduce their holdings of federal government bonds

Foreign investment in Canadian securities totalled $18.3 billion in the first quarter, the lowest investment since the third quarter of 2015. The bulk of the investment activity was in short-term debt instruments.

Foreign investment in the Canadian money market reached $15.4 billion, more than offsetting the overall divestment recorded in 2017. Foreign acquisitions were mainly in corporate paper.

Foreign investors' holdings of Canadian bonds were down by $3.1 billion in the first quarter, the first divestment since the second quarter of 2013. Foreign investors reduced their holdings of federal government bonds by a record $27.6 billion. Sales of bonds on the secondary market and retirements both contributed to the decline. Foreign investment in private corporate bonds, mainly new bonds denominated in foreign currencies, moderated the overall reduction in the quarter.

Foreign investment in Canadian equities totalled $6.1 billion in the first quarter. A reduction in foreign holdings of Canadian shares in the energy and mining sector was more than offset by an increase in the manufacturing sector.

Chart 4: Foreign portfolio investment

Canadian investment in foreign securities slows

Canadian investors acquired $20.0 billion of foreign securities in the first quarter, down from $33.7 billion in the fourth quarter. The purchases were almost evenly split between foreign bonds and foreign shares.

Canadian investment in foreign debt securities reached $11.9 billion in the first quarter, the highest investment since the fourth quarter of 2015. Acquisitions of non-US foreign bonds and US Treasury bonds contributed the most to the investment activity. Meanwhile, Canadian investment in foreign shares totalled $8.1 billion, led by strong purchases of US shares in January.

Official international reserves decline

Canada's official international reserves declined by $5.1 billion in the first quarter. A large reduction in Canada's currency and deposits reserve assets was partially offset by an increase in securities assets.

Table 376-0105 ¹
Balance of international payments, current account, seasonally adjusted
quarterly (dollars x 1,000,000)

• Tab 1:Data table
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Data table

The data below is a part of CANSIM table  376-0105.  Use the  Add/Remove data  tab to customize your table.

Selected items [Add/Remove data]

Geography = Canada

Receipts, payments and balances	Current account	2017				2018
		Q1	Q2	Q3	Q4	Q1
footnotes
Receipts, seasonally adjusted	Total current account	196,354	201,189	191,931	200,937	201,918
	Goods and services	166,489	170,147	159,620	166,485	168,763
	Goods	138,591	141,885	131,390	137,752	139,260
	Services 2	27,898	28,262	28,230	28,733	29,503
	Primary income	26,790	27,929	29,098	31,317	29,776
	Compensation of employees	430	446	429	430	435
	Investment income	26,360	27,483	28,669	30,887	29,341
	Direct investment income	15,545	16,532	17,803	19,605	17,831
	Portfolio investment income 3, 4	7,949	8,152	7,923	8,115	8,250
	Other investment income 3, 4	2,866	2,799	2,943	3,168	3,260
	Secondary income	3,075	3,113	3,214	3,135	3,379
	Private transfers 8	964	1,024	1,032	997	1,037
	Government transfers	2,111	2,089	2,182	2,138	2,342
Payments, seasonally adjusted	Total current account	210,320	216,077	209,858	217,423	221,414
	Goods and services	175,654	181,020	174,453	180,410	183,916
	Goods	141,378	146,832	140,118	145,246	148,227
	Services 2	34,276	34,188	34,335	35,165	35,689
	Primary income	30,901	31,298	31,484	33,149	33,533
	Compensation of employees	932	935	942	949	950
	Investment income	29,969	30,363	30,542	32,200	32,583
	Direct investment income	12,866	12,297	12,643	13,448	13,747
	Portfolio investment income 3, 4	13,703	14,399	14,348	15,061	15,037
	Other investment income 3, 4	3,400	3,667	3,551	3,691	3,799
	Secondary income	3,765	3,759	3,922	3,864	3,965
	Private transfers 8	2,465	2,515	2,513	2,544	2,608
	Government transfers	1,300	1,244	1,409	1,320	1,357
Balances, seasonally adjusted	Total current account	-13,966	-14,888	-17,927	-16,486	-19,496
	Goods and services	-9,165	-10,873	-14,833	-13,925	-15,153
	Goods	-2,787	-4,946	-8,728	-7,494	-8,967
	Services 2	-6,378	-5,926	-6,104	-6,432	-6,186
	Primary income	-4,111	-3,369	-2,386	-1,832	-3,757
	Compensation of employees	-502	-489	-513	-519	-516
	Investment income	-3,609	-2,880	-1,873	-1,313	-3,242
	Direct investment income	2,679	4,235	5,161	6,157	4,084
	Portfolio investment income 3, 4	-5,754	-6,247	-6,425	-6,946	-6,786
	Other investment income 3, 4	-534	-868	-608	-524	-539
	Secondary income	-691	-646	-708	-729	-586
	Private transfers 8	-1,501	-1,492	-1,481	-1,547	-1,570
	Government transfers	811	845	773	818	985

Footnotes:

1.

For seasonally adjusted values prior to the first quarter of 1981, please see archived CANSIM table 376-0005.

2.

Includes a general provision to cover legal, accounting and third-party management consulting until surveyed more specifically from 1995; also includes retail software exports before 1996.

3.

Before 2002, receipts of money market interest are included indistinguishably with other investment and not with portfolio investment.

4.

Prior to 1993, withholding tax applicable on payments of money market interest was included with interest on other investment. From 1993, it is included in interest on portfolio investment.

5.

Foreign taxes are applicable only to payments where it refers to total withholding taxes paid by Canadian residents and which are initially part of various Canadian interest, dividend and services receipts.

6.

Canadian taxes are applicable only to receipts where it refers to total withholding taxes received by the Government of Canada and which are initially part of various Canadian interest, dividend, and services payments.

7.

Official contributions are applicable only to payments where it refers to official contributions made by the Canadian governments and their enterprises.

8.

Private transfers and other private transfers include the counterpart of adjustments for insurance claims volatility made in the insurance services.

Source:  Statistics Canada. Table  376-0105 -  Balance of international payments, current account, seasonally adjusted, quarterly (dollars),  CANSIM (database). (accessed: )

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180530/dq180530a-eng.pdf

REUTERS. MAY 30, 2018. Canada's current account deficit widens as trade gap grows

OTTAWA (Reuters) - Canada’s current account deficit widened to C$19.50 billion ($15.00 billion) in the first quarter, the third largest ever, thanks to a growing international trade gap in goods, Statistics Canada said on Wednesday.

Analysts in a Reuters poll had forecast a shortfall of C$18.00 billion. The record deficit was the C$20.20 billion set in the third quarter of 2010.

The trade deficit in goods jumped to C$8.97 billion from C$7.49 billion as imports grew at a faster rate than exports.

Imports rose to C$148.23 billion from C$145.25 billion on higher shipments of motor vehicles and parts as well as energy products. Exports edged up to C$139.26 billion from C$137.75 billion on greater demand for energy products.

Direct investment in Canada for the quarter rose to C$17.79 billion, the highest level in two and a half years, with more than half of the money going to the manufacturing sector.

Reporting by David Ljunggren; Editing by Paul Simao

AGRICULTURE

Competition Bureau Canada. May 30, 2018. Competition and innovation safeguarded in the Canadian agricultural sector. Competition Bureau reaches consent agreement with Bayer in its proposed acquisition of Monsanto

OTTAWA, ON – The Competition Bureau announced today that it has reached an agreement with Bayer AG (Bayer) related to its proposed acquisition of Monsanto Company (Monsanto). This agreement addresses the Commissioner of Competition’s concerns that the proposed transaction would have significantly harmed competition and innovation in Canada’s agricultural sector.

Following an extensive review, the Bureau concluded that the proposed acquisition would likely substantially lessen and prevent competition in Canada with respect to the supply of canola seeds and traits, soybean seeds and traits, seed treatments that protect crops against nematodes, and carrot seeds.

To address those concerns, the agreement requires Bayer to sell its canola seed and traits business, soybean seed and traits business, carrot seed business, nematode seed treatment business, glufosinate-ammonium herbicide business, LibertyLink herbicide tolerance technology, assets related to the Centurion herbicide, and digital farming business in Canada. Bayer has proposed BASF SE as the buyer of the assets under the agreement. The Bureau is actively reviewing the suitability of BASF as the proposed buyer of these assets.

The Bureau is satisfied that the agreement will preserve competition and innovation in important agricultural inputs such as canola seeds, Canada’s highest acreage crop.

Given that Bayer and Monsanto’s businesses operate in many countries and the global nature of the transaction, the Bureau coordinated its review with other jurisdictions, including the European Commission and the U.S. Department of Justice (U.S. DOJ). The Bureau's strong relationships with the European Commission and the U.S. DOJ resulted in an efficient review of this matter.

The Bureau will publish a comprehensive position statement on its review in the coming days.

Quotes

“Agriculture has always been a critical part of the Canadian economy, and innovation remains as important in this industry as in emerging sectors. This agreement with Bayer will protect competition and innovation in Canada’s agricultural sector, and is the result of a collaborative approach with the parties and our international counterparts.”

- John Pecman, Commissioner of Competition

Quick facts

• On September 14, 2016, Bayer and Monsanto signed a definitive agreement under which Bayer proposed to acquire Monsanto for US$128 per share. The offer price valued Monsanto at US$66 billion.
• Bayer is a global pharmaceutical, consumer health, animal health and crop protection science company headquartered in Leverkusen, Germany.
• Monsanto is a global provider of agricultural products headquartered in St. Louis, Missouri.
• Bayer’s LibertyLink herbicide tolerance trait can be found in approximately 55% of canola seeds sold in Canada and Monsanto’s Roundup Ready trait can be found in approximately 40% of these seeds.
• According to the Canola Council of Canada, the canola industry contributes $26.7 billion per year to the Canadian economy.

FULL DOCUMENT: https://www.canada.ca/en/competition-bureau/news/2018/05/competition-and-innovation-safeguarded-in-the-canadian-agricultural-sector.html

The Globe and Mail. REUTERS. 30 May 2018. Bayer wins U.S. approval to buy Monsanto. Approval contingent on the company selling about $9-million in assets
LUDWIG BURGER
DIANE BARTZ

WASHINGTON - Bayer AG won U.S. approval for its planned takeover of Monsanto Co. after agreeing to sell about US$9-billion in assets, clearing a major hurdle for the US$62.5-billion deal that will create by far the largest seeds and pesticides maker.

Makan Delrahim, who heads the U.S. Justice Department’s (DoJ) Antitrust Division, said the asset sales agreed to by Bayer were the “largest ever divestiture ever required by the United States.”

A Bayer spokesman said the planned sale of businesses with €2.2-billion ($3.3-billion) in sales to BASF already agreed to address antitrust concerns, mainly in Europe, were not materially different from the DoJ’s demands.

“Receipt of the DoJ’s approval brings us close to our goal of creating a leading company in agriculture,” Bayer CEO Werner Baumann said in a statement.

After months of delays in a drawn-out review process the ruling brings Bayer close to creating an agricultural supplies giant with sales of about €20-billion ($30-billion), based on 2017 figures, when taking into account the divestments.

At current foreign exchange rates, that compares to about €12.4-billion ($18.6-billion) at DowDuPont’s Corteva Agriscience unit, €11-billion ($16.5-billion) at ChemChina’s Syngenta and €7.9-billion ($11.8-billion) at BASF, including businesses to be acquired.

Bayer’s move to combine its crop-chemicals business, the world’s second-largest after Syngenta AG, with Monsanto’s industry-leading seeds business, is the latest in a series of major agrochemicals tie-ups.

U.S. chemicals giants Dow Chemical and DuPont merged in September, 2017, and are now in the process of splitting into three units. In other consolidation in the sector, China’s state-owned ChemChina purchased Syngenta and two huge Canadian fertilizer producers merged to form a new company, now called Nutrien.

Bayer committed to selling its entire cotton, canola, soybean and vegetable seeds businesses and digital farming business, as well as its Liberty herbicide, which competes with Monsanto’s Roundup.

Under agreements with European and other antitrust enforcers, Bayer agreed to sell assets with revenues of €2.2-billion ($3.3-billion), to rival BASF for €7.6-billion ($11.4-billion).

Bayer said in a statement it expected Bayer and Monsanto to begin the integration process as soon as the sales to BASF are complete, which it said are expected to take two months to complete.

If Bayer does not close the deal by June 14, Monsanto could withdraw from the takeover agreement and seek a higher price.

It has already secured the goahead from key jurisdictions, including the European Union, Brazil and Russia. Apart from the United States, it still needs clearance in Canada and Mexico.

In a separate statement, Bayer said on Tuesday the European Commission had approved BASF as a suitable buyer of the businesses to be divested.

Bayer last week said synergies from folding Monsanto into its organization would be about US$300-million below its previous target because it will have to sell more businesses than initially expected.

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LGCJ.: