CANADA ECONOMICS

ECONOMY

StatCan. 2018-06-07. Canadian Economic News, May 2018
 
The May 2018 issue of Canadian Economic News is now available.

Canadian Economic News provides a concise monthly summary of selected Canadian economic events, and international and financial market developments, by calendar month.

Note to readers

Canadian Economic News is intended to provide contextual information to support users of economic data published by Statistics Canada. In identifying major events or developments, Statistics Canada is not suggesting that these have a material impact on the economic data published for a particular reference month.

All information presented is obtained from publicly available news and information sources and does not reflect any protected information provided to Statistics Canada by survey respondents.

May 2018 edition

This module provides a concise summary of selected Canadian economic events, as well as international and financial market developments by calendar month. It is intended to provide contextual information only to support users of the economic data published by Statistics Canada. In identifying major events or developments, Statistics Canada is not suggesting that these have a material impact on the published economic data in a particular reference month.

All information presented here is obtained from publicly available news and information sources, and does not reflect any protected information provided to Statistics Canada by survey respondents.

Resources

• The Government of Canada announced on May 29th that it had reached an agreement with Kinder Morgan to purchase the company's Trans Mountain Expansion Project (TMEP) and related pipeline and terminal assets for $4.5 billion. The Government also said it had reached an agreement with Kinder Morgan to immediately restart construction on the TMEP, and that it will guarantee financing for the 2018 summer construction season through a loan guarantee from Export Development Canada.
• The Government of British Columbia announced on May 22nd that it had filed a statement of claim in Alberta's Court of Queen's Bench challenging the constitutionality of Alberta's Preserving Canada's Economic Prosperity Act. The Act, which was passed by the Government of Alberta on May 16th, gives the province the authority to require companies to obtain a licence before exporting energy products from Alberta via pipeline, rail or truck.
• Calgary-based TransCanada Corporation announced that the National Energy Board (NEB) has recommended the federal government approve a variance to the previously issued North Montney Mainline Project certificate, which would allow construction to start on the proposed $1.4 billion natural gas project in northeast British Columbia. TransCanada said that subject to federal approval, construction is expected to start by the third quarter of 2018, with an anticipated in-service date of mid-2019.
• Shell Canada Energy, PetroChina Kitimat LNG Partnership, Diamond LNG Canada Ltd. and Kogas Canada LNG Ltd. announced that Malaysia-based Petroliam Nasional Berhad (Petronas) will take an equity position in LNG Canada, located in Kitimat, British Columbia, through its wholly owned entity the North Montney LNG Limited Partnership. The companies said the transaction is subject to regulatory approvals and closing conditions.
• Netherlands-based Royal Dutch Shell plc announced an agreement to sell its entire stake in Canadian Natural Resources Limited of Calgary for approximately USD $3.3 billion. Shell said the sale is expected to be completed on May 9, 2018.
• Calgary-based Enbridge Inc. announced its indirect subsidiary, Enbridge (U.S.) Inc., has entered into a definitive agreement to sell Texas-based Midcoast Operating, L.P. and its subsidiaries for USD $1.12 billion. Enbridge also announced it has entered into agreements with the Canada Pension Plan Investment Board (CPPIB) to monetize a 49% interest in select North American onshore renewable power assets, as well as 49% of Enbridge's interest in two German offshore wind projects through a newly created joint venture with CPPIB, for approximately CAD $1.75 billion. The company said the transactions are expected to close in the third quarter of 2018, subject to regulatory approvals.
• Saskatoon-based Nutrien Ltd. and Tianqi Lithium Corporation of China announced they had signed an agreement whereby Tinaqi Lithium has agreed to purchase 62.6 million "A shares" of Sociedad Química y Minera de Chile S.A. held by Nutrien for a gross valuation of approximately USD $4.07 billion. The companies said the agreement is expected to be completed in the fourth quarter of this year, subject to Tianqi Lithium shareholder and regulatory approvals.

Manufacturing

• Michigan-based Ford Motor Company announced on May 9th that parts shortages resulting from the fire at Michigan-based Meridian Magnesium Products of America is impacting F-150 and Super Duty production at Ford's Kansas City Assembly, Dearborn Truck and Kentucky Truck plants. On May 16th, Ford announced it was restarting production of the F-150 at the Deerborn Plant on May 18th and that production was targeted to restart by May 21st at the Kentucky and Kansas City Plants.
• Montreal-based Bombardier Commercial Aircraft and Air Baltic Corporation AS of Latvia announced the parties had executed a firm purchase agreement for the sale and purchase of 30 CS300 aircraft with options and purchase rights for an additional 30 aircraft of the same type. Bombardier said that based on the list price of the CS300 aircraft, the firm order is valued at approximately USD $2.9 billion and that this amount would increase to nearly USD $5.9 billion should all 15 options and 15 purchase rights be exercised.
• Bombardier also announced it had signed a letter of intent for up to 18 Global 6500 and Global 7500 business jets with HK Bellawings Jet Limited of Hong Kong. The company said that if all firm orders and options are exercised, the transaction would be valued at approximately USD $1.14 billion based on 2018 list prices.

Retail

• Toronto-based Canadian Tire Corporation, Limited (CTC) announced it had entered into an agreement to purchase the company, controlled by the Ontario Teachers' Pension Plan, which owns and operates the Helly Hanson brands and related businesses for $985 million. CTC said the transaction is expected to close in Q3 2018, subject to usual closing conditions.
• Montreal-based Le Château Inc. announced that it is planning to close approximately 20 stores in 2018. The company confirmed that it had closed 27 stores in the past fiscal year.

Other news

• U.S. President Donald Trump announced on May 31st that the United States is implementing a 25% tarrif on steel imports and a 10% tariff on aluminum imports from Canada, Mexico and the European Union. The Government of Canada said on May 31st that in response to these measures, Canada intends to impose tariffs on imports of steel, aluminum and other products from the U.S. – representing a total value of $16.6 billion. The Government said these countermeasures will take effect on July 1st, 2018.
• The Bank of Canada maintained the target for the overnight rate at 1.25%. The last change in the target for the overnight rate was a 25 basis-point increase announced in January 2018.
• On May 11th, the Government of Canada announced it had accepted a formal request for federal assistance from the Government of New Brunswick, including support from the Canadian Armed Forces, to help communities in New Brunswick affected by the floods.
• On May 17th, the Federal Government announced it had accepted a formal request for federal assistance from the Government of British Columbia, including support from the Canadian Armed Forces (CAF), to help communities in British Columbia affected by the floods. On May 23rd, the Government of British Columbia announced that the flood situation in many parts of the province was beginning to stabilize and that many of the CAF troops who had assisted with flood response efforts will begin returning to their base in Edmonton.
• Vancouver-based Aurora Cannabis Inc. and MedReleaf Corp. of Markham announced they had entered into a definitive arrangement agreement whereby Aurora intends to acquire all of the issued and outstanding common shares of MedReleaf in an all-share transaction valued at approximately $3.2 billion. The companies said the transaction is subject to shareholder and regulatory approvals.
• Montreal-based Quebecor Inc. announced it had entered into an agreement with Quebecor Media Inc. and Caisse de dépôt et placement du Québec to repurchase all of the share capital of Quebecor Media still held by the Caisse for $1.69 billion. Quebecor said the transactions contemplated in the agreement are expected to be fully completed by June 22, 2018 subject to customary closing conditions and regulatory approvals.
• Montreal-based Canadian National Railway Company (CN) announced on May 2nd that it will buy 350 centrebeam cars to serve growing demand from lumber producing customers across its North American network. CN said the cars will be manufactured in Hamilton, Ontario by National Steel Car Ltd., and are expected to be delivered starting in September. CN also said it is looking at an option to purchase or lease an additional 300 cars.
• CN also announced on May 24th that it plans to acquire 1,000 new generation high-cube grain hopper cars over the next two years to rejuvenate the aging equipment needed to serve increasing annual crop yields. CN said the cars will be built by National Steel Car Ltd. at the company's Hamilton plant.
• Toronto-based OMERS Private Equity announced it had entered into an agreement with New Mountain Capital to acquire Alexander Mann Solutions of the U.K. for an enterprise value of USD $1.1 billion. OMERS said the proposed transaction is expected to close in the second quarter of 2018 subject to customary approvals by the antitrust authorities.
• Toronto-based Aecon Group Inc. announced the Governor in Council had issued an order under the Investment Canada Act directing CCCC International Holding Limited of China not to implement its proposed acquisition of Aecon. The company said that as a result, the arrangement between Aecon and CCCI will not proceed.

United States and other international news

• The U.S. Federal Open Market Committee (FOMC) maintained the target range for the federal funds interest rate at 1.50% to 1.75%. The last change in the target range was a 25 basis point increase announced in March 2018.
• The Bank of England's Monetary Policy Committee voted to maintain the Bank Rate at 0.50% and the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion. The last change in the Bank Rate was a 25 basis-point increase in November 2017.
• The Reserve Bank of Australia maintained the cash rate at 1.50%. The last change in the cash rate was a 25 basis point reduction in August 2016.
• U.S. President Donald Trump announced he was terminating the United States' participation in the Joint Comprehensive Plan of Action (JCPOA) with Iran and re-imposing economic sanctions lifted under the deal.
• The U.S. Department of Commerce announced it had initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair the national security as defined in Section 232 of the Act.
• China's Ministry of Finance announced it will cut import tariffs on vehicles and auto parts starting July 1st. The Ministry said that for car imports, the 25% tariff levied on 135 items and the 20% duty levied on four items will both be reduced to 15%, while import tariffs for 79 items of auto parts will be reduced to 6%.
• Arkansas-based Walmart Inc. announced it had signed definitive agreements to become the largest shareholder in Flipkart Group of India. Walmart said it will pay approximately USD $16 billion for an initial stake of approximately 77% in Flipkart. The company said that closing is expected later this calendar year, subject to regulatory approval.
• Switzerland-based Nestlé S.A. announced an agreement granting it perpetual rights to market Starbucks consumer and foodservice products globally, outside of the company's coffee shops. Nestlé said that, as part of the transaction, Starbucks will receive an up-front cash payment of USD $7.15 billion. Nestlé said the agreement is subject to customary regulatory approval and is expected to close by the end of 2018.
• Illinois-based Boeing Company announced it had entered into a definitive agreement to acquire KLX Inc. of Florida, including the company's Aerospace Solutions Group, in an all-cash transaction totaling USD $4.25 billion. Boeing said the sale is expected to close by Q3 2018, subject to KLX shareholder and regulatory approvals. The company said the transaction is also subject to the successful divestment and separation of KLX Inc.'s Energy Services Group.
• Michigan-based General Motors Company (GM) announced that the SoftBank Vision Fund of the UK will invest USD $2.25 billion in GM Cruise Holdings LLC and that GM will also invest USD $1.1 billion in GM Cruise upon closing of the transaction.
• Germany-based Volkswagen Group announced it will open three new FAW-Volkswagen production facilities in China in the next few months, including new factories in Qingdao, Tianjin, and Foshan. The company said the Qingdao plant opened on May 28, 2018, while the Foshan plant will open in June and the Tianjin facility will open in August.
• Illinois-based Sears Holdings Corporation announced it had identified approximately 100 non-profitable stores in the United States, 72 of which will begin store closing sales in the near future.

Financial market news

• Crude oil (West Texas Intermediate) closed at USD $67.04 on May 31st, down from $68.57 at the end of April. The Canadian dollar closed at 77.23 cents U.S. on May 31st, down from 77.91 cents U.S. on April 30th. The S&P/TSX closed at 16,061.50 on May 31st, up from a closing value of 15,607.88 at the end of April.

FULL DOCUMENT: https://www.statcan.gc.ca/eng/dai/btd/cen/may2018

BANK OF CANADA. June 7, 2018. Canada’s financial system remains resilient as vulnerabilities show further signs of easing

Ottawa, Ontario - High household indebtedness and housing market imbalances remain the most important vulnerabilities identified by the Bank of Canada in its Financial System Review (FSR), published today. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system.

The vulnerability related to high household indebtedness has begun to ease. Incomes continue to rise and household credit growth has slowed due to higher interest rates and policy measures aimed at mortgage financing and housing. Because of the sheer size of the stock of debt, however, this vulnerability will persist for some time.

House price growth has also slowed, led by a decline in the Greater Toronto Area. The condominium markets in the Toronto and Vancouver areas remain strong, with some evidence of speculative activity. Overall, the vulnerability associated with housing market imbalances has shown signs of lessening but remains elevated.

“The two main vulnerabilities we have been watching closely are showing continued signs of easing, which is encouraging,” said Governor Stephen S. Poloz. “Combined, the impact of higher interest rates and the changes to the mortgage guidelines have reduced credit growth and improved the quality of new lending.”

The third main vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system. The Bank has been working with the major banks and Payments Canada to ensure Canada’s key payment systems are able to recover quickly should a cyber attack be successful. “Continued collaboration and a greater pooling of resources are needed to increase the overall resilience of the financial system,” said the Governor.

The key risk scenarios that apply to these vulnerabilities are similar to those in the November 2017 FSR, as is the level of risk that any of these scenarios might materialize. The most important risk is a severe nationwide recession leading to a rise in financial stress. Other key risks are a house price correction in overheated markets and a sharp increase in long-term interest rates driven by higher global risk premiums.

The Bank is also modernizing the way it communicates and engages with Canadians on financial stability issues. “This autumn, we will launch a new financial system hub on our website, where we will publish timely and accessible research and analysis throughout the year,” said Senior Deputy Governor Carolyn A. Wilkins. As well, a member of Governing Council will deliver a speech each autumn to provide an update on the Bank’s assessment of the vulnerabilities and risks to the financial system. The FSR will now be published once a year, in June, and the quarterly Monetary Policy Report will include more in-depth discussion of relevant financial system issues, as warranted.

This issue of the FSR also features three reports written by Bank of Canada staff:

• Establishing a Resolution Regime for Canada’s Financial Market Infrastructures
• Covered Bonds as a Source of Funding for Banks’ Mortgage Portfolios
• The Bank of Canada’s Financial System Survey

FULL DOCUMENT: https://www.bankofcanada.ca/wp-content/uploads/2018/06/press_070618.pdf

BANK OF CANADA. June 7, 2018. Release of the Financial System Review. Opening Statement. Stephen S. Poloz - Governor. Carolyn A. Wilkins - Senior Deputy Governor

Ottawa, Ontario - Governor Poloz:

Good morning, and thank you for being here today. Senior Deputy Governor Wilkins and I are pleased to be with you to talk about the latest issue of the Bank’s Financial System Review (FSR), which we published today.

Let me quickly remind everyone about the purpose of the FSR—to identify key vulnerabilities in the financial system, which can interact with and magnify economic shocks. We monitor the evolution of these vulnerabilities, and then apply a set of risk scenarios to look at the potential implications for the financial system and economy if a significant shock were to occur.

The main vulnerabilities that we see today are the same as those in the last FSR in November. I will begin with a few words about two of these: elevated household debt and imbalances in housing markets. These vulnerabilities are expected to persist for some time, although we have seen continued signs of easing.

Several factors are helping to lessen the vulnerability related to household indebtedness. Importantly, there has been a series of changes to mortgage lending guidelines. We have also seen a slowdown in credit growth along with higher interest rates. As well, a solid expansion in the Canadian economy is leading to strong growth in employment and income and, over time, this will support Canadians’ ability to manage their debt, even at a time of rising interest rates.

The changes to mortgage lending guidelines are driving a steady improvement in the quality of new loans. We have seen a decline in the share of mortgages that have a loan-to-income ratio above 450 per cent. In fact, the share of new insured mortgages that have a ratio above this threshold has been cut in half since the middle of 2016. This is an important improvement, because we know that households with this level of debt are more vulnerable to an economic shock, such as a recession.

However, I will point out two reasons for continued vigilance. First, because the total amount of debt carried by Canadian households is so large, we know that it will be with us for a long time. Second, it is still too soon to fully assess the impact of the newest changes to mortgage lending guidelines. These guidelines, which came into effect at the start of the year, were aimed at tightening standards for uninsured mortgages. It is not yet clear whether the guidelines are driving a significant amount of activity away from federally regulated institutions and toward private lenders and credit unions, who may not follow the federal guidelines.

This is an issue that we will monitor. We are looking forward to lending data from the second quarter, as well as the latest information from the Canada Mortgage and Housing Corporation about mortgage underwriting practices, which we will receive later this year.

In terms of housing market imbalances, we have also seen some lessening in this vulnerability, though it remains elevated. The annual rate of house price growth peaked in April 2017, at just under 20 per cent on a national basis, and is now below 2 per cent. This slowdown is due to the declining affordability of housing in some markets, as well as the combined impact of higher interest rates, macroeconomic policies such as the new mortgage lending guidelines, and housing policy measures taken by various provincial governments.

Of course, that figure is a national average. Outside of Toronto, national house price growth remains above 5 per cent. A decline in prices for single-family homes in Toronto is a major factor pulling down this national average. In contrast, prices for condominiums are still growing rapidly, particularly in the greater Toronto and Vancouver areas. This is a reverse of the dynamics that we saw until early 2017, when price growth for condos trailed the pace for single-family homes. It is possible that the guidelines are having an impact here by limiting the amount some buyers can borrow and increasing the demand for condos relative to single-family homes. It is also possible that speculative activity is helping to push prices higher.

The third main vulnerability we are watching is the possibility of a major successful cyber attack on a financial institution or market infrastructure, such as the payment systems that we all rely on every day. Given how interconnected our financial system is, there is concern that a successful attack on one institution could have wide-ranging effects. The Bank has been working with major banks and Payments Canada to make sure our country’s key payment systems can recover quickly from a successful cyber attack.

Overall, when we look at the three vulnerabilities and our risk scenarios, we judge that the overall level of risk is roughly unchanged from November, and our financial system remains resilient.

I also want to point out that in this FSR, we report the results of a survey we conducted with financial system participants. Respondents identified the threat of a cyber attack, geopolitical events and a pronounced decline in property prices as among the most important risks facing their firms’ own activities and the broader financial system.

Before we answer your questions, I will turn it over to Senior Deputy Governor Wilkins, who will say a few words about the Bank’s plans for communications on financial system issues.

Senior Deputy Governor Wilkins:

Thank you, Governor.

As many of you know, for over a decade, the biannual Financial System Review has been our main vehicle for communicating our analysis and research on developments related to stability of the financial system. The financial crisis taught us, the hard way, just how important it is to keep on top of financial system risks. That’s as true today as it was then.

I am pleased to tell you about some changes we are making to improve the accessibility and timeliness of our work in this area. The first is that this autumn, we will launch the Bank of Canada’s financial system hub on our website. The hub will offer up-to-date analysis and articles on financial system issues, presented in an engaging way and aimed at a broad audience. The goal is to help more Canadians better understand developments in the financial system without having to wait for publication of the full FSR.

The second change is that we will publish the FSR once a year, in June. This recognizes that the main vulnerabilities facing the financial system tend to evolve very slowly. As the Governor said, the top three vulnerabilities in our financial system are unchanged from the previous report, as is the overall level of risk.

The third change is that we will introduce a speech each autumn by a member of Governing Council that will give an update on the Bank’s views about the evolution of the main vulnerabilities and risks to the financial system. This speech will draw from the analysis that is published on the hub. The concept is similar to the regular economic progress report speeches that we have begun doing.

We will also use our quarterly Monetary Policy Reports to discuss relevant financial system issues when they have a bearing on the outlook for economic growth and inflation. The bottom line is that we are modernizing our financial system communications, to be more nimble and to give these issues the greater visibility that they deserve.

With that, Governor Poloz and I would be happy to answer your questions.

FULL DOCUMENT: https://www.bankofcanada.ca/wp-content/uploads/2018/06/opening-statement-070618.pdf

BANK OF CANADA. June 7, 2018. Financial System Review - June 2018

This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.

FULL DOCUMENT: https://www.bankofcanada.ca/wp-content/uploads/2018/06/fsr-june2018.pdf

Establishing a Resolution Regime for Canada’s Financial Market Infrastructures.
Elizabeth Woodman, Lucia Chung, Nikil Chande

This report highlights how an effective resolution regime promotes financial stability. It does this by ensuring that financial market infrastructures (FMIs) would be able to continue to provide their critical functions during a period of stress when an FMI’s own recovery measures were failing. The report explains the Bank of Canada’s new role as the resolution authority for FMIs, which will further bolster financial system resilience.

FULL DOCUMENT: https://www.bankofcanada.ca/wp-content/uploads/2018/06/fsr-june18-woodman.pdf

Covered Bonds as a Source of Funding for Banks’ Mortgage Portfolios
Toni Ahnert

The author traces developments in the Canadian covered bond market. Covered bonds could be a valuable way to provide a stable and diverse source of funding, particularly for smaller banks. However, higher issuance could increase banks’ vulnerability to liquidity stress, with implications for the broader financial system. The author argues that these benefits and challenges can be balanced in a well-designed policy framework.

FULL DOCUMENT: https://www.bankofcanada.ca/wp-content/uploads/2018/06/fsr-june18-ahnert.pdf

The Bank of Canada’s Financial System Survey
Guillaume Bédard-Pagé, Ian Christensen, Scott Kinnear, Maxime Leboeuf

This report presents the details of a new semi-annual survey that will improve the Bank of Canada’s surveillance across the financial system and deepen efforts to engage with financial system participants. The survey collects expert opinions on the risks to and resilience of the Canadian financial system as well as on emerging trends and financial innovations. The report presents an overview of the survey and provides high-level results from the spring 2018 survey.

FULL DOCUMENT: https://www.bankofcanada.ca/wp-content/uploads/2018/06/fsr-june18-bedard-page.pdf

The Globe and Mail. JUNE 7, 2018. Higher rates, stricter mortgage rules curbing home prices but debt still a key risk: BoC
DAVID BERMAN

TORONTO - The Bank of Canada believes that higher interest rates and stricter mortgage regulations are successfully curbing lofty Canadian home prices and high household debt levels, but warns that the vast size of outstanding debt continues to pose a key risk to the financial system.

“The two main vulnerabilities we have been watching closely are showing continued signs of easing, which is encouraging,” Stephen Poloz, Governor of the Bank of Canada, said in a statement.

The upbeat assessment comes from the Bank of Canada’s semi-annual Financial System Review, released on Thursday, and follows substantial changes to the country’s mortgage regulatory framework and economic conditions in Canada.

Regulators, keen to slow the pace of house price growth in a number of key Canadian markets, especially Toronto and Vancouver, recently tightened mortgage regulations and imposed stress tests to make it more difficult for prospective home buyers to qualify for loans.

At the same time, interest rates and bond yields have been rising with global economic activity, lifting borrowing costs significantly. Five-year fixed mortgage rates have increased by about 110 basis points over the past year, and rates for variable mortgages have risen by nearly 40 basis points – weighing further on household debt levels. (There are 100 basis points in a percentage point.)

The ratio of Canadian household debt to disposable income was close to 170 per cent at the end of 2017, fueled in part by low borrowing costs and high home prices, which raised concerns among a number of observers within Canada and international institutions. However, the Bank of Canada believes the ratio likely declined slightly in the first quarter of this year, providing some relief.

“Growth in residential mortgages and home equity lines of credit slowed in the first four months of the year, in line with weaker home sales and slower house price growth,” the Bank of Canada noted in its review.

“The pace of other consumer borrowing, which makes up the remaining 15 per cent of outstanding household debt, has also slowed,” it added.

Yet the Bank of Canada believes that it is still too early to gauge the full impact of tighter mortgage standards, the latest of which kicked in at the start of 2018. Home buyers, faced with new qualification rules in 2018, could have pushed ahead with their borrowing decisions prior to the implementation of the new rules or benefited from preapprovals in the first quarter of this year, clouding the picture so far.

As well, trade tariffs recently imposed by the United States, amid concerns about the prospects of an all-out international trade war, are hanging over the economic outlook this year.

The central bank expects that updated rules to mortgage qualifications alone will weigh on economic activity, but was silent on the potential impact of trade tariffs. The bank estimates that the new rules will subtract about 0.2 percentage points from gross domestic product by the end of 2019.

“Considerable uncertainty around its ultimate impact on economic activity and mortgage quality remains,” the bank said.

The Bank of Canada added that home price growth peaked in early 2017, when rising employment, increased immigration, low interest rates and speculative behavior boosted demand for housing amid a limited supply of new single-family homes in some cities.

Now, though, the year-over-year increase in home prices has declined from 20 per cent in April, 2017, to about 1.5 per cent nationally, driven by price declines in the Greater Toronto Area and declining sales in the Greater Vancouver Area.

While the housing market appears to be heading in the right direction, the Bank of Canada has highlighted cybersecurity as a key vulnerability in Canada’s interconnected financial system – a topical concern given that Bank of Montreal and Simplii Financial, an arm of Canadian Imperial Bank of Commerce, have both revealed potential cyberthreats in recent weeks.

The central bank has been working with the Big Six banks and Payments Canada - which is responsible for much of the country’s payments infrastructure - to make sure the financial system can recover quickly in the event of a successful cyberattack, focusing on the need to share resources and expertise.

“Continued collaboration and a greater pooling of resources are needed to increase the overall resilience of the financial system,” Mr. Poloz said.

REUTERS. JUNE 7, 2018. Trade uncertainty 'a little more risky' now: Bank of Canada
Leah Schnurr, Andrea Hopkins

OTTAWA (Reuters) - Trade uncertainty feels more risky than it did in April, the head of the Bank of Canada said on Thursday, noting the impact of recent U.S. tariffs on aluminum and steel imports will be incorporated into updated economic forecasts next month.

The comments from Governor Stephen Poloz came after the central bank said the vulnerabilities created by Canada’s housing market and huge household debt have eased amid rising incomes, higher interest rates and tighter mortgage rules.

In a report that continued the upbeat tone set last week when the central bank signaled more rate hikes were coming, the bank said slowing credit growth among households and higher incomes have eased vulnerabilities since its November report, but they remain elevated and will persist for some time.

The central bank has raised rates three times since July 2017 and expectations of a hike next month have risen.

Poloz told a news conference that unknown trade policy was the biggest risk in the context of setting monetary policy.

“In the (Monetary Policy Report) of April (trade) was the top risk and nothing has happened since then to make it less important or less risky. On the contrary, it feels even a little more risky today,” Poloz told reporters.

Since April, the United States has moved ahead with tariffs on steel and aluminum imports from countries including Canada, while momentum to negotiate an updated North American Free Trade Agreement has stalled.

Poloz said while the impact of the tariffs will be addressed in the bank’s projections in July, consumers will end up paying more for many things, which will impact inflation.

“Reducing trade is a negative sum game. Everybody loses, in some way or another,” he said.

While the bank said it was encouraged by the easing of the two main financial system vulnerabilities around debt and housing, the closely watched Financial System Review report noted “some evidence of speculative activity” in condominiums in Toronto and Vancouver.

The condo markets in Canada’s two most expensive housing markets have remained strong even as the detached market has swooned following higher borrowing costs and tighter mortgage rules.

It said speculation may be supporting condo resales as investors bet that price gains will continue, and noted the risk that speculators may quickly sell their assets if prices fall.

Still, the bank said it expects the housing market to stabilize, with strong labor markets supporting fundamentals.

Additional reporting by Fergal Smith, Matt Scuffham and Nichola Saminather in Toronto; Editing by Frances Kerry and Susan Thomas

The Globe and Mail. 7 Jun 2018. Banking committee ‘disappointed’ in Morneau
BILL CURRY, PARLIAMENTARY REPORTER

OTTAWA - The Senate banking committee has sent a strongly worded letter to Bill Morneau, telling the Finance Minister that Senators are “extremely disappointed” that senior officials were not made available to discuss controversial Bank Act changes.

Senate banking committee chair Doug Black said the committee made several requests and provided several possible dates for officials from Finance Canada and the Office of the Superintendent of Financial Institutions (OSFI) to appear, but all were turned down.

“I take an extremely dim of view of that, as perhaps the letter reflects,” Mr. Black said in an interview.

The senators were seeking additional information about provisions in the minister’s latest budget bill, C-74, that would give banks broader authority to enter into business arrangements with financial technology firms, or fintechs.

The provision is the heart of a controversy that was first reported last month by The Globe and Mail. Two officials with the Canadian Association of Mutual Insurance Companies told The Globe that they each received an “angry” phone call from Mr. Morneau’s office telling them that they should stop raising concerns about the provisions with MPs and Senators and that they should not appear before Parliamentary committees on the issue.

The minister’s office has acknowledged that two “frank and direct” phone calls took place, but denies that the insurance officials were told to stop talking to MPs or to not appear before committees.

As a result of the banking committee’s decision to hold extra hearings on those specific provisions, senators heard from Privacy Commissioner Daniel Therrien, who said the section does raise privacy concerns and fails to strike the right balance between fostering commercial innovation and protecting consumers.

While Finance officials had appeared before the committee in early May, the senators wanted the department to return and answer questions specifically related to the fintech provisions. The committee also wanted to hear from OSFI, the federal banking regulator.

Critics have called for more study of the provisions given that, unlike banks, many fintechs are not subject to federal financial regulations. Bank executives told senators that any sharing of customer data with fintechs is only done according to their own high standards for data security and privacy protection and that the provisions would allow banks to work with a broader range of fintechs.

In the committee letter to the minister, Mr. Black notes senators were unable to reach a firm conclusion on the issue because they faced a tight deadline and were not able to hear from the relevant officials.

“The committee is extremely disappointed to have to make observations on this legislation without the important input that officials would have provided on the issues,” Mr. Black wrote on behalf of the banking committee. “The committee expects to receive better co-operation in the future.”

In a report, the banking committee said it “remains concerned about the potential cybersecurity risks that this bill may introduce” and called for further study of the fintech-related changes.

An OFSI spokesperson said officials with the relevant expertise were not available on the dates provided by the committee.

“We make every effort to make OSFI officials available when we receive invitations to appear before parliamentary committees,” Annik Faucher said.

The minister’s office noted that officials had appeared earlier and also answered questions on the issue this week when they came with the minister before the Senate national finance committee.

Mr. Morneau told senators on Tuesday that Canada’s privacy laws will continue to apply even if customer data is transferred to a fintech. “I appreciate the anxiety around data and recognize that this is some place that we need to continue to be vigilant, but that has nothing to do with this particular measure,” he said.

REUTERS. JUNE 7, 2018. Canadian dollar seen up on BoC rate hikes; NAFTA a wild card: Reuters poll
Fergal Smith

TORONTO (Reuters) - Canada’s dollar will strengthen over the coming year as economic growth prompts the Bank of Canada to raise interest rates again, a Reuters poll showed, but strategists see risk to their bullish forecasts from NAFTA talks.

The poll of more than 40 foreign exchange strategists predicted the loonie will rise to C$1.27 to the greenback, or 78.74 U.S. cents, in three months, from around C$1.2954 on Thursday.

After hitting a 2-1/2-month low on Tuesday at C$1.3067, the currency is expected to climb further to C$1.25 in a year.

“The Canadian economy is hitting its potential growth rate,” said Derek Halpenny, European head of global markets research at MUFG Bank. “This will result in the BoC raising rates in July.”

Canada’s central bank has raised its benchmark interest rate three times since last summer to leave it at 1.25 percent. Economists polled by Reuters expect it to hike twice more this year.

Chances of further tightening as soon as next month have climbed to about 70 percent, data from the overnight index swaps market showed, from less than 50 percent before a recent policy statement from the central bank that was more hawkish than the market had expected. BOCWATCH

“We think the Bank of Canada will basically be on a hiking path that is not dissimilar to the Federal Reserve,” said Ranko Berich, head of market analysis at Monex Canada and Monex Europe, who expects the loonie to strengthen to C$1.19 in 12 months.

Berich said Canada has “a lot of leverage over the United States” in negotiations to revamp the North American Free Trade Agreement because it is a major buyer of American goods, including many manufactured products. But if the U.S. does withdraw from the 24-year-old accord it could “blow the loonie to pieces.”

Canada sends about 75 percent of its exports to the United States.

In addition to slow-moving NAFTA talks, policymakers have been fretting recently about the impact of new U.S. tariffs on steel and aluminum imports.

Top U.S. allies are set for a showdown with Washington at this week’s G7 summit in Canada as the Trump administration shows no sign of backing down from protectionist policies that have upset trading partners and unnerved investors.

Reduced risk appetite could weigh on the Canadian dollar because Canada depends on capital flows to finance its current account deficit.

“When risk aversion picks up, volatility picks up, capital flows tend to dry up and you get risk of undershooting on the exchange rate,” said Ben Randol, senior FX strategist at Bank of America Merrill Lynch.

(For other stories from the June Reuters global foreign exchange poll:)

Polling by Mumal Rathore and Sarmista Sen; Editing by Toby Chopra

NAFTA

The Globe and Mail. 7 Jun 2018. The President aimed his fire at Canada with War of 1812 remark. ‘Didn’t you guys burn down the White House,’ Trump said when asked how Canada could possibly be a threat to U.S. security
ADRIAN MORROW, WASHINGTON

In a telephone call on May 25, Prime Minister Justin Trudeau asked U.S. President Donald Trump how he could possibly consider Canada a threat to America’s national security – the ostensible reason for looming tariffs on Canadian steel and aluminum.

“Didn’t you guys burn down the White House?” Mr. Trump replied, in reference to the capture of Washington during the War of 1812.

The President’s glib response, first reported by CNN and confirmed by The Globe and Mail, was emblematic of Mr. Trump’s new attitude toward his northern neighbour, whom he is treating as his No. 1 enemy amid an escalating trade war and growing rhetorical battle with Mr. Trudeau.

Since hitting 30 countries with metals tariffs last week, Mr. Trump has bashed Canada far more than his usual adversaries in Mexico, China or the European Union.

When Mr. Trudeau announced retaliatory levies on a slew of U.S. goods – from orange juice to pickles – and accused the Trump administration of ignoring “logic and common sense” on trade, Mr. Trump called out the Prime Minister by name in a statement that threatened to tear up the North American free-trade agreement. In a tweet the next morning, he mused about shutting Canadian wood products out of America.

And after the Prime Minister took to U.S. television to describe Mr. Trump as “unpredictable” and his tariffs “insulting and unacceptable,” the President lashed out again online, tweeting that “Canada has all sorts of trade barriers on our Agricultural products. Not acceptable!”

Mr. Trump was notably more muted in his treatment of Mexico and the EU, even as they announced similar retaliations.

Things stand to get worse: While Mr. Trudeau is hoping a meeting with Mr. Trump at the G7 summit in Quebec later this week will calm the waters, the President is mulling further tariffs, including a 25-per-cent levy on Canadian-made cars and trucks.

The fight has pushed relations between Canada and its closest commercial and diplomatic partner to their tensest time in recent memory, with $900-billion of annual trade in the balance.

At least part of Mr. Trump’s ire toward Canada appears to come from dashed expectations, observers said. For more than a year, Mr. Trudeau publicly avoided any public criticism of the President, making his tough tariff response a surprise.

“Trump thought Canada was going to be the easiest country to play, and he’s disappointed that didn’t happen,” said Dunniella Kaufman, a Canadian trade lawyer based in Washington.

Sources with knowledge of the Trump administration’s thinking say the President’s annoyance with Ottawa has actually been building for nearly a year: When the Trump administration started NAFTA renegotiations last summer, it expected Canada to gang up on Mexico and help force it to give up auto jobs that had been lured south. When Canada instead formed a common front with Mexico against Mr. Trump’s protectionist demands, the United States was upset, the sources said.

At a White House meeting in February, Mr. Trump complained that Canada was “very smooth” at taking the United States’ money in unfair trade deals. On other occasions, he has accused the country of being “very rough” as it has “taken advantage” of the United States and “outsmarted our politicians for many years.”

Christopher Sands, director of the Center for Canadian Studies at Johns Hopkins University, said Mr. Trump was particularly rankled by Ottawa’s NAFTA outreach campaign, during which Canadian politicians and businesspeople fanned out across the country to encourage their American counterparts to lobby the White House to preserve NAFTA.

“I think it started bugging him,” he said.

Matthew Rooney, a former U.S. state department official in charge of the Canada file during the Obama administration, said there have been difficult times in the past. When then-prime minister Stephen Harper in 2011 said U.S. approval of the Keystone XL pipeline – which president Barack Obama was refusing to do – was a “no-brainer,” the White House considered the remark beyond the pale.

But tensions with the current President are on a different level.

“There have always been little tiffs that are part of doing business. But this is a little unusual and unusually personal,” he said. “If President Trump actually referenced the War of 1812, that is frankly absurd.”

The reference itself is not entirely historically accurate. While the war was largely fought over control of Canada, which was then a British colony, the August, 1814, attack on Washington itself was carried out by British regulars and marines rather than colonial militia. The raid, made in revenge for the American burning of York – present-day Toronto – the previous year, saw the British briefly capture and set fire to the U.S. capital.

Mr. Trump’s chief economic adviser, Larry Kudlow, played down the feud at a White House briefing Wednesday.

“The United States and Canada will remain firm friends and allies, whatever short-term disagreements may occur,” Mr. Kudlow said. “So I would say relations are very good.”

And Laura Dawson, director of the Canada Institute at the Wilson Center think tank in Washington, said that – despite the current drama – ties between the two countries on everything from commerce to the Stanley Cup final are strong enough to weather the storm.

“It’s important to differentiate between relations between leaders, and relations between communities, government organizations, businesses and citizens,” she wrote in an e-mail. “Six Canadians on the Caps roster and eight on Vegas. We’re still good.”

The Globe and Mail. 7 Jun 2018.  The era of the Trump whisperers is coming to an end. Will the Trump whisperers be forced to shout?
Campbell Clark, Columnist

 When French President Emmanuel Macron arrived to visit Justin Trudeau, it was a meeting of the two leaders who had developed relationships with Donald Trump. But the era of the Trump whisperer appears to be ending.

At least, there’s no sign the U.S. President is willing to listen any more.

Mr. Trudeau’s been on the phone a lot with Mr. Trump lately, trying to persuade the President not to include Canada in steel and aluminum tariffs ostensibly imposed on nationalsecurity grounds. But when Mr. Trudeau insisted in a May 25 call that Canada can’t be considered a threat, Mr. Trump reportedly replied, “Didn’t you guys burn down the White House?”

It doesn’t really matter that Mr. Trump might be pretending to nurse some ahistorical grudge left over from the War of 1812, or just joking. What matters is that Mr. Trump once seemed to make a few friends on the world stage, and though he didn’t change course for the sake of the relationship, he was often willing to ease a little, or play down difference or keep talking. Now, his attitude is different.

When Mr. Trump was planning to trigger U.S. withdrawal from NAFTA to mark his 100th day in office, a hastily organized campaign by the Trump administration’s pro-trade advisers, along with phone calls from Mr. Trudeau and Mexican President Enrique Pena Nieto, pulled him back.

But now, a lot of those pro-trade advisers are gone and one of the replacements, Larry Kudlow, told reporters Wednesday that Mr. Trump is heading to a G7 Summit “sticking to his guns.” And Mr. Trump, according to one report, asked advisers to prepare new sanctions to penalize Canada for having the temerity to announce countervailing tariffs.

So when Mr. Macron strolled up the steps of Parliament to get a warm greeting from Mr. Trudeau, it was surely the prelude to a discussion – at a small dinner with only their spouses in the room − of whether there’s any kind of charm they can work on the President.

The two are mirror images: Gen X leaders, both centrists promising change, both handsome and charming, meeting in Mr. Trudeau’s Centre Block office in nattily tailored dark suits. Both also have a political base that doesn’t care for Mr. Trump, but decided they had to pull him close.

Mr. Macron hosted the U.S. President in Paris, took U.S. withdrawal from the Paris climate accord with tactically worded opposition, and was invited for a touchy-feely visit in Washington in April, including the first state dinner that Mr. Trump hosted for a foreign leader.

But when Mr. Macron spoke to Mr. Trump on the phone recently to complain about the steel and aluminum tariffs, the tenor between the two was described as “terrible.” CNN cited a source who said that Mr. Macron thought their close relationship would allow him to speak his mind, but Mr. Trump didn’t like it.

That may have always been Mr. Trump’s temperament. But it also seems clear he’s now surrounded by a team that reinforces his own instincts.

That throws a curve into some of the charm-offensive strategies other governments have deployed. Even before Mr. Trump was inaugurated, Mr. Trudeau’s senior advisers rushed to make connections with senior White House advisers such as Steve Bannon and Jared Kushner. Mr. Bannon is now long gone and Mr. Kushner doesn’t seem to lead trade files.

Mr. Trump’s previous economic adviser, Gary Cohn, was a pro-trade advocate. Mr. Kudlow, a former investment banker, Reagan administration official and conservative economic commentator, defended Mr. Trump’s tariffs as a tool to combat the protectionist policies of countries such as China, without for a moment acknowledging that imposing steel tariffs on Canada or Britain is itself a protectionist action.

It’s still unlikely Mr. Trump will get the big confrontation that’s been foreshadowed for this week’s G7 Summit. It’s not just Mr. Trudeau and Mr. Macron, but the leaders of Japan, Germany and Britain who have invested time in building a relationship with Mr. Trump. They’ll presumably try to deflect Mr. Trump’s steel action toward China, rather than them. But Mr. Trump’s giving every indication he’s not listening to those whispers anymore.

The Globe and Mail. 7 Jun 2018. EDITORIAL. Cheesy politics

You would have been called a cynic if you had predicted that, on the launch of a Canada-U.S. trade war initiated without valid cause by the larger country, Canada’s free-market Conservative Party would use the occasion to undermine its own government by supporting tariff-protected dairy farmers.

But then, politics has a way of breeding cynicism. Conservative Leader Andrew Scheer did his part on Tuesday when he released a statement criticizing not U.S. President Donald Trump, who capriciously imposed levies on Canadian steel and aluminum last week, but Prime Minister Justin Trudeau for the crime of announcing “flexibility” in his position on access to the Canadian dairy market.

Mr. Scheer called any weakening of the tariffs that shield Canadian milk, eggs and poultry from foreign competition “totally unacceptable” and accused the PM of being duplicitous for saying otherwise to an American audience.

The most galling thing about this attack on the PM was not that the Conservative stance on supply management is dead wrong. All three major parties have, in the past, steadfastly supported the antiquated and expensive fixed prices, production quotas and trade barriers that protect dairy and poultry farming in Canada, so Mr. Scheer is not alone in this.

As well, the hypocrisy of the Tories, Canada’s party of economic liberalism, backing a protectionist price-fixing scheme that costs consumers dearly is obvious enough.

No, it’s the way the party, and Mr. Scheer in particular, came to their wrong-headed position that is most troubling.

The party is led by a man who secured his job in large part thanks to the votes of insta-Conservative dairy farmers who signed up in key Quebec ridings to defeat Mr. Scheer’s libertarian rival, Maxime Bernier, in the 2017 leadership race.

Mr. Scheer even had the nerve to joke about his debt to this form of legalized corruption, taking a meaningful swig from a carton of milk at Ottawa’s press gallery dinner last year.

He can wink at the situation all he likes, but it has helped put him in the position of attacking free trade with the United States while the Prime Minister fights a tough battle to preserve the same.

On the bright side: vindication for the cynics.

US TARIFFS ON STEEL AND ALUMINIUM IMPORTS

The Globe and Mail. 7 Jun 2018. OPINION. Why Ottawa’s countertariffs could boost the country’s food industry. Canada’s retaliation against U.S. trade moves targets categories with lower sales volumes and domestic alternatives in the marketplace
SYLVAIN CHARLEBOIS, Professor in food distribution and policy, faculty of management, Dalhousie University

History has shown us that trade wars are not kind to consumers when agriculture and food products are targeted. Food inflation tends to skyrocket when barriers are erected and, as Canada imports more than $25-billion worth of agrifood products from the United States, consumers will feel the pain.

We are now officially at war with the United States – trade war, that is. In response to U.S.-imposed tariffs on steel and aluminum, Canada intends to introduce levies on some U.S. goods. Like any trade war, it could escalate. Canada will unlawfully (under WTO rules) implement countermeasures that will take effect on July 1 if the United States does not rescind its duties on steel and aluminum: It’s like Walmart going up against that cute little gift store we visit every so often. And just to be clear, Canada is not Walmart in this scenario.

This trade war appears to be moving into agrifood, one of the most sensitive economic sectors when it comes to trade. Of the 84 items mentioned on Canada’s “Table 2” list of products that would be subject to tariffs, 23 are food products. History has shown us that trade wars are not kind to consumers when agriculture and food products are targeted. Food inflation tends to skyrocket when barriers are erected and, as Canada imports more than $25-billion worth of agrifood products from the United States, consumers will feel the pain. Fruits, nuts, vegetables, beverages and baked goods represent a big portion of those imports, but, interestingly, none of those items are mentioned in Ottawa’s recently issued notice of intent.

In other words, it is highly unlikely these countermeasures will become a threat to Canada’s food security.

In fact, it is categories with lower sales volumes that are being targeted, and most of the food products on the list have Canadian-based alternatives in the marketplace. Yogurt, ketchup, pizza, maple syrup, chocolate, jam and whisky are made in Canada, but other categories, such as prepared foods, mustard, soy sauce or mayonnaise may be more problematic: Canadians will likely see some U.S. goods becoming more expensive; perhaps some as expensive as many Canadian-produced products.

This could be welcome news for some of domestic businesses – the “Buy Canadian” movement will certainly see it as a needed boost. The challenge, of course, is that many of the U.S. products are cheaper – much cheaper – even when the dollar was worth less than 75 US cents.

Price points will likely go up and cheaper options could be limited.

But food retail prices have barely moved since January. Annualized food inflation is at 0.1 per cent. Prices have room to increase, and if tariffs are implemented, grocers could see it as an opportunity to raise prices.

If they opt to do this, the move will likely be subtle and consumers may not even notice a 3-percent to 4-per-cent hike on prices of U.S.-based food products.

Back in early 2017, Ottawa eliminated many tariffs on a long list of ingredients, including cereals and grains, fats and oils, fruits and vegetables, and other food preparations.

These measures allowed Canadian processors to save more than $200-million a year and strengthen their competitiveness both at home and abroad. The list of possible countermeasures does not suggest that Ottawa intends to reinstate these tariffs, and so sparing the processing industry.

The notice of intent appears to be quite populist, targeting consumable food products many Canadians buy regularly, but not frequently.

In fact, the list seems to include either products we manufacture, or products we actually should be manufacturing more of, such as soy sauce and mustard. Canada is the largest exporter of mustard seed in the world, with most of it being sold to the United States and bought back in bottles at 20 times the price.

This could perhaps be the financial incentive needed to change this practice.

Throughout history, countries attempting to protect their market by issuing duties on food imports have seen how such measures can often backfire, usually hurting those who are supposedly being protected. But Ottawa seems to be using a different playbook with Washington. It seems to want to send a clear message that the new tariffs are unacceptable, while at the same time offering the food industry an opportunity to grow.

Its notice of intent delicately strikes a balance between diplomatic resilience and economic inducement for our agrifood economy. Consequently, it may not be such a bad thing if mustard and mayonnaise get more expensive.

But based on pure economics, Canada cannot win against the United States.

That fight won’t even be even close. Some argue that the Trudeau government is playing a game of chess with Washington – but the game looks more like Russian roulette than anything else.

The tiff could play out in many ways before July 1. We should all hope Canada has a long-term plan if this trade war lasts a while, as it likely will.

G7

PM. June 7, 2018. Prime Minister releases report on common challenges faced by G7 countries

Ottawa, Ontario - All G7 countries face a common challenge that goes to the heart of how citizens measure progress in their daily lives – namely, whether the benefits of economic growth are fairly shared.

As G7 President, Canada is seized with this economic problem, and has set the goal of achieving growth that works for everyone at the centre of this year’s G7 agenda.

The Prime Minister, Justin Trudeau, today released a short report – Achieving Growth that Works for Everyone – to highlight this common challenge and identify ways we can work together to address it. Canada believes the best path forward is to focus on the following priorities:

• Helping workers adapt to the changing world of work;
• Delivering strong growth by investing in people;
• Building strong communities and economies;
• Ensuring that everyone pays their fair share by tackling international tax avoidance and evasion; and,
• Better measuring growth that works for everyone.

No one country has all the answers, and no one country can solve these challenges alone. By sharing ideas and working together, we can make meaningful progress.

These challenges will play a central role in G7 leaders’ discussions – discussions which must continue beyond Charlevoix as we work together to create economic growth that benefits everyone, and leave our citizens with a better, more hopeful future.

Quote

“In Charlevoix, we will focus on fighting inequality and creating growth that works for everyone. If we meet these challenges head-on, I am confident we can strengthen the middle class and offer real help to people working hard to join it.”

—The Rt. Hon. Justin Trudeau, Prime Minister of Canada

Department of Finance Canada. June 6, 2018. Canada Leads in Bringing Together G7 Private Sector Investment for International Development

Toronto, Ontario – The Government of Canada is investing in growth that works for everyone. As this year's G7 host, Canada has an opportunity to ensure growth benefits not only Canadians, but also people in need around the world.

Following last week's meetings of G7 Finance and Development Ministers and Central Bank Governors in Whistler, major Canadian institutional investors—led by the Caisse de dépôt et placement du Québec (CDPQ) and the Ontario Teachers' Pension Plan (OTPP)—today launched a leadership initiative for international development, alongside Minister of Finance Bill Morneau and Minister of Environment and Climate Change Catherine McKenna.

The initiative brings together major institutional investors from across G7 countries to help address some of the big challenges that limit growth that works for everyone, including the lack of women in leadership positions; a persistent global infrastructure gap, especially in emerging markets; and the threats to growth posed by climate change. Marc-André Blanchard, Canada's Ambassador to the United Nations, has played a key role in the development of the initiative.

In collaboration with the Government of Canada, this group of leading global institutional investors, led by CDPQ and OTPP, will work together to promote gender diversity in capital markets, create an infrastructure fellowship program to help develop expertise in emerging and developing economies, and take steps to better recognize and report on the financial risks associated with climate change.

Quotes

"Canadian and other G7 institutional investors can lead by example in mobilizing financial resources to support sustainable development around the world, including initiatives that advance gender equality and deliver critical infrastructure to people and communities in need. I am pleased to see Canada at the forefront of these efforts through its G7 Presidency, and look forward to working with our partners in creating growth that works for everyone."

- Bill Morneau, Minister of Finance

"Climate change is putting both our environment and our economy at risk—but it's also creating trillions of dollars of investment opportunities as global demand for clean solutions grows. Improving our understanding of the economic risks and opportunities we'll encounter as our climate changes is essential as we work to strengthen Canada's economy and create jobs and opportunities for the middle class. Today, I applaud the G7 institutional investors for leading this dialogue and working towards cleaner, more inclusive growth and a more sustainable economy."

- Catherine McKenna, Minister of Environment and Climate Change

"Investments in infrastructure build stronger, more inclusive and sustainable communities where everyone has access to opportunities. Our government is making historic investments in infrastructure, but we recognize that traditional financing alone cannot close the infrastructure gap our country faces. We need to be innovative in how we conceive of and finance projects, which is why we created the Canada Infrastructure Bank, a new tool that will engage private and institutional investors to build new transformative infrastructure projects across Canada. We welcome the new initiatives put forward today and look forward to future collaborations."

- Amarjeet Sohi, Minister of Infrastructure and Communities

FULL DOCUMENT: https://www.canada.ca/en/department-finance/news/2018/06/canada-leads-in-bringing-together-g7-private-sector-investment-for-international-development.html

The Globe and Mail. 7 Jun 2018. Trump will ‘talk tough’ on trade at G7, adviser says. Tariffs: Trump adviser says President isn’t afraid to come to G7, cites good relationship with Trudeau. Kudlow plays down trade war fears amid reports of more sanctions against Canada
ROBERT FIFE, QUEBEC CITY

President Donald Trump won’t back down on his trade and tariff dispute with U.S. allies even as Prime Minister Justin Trudeau and other leaders plot ways at the Group of Seven Summit to convince him to reverse course and head off a potential trade war.

There were reports on Wednesday that the White House is discussing additional sanctions against Canada in retaliation for Ottawa’s threat to impose tariffs next month on roughly $16-billion of U.S.-made products .

The President’s top economic adviser, Larry Kudlow, told reporters on Wednesday the trade dispute with Mr. Trudeau and the leaders of Great Britain, Germany, France, Italy and Japan is nothing more than a “family quarrel.”

But Mr. Kudlow said Mr. Trudeau, who is playing host in the picturesque village of La Malbaie, Que., and the other leaders are mistaken if they think the President can be turned against his America First trade agenda. “There are disagreements. He is sticking to his guns and he is going to talk tough to them,” Mr. Kudlow said at a White House briefing on the twoday G7 Summit that begins Friday.

At the same time, Mr. Kudlow played down any fears the tariffs could prompt a trade war and stall global economic growth. “Look, we are talking everything through. There may be disagreements. We regard this as much like a family quarrel. I am always an optimist and believe it can be worked out,” he said.

Still, Mr. Kudlow said the President believes the global economic system is broken and tilted against the U.S. economy. Last week, Mr. Trump imposed steel and aluminum tariffs on the European Union, Mexico and Canada – a move that could cause dire economic consequences for the United States’ Western allies.

Mr. Trudeau and French President Emmanuel Macron met on Parliament Hill Wednesday to strategize on how to talk “common sense” to the intemperate and unpredictable Mr. Trump at the G7 meeting, one senior Canadian official said.

“There will be some very direct conversations on some issues where there have been disagreements. Tariffs obviously come to mind,” Mr. Trudeau told reporters in Ottawa.

The G7 Summit involves the leaders − without a cast of advisers − and this will allow for noholds-barred talk on Mr. Trump’s tariff decision and their dollarfor-dollar tariff response, a senior federal official said.

The Washington Post reported Wednesday that the Trump White House is discussing more economic penalties against Canada.

“I read that Washington Post story also. We have had no formal notification or informal notification from the United States of any additional measures being contemplated,” Foreign Affairs Minister Chrystia Freeland told reporters in Ottawa. She added Ottawa is prepared for any possible action the United States might take, but did not elaborate.

Mr. Trudeau also shot down Mr. Trump’s call for Canada and Mexico to negotiate bilaterally to reach free-trade deals with Washington rather than pursuing talks to renegotiate the North American free-trade agreement.

“Canada’s approach is and always has been that the trilateral approach is better for Canada and Mexico and the United States,” he said.

Instead of fighting amongst themselves at the G7, the Canadian official said Mr. Trudeau will make the case that the United States should be working with its allies to press China to open up its economy.

Mr. Kudlow agreed that China is the No. 1 culprit in closing off much of its market to the world while flouting World Trade Organization rules and stealing Western intellectual property.

“China has engaged in unfair trade practices and frequently in WTO illegal trading practices,” he said. “The whole world agrees with us regarding China’s trade practices and in fact many parts of the world have filed their own complaints on exactly the same grounds.”

Mr. Kudlow said Mr. Trump was not afraid to come to the summit even if, as expected, he will be ganged up on regarding trade while getting support from the leaders on his efforts to denuclearize North Korea at a summit on June 12 in Singapore with Kim Jong-un.

He said the President and Mr. Trudeau have a good relationship even though they had a frank exchange in a telephone call on May 25 when the Prime Minister complained to Mr. Trump for threatening to invoke national security as the reason to hit Canada with steel and aluminum tariffs. The President followed up last week and imposed the tariffs despite Mr. Trudeau’s strong objections.

CNN reported and The Globe and Mail confirmed that when Mr. Trudeau pressed the President on how to justify the tariffs on national-security grounds, Mr. Trump quipped: “Didn’t you guys burn down the White House?”

Mr. Trump was reportedly referring to the War of 1812 when the British Red Coats burned down the White House in retaliation for an American attack on the Ontario town of York, the precursor of Toronto, when Canada was still a British territory.

Roland Paris, a former foreignpolicy adviser to Mr. Trudeau and now a professor at the University of Ottawa, said the summit will be a real test for the Prime Minister who is hosting his first international summit.

“The challenge is to have a frank discussion on trade and some of the hot-button issues but to de-escalate the rhetoric at the same time,” Prof. Paris said. “I wouldn’t expect Donald Trump to be changing his mind on any of these controversial issues at this meeting but having a frank discussion in a small group of leaders in these settings is important to maintain these open channels.”

The leaders are expected to offer support to Mr. Trump on North Korea but are expected to clash with him on the environment and over his decision to abandon the Iranian nuclear accord.

The Globe and Mail. 7 Jun 2018. Pension funds launch G7 investors group
JACQUELINE NELSON

It’s much more about using all the other resources we have – our people, our expertise, our relationships, our networks. 

MICHAEL SABIA, CHIEF EXECUTIVE, CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC

Some of Canada’s largest pension funds and the Canadian government are drumming up international support to invest in issues of importance to the G7.

The Caisse de dépôt et placement du Québec and Ontario Teachers’ Pension Plan will lead a group of global investors with a combined $6-trillion in assets under management in an effort to improve climate-related disclosures, boost women in finance and bolster expertise in infrastructure. These focus areas line up with Canadian government priorities and Finance Minister Bill Morneau and Environment Minister Catherine McKenna attended an event in Toronto to support the initiative on Wednesday.

The investor group, which includes other large pension funds, European insurers and asset managers, believes it can use its member contact networks and investment expertise to launch targeted programs that will, over time, improve investment and economic conditions across the world.

It’s a big goal that begins with the design of some small pilot programs in three priority areas. One such effort includes a fellowship for senior public-sector infrastructure managers in emerging markets run in partnership with York University’s Schulich School of Business. This program is being touted as a way to “help fill the gap in markets where infrastructure needs are most critical,” because increasing a region’s financial and operations expertise in the sector could lead to more investment interest and opportunities for the funds.

The G7 investor organization plans to contribute between $10-million and $15million toward its programs over the next few years. But Michael Sabia, chief executive of the Caisse, said the institutions’ main contributions won’t be financial.

“It’s much more about using all the other resources we have – our people, our expertise, our relationships, our networks,” he said during a presentation at the Toronto event.

In recent years, most large investment groups have heightened their focus on environmental, social and governance (ESG) factors when evaluating potential deals. Many are focused on the impact of long-term trends such as a transition away from fossil fuels, disruption caused by technology and labour issues that can affect their returns and reputations.

As ESG becomes an increasingly important term to institutional investors, it has changed their expectations of assets they buy and businesses they invest in. And they’re not alone. Other international groups have rolled out new targets, such as the 17 sustainable development goals identified as priorities by the United Nations in the years leading up to 2030. And last year, a task force founded by the G20’s Financial Stability Board, which is chaired by Bank of England Governor Mark Carney, set out its recommendations for better climate-related financial disclosure.

Although there are many frameworks and initiatives being developed across the world, Mr. Sabia said this new investor group was trying to bring a more targeted and disciplined approach to a few key issues. “What we’re trying to do with this group is work more intensively together … and have very specific and practical actions that we will continue to develop,” he said.

Along with the infrastructure initiative, the group is also pursuing a partnership with the CFA Institute focused on encouraging women at universities in developing markets to gain experience in the investment industry.

The third initiative looks at moving quicker to implement uniform and comparable climate-risk disclosures among businesses. That will include the investor group’s members leaning on their respective portfolio companies to adopt international recommendations.

Co-ordinating all of the investor and government priorities and deciding on three main areas of focus took about six months, organizers said. Partner institutions include insurers Allianz and Aviva, U.S. pension fund CalPERS and Natixis Investment Managers, along with many Canadian pension funds.

REUTERS. JUNE 7, 2018. Battered by Trump on trade and Iran, G7 leaders to meet
David Ljunggren, Jean-Baptiste Vey

OTTAWA (Reuters) - Leaders of the Group of Seven rich nations headed for a summit in Canada on Thursday more divided than at any time in the group’s 42-year history, as U.S. President Donald Trump’s “America First” policies risk causing a global trade war and deep diplomatic schisms.

In a bid to rebuild America’s industry, Trump has imposed hefty tariffs on steel and aluminum imports, including those from key G7 allies like Canada, Japan and the European Union.

He has threatened to use national security laws to do the same for foreign car imports and has walked back on environmental agreements and an international deal to prevent Iran from building a nuclear bomb.

French President Emmanuel Macron, who has invested in a warm personal relationship with Trump, said that the other G7 nations should remain “polite” and productive but warned that “no leader is forever”, a sign that Europe would not surrender meekly to the U.S. president.

Trump will come face-to-face at the gathering in Charlevoix, Quebec, with world leaders whose views do not chime with his on a range of issues from trade to the environment as well as Iran and the construction of a new U.S. embassy in Jerusalem.

Ahead of the summit, Trump signaled that he was in no mood to compromise at a meeting with Japanese Prime Minister Shinzo Abe, who has tried to cultivate a friendly relationship with the American president.

Trump said he would raise the issue of U.S. car imports with Abe at a meeting in Washington.

EX-BEST FRIENDS

Abe is not the only world leader to have tried charming Trump and failed to come away with concessions from the U.S. leader. Macron, who appeared to have built a warm relationship, said that the so-called “G6” leaders would not spark a fight at the summit.

“In this environment, above all we always have to stay polite, stay productive and try to convince (them), to keep the United States on board because they are our historical ally and we need them,” Macron told a news conference held with Canadian Prime Minister Justin Trudeau in Ottawa.

The U.S. president also has frosty relations with Trudeau, the summit host. Pleas by the other member countries for exemptions from the U.S. steel and aluminum tariffs, which went into effect on June 1, have fallen on deaf ears in Washington.

The Canadian leader is embroiled in rows with Washington over steel and aluminum and negotiations over the North American Free Trade Agreement where Trump’s negotiators have tried to bulldoze Canadian and Mexican objections to a modified pact.

Macron stressed however that the United States was no longer the sole economic superpower in the world and urged other industrialized countries to stick together.

“We must not fall apart. The six other nations of the G7 represent a market that is larger than the American market,” Macron said.

His plea for unity may fall, even within the European Union. Germany has suggested making accommodations over trade with the United States for fear of triggering a ratcheting up of tensions over cars that would embroil companies like BMW and Mercedes.

Europe faces renewed domestic economic and political challenges in addition to those posed by Trump’s unilateralism.

One source with knowledge of the matter said that Italy wanted to “create as much space as possible to continue the dialogue with the U.S.”, noting that new Italian Prime Minister Guiseppe Conte, a political novice, would be treading carefully in Canada because he “needs to see the dynamics of the group.”

Japan is also expected to take a less confrontational approach than its G7 peers, while still quietly pressing its case on trade.

Abe too has more at stake than tariffs.

Japan fears being left to one side if Trump and North Korean leader Kim Jong Un strike a deal at a summit in Singapore next week.

Japan worries that there will be no resolution of the issue of Japanese citizens abducted by the North and that Trump would only deal with North Korea’s ability to strike the United States, and pay less attention to shorter range missiles that could still target Japan.

Despite the lobbying and pleas, Trump has pressed ahead with tariffs as well as pulling out of the Paris climate accord. Intense diplomacy from Europe to save an international nuclear agreement with Iran also failed.

At the same time as taking on Europe and allies like Japan. Trump has told China, the world’s second largest economy, to cuts its massive trade surplus with the United States. Washington has also threatened tariffs on imports of Chinese goods unless Beijing stops stealing American companies’ intellectual property.

Economically too, Europe may have more to fear if Trump does go for auto tariffs.

Its recovery from the 2008-9 financial crisis has been far slower than that of the United States where the Federal Reserve is on the cusp of another rate rise while the European Central Bank is still using crisis-era measures.

Financial markets around the world were battered by Trump’s trade threats, although they have recovered somewhat, they are still vulnerable and Italy’s new government is also a risk. Trump may have less to fear than slow-growing Europe and Japan from a trade war in terms of economic losses if the “G6” pushes back on tariffs.

“This is unlikely to deter President Trump given the United States’ widening $570 billion trade deficit, particularly if he feels cornered,” said Olivier Desbarres of economic strategy consultancy 4X Global Research.

“This could in turn rattle equity markets and an already under pressure Mexican Peso and stymie any upward trend in the range-bound Canadian Dollar and recovering Euro.”

Reporting by David Ljunggren; Additional reporting to Roberta Rampton in Washington, Giselda Vagnoni in Rome and William Mallard in Tokyo; Writing by David Chance; Editing by Alistair Bell

CANADA - FRANCE

PM. June 7, 2018. Prime Minister announces even closer collaboration with France

Ottawa, Ontario - Prime Minister Justin Trudeau announced that the President of the French Republic, Emmanuel Macron, today concluded the bilateral portion of his first visit to Canada as president. The two leaders will now travel to the Charlevoix region of Quebec to take part in the G7 Summit.

During the visit, Prime Minister Trudeau and President Macron further strengthened our two countries’ close and historic relationship and worked together on issues that matter to Canadians and French people alike. The two leaders committed to set up the Fonds Transatlantique (Transatlantic Fund), which will invest just over $120 million (€75 million) in French and Canadian companies that want to develop their business on the other continent. The fund will promote economic growth and create good, middle class jobs on both sides of the Atlantic.

Prime Minister Trudeau and President Macron also announced the signing of the Canada-France Statement on Artificial Intelligence, which calls for the creation of an international study group on artificial intelligence made up of experts from government, industry, and civil society. The group will be mandated to become the global reference on issues related to artificial intelligence, a field that is increasingly affecting all human activities and that will continue to have a significant influence on economic growth and the labour market.

Prime Minister Trudeau and President Macron also established the Canada-France Action Plan on International Assistance and Sustainable Development, guided by Canada’s Feminist International Assistance Policy and France’s international strategy on gender equality. This action plan will launch a periodic and in-depth bilateral dialogue on international assistance issues. The plan will help our two countries to promote issues of mutual importance within international organizations, as well as to identify and bring to life initiatives that advance shared priorities.

Through a joint statement on multilateralism, the two leaders reaffirmed the strong ties between Canada and France, as well as their commitment to shared values like liberty, democracy, respect for human rights, and the rule of law. They also restated their commitment to fight climate change and to promote democratic values, free and open trade, and gender equality.

Science, technology, and innovation are essential for economic growth and the prosperity of both countries, and international cooperation in research plays a key role. That is why Canada and France have agreed to work together to increase the mobility of students and researchers between the two countries. Canada and France also signed a letter of intent to launch discussions and establish official agreements in the future, to encourage more students, researchers, and industry partners from both countries to take advantage of the programs in place.

To continue deepening our bilateral ties and maintain this momentum at the highest political level, France and Canada committed to create a Franco-Canadian Council of Ministers, working with the President of the French Republic and the Prime Minister of Canada. The Council of Ministers will meet every two years to report on strengthened cooperation and develop joint initiatives.

The Prime Minister also used his discussion with President Macron to reiterate Canada’s support of Michaëlle Jean as the Secretary General of the Organisation Internationale de la Francophonie (OIF), emphasizing her leadership in the OIF’s efforts to advance gender equality, support young people, and promote democratic values.

Quote

“My discussions with President Macron over the past few days are a testament to Canada and France’s strong and historic relationship. From the economy to jobs to the environment, our countries share an ambitious vision for a better future for everyone. Thanks to the Canada-European Union Comprehensive Economic and Trade Agreement, as well as new common initiatives, our collaboration is even stronger. I look forward to working even more closely with President Macron to grow the middle class and build economies that work for everyone.”

— Rt. Hon. Justin Trudeau, Prime Minister of Canada

Highlights

• Prime Minister Trudeau and French President Macron first met at the NATO Summit in Brussels in May 2017. Their first bilateral meeting took place on the margins of the G7 Summit in Taormina, Italy, the same month.
• Canada and France enjoy excellent bilateral relations based on a common history, culture, and values.
• France is Canada’s ninth largest merchandise trading partner and its fourth largest export market in the European Union. In 2017, bilateral trade between the two countries totalled $9.6 billion, with Canadian exports to France rising to $3.4 billion.
• At the end of 2017, Canadian direct investment in France was valued at $8 billion, while French direct investment in Canada was valued at $8.2 billion.

The Globe and Mail. JUNE 7, 2018. Trudeau, Macron lay down hard line on U.S. tariffs ahead of G7
ROBERT FIFE

QUEBEC CITY - Prime Minister Justin Trudeau and French President Emmanuel Macron say they intend to bluntly tell Donald Trump at the Group of Seven summit on Friday that U.S. trade tariffs on steel and aluminum will hurt American workers and must be reversed.

A day before the G7 summit begins in the mountainous Quebec town of La Malbaie, the French leader and Mr. Trudeau held a strategy session in Ottawa aimed at confronting Mr. Trump and his protectionist trade agenda.

Mr. Trudeau said “we are going to defend our industries and our workers” and “show the U.S. President that his unacceptable actions are hurting his own citizens. American jobs are on the line because of his actions.”

In even blunter language, Mr. Macron told a joint news conference that the U.S. tariffs on European, Canadian and Mexican steel and aluminum are “unilateral and illegal” and predicted that they will hurt global growth.

“A trade war doesn’t spare anyone. It will start first of all to hurt U.S. workers, and the cost of raw materials will rise, and industries will become less competitive,” he said.

Mr. Trump’s top economic adviser, Larry Kudlow, told reporters on Wednesday that the U.S. administration won’t back down on the Trump trade and tariffs dispute with U.S. allies.

Mr. Kudlow characterized Canada and Europe’s angry reaction to the tariffs – including reciprocal tariffs on U.S. goods that come into effect on July 1 – as a “family quarrel.”

Mr. Trudeau, who is playing summit host, said Mr. Trump, who is known to dislike criticism, is still planning to attend the two-day summit of leaders of Canada, France, Great Britain, Germany, Italy and Japan, “according to his tweet this morning.” The tweet struck a tough line the day before the President was expected to arrive: “Getting ready to go to the G-7 in Canada to fight for our country on Trade (we have the worst trade deals ever made),” he said.

“I would like to say Mr. Trump that the measures taken are counterproductive. We can’t engage in a trade war against friends,” Mr. Macron said.

British Prime Minister Theresa May, German Chancellor Angela Merkel and Japan’s Shinzo Abe, who meets Mr. Trump at the White House Thursday, have all condemned the U.S. tariffs.

Mr. Trump can also expect to be the odd man out on the issues of climate change and Iran, given his decision to pull out of the Iranian nuclear deal. Europe and Canada will press the President to allow them to continue to co-operate with Iran, so that it maintains its promise not to build nuclear weapons.

”Don’t prevent other people from keeping [the nuclear agreement] and don’t push Iran out of it,” Mr. Macron said.

Mr. Macron said the leaders would, however, support Mr. Trump’s effort to denuclearize North Korea when he meets leader Kim Jong-un in Singapore on June 12. U.S. Secretary of State Mike Pompeo is expected to brief the G7 leaders on the issue.

It remains uncertain whether the G7 will even release a final communiqué, given the deep disputes that Mr. Trump has with the other leaders on trade, Iran and the environment.

Mr. Macron said the leaders don’t want to put out a communiqué if “we drain it of all meaning.”

The Globe and Mail. JUNE 6, 2018. A 204-year-old grievance? Trump cites War of 1812 as trade dispute with Canada intensifies
ADRIAN MORROW

WASHINGTON - In a telephone call on May 25, Prime Minister Justin Trudeau asked U.S. President Donald Trump how he could possibly consider Canada a threat to America’s national security – the ostensible reason for looming tariffs on Canadian steel and aluminum.

“Didn’t you guys burn down the White House?” Mr. Trump replied, in reference to the capture of Washington during the War of 1812.

The President’s glib response, first reported by CNN and confirmed by The Globe and Mail, was emblematic of Mr. Trump’s new attitude toward his northern neighbour, whom he is treating as his No. 1 enemy amid an escalating trade war and growing rhetorical battle with Mr. Trudeau.

Since hitting 30 countries with metals tariffs last week, Mr. Trump has bashed Canada far more than his usual adversaries in Mexico, China or the European Union.

When Mr. Trudeau announced retaliatory levies on a slew of U.S. goods – from orange juice to pickles – and accused the Trump administration of ignoring “logic and common sense” on trade, Mr. Trump called out the Prime Minister by name in a statement that threatened to tear up the North American free-trade agreement. In a tweet the next morning, he mused about shutting Canadian wood products out of America.

And after the Prime Minister took to U.S. television to describe Mr. Trump as “unpredictable” and his tariffs “insulting and unacceptable,” the President lashed out again online, tweeting that “Canada has all sorts of trade barriers on our Agricultural products. Not acceptable!”

Mr. Trump was notably more muted in his treatment of Mexico and the EU, even as they announced similar retaliations.

Things stand to get worse: While Mr. Trudeau is hoping a meeting with Mr. Trump at the G7 summit in Quebec later this week will calm the waters, the President is mulling further tariffs, including a 25-per-cent levy on Canadian-made cars and trucks.

The fight has pushed relations between Canada and its closest commercial and diplomatic partner to their tensest time in recent memory, with $900-billion of annual trade in the balance.

At least part of Mr. Trump’s ire toward Canada appears to come from dashed expectations, observers said. For more than a year, Mr. Trudeau publicly avoided any public criticism of the President, making his tough tariff response a surprise.

“Trump thought Canada was going to be the easiest country to play, and he’s disappointed that didn’t happen,” said Dunniella Kaufman, a Canadian trade lawyer based in Washington.

Sources with knowledge of the Trump administration’s thinking say the President’s annoyance with Ottawa has actually been building for nearly a year: When the Trump administration started NAFTA renegotiations last summer, it expected Canada to gang up on Mexico and help force it to give up auto jobs that had been lured south. When Canada instead formed a common front with Mexico against Mr. Trump’s protectionist demands, the United States was upset, the sources said.

At a White House meeting in February, Mr. Trump complained that Canada was “very smooth” at taking the U.S.’s money in unfair trade deals. On other occasions, he has accused the country of being “very rough” as it has “taken advantage” of the United States and “outsmarted our politicians for many years.”

Christopher Sands, director of the Center for Canadian Studies at Johns Hopkins University, said Mr. Trump was particularly rankled by Ottawa’s NAFTA outreach campaign, during which Canadian politicians and businesspeople fanned out across the country to encourage their American counterparts to lobby the White House to preserve NAFTA.

“I think it started bugging him,” he said.

Matthew Rooney, a former U.S. state department official in charge of the Canada file during the Obama administration, said there have been difficult times in the past. When then-prime minister Stephen Harper in 2011 said U.S. approval of the Keystone XL pipeline – which then-president Barack Obama was refusing to do – was a “no-brainer,” the White House considered the remark beyond the pale.

But tensions with the current President are on a different level.

“There have always been little tiffs that are part of doing business. But this is a little unusual and unusually personal,” he said. “If President Trump actually referenced the War of 1812, that is frankly absurd.”

The reference itself is not entirely historically accurate. While the war was largely fought over control of Canada, which was then a British colony, the August, 1814, attack on Washington itself was carried out by British regulars and marines rather than colonial militia. The raid, made in revenge for the American burning of York – present-day Toronto – the previous year, saw the British briefly capture and set fire to the U.S. capital.

Mr. Trump’s chief economic adviser, Larry Kudlow, played down the feud at a White House briefing Wednesday.

“The United States and Canada will remain firm friends and allies, whatever short-term disagreements may occur,” Mr. Kudlow said. “So I would say relations are very good.”

And Laura Dawson, director of the Canada Institute at the Wilson Center think tank in Washington, said that – despite the current drama – ties between the two countries on everything from commerce to the Stanley Cup final are strong enough to weather the storm.

“It’s important to differentiate between relations between leaders, and relations between communities, government organizations, businesses and citizens,” she wrote in an e-mail. “Six Canadians on the Caps roster and eight on Vegas. We’re still good.”

INTERNATIONAL TRADE

EDC. June 07, 2018. WEEKLY COMMENTARY. The next wave of jobs. There is indeed an industrial revolution going on.
Peter Hall, Vice-President and Chief Economist

Is technology a job-gobbler? Many think so. The protracted under-performance of the job market in the post-recession period has policymakers, analysts and the general public casting blame on digitization, robotics, artificial intelligence and the like for hollowing out the job market and robbing millennials of the hope their forbears had at the same age and stage of life. There is no doubt that a lot of this is true. But is it completely true, or are our fears perhaps a bit exaggerated?

Another industrial revolution underway?

At first glance, the stories about a new industrial revolution, complete with all of its negative effects, are compelling. Peel the key arguments back a bit, though, and its plain to see that many have stopped talking about economic cycles; suddenly, every ill we have is due to structural changes of one kind or another. Sadly, the analytical community is incentivized to raise, create new buzz-words for, and at the limit even magnify the role of these structural factors. This can, and I believe has, masked the critical role of the cycle in our current circumstances. It is clear that a good chunk of today’s labour market woes are related to ups and downs in the economy that this time around are maybe somewhat more protracted than usual.

Not convinced? Consider that not so long ago, following an explosion of technology, unemployment rates hit lows we had not seen for decades. Rates that economists believed were impossible to achieve without runaway wage growth, yet labour costs remained contained. And consider that it wasn’t so long ago – 2001 and 2008 – that these milestones were achieved.

Today’s labour market woes

Scan current data, and it looks like we are back in the same space. The US boasts a 3.9 per cent unemployment rate, close to an all-time low, and wages are still pretty tame. Europe is on the same path, fast closing in on recent lows for its pan-regional unemployment rate. Unlike the other recent lows, though, this time around labour force participation is far lower than normal, as are employment-to-population ratios. Roll these in, and ‘effective’ unemployment rates – a measure agreed and used by the Fed – are a lot higher. What’s more worrisome is that this isn’t just due to the aging population; participation by young people – the millennial generation – is also alarmingly low. Here’s where the ‘structural’ advocates claim victory. Are they right?

Not entirely. Canada saw all of this one cycle earlier. In the 1990s, draconian federal and provincial budget cuts created a jobless recovery, and the young – at that time, Generation X – were bypassed in huge numbers. Predictably, many came out with stories of permanent structural change, only to be proven almost completely wrong when the cutting phase was over. Some of the changes truly were structural, but for the most part, things got back to normal. Is it the same story this time around?

Is construction promising jobs, jobs, jobs?

Technology is indeed displacing many positions, so fears are founded in reality. But a reality check is found in the construction sector. Here’s an industry that was pummelled – on both sides of the Atlantic – by the worst global downturn since the Great Depression. It’s a sector that never really recovered. But it is making a comeback. It was down so long that a lot of the jobs simply disappeared. Now, the market is suggesting that the jobs need to come back, and it has compelling mechanisms to lure them back to work: the need is up, putting pressure on existing capacity. Contract prices then rise, creating the ability to increase hiring. By our estimation, pent-up demand is strong enough to keep the pressure on for years. It’s a time-tested story, playing out in plain view once again.

It all sounds a bit too simple, but if the bean counters are right, there is a layer of mid-skilled folks out there that are the prime concern of the technology worry-warts. And for the first time in a long while, there is a groundswell of demand for them. A key question is, will the economy actually realize it, or shy away from the opportunity because it finds the structural messages too compelling? Time alone will tell – but the current trajectory suggests a growing uptake.

The bottom line?

There is indeed an industrial revolution going on. We need to keep a diligent eye on its negative effects. But there is also a world of rising demands out there, in developed and emerging markets alike, that we are running out of capacity to serve. Building up that capacity will help gobble up the jobless.

US - CHINA

The Globe and Mail. THE NEW YORK TIMES. 7 Jun 2018. Mysterious illness that hit diplomats in Cuba surfaces in China. Illness: Pompeo calls symptoms ‘very similar’ to those in Cuba
STEVEN LEENEWS 
MYERS JANE
PERLEZ GUANGZHOU
WITH A REPORT FROM GLOBE STAFF

U.S. officials have raised suspicions about whether other countries, perhaps China or Russia, might be to blame.

CHINA - A crisis over a mysterious ailment sickening U.S. diplomats and their families – which began in Cuba and recently appeared in China – widened on Wednesday. The State Department evacuated at least two more Americans who fell ill in China after hearing strange noises, officials said.

Many other employees at the U.S. Consulate in the southern Chinese city of Guangzhou and their family members are also being tested by a State Department medical team that has been flown in, officials said. It is unclear how many of them are exhibiting symptoms, but officials expect more U.S. personnel to be evacuated.

For months, U.S. officials have been worried that their diplomats have been subjected to targeted attacks involving odd sounds, leading to symptoms similar to those “following concussion or minor traumatic brain injury,” the State Department says.

The new illnesses in China come just weeks after U.S. officials reported finding their first case in Guangzhou, where a consulate employee got sick after reporting disturbing noises.

The illnesses in China have broadened a medical mystery that started in 2016, when U.S. Embassy employees and their family members began falling ill in Havana. In all, 24 of them were stricken with headaches, nausea, hearing loss, cognitive issues and other symptoms after saying they heard odd sounds.

The issue has roiled relations with Cuba, which immediately fell under suspicion, and led the United States to expel Cuban diplomats.

But with Americans now exhibiting similar symptoms in Guangzhou, U.S. officials have raised suspicions about whether other countries, perhaps China or Russia, might be to blame.

That is sure to complicate already strained relations with both countries over a variety of economic, political and security issues. Russia has been accused of meddling in the 2016 U.S. presidential election, trade disputes have erupted with China and U.S. officials fear that the Chinese are undermining relations with North Korea before a summit meeting with President Donald Trump planned for next week.

The mystery spread to China this spring, when the first employee fell ill, and fears escalated last month when the government warned other employees to seek medical attention if they experienced unusual ailments. The illnesses appear more widespread than the State Department initially reported last month, when it said that one person had “reported subtle and vague, but abnormal, sensations of sound and pressure.”

Secretary of State Mike Pompeo said last month at a hearing of the House Foreign Affairs Committee that the symptoms of the first U.S. employee in Guangzhou to report being ill “are very similar and entirely consistent with the medical indications that have taken place to Americans working in Cuba.”

There are roughly 170 American diplomats or employees in Guangzhou, as well as their family members, and a senior U.S. official said a sizable number had undergone or would soon undergo testing by the State Department doctors who arrived on May 31.

The latest American employee evacuated from Guangzhou is Mark A. Lenzi, a security engineering officer at the consulate. He left Wednesday evening with his wife and two children after having suffered in recent months from what he described in an interview as neurological symptoms. He said that his wife had similar symptoms and that they had heard unusual sounds in their apartment.

After the injuries were diagnosed in Cuba, the Trump administration expelled 15 Cuban diplomats, saying Cuban officials had failed to adequately protect American diplomats. The Cuban government denied any involvement. U.S. officials suggested it was too soon to consider such a response in China, although they have raised it with the Chinese government.

On May 23, the State Department disclosed that an employee stationed in China had complained of “subtle and vague, but abnormal sensations of sound and pressure” over several months from late 2017 until April. That employee, who was evacuated, was not identified.

The disclosure caused anxiety and anger among U.S. government employees in China.

Among them was Mr. Lenzi. In an email sent to the entire staff of the consulate, he complained the employee was evacuated in April, but that no one was told of the health concerns until a month later – after doctors in the United States had found evidence of brain trauma.

The sounds and sensations did not occur at the consulate itself, which opened in 2013 and is a state-of-the-art building designed to withstand electronic eavesdropping and other security and intelligence threats. Instead, the ailing employees said they experienced the strange sounds and sensations in at least two apartment complexes.

In an interview before leaving China, Mr. Lenzi said he had lived in the same apartment tower as the officer evacuated in April. Another diplomat who reported symptoms was at a different upscale building near the consulate.

Even if people are evacuated for further tests, that does not necessarily mean that they have suffered injuries or illnesses, the officials emphasized. Only 25 per cent of those evacuated from Cuba, for example, were later found to have health problems.

In a Tuesday statement, Mr. Pompeo said he had created a health-care task force to examine “the unexplained health incidents that have affected a number of U.S. government personnel and family members stationed overseas.”

The statement left open the possibility that there have been similar events at other U.S. embassies or consulates. One U.S. official said that he was aware of reports of isolated episodes, but that there did not appear to be any discernible pattern.

Mr. Lenzi worked for the diplomatic security department, and he believes that his work could have made him a target. Before joining the Foreign Service in 2011, he worked with the International Republican Institute, funded by Congress, promoting democratic reforms in Ukraine and Georgia – two countries where Russia has denounced American involvement.

A Global Affairs spokesman said the department is working to determine whether Canadian diplomats in Guangzhou or their families have been affected.

ENERGY

REUTERS. JUNE 6, 2018. Oil gains on Venezuela export cuts, OPEC production levels
Jessica Resnick-Ault

NEW YORK (Reuters) - Oil prices surged more than $1 a barrel on Thursday, lifted by concern about a steep drop in exports from Venezuela and concerns OPEC may not raise production at its meeting this month.

Brent crude futures LCOc1 were up $1.48 at $76.84 a barrel by 11:40 a.m. EDT (1640 GMT). U.S. West Texas Intermediate (WTI) crude CLc1 rose $1.16 to $65.88 a barrel.

Futures contracts for gasoline RBc1 and ultra-low sulfur diesel HOc1 strengthened after reports of a fire at Citgo Petroleum’s Corpus Christi, Texas refinery.

Crude prices got an early lift on concerns about exports from Venezuela. Gains grew when Algeria’s oil minister indicated OPEC would focus on balancing the market rather than on rolling back production caps.

“They’re all seeming to push back on the Saudis’ push to raise production,” said John Kilduff, a partner at Again Capital Management in New York. “With this more than 10 percent (price) fall, they may reconsider things as we come closer to the meeting.”

OPEC member Venezuela, threatened with U.S. sanctions in the midst of an economic crisis, is nearly a month behind delivering crude to customers from its main export terminals, according to shipping data. Angola has also seen output decline rapidly from its aging fields.

In Venezuela, chronic delays and production declines could soon breach state-run PDVSA’s supply contracts. Tankers waiting to load more than 24 million barrels of crude, almost as much as PDVSA shipped in April, are sitting off the main oil port, according to shipping data.

Noting Venezuela’s troubles and OPEC’s pending decision on supply, London Capital Group head of research Jasper Lawler said “oil traders could be in for an increased bout of volatility.”

The Organization of the Petroleum Exporting Countries and other producers including Russia have cut output since 2017 to reduce a global crude glut. The group meets in Vienna on June 22 to discuss its supply policy.

Algerian Energy Minister Mustapha Guitouni said on state radio: “What matters to us is that there is a balance between supply and demand to ensure the stability of the oil markets.”

OPEC-member Iraq said on Wednesday a production increase was not on the table.

This followed an unofficial request from the United States asking OPEC’s effective leader Saudi Arabia to boost output.

“Venezuela’s worsening economic crisis, together with ongoing geopolitical tensions in the Middle East, will remain supportive of oil prices,” Abhishek Kumar, Interfax Energy senior analyst said. “Nevertheless, growing prospects for an increase in production from the ‘OPEC Plus’ and rising oil output from the U.S. will cap price gains.”

Crude output is surging toward 11 million bpd in the United States, which is closing in on Russia’s position as the world’s largest producer.

Surging U.S. production has widened the discount of WTI futures to Brent to more than $11 a barrel CL-LCO1=R.

Additional reporting by Meng Meng and Aizhu Chen in Beijing and Amanda Cooper in London; Editing by Elaine Hardcastle and Alexandra Hudson

PM

June 7, 2018. Itinerary

Note: All times local

Ottawa, Ontario

 8:50 a.m. The Prime Minister and the President of France will walk down the Hall of Honour.

Hall of Honour
Centre Block
Parliament Hill

Note for media:

Photo opportunity
9 a.m.     The Prime Minister will hold a joint media availability with the President of France.

House of Commons Foyer
Centre Block
Parliament Hill

Note for media:

Open coverage
La Malbaie, Quebec

7:30 p.m. The Prime Minister will meet with the President of the European Council, Donald Tusk, and the President of the European Commission, Jean‑Claude Juncker.

Murray Room, Lobby Level
Fairmont Le Manoir Richelieu
181 rue Richelieu

Note for media:

Pooled photo opportunity

June 6, 2018. Prime Minister announces the appointment of two Senators

Ottawa, Ontario - The Prime Minister, Justin Trudeau, today announced that the Governor General appointed the following independent Senators to fill vacancies in the Senate:

• Donna Dasko (Ontario)
• Pierre Dalphond (Quebec)

Dr. Dasko is a sociologist, business leader, and one of Canada’s best known and respected pollsters. A strong advocate for gender equality, Dr. Dasko co-founded and served as the former National Chair of Equal Voice, and helped launch the Campaign for an Equal Senate for Canada.

The Honourable Pierre Dalphond is a certified arbitrator, accredited mediator, and former senior judge of the Quebec Court of Appeal. With his extensive legal background, Mr. Dalphond is a guest lecturer at the Université de Montréal and speaks regularly at domestic and international conferences.

Both individuals were recommended by the Independent Advisory Board for Senate Appointments and chosen using the merit-based process open to all Canadians. This process ensures Senators are independent, reflect Canada’s diversity, and are able to tackle the broad range of challenges and opportunities facing the country.

Quote

“I am delighted to welcome these accomplished Canadians to the Senate. I look forward to working with Dr. Dasko and Mr. Dalphond. Their remarkable knowledge and experience will be a great benefit to our country.”

—The Rt. Hon. Justin Trudeau, Prime Minister of Canada

Quick Facts

• These are the 35th and 36th appointments to the Senate made on the advice of Prime Minister Justin Trudeau.
• Under the Canadian Constitution, the Governor General appoints individuals to the Senate. By convention, Senators are appointed on the advice of the Prime Minister.
• Since 2016, the selection process for Senators has been opened to allow all Canadians to apply. Candidate submissions are reviewed by the Independent Advisory Board for Senate Appointments, which provides the Prime Minister with recommendations. From the recommended pool of candidates, the Prime Minister selects the individuals he then recommends to the Governor General for appointment to the Senate.
• The Independent Advisory Board for Senate Appointments is guided by public, transparent, non-partisan, and merit-based criteria to identify highly qualified candidates.
• Once appointed by the Governor General and summoned to the Senate, the new Senators join their peers to examine and revise legislation, investigate national issues, and represent regional, provincial, and minority interests –important functions in a modern democracy.

Biographical Notes

Donna Dasko

Donna Dasko is a respected national pollster, media commentator, sociologist, and private sector business leader with considerable public policy experience. She holds a Doctor of Philosophy and a Master of Arts from the University of Toronto and a Bachelor of Arts (Honours) from the University of Manitoba.

Dr. Dasko was formerly Senior Vice-President of Environics Research Group Ltd, and built the firm from a small consultancy to one of Canada’s leading research firms. During her career, she led major research studies in areas including the economy, budget priorities, tobacco control, health promotion, national unity, and many others. She was a leader in developing media-sponsored polling including the Globe-Environics Poll and election and special feature polling for the CBC.

As a community volunteer, she served in many roles including President of St. Stephen’s Community House, Director of the United Way of Greater Toronto, Governor of the Canadian Unity Council (devoted to Canadian unity and federalism), Chair of the national CEO Roundtable for the Alzheimer Society, and Advisor to GreenPac (which promotes environmental leadership).

Dr. Dasko’s passion for the promotion of women in politics has guided much of her advocacy. She is a Co-Founder and former National Chair of Equal Voice, a non-partisan organization aimed at electing more women in Canada. She currently serves on the Board of Directors of Women’s Legal Education and Action Fund (LEAF), which promotes equality rights for women. In 2015, she co-founded the Campaign for an Equal Senate for Canada, an initiative to promote a gender-equal Senate. She works with National Democratic Institute on issues related to women in politics internationally.

She is currently a Fellow at the University of Toronto’s School of Public Policy and Governance and teaches in the Master’s program. She is a member of Statistics Canada’s Advisory Committee on Social Conditions.

Pierre Dalphond

Born in Joliette, the Honourable Pierre Dalphond has extensive legislative and judicial experience in Canada. He obtained a law degree from the Université de Montréal, before completing a masters in political philosophy and law at Oxford University in 1982.

In addition to being a member of the Quebec Bar Association since 1979, Mr. Dalphond served as Legislative Advisor to the President of the Privy Council and Leader of the Government in the House of Commons from 1982 to 1984. He then became a partner in the law firm McCarthy Tétrault, where he practiced civil law, business law, energy law, and constitutional and administrative law.

He was appointed to the Superior Court of Quebec in 1995 and to the Quebec Court of Appeal in 2002. He has sat on a number of committees for the Superior Court, the Court of Appeal, bar associations, and the Canadian Judicial Council.

During his career, he served as president of the Canadian Superior Courts Judges Association, a member of the board of directors of the Canadian Institute for the Administration of Justice, and president of the Judicial Appointments Advisory Committee for Montréal and Western Quebec.

For more than 30 years, he has played an active role in advancing legal education in Quebec, Canada, and around the world. He has given numerous talks in Canada and abroad, hosted educational activities for judges from Canada and abroad, and written a number of legal articles.

In recognition of his exceptional contribution to educating young lawyers, the Young Bar of Montréal named him an honorary member for life. He also received the Queen’s Diamond Jubilee Medal in 2012.

Mr. Dalphond currently works as senior counsel in Stikeman Elliott’s Montréal office and as a visiting professor at the Université de Montréal’s Faculty of Law. He is also a member of the board of directors of the Quebec Society of Comparative Law, a faculty member at the Philippe Kirsch Institute, and a member of several national and international organizations related to commercial mediation and arbitration.

FULL DOCUMENT: https://pm.gc.ca/eng/news/2018/06/06/prime-minister-announces-appointment-two-senators

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LGCJ.: