CANADA ECONOMICS

COLOMBIA

Global Affairs Canada. June 18, 2018. Canada congratulates Colombia’s president-elect

Ottawa, Ontario - The Honourable Chrystia Freeland, Minister of Foreign Affairs, today issued the following statement:

“On behalf of the Government of Canada, I congratulate Iván Duque Márquez on his election as the next president of Colombia. I also wish to congratulate Marta Lucía Ramirez on becoming the first woman ever to hold the office of vice-president of Colombia.

“From our strong bilateral partnership to our cooperation in regional and international organizations and initiatives, such as the Organization of American States and the Lima Group, Canada and Colombia share a commitment to democracy and human rights.

“Our two countries also have a strong trade relationship, which is supported by the Canada-Colombia Free Trade Agreement and its accompanying labour and environmental cooperation agreements. We are eager to expand this collaboration and we are pursuing negotiations for Canada to join the Pacific Alliance as an associated state, of which Colombia is a founding member.”

US - CHINA

The Globe and Mail. 18 Jun 2018. U.S. lawmakers warn Canada about Huawei. Chinese telecom giant a national security threat to Western allies, senators say
ROBERT FIFE
STEVEN CHASE

OTTAWA - Senior lawmakers on U.S. intelligence committees are warning the Trudeau government that Chinese smartphone maker Huawei – which has turned Canada into a key research centre for next-generation mobile technology – is a national-security threat to a network of Canada’s allies.

Republican Senator Tom Cotton and Democratic Senator Mark Warner told The Globe and Mail that the Chinese telecom giant is a grave cybersecurity risk and its smartphones and equipment should not be used by Canada and other Western allies.

Of paramount concern is an allout drive by the Chinese technology conglomerate to become a world leader in the next-wave 5G telecommunications technology, which is expected to bring near-broadband speeds to smartphones and enable such breakthrough technologies as driverless cars. A spokesperson for Mr. Cotton, who has tabled legislation to ban the U.S. government from dealing with Huawei, said he instructed the director of the National Security Agency, Lieutenant-General Paul Nakasone, to “engage with Canadians” and other members of the “Five Eyes” intelligence-sharing community “to educate them on the threat” and keep Huawei out of their 5G networks.

Five Eyes is an intelligence-sharing network among Australia, Canada, New Zealand, Britain and the United States.

Huawei is largely shut out of the U.S. market and Australia is currently considering blocking the Chinese national tech champion from supplying equipment to the construction of 5G telecommunications infrastructure – a move that would further frustrate the Shenzhen-based company’s ambition to be the world leader in this technology.

In Canada, a Globe and Mail investigation last month revealed that universities, governments and phone companies are helping Huawei – now the largest telecommunications equipment manufacturer in the world in the Broughton Archipelago – to develop the ultrafast wireless technology, which it is using for hundreds of patent filings. Canadian universities are a pipeline for intellectual property that bolsters the company’s 5G market position.

Chiefs of six U.S. intelligence agencies and three former heads of Canada’s spy services recently said that Huawei is one of the world’s top cyberintelligence threats and its 5G technology could be used to conduct remote spying and maliciously modify or steal information or even shut down systems.

“Certainly this threat demonstrates the need for a concerted, co-ordinated response among allies,” Mr. Warner said in a statement to The Globe. “The significant U.S. presence – government, corporate and citizen – in Canada, the vulnerabilities telecom equipment and infrastructure can present, should underscore that concern, as does China’s use of coercion, forced co-operation and co-option to acquire sensitive technologies.”

Mr. Nakasone, who heads the U.S. signals intelligence agency, told the Senate intelligence committee that he would not use Huawei products because the company answers to the ruling Communist Party. Article 7 of China’s 2017 National Intelligence Law says that Chinese companies must “support, co-operate with and collaborate in national intelligence work, and guard the secrecy of national intelligence work they are aware of.”

Two senior members of the intelligence committee in the House of Representatives – ranking Democrat Adam Schiff and Republican Mike Conaway – said national-security concerns should raise alarm bells in any country where Huawei products are sold and could compromise Five Eyes intelligence. “Given the integration of the U.S. and Canadian economies, Huawei equipment used in Canada is likely to affect both our countries – to our detriment,” Mr. Schiff told The Globe.

Mr. Conaway said: “Huawei poses a serious national-security threat to U.S. government communications. Because of the high level of intelligence sharing between Five Eyes countries, I have concerns that the presence of Huawei in any of these countries could present a significant risk to our co-ordination, and ultimately, U.S. national security as a result.”

Despite these concerns, all major Canadian telecom carriers are now heavily promoting Huawei’s latest smartphone, and Canadian universities have defended the work they do with Huawei, saying they haven’t been told by Canada’s national-security agencies to avoid producing R&D for the Chinese behemoth.

Michael Wessel, a commissioner on the U.S.China Economic Security Commission, a watchdog that reports to Congress, said Huawei has “dramatically expanded” its relationships with universities around the world, hoping to harvest the best research. “Huawei’s involvement with Canadian universities raises serious questions as well in light of the strong relationship between U.S. and Canadian technology and telecommunications firms, the integrated nature of our technology infrastructure and the cutting-edge research being done in Canada,” Mr. Wessel said. “Canada, through its recent rejection of the purchase of Aecon by a Chinese state-owned entry, has shown an increasing sensitivity to Chinese security threats and should act, as the U.S. should, to have their universities quickly sever their ties to Huawei.”

Public Safety Minister Ralph Goodale did not respond to a request for comment and instead referred The Globe to the Communications Security Establishment, which collects foreign security intelligence and seeks to protect Ottawa’s information systems from cyberattacks.

“While we are unable to comment on specific companies, products or service providers, Canadians can be assured that the Government of Canada is working to make sure the strongest protections are in place to safeguard the systems Canadians rely on,” spokesman Evan Koronewski said.

Huawei vice-president Scott Bradley said his firm has been working “openly and transparently” with the Canadian government and domestic telecoms for a decade to satisfy nationalsecurity concerns. He has noted Huawei does not bid on government telecommunications contracts. “From the outset, we have understood fully as an incoming vendor in the area of telecommunications, let alone a telecommunications company based in China, we would need to work under certain parameters and guidelines to meet the requirements of the government and Canadian operators,” he said. “Similarly, we have had to address these issues in other major markets around the world, including all other G7 nations. In all of these countries, except the United States, we have been able to find a way to meet and address these issues.”

Last week, Mr. Goodale announced $500-million over five years for the establishment of a new Canadian Centre for Cyber Security, measures to help small businesses boost their cyberdefences and the RCMP to tackle online crime. The plan is mostly silent about foreign-owned telecommunications companies such as Huawei. Former Canadian Security Intelligence Services directors Ward Elcock and Richard Fadden, and John Adams, the former head of this country’s CSE, have told The Globe that Huawei products and 5G technology could provide China with the capacity to spy on Canadians.

Since arriving in Canada a decade ago, Huawei has committed about $50-million to 10 leading Canadian universities to fund 5G technology, which it used as the basis for hundreds of patent filings. The amount the company gives to universities is expected to grow to about $18million this year alone.

CANADA - US

The Globe and Mail. 18 Jun 2018. Escalating trade war hinders global commerce. Companies stung by immediate impact as U.S. tariffs roll out and spark retaliation. Holts: Retailer returning to simpler business model amid heated market competition
PETER S. GOODMAN
IAN AUSTEN
ELISABETH MALKIN 

LONDON - Only a few months ago, the global economy appeared to be humming, with all major nations growing in unison. Now, the world’s fortunes are imperilled by an unfolding trade war.

As the Trump administration imposes tariffs on allies and rivals alike, provoking broad retaliation, global commerce is suffering disruption, flashing signs of strains that could hamper economic growth. The latest escalation came Friday, when U.S. President Donald Trump announced fresh tariffs on US$50-billion in Chinese goods, prompting swift retribution from Beijing.

As the conflict broadens, shipments are slowing at ports and airfreight terminals around the world. Prices for crucial raw materials are rising. At factories from Germany to Mexico, orders are being cut and investments delayed. U.S. farmers are losing sales as trading partners hit back with duties of their own.

Workers in a Canadian steel mill scrambled to recall rail cars headed to the United States border after Trump this month slapped tariffs on imported metals. A Seattle customer soon cancelled an order.

“The impact was felt immediately,” said Jon Hobbs president of AltaSteel in Edmonton. “The penny is really dropping now as to what this means to people’s businesses.”

The Trump administration portrays its confrontational stance as a means of forcing multinational companies to bring factory production back to American shores. Mr. Trump has described trade wars as “easy to win” while vowing to rebalance the United States’ trade deficits with major economies like China and Germany.

Mr. Trump’s offensive may yet prove to be a negotiating tactic that threatens economic pain to force deals, rather than a move to a fullblown trade war. Americans appear to be better insulated than most from the consequences of trade hostilities. As a large economy in relatively strong shape, the United States can find domestic buyers for its goods and services when export opportunities shrink.

Even so, history has proven that trade wars are costly while escalating risks of broader hostilities.

He also slashed about 80 per cent of Holts’ e-commerce merchandise categories, leaving just beauty items, as he prepared for an online return with upgraded technology and inventory that better reflected goods in its stores.

For the first year or so under his leadership, Holts grappled with softer sales growth as the chain underwent the makeover. But today it is beginning to see the fruits of his team’s work, he said in an interview.

“We certainly had to up our game here in the corporate office,” said Mr. Grauso, clad in casual-chic of a grey Brunello Cucinelli jacket over a sweater and shirttails stylishly hanging out over dark Acne jeans, rolled up at the bottom, and Prada loafers. (“I’m good friends with Brunello,” he says.)

“Have we lost customers? Perhaps. Are the customers we retained buying more? Perhaps. One way or another, we’ve got double-digit growth and two competitors entered the market.”

In its push to emerge a winner in Canada’s luxury wars, Holts is pouring $400-million into remodelling and expanding four of its nine stores in Montreal, Toronto and Vancouver along with new technology over a four-year period to 2020, he said.

Owned by the private company of the wealthy Weston family, which also controls the country’s premier grocer, Loblaw Cos. Ltd., and the No. 1 drugstore chain, Shoppers Drug Mart, Holts is returning to a simpler business model. It has shed ancillary businesses such as its discount chain and done away with underperforming stores, private labels and fur salons.

“It shows the commitment that the group has in this brand to the market in the face of competition,” said Mr. Grauso, who previously headed Loblaw’s Joe Fresh apparel line and before that was an executive at luxury goods suppliers.

The luxury fashion market is growing in Canada, bolstered by more players, a stronger economy and favourable currency shifts, said Randy Harris, president of researcher Trendex North America. The industry has also been helped by millennials making their first luxury purchases; more e-commerce; and a pickup in the chi-chi casual and streetwear segment, he said.

While total Canadian retail apparel sales dropped 2.1 per cent to $30.6-billion last year, sales of luxury clothing rose 4.2 per cent to $2.3-billion in 2017 and will climb 3.7 per cent this year, according to Trendex estimates.

“If there were any losers in the luxury apparel market last year, it had to be both Holt Renfrew and the Bay,” Mr. Harris said, adding that Holts did benefit from beefing up its beauty business. While Holts has begun to update its stores, “it should have started much earlier,” he said. And delaying by a few years the launch of its combined new Holt Renfrew/Ogilvy store in Montreal to replace two separate ones “will only ensure the retailer could be in danger of being lapped in the Canadian luxury apparel market,” he said.

Mr. Grauso countered that Holts has capitalized on more customers shopping in Canada rather than in other countries. “I’ve heard a lot of customers say to me they have less reason to shop elsewhere, meaning outside of Canada. You want to keep your core customer shopping in your town.”

He said annual sales at privately held Holts have increased to more than $1-billion from an estimated $800-million in 2013, enjoying a double-digit lift at existing stores so far this year (and single-digit gains last year after a year of no growth in 2016). That’s despite having closed three stores in Ottawa, Quebec City and Winnipeg as well as its two HR2 discount outlets and most of its e-commerce over the past few years, he added. But heavy investments in the business are eating into profits.

Today the retailer is investing in markets and categories in which it thinks it can profit most, including Montreal, where neither Nordstrom nor Saks operates, and Vancouver, where Saks doesn’t have a store.

Within the next two years, Holts will close its sole men’s only store in Toronto – which opened in 2014 and, Mr. Grauso said, was too small and never meant to be permanent – while introducing a men’s section with double the space in its nearby flagship store.

He’s also bulking up on fast-growing categories of casual and athletic wear to cater to well-off millennial shoppers, as well as footwear, beauty, handbags, outerwear and overall edgier designs. Departments of more formal wear such as suits and ties have been scaled back. Holts has dropped private labels (which are made specifically for a retailer and are usually less expensive) as it focuses more on big brands.

To bond more with customers, Holts has increased by 30 per cent the number of “personal shoppers” since Mr. Grauso arrived. The retailer now employs more than 40 of those advisers.

“There’s still more to do,” he said. “I certainly don’t want anyone to feel that we’re done.”

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LGCJ.: