CANADA ECONOMICS

NAFTA



The Globe and Mail. 15 Jun 2018. Canada, U.S. set sights on summer NAFTA talks. Both countries and Mexico have discussed compromises to settle Washington demands that have been major sticking points in negotiations
ADRIAN MORROW, WASHINGTON
GREG KEENAN, TORONTO
JUSTIN GIOVANNETTI, TORONTO

We spoke about a plan and a path forward for continuing our negotiations.

CHRYSTIA FREELAND FOREIGN AFFAIRS MINISTER

NATHAN DENETTE/THE CANADIAN PRESS. Minister of Foreign Affairs Chrystia Freeland arrives at the Ontario Legislature with her special assistant André Capaldi to meet with the province’s premier-designate Doug Ford on Thursday.

Foreign Affairs Minister Chrystia Freeland and the Trump administration’s trade chief have agreed to resume “intensive” NAFTA talks this summer as Canada looks for a way out of its burgeoning trade war with the United States.

And sources with knowledge of the confidential discussions say the three countries have discussed compromise proposals to break logjams on automotive content rules and a sunset clause – two key U.S. demands that are major sticking points in the talks to renegotiate the North American free-trade agreement.

Ms. Freeland met with U.S. Trade Representative Robert Lighthizer at his office near the White House for an hour on Thursday morning.

“We spoke about a plan and a path forward for continuing our negotiations,” Ms. Freeland said later. “We decided to continue our work in an intensive way over the summer.”

They have not yet set specific meeting dates.

The Trump administration has insisted it will not lift tariffs on steel and aluminum it imposed at the start of this month until Canada and Mexico agree to a deal on NAFTA. Canada has announced it will retaliate with equivalent tariffs on $16.6billion worth of U.S. goods starting July 1.

The U.S. President has also threatened to impose a 25-per-cent levy on imported autos.

Sources with knowledge of the confidential talks said the United States has held out the possibility of dropping the tariffs once Canada and Mexico agree to the Trump administration’s NAFTA auto content demands, with the rest of the pact to be negotiated afterward.

Among other things, the United States wants provisions that would force car and truck makers to use at least 70 per cent North American steel and aluminum and source 40 per cent of their car parts from factories paying at least US$16 an hour. The latter measure is intended to make it more difficult for Mexico to attract manufacturing jobs by allowing auto makers to pay wages averaging the equivalent of US$4 an hour.

Compromise discussions have focused on reducing the percentage of content subject to the wage and steel standards. Mexico has also proposed allowing auto makers to choose which standards they meet, fulfilling a requirement on steel, for instance, but not on wages.

Negotiators have also discussed how to make a NAFTA sunset clause that the United States is demanding more acceptable to Canada and Mexico, one source said. The original proposal – rejected by Prime Minister Justin Trudeau – would terminate NAFTA in five years unless all three sides agreed to extend it. Compromise ideas include making the time period longer and adding a provision for regular negotiations to address issues years before the expiry date, the source said.

Dan Ujczo, an Ohio trade lawyer who represents auto-parts makers, said he believes U.S. negotiators will try to cut a deal with Mexico right after that country’s presidential election on July 1 and use this to press Canada into an agreement.

Leftist candidate Andres Manuel Lopez Obrador is leading in the polls and is expected to be more amenable to U.S. auto demands – particularly on wage standards – because he is not as close to multinational automakers as the current government of Enrique Pena Nieto.

Mr. Ujczo said he believes the United States will keep negotiating and does not plan to imminently trigger the six-month process of withdrawing from NAFTA, which Mr. Trump has repeatedly threatened to do.

“If the goal is to torture Canada, he’s going to have it on the rack and stretch it out with tariffs, NAFTA, uncertainty,” he said. “You don’t cut the rope by withdrawal and ease the pain – that would be mercy, almost.”

Ottawa is pressing ahead with its campaign to get U.S. governors, members of Congress and the business community to urge the White House to ease off on its tough NAFTA demands.

Ontario premier-designate Doug Ford vowed to join the fight on Thursday after a briefing at the Whitney Block near the Ontario Legislature from Ms. Freeland and David MacNaughton, Canada’s ambassador to the United States.

“It’s going to be a full-court press. I’m going to be travelling to every single state, because nothing is better than meeting someone eyeto-eye,” Mr. Ford said.

Canada’s steel industry is calling on companies that use steel in Canada and have operations in the United

States – such as auto makers

– to lobby the U.S. administration to lift the tariffs on Canada.

The federal government has released a list of U.S. products it proposes to target, including steel, aluminium, boats, maple syrup and orange juice. The federal government gave Canadians until Friday to comment on the plan.

“Only by presenting a unified ‘Team Canada’ approach to free and open trade can we hope to convince the U.S. to exempt Canada from tariffs in steel and aluminum and to discourage the U.S. moving forward with … tariffs on imports of autos and automotive parts from Canada,” Canadian Steel Producers Association president Joseph Galimberti said in the comment he submitted, which was released on Thursday.

Ms. Freeland had the tête-à-tête with Mr. Lighthizer the morning after she gave a tough speech to Washington’s foreign policy establishment linking Mr. Trump’s tariffs to the mounting populist authoritarianism threatening liberal democracy around the world.

That speech, at an event during which she received Foreign Policy magazine’s diplomat of the year award, described the tariffs as “absurd” and “hurtful” and a “naked example of the United States putting its thumb on the scale, in violation of the very rules it helped to write.”

Ms. Freeland said she gave Mr. Lighthizer a copy of the speech at their meeting. She said he was “very gracious” and congratulated her on the award.

“I believe very strongly that it is important for those of us who believe in liberal democracy – and I think that includes the overwhelming majority of Canadians – for us to strike back,” Ms. Freeland said on Thursday, warning that democracies must fight against “demagogues who scapegoat immigrants at home, or foreign trading partners.”

The Globe and Mail. 15 Jun 2018. Wood-shingle makers join forces against softwood tariffs. Firms appeal to Washington after being blindsided by addition of their products to lumber dispute. Tariffs: Alliance made up of B.C., New Brunswick, Quebec firms
BRENT JANG, VANCOUVER

DOUG DONALDSON, B.C. FORESTS MINISTER

It’s outrageous that shakes and shingles are considered by the U.S. to be ‘lumber.’

Canadian producers of cedar shakes and shingles are seeking to fend off new U.S. tariffs, waging war against the Trump administration more than three decades after Ronald Reagan imposed duties that lasted five years on the wood-roofing materials.

Canadian firms say the products have been unfairly targeted with duties of 20.23 per cent. They have formed a group, the Shake and Shingle Alliance, to oppose their inclusion in the U.S. tariffs on softwood lumber.

The group’s members “were caught off guard” by the surprise addition of their products three months ago to the dispute over softwood lumber, according to a 55-page submission from the alliance this week to the U.S. Department of Commerce that asks for Canadian shakes and shingles to be exempt from tariffs.

“We request that the Department expedite to the greatest possible extent its review of this request and render a decision at the earliest possible time to prevent further injury,” the alliance said in its document, addressed to Commerce Secretary Wilbur Ross.

The U.S. customs and border agency told the companies in a notice on March 15 that wood products that are tapered to less than six millimetres in thickness at one end are not necessarily exempt from the softwood tariffs.

A lawyer for the alliance raised Canada’s concerns, including opposition to the inclusion of wood products that are thinner than lumber, during a May 24 meeting with Commerce Department officials.

Late last year, the United States decided to levy final duties averaging 20.23 per cent against most Canadian lumber producers.

A dozen Canadian companies have joined the alliance, which said producers in three provinces were targeted without any warning. The notice from the U.S. Customs and Border Protection about the new tariffs came 10 weeks after the final duties against Canadian lumber took effect on Jan. 3, the filings show.

“CSS [cedar shakes and shingles] constitute a separate and distinct product and industry,” the alliance said in its submission dated June 12, arguing that U.S. border officials can easily tell the difference between the roofing products and the “subject merchandise” of softwood lumber.

“CSS are easily distinguishable from subject merchandise at the border and cannot feasibly be used in place of, or further manufactured into, subject merchandise.”

B.C. Forests Minister Doug Donaldson said the B.C. government backs Canadian producers. “It’s outrageous that shakes and shingles are considered by the U.S. to be ‘lumber.’ We support them in their request to be excluded from the tariffs,” Mr. Donaldson said in a statement to The Globe and Mail on Thursday.

The Reagan administration put a 35per-cent duty on Canadian cedar shakes and shingles in May, 1986. “Actions like this make it extremely difficult for anyone, including Canadians, to be friends with the Americans from time to time,” then-prime minister Brian Mulroney said.

Mr. Mulroney’s government imposed tariffs a month later on U.S. items including books, computer components and Christmas trees.

The Americans gradually reduced the duties against shakes and shingles, ending them in June, 1991.

Five of the alliance’s members are based in British Columbia, four in Quebec and three in New Brunswick. They include Best Quality Cedar Products Ltd. in Maple Ridge, B.C., Fraser Specialty Products Ltd. in Fredericton and Les Bardeaux Lajoie Inc. in Saint-Eusèbe, Que.

“We respectfully submit that CSS are not softwood lumber,” the alliance said. “CSS are a separate and distinct product that is manufactured directly from cedar logs in dedicated mills, using specialized equipment not used in the manufacture of softwood lumber.”

The alliance said the U.S. lumber lobby did not list shakes and shingles among its concerns in the dispute. Canadian producers say members of the influential U.S. group COALITION, which stands for Committee Overseeing Action for Lumber International Trade Investigations or Negotiations, do not even manufacture shakes and shingles.

“Cedar shakes and shingles are specialized, high-end products used on the roof and sides of residential and commercial buildings, to create a desired architectural style,” the alliance said in its filing to the Commerce Department.

“We respectfully request that the Department take administrative notice of the fact that past Department investigations involving softwood lumber have expressly identified shakes and shingles as an industry separate from softwood lumber.”

The latest cross-border clash over softwood is the fifth round in the fight dating back to 1982.

INTERNATIONAL TRADE

Global Affairs Canada. June 15, 2018. Minister Champagne to lead a delegation of Canadian business women in international trade to Detroit

Ottawa, Ontario - The Government of Canada is committed to advancing gender equality and creating more opportunities for women to participate in the economy and create growth that works for everyone.

From June 20 to 21, the Honourable François-Philippe Champagne, Minister of International Trade, will lead the first delegation of Canadian business women to the Women’s Business Enterprise National Council (WBENC) National Conference and Business Fair in Detroit. This year’s theme is Join Forces, Succeed Together!

While at the conference, Minister Champagne will host a reception for the Canadian delegation and invited U.S. business guests. The Minister will also deliver a keynote address at the WBENC final luncheon.

While in Detroit, the Minister will participate in a discussion with the leadership and the board of Directors of the Detroit Regional Chamber and also lead a round table discussion on Canadian Innovation, R&D and Artificial Intelligence (AI) capabilities.

The Minister will also take this opportunity to meet with automotive industry and other business leaders on both sides of the border who have an interest in trade and investment with Canada.

Quotes

“The Government of Canada recognizes that women are integral to international trade and to economic growth. Over the last few decades, trailblazing Canadian women have increasingly brought their energy, ideas, and entrepreneurial spirit to bear throughout Canada’s business world. From small and medium-sized businesses, to large, multinational firms, Canadian business women are making a positive impact in markets all over the world.”

- François-Philippe Champagne, Minister of International Trade

Quick facts

• The WBENC National Conference and Business Fair is the world’s largest conference targeted to women who want to access supplier diversity opportunities through U.S. Fortune 500 companies.
• The Global Affairs Canada’s Business Women in International Trade (BWIT) program mandate is to link Canadian women entrepreneurs with international business opportunities to help spur their company’s growth.
• The U.S.-Canada trade relationship has long been a model for the world: it is growing, it is balanced, it is fair and it supports growth, innovation and well-paying jobs in both countries.
• Millions of good, middle-class jobs on both sides of the border depend on our partnership. In the United States alone, nearly 9 million jobs are linked to Canadian trade and investment.

FULL DOCUMENT: https://www.canada.ca/en/global-affairs/news/2018/06/minister-champagne-to-lead-a-delegation-of-canadian-business-women-in-international-trade-to-detroit.html

INDUSTRY

StatCan. 2018-06-15. Monthly Survey of Manufacturing, April 2018

• Manufacturing sales: $56.2 billion; April 2018; -1.3% decrease (monthly change)
• Inventories: $81.2 billion; April 2018; 2.2% increase (monthly change)
• Inventory-to-sales ratio: 1.44; April 2018; 0.04 pts increase (monthly change)
• Unfilled orders: $90.0 billion; April 2018; 1.3% increase (monthly change)
• Source(s): Table 16-10-0047-01: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1610004701

Manufacturing sales fell 1.3% to $56.2 billion in April, following two consecutive monthly increases.

Sales were down in 10 of 21 industries, representing 49.6% of the manufacturing sector. Sales in the petroleum and coal products and transportation equipment industries accounted for much of the decrease in April. Excluding these two industries, manufacturing sales rose 0.4%.

Chart 1: Manufacturing sales decline

In constant dollars, manufacturing sales in volumes declined 1.9%.

The petroleum and coal products and transportation equipment industries post the largest declines

In April, sales in the petroleum and coal products industry fell 10.9% to $5.2 billion, a third consecutive monthly decline. The decrease in April was entirely due to lower sales volumes, as prices for the industry rose 4.5%, according to the Industrial Product Price Index. Partial shutdowns at a number of Canadian refineries for maintenance work during the month were a major contributor to the decline in volumes sold (-13.2%).

Sales of transportation equipment fell 2.3% to $10.9 billion in April, largely due to weaker sales of other transportation equipment (-55.8%) and lower production of aerospace products and parts (-6.4%).

In April, sales were up in 11 industries, with the largest increases in the primary metal manufacturing (+3.8%) and food products (+1.9%) industries.

Sales down in six provinces

In April, sales were down in six provinces, led by Quebec and Alberta.

Following two months of increases, sales in Quebec fell 3.4% to $13.3 billion, mostly as a result of lower sales of petroleum and coal products. Decreases in the aerospace product and parts industry and the machinery industry also contributed to the provincial decline.

In Alberta, sales were down 5.3%, following a 0.5% increase in March. The decline was largely attributable to a 20.5% decrease in sales of petroleum and coal products, which resulted in part from partial shutdowns for maintenance work at some of the province's refineries.

Saskatchewan posted the largest monthly increase in April, with sales rising 6.7% to $1.5 billion. This second consecutive monthly increase was driven by higher sales of non-durable goods.

Inventory levels rise

Inventory levels rose 2.2% in April to $81.2 billion, a seventh consecutive monthly increase. The largest inventory increase occurred in the petroleum and coal products industry (+6.6%). Inventory levels also rose in the transportation equipment (+2.2%), machinery (+3.7%) and food products (+2.9%) industries.

Chart 2: Inventory levels increase

The inventory-to-sales ratio rose from 1.40 in March to 1.44 in April. The inventory-to-sales ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.

Chart 3: The inventory-to-sales ratio increases

Unfilled orders increase

In April, unfilled orders increased 1.3% to $90.0 billion, a third consecutive monthly increase. Most of the gain came from a 1.8% increase in the aerospace product and parts industry. Unfilled orders were also up in the fabricated metal products industry.

Chart 4: Unfilled orders increase

New orders fell 1.6% to $57.4 billion in April. This decline was mainly the result of lower new orders in the petroleum and coal products and in the aerospace product and parts industries.

FULL DOCUMENT: https://www150.statcan.gc.ca/n1/en/daily-quotidien/180615/dq180615b-eng.pdf?st=r-qZmx8J

ENERGY

StatCan. 2018-06-15. Supply and disposition of refined petroleum products, March 2018

• Refinery receipts of crude oil: 8.0 million cubic metres; March 2018; -8.0% decrease (12-month change)
• Source(s): Table 25-10-0041-01: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=2510004101
• Refinery production: 9.7 million cubic metres; March 2018; -4.7% decrease (12-month change)
• Refinery domestic sales: 8.3 million cubic metres; March 2018; -7.4% decrease (12-month change)
• Source(s): Table 25-10-0044-01: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=2510004401

Refinery receipts of crude oil, production of refined petroleum products and domestic sales of refined petroleum products were down in March compared with the same month in 2017.

Less crude oil received by refineries

Canadian refineries received 8.0 million cubic metres of crude oil in March, down 8.0% from the same month a year earlier.

Chart 1: Crude oil and equivalent products received by refineries

Imports to refineries were down 15.6% from March 2017 to 2.6 million cubic metres. Domestic crude oil received by refineries declined 3.8% to 5.4 million cubic metres.

Crude oil inventories held at refineries totalled 3.4 million cubic metres in March, down 18.0% from the same month in 2017.

Crude oil used in refinery production down

Total crude oil and equivalent products used in refinery production decreased 3.1% from March 2017 to 8.5 million cubic metres.

Refinery production and sales down

Production of refined petroleum products was down 4.7% from March 2017 to 9.7 million cubic metres, while domestic sales declined 7.4% to 8.3 million cubic metres.

Chart 2: Domestic sales of refined petroleum products, by product

Imports and exports up

Imports of refined petroleum products rose 21.5% from March 2017 to 1.4 million cubic metres and exports increased 9.9% to 2.4 million cubic metres.

Imports of motor gasoline (+54.1%) and aviation turbo fuel (+71.4%) were both up compared with the same month a year earlier.

Inventories up

Closing inventories of refined petroleum products held by refineries increased 12.4% from March 2017 to 8.7 million cubic metres.

First quarter review for 2018

Canadian refineries received 24.2 million cubic metres of crude oil in the first quarter, down 4.0% from the same quarter in 2017.

Over the same period, production of refined petroleum products declined 1.4% to 28.4 million cubic metres and domestic sales decreased 2.4% to 24.5 million cubic metres.

Petroleum product imports rose 14.3% to 4.1 million cubic metres, while exports increased 0.8% to 7.1 million cubic metres.

FULL DOCUMENT: https://www150.statcan.gc.ca/n1/en/daily-quotidien/180615/dq180615c-eng.pdf?st=oMwE53_r

TOURISM

Innovation, Science and Economic Development Canada. June 14, 2018. Minister Chagger to lead federal, provincial and territorial tourism trade mission to China. Mission will connect Canadian businesses to partners in the world’s largest outbound tourism market during the Canada-China Year of Tourism

Ottawa ON - Canada and China enjoy strong people-to-people and business-to-business ties—the foundation for further cooperation and growth in both countries. As the Canada-China Year of Tourism (CCYT) enters peak tourist season, Canada’s dynamic tourism industry is getting ready to welcome a record number of Chinese visitors, which will lead to the creation of good middle-class jobs and economic growth for Canadians.

To help Canadian companies take full advantage of the unprecedented opportunity offered by CCYT, the Honourable Bardish Chagger, Leader of the Government in the House of Commons and Minister of Small Business and Tourism, today announced that she will lead a delegation of more than two dozen Canadian tourism companies, alongside provincial and territorial ministers and officials, to China from June 23 to 28.

The week-long mission will bring together tourism industry businesses and stakeholders, with a focus on Indigenous tourism, rural and remote destinations, culinary tourism and winter sports tourism. The delegation will showcase Canada’s diverse and unique tourism opportunities to Chinese travellers and to the Chinese tourism industry.

Through this mission, Canadian tourism industry leaders will be immersed in the Chinese market and will develop a better understanding of its immense potential. They will have the opportunity to promote Canada’s tourism offerings and meet key stakeholders in the Chinese tourism industry through business-to-business matchmaking and briefings from trade and tourism experts. A number of key business development events—in Beijing, Hangzhou and Shanghai—will help delegates gain a better understanding of this market and forge important partnerships with Chinese operators.

The delegation comprises tourism industry leaders from across Canada, including Parks Canada, Destination Canada, the Tourism Industry Association of Canada (TIAC) and the Indigenous Tourism Association of Canada (ITAC).


Quotes

“As we celebrate the Canada-China Year of Tourism, I am honoured to lead this delegation of Canadian tourism industry leaders to China. China is Canada’s second-largest overseas source market for tourists, and it’s growing. Our government understands the economic opportunity this represents for the more than 200,000 small businesses in the industry and the close to 1.8 million Canadians whose jobs are supported by tourism. Tourism is the number one employer of youth and makes up 2% of Canada’s GDP. Tourism is also Canada’s largest service export. We are committed to building on this momentum. Our goal is to double the number of Chinese visitors coming to Canada by 2021, and the relationships we build on this trade mission will strengthen our business-to-business connections in this key market.”

– The Honourable Bardish Chagger, Leader of the Government in the House of Commons and Minister of Small Business and Tourism

“I encourage all Chinese tourists to experience the outdoors and learn about Canada’s heritage by visiting our national parks, historic sites and marine conservation areas during the Canada-China Year of Tourism. I am especially proud that we are offering free admission for youth from around the world, from 2018 and beyond, to all our Parks Canada places from coast to coast to coast. This is the perfect way to celebrate families and the importance of protected areas.”

– The Honourable Catherine McKenna, Minister of Environment and Climate Change and Minister responsible for Parks Canada

“There is unprecedented momentum in the Chinese market, and we are working with our provincial and territorial partners and tourism businesses from across the country to seize the opportunity. This trade mission, led by the Government of Canada, is great exposure for our partners and the sector as a whole.”

– David F. Goldstein, President and Chief Executive Officer, Destination Canada

“With the continued growth forecasted for China inbound tourism, the Tourism Industry Association of Canada welcomes the opportunity to join the trade mission. Helping Canadian businesses capitalize on this market is an ongoing priority for our organization. Since 2016, TIAC has been working with the Government of Canada to administer the Canada-China Inbound Tour Operator Accreditation Program, helping SMEs get China-ready with 20 training sessions delivered across Canada. TIAC continues to strengthen the cooperation between the two countries by advocating for measures that facilitate access to Canada, securing market-approved payment methods, and partnering with leading Chinese organizations such as CNTA, the Word Tourism Alliance and UnionPay.”

– Charlotte Bell, President and Chief Executive Officer, Tourism Industry Association of Canada

“With its depth and breadth of cultural, adventure, accommodation and activity offerings available for visitors from around the world in which to immerse themselves, Indigenous tourism is a key motivator for Canada’s tourism industry. For the past three years, our national organization has worked closely with the Government of Canada and our provincial and territorial partners to ensure that international visitors seek out and enjoy these unique experiences when they visit our beautiful country.”

– Keith Henry, President and Chief Executive Officer,  Indigenous Tourism Association of Canada

Quick facts

• This trade mission is part of Minister Chagger’s commitment to working with provincial and territorial representatives to better promote Canada as a top tourism destination, which she made during the annual meeting of the Canadian Council of Tourism Ministers.
• Tourism is Canada’s top service export, accounting for one in ten jobs associated with the visitor economy.
• Tourism GDP in 2017 was $41.2 billion, up 6.3% from 2016. Tourism’s share of Canadian GDP in 2017 was over 2%.
• More than 735,000 jobs were directly supported by tourism in 2017, up 1.9% from 2016.
• China is Canada’s second-largest trading partner, its largest and fastest-growing source market for international students, and its second-largest overseas source of tourists.
• Chinese travellers typically spend more on average than other travellers. The amount spent per trip in 2016 was $2,517. Chinese tourists spent an estimated $1.488 billion in Canada in 2016.
• Since China granted Canada approved destination status in 2010, the number of Chinese tourists to Canada grew on average by nearly 20% each year.
• The number of tourists from China grew from 195,000 in 2010 to 682,000, according to preliminary estimates, in 2017. The government is committed to continuing this impressive trend of record-breaking growth.
• Preliminary tourism estimates for the first quarter of 2018 (January to March) show that approximately 131,000 Chinese tourists visited Canada, representing growth of 25.6% compared to the first quarter of 2017. In the first quarter of 2018, China overtook the U.K. as the largest overseas market for Canadian tourism for the first time ever.

FULL DOCUMENT: https://www.canada.ca/en/innovation-science-economic-development/news/2018/06/minister-chagger-to-lead-federal-provincial-and-territorial-tourism-trade-mission-to-china.html

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LGCJ.: