CANADA ECONOMICS
US TARIFFS ON STEEL AND ALUMINIUM IMPORTS
Global Affairs Canada. 2018-06-01. Canada files World Trade Organization and North American Free Trade Agreement litigation in response to illegal U.S. tariffs
Ottawa, ON - The Honourable Chrystia Freeland, Minister of Foreign Affairs, today issued the following statement:
“Canada will always defend Canadian workers and Canadian interests against protectionist actions that undermine the integrity of the global trading system.
“On top of the retaliatory measures announced yesterday, the Government of Canada today requested WTO consultations with the United States regarding its imposition of punitive tariffs on imports of steel and aluminium from Canada, and more generally, on the United States’ improper use of national security pretexts for protectionist purposes.
“As a key NORAD and NATO ally of the United States, and as the number-one customer of American steel, Canada views the U.S. trade restrictions imposed on Canadian steel and aluminum as absolutely unacceptable.
“These unilateral tariffs, imposed under a false pretext of safeguarding U.S. national security, are inconsistent with the United States’ international trade obligations and WTO rules.
“Canada will closely collaborate with the European Union, which also filed a WTO challenge today, as well as with other like-minded countries, on opposing these tariffs.
“Canada also intends to request the establishment of a NAFTA Chapter 20 panel to address the United States’ violation of NAFTA rules. That request will also be filed today.
“It is entirely inappropriate to view any trade with Canada as a national security threat to the United States. Canada is a safe and secure supplier of fairly traded steel and aluminum for U.S. defence and security. Canada is recognized in U.S. law as a part of the U.S. National Technology and Industrial Base related to national defence.
“Canada is a strong proponent of the rules-based international trading system, which ensures the predictability of global trade.”
Notice of intent to impose countermeasures action against the United States in response to tariffs on Canadian steel and aluminum products
Background
On May 31, 2018, the United States (U.S.) announced the imposition of tariffs on imports of certain steel and aluminum products from Canada (at the rates of 25% and 10%, respectively).
In response to these measures, Canada intends to impose surtaxes or similar trade-restrictive countermeasures against up to C$16.6 billion in imports of steel, aluminum, and other products from the U.S., representing the value of 2017 Canadian exports affected by the U.S. measures. The Government is also considering whether additional measures may be required.
Scope of countermeasures
The products subject to countermeasures will be drawn from those listed in Tables 1 and 2 below. Goods selected from Table 1 will be subject to a 25 per cent surtax or similar trade-restrictive measures. Goods selected from Table 2 will be subject to a 10 per cent surtax or similar trade-restrictive measures.
These countermeasures will only apply to goods originating from the U.S., which shall be considered as those goods eligible to be marked as a good of the U.S. in accordance with the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations.
These countermeasures will take effect on July 1, 2018 and will remain in place until the U.S. eliminates its trade-restrictive measures against Canada. The countermeasures will not apply to U.S. goods that are in transit to Canada on the day on which these countermeasures come into force.
The list of products outlined at the heading, subheading or tariff item level in Tables 1 and 2 should be read in conjunction with the Schedule to Canada's Customs Tariff.
Comments
Written comments should be provided no later than June 15, 2018. Submissions, at a minimum, should include the following information:
- Canadian company/industry association name, address, telephone number, and contact person.
- Relevant eight-digit tariff item(s) and description of the goods of particular interest.
- Reasons for the expressed support for, or concern with, the proposed countermeasures, including detailed information substantiating any expected beneficial or adverse impact.
- If concern is expressed with respect to the proposed countermeasures for one or more eight-digit tariff item(s), please provide views on ways to alleviate such concerns.
- Please identify if information provided in the submissions is commercially sensitive.
| Tariff heading, subheading or item* | Description** |
|---|---|
| 72.06 | Iron and non-alloy steel in ingots or other primary forms (excluding iron of heading 72.03) |
| 72.07 | Semi-finished products of iron or non-alloy steel |
| 72.08 | Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, hot-rolled, not clad, plated or coated |
| 72.09 | Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, cold-rolled (cold-reduced), not clad, plated or coated |
| 72.10 | Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, clad, plated or coated |
| 72.11 | Flat-rolled products of iron or non-alloy steel, of a width of less than 600 mm, not clad, plated or coated |
| 72.12 | Flat-rolled products of iron or non-alloy steel, of a width of less than 600 mm, clad, plated or coated |
| 72.13 | Bars and rods, hot-rolled, in irregularly wound coils, of iron or non-alloy steel |
| 72.14 | Bars and rods of iron or non-alloy steel, not further worked than forged, hot-rolled, hot-drawn or hot-extruded, but including those twisted after rolling. |
| 72.15 | Other bars and rods of iron or non-alloy steel |
| 72.17 | Wire of iron or non-alloy steel |
| 72.18 | Stainless steel in ingots or other primary forms; semi-finished products of stainless steel |
| 72.19 | Flat-rolled products of stainless steel, of a width of 600 mm or more |
| 72.20 | Flat-rolled products of stainless steel, of a width of less than 600 mm |
| 72.21 | Bars and rods, hot-rolled, in irregularly wound coils, of stainless steel |
| 72.22 | Other bars and rods of stainless steel; angles, shapes and sections of stainless steel |
| 72.23 | Wire of stainless steel |
| 72.24 | Other alloy steel in ingots or other primary forms; semi-finished products of other alloy steel |
| 72.25 | Flat-rolled products of other alloy steel, of a width of 600 mm or more |
| 72.26 | Flat-rolled products of other alloy steel, of a width of less than 600 mm |
| 72.27 | Bars and rods, hot-rolled, in irregularly wound coils, of other alloy steel |
| 72.28 | Other bars and rods of other alloy steel; angles, shapes and sections, of other alloy steel; hollow drill bars and rods, of alloy or non-alloy steel |
| 72.29 | Wire of other alloy steel. |
| 7216.10 | U, I or H sections, of iron or non-alloy steel, not further worked than hot-rolled, hot-drawn or extruded, of a height of less than 80 mm |
| 7216.21 | L sections, of iron or non-alloy steel, not further worked than hot-rolled, hot-drawn or extruded, of a height of less than 80 mm |
| 7216.22 | T sections, of iron or non-alloy steel, not further worked than hot-rolled, hot-drawn or extruded, of a height of less than 80 mm |
| 7216.50 | Other angles, shapes and sections, of iron or non-alloy steel, not further worked than hot-rolled, hot-drawn or extruded |
| 7216.99 | Other angles, shapes and sections, of iron or non-alloy steel |
| 73.05 | Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross-sections, the external diameter of which exceeds 406.4 mm, of iron or steel |
| 73.06 | Other tubes, pipes and hollow profiles (for example, open seam or welded, riveted or similarly closed), of iron or steel |
| 7301.10 | Sheet piling of iron or steel, whether or not drilled, punched or made from assembled elements |
| 7302.40 | Railway or tramway track construction material of iron or steel: Fish-plates and sole plates |
| 7302.90 | Other railway or tramway track construction material of iron or steel |
| 7304.11 | Line pipe of a kind used for oil or gas pipelines: Of stainless steel |
| 7304.19 | Line pipe of a kind used for oil or gas pipelines: Other |
| 7304.24 | Casing or tubing, of a kind used in drilling for oil or gas: Of stainless steel |
| 7304.29 | Other casing or tubing, of a kind used in drilling for oil or gas |
| 7304.31 | Tubes and pipes, of circular cross-section, of iron or non-alloy steel: Cold-drawn or cold-rolled (cold-reduced) |
| 7304.39 | Other tubes and pipes, of circular cross-section, of iron or non-alloy steel |
| 7304.41 | Tubes and pipes, of circular cross-section, of stainless steel: Cold-drawn or cold-rolled (cold-reduced) |
| 7304.49 | Other tubes and pipes, of circular cross-section, of stainless steel |
| 7304.51 | Tubes and pipes, of circular cross-section, of other alloy steel: Cold-drawn or cold-rolled (cold-reduced) |
| 7304.59 | Other tubes and pipes, of circular cross-section, of other alloy steel |
| 7304.90 | Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel. |
| *Where listed at the heading or subheading level, coverage includes all tariff items under that heading or subheading. **Descriptions are included for illustrative purposes and do not necessarily reflect Harmonized System nomenclature. | |
| Tariff heading, subheading or item* | Description** |
|---|---|
| 0403.10 | Yogourt |
| 0901.21 | Coffee, roasted: Not decaffeinated |
| 1602.32.11 | Prepared meals: Of spent fowl; Specially defined mixtures |
| 1602.32.92 | Other: Specially defined mixtures, other than in cans or glass jars; Spent fowl other than in cans or glass jars |
| 1602.50.10 | Prepared meals, of bovine |
| 1602.50.99 | Other prepared or preserved meat of bovine, other than in cans or glass jars |
| 1702.20 | Maple sugar and maple syrup |
| 1704.90.20 | Liquorice candy; Toffee |
| 1704.90.90 | Other sugar confectionery (including white chocolate), not containing cocoa. |
| 1806.31 | Other chocolate, in blocks, slabs or bars: Filled |
| 1806.32 | Other chocolate, in blocks, slabs or bars: Not filled |
| 1905.90.51 | Pizza and quiche |
| 2001.10 | Cucumbers and gherkins |
| 2007.99.10 | Strawberry jam |
| 2007.99.90 | Nut purées and nut pastes, berry purées, other fruit purées other than banana purée, other jams, jellies |
| 2009.12 | Orange juice: Not frozen, of a Brix value not exceeding 20 |
| 2103.10 | Soya sauce |
| 2103.20 | Tomato ketchup and other tomato sauces |
| 2103.30.20 | Prepared mustard |
| 2103.90 | Mayonnaise, salad dressing, mixed condiments and mixed seasonings, other sauces |
| 2104.10 | Soups and broths and preparations therefor |
| 2202.10 | Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured |
| 2208.30 | Whiskies |
| 3304.30 | Manicure or pedicure preparations |
| 3305.30 | Hair lacquers |
| 3307.10 | Pre-shave, shaving or after-shave preparations |
| 3307.49 | Preparations for perfuming or deodorizing rooms, including odoriferous preparations used during religious rites, nes |
| 3401.30 | Organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap |
| 3402.20.10 | Automatic dishwasher detergents |
| 3406.00.90 | Other candles and tapers and the like not including those for birthdays, Christmas or other festive occasions |
| 3506.10 | Products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1 kg |
| 3808.91.10 | Insecticides: In packages of a gross weight not exceeding 1.36 kg each |
| 3808.92.10 | Fungicides: In packages of a gross weight not exceeding 1.36 kg each |
| 3808.93.10 | Herbicides, anti-sprouting products and plant-growth regulators: In packages of a gross weight not exceeding 1.36 kg each |
| 3923.21.90 | Other sacks and bags (including cones) of polymers of ethylene |
| 3923.29.90 | Other sacks and bags (including cones) of other plastics, nes |
| 3924.10 | Tableware and kitchenware |
| 3924.90 | Household articles and hygienic or toilet articles, of plastics |
| 4412.39 | Plywood, consisting solely of sheets of wood (other than bamboo), each ply not exceeding 6 mm thickness: Other, with both outer plies of coniferous wood |
| 4412.99.90 | Other plywood, veneered panels and similar laminated wood |
| 4802.56 | Other paper and paperboard, not containing fibres obtained by a mechanical or chemi-mechanical process or of which not more than 10% by weight of the total fibre content consists of such fibres: Weighing 40 g/m² or more but not more than 150 g/m², in sheets with one side not exceeding 435 mm and the other side not exceeding 297 mm in the unfolded state |
| 4811.59 | Other paper and paperboard coated, impregnated or covered with plastics (excluding adhesives) |
| 4818.10 | Toilet paper |
| 4818.20 | Handkerchiefs, cleansing or facial tissues and towels |
| 4818.30 | Tablecloths and serviettes |
| 4822.10 | Bobbins, spools caps and similar supports of a kind used for winding textile yarn, of paper pulp, paper or paperboard (whether or not perforated or hardened) |
| 4822.90 | Other bobbins, spools caps and similar supports of paper pulp, paper or paperboard (whether or not perforated or hardened) |
| 4909.00 | Printed or illustrated postcards; printed cards bearing personal greetings, messages or announcements, whether or not illustrated, with or without envelopes or trimmings. |
| 7310.10 | Beer kegs, of iron or steel, of a capacity of 50 litres or more |
| 7310.29 | Beer kegs, of iron or steel, of a capacity of less than 50 litres |
| 7321.90 | Parts of iron or steel, of stoves, ranges, grates, cookers (including those with subsidiary boilers for central heating), barbeques, braziers, gas-rings, plate warmers and similar non-electric domestic appliances |
| 76.04 | Aluminum bars, rods and profiles |
| 76.05 | Aluminum wire |
| 76.06 | Aluminum plates, sheets and strip, of a thickness exceeding 0.2 mm |
| 76.07 | Aluminum foil (whether or not printed or backed with paper, paperboard, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0.2 mm |
| 76.08 | Aluminum tubes and pipes |
| 76.09 | Aluminum tube or pipe fittings (for example, couplings, elbows, sleeves) |
| 76.10 | Aluminum structures (excluding prefabricated buildings of heading 94.06) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminum plates, rods, profiles, tubes and the like, prepared for use in structures |
| 76.11 | Aluminum reservoirs, tanks, vats and similar containers, for any material (other than compressed or liquefied gas), of a capacity exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment |
| 76.12 | Aluminum casks, drums, cans, boxes and similar containers (including rigid or collapsible tubular containers), for any material (other than compressed or liquefied gas), of a capacity not exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment |
| 76.13 | Aluminum containers for compressed or liquefied gas |
| 76.14 | Stranded wire, cables, plaited bands and the like, of aluminum, not electrically insulated |
| 76.15 | Table, kitchen or other household articles and parts thereof, of aluminum; pot scourers and scouring or polishing pads, gloves and the like, of aluminum; sanitary ware and parts thereof, of aluminum |
| 76.16 | Other articles of aluminum |
| 8418.10 | Combined refrigerator-freezers, fitted with separate external doors |
| 8419.19 | Instantaneous or storage water heaters, non-electric: Other than instantaneous gas water heaters |
| 8422.11.90 | Other dish washing machines, other than of the household type |
| 8433.11 | Mowers for lawns, parks or sports-grounds: Powered, with the cutting device rotating in a horizontal plane |
| 8450.11 | Household or laundry-type washing machines, each of a dry linen capacity not exceeding 10 kg: Fully-automatic machines |
| 8450.20 | Household or laundry-type washing machines, each of a dry linen capacity exceeding 10 kg |
| 85.37 | Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 85.35 or 85.36, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of Chapter 90, and numerical control apparatus, other than switching apparatus of heading 85.17 |
| 8903.10 | Inflatable boats |
| 8903.91 | Sailboats, with or without auxiliary motor |
| 8903.92 | Motorboats, other than outboard motorboats |
| 8903.99.90 | Outboard motorboats, other vessels for pleasure or sports, nes |
| 90.32 | Automatic regulating or controlling instruments and apparatus |
| 9401.61 | Other seats, with wooden frames: Upholstered |
| 9404.21 | Mattresses of cellular rubber or plastics, whether or not covered |
| 9404.29 | Mattresses of other materials |
| 9404.30 | Sleeping bags |
| 9404.90 | Other bedding and similar articles, nes |
| 9504.40 | Playing cards |
| 9608.10 | Ball point pens |
| 9608.20 | Felt tipped and other porous-tipped pens and markers |
Global Affairs Canada. May 31, 2018. Address by the Honourable Chrystia Freeland, Minister of Foreign Affairs, on steel and aluminum tariffs imposed by the United States. Speech
Ottawa, Canada - The United States’ decision to impose tariffs on Canadian steel and aluminum shipments is totally unacceptable.
In response to these measures, Canada intends to impose tariffs on imports of steel, aluminum and other products from the United States—representing the total value of 2017 Canadian exports affected by the U.S. measures. That is $16.6 billion. We are imposing dollar-for-dollar tariffs for every dollar levied against Canadians by the United States.
We are today publishing two lists of goods: one list that will be subject to a 25% tariff; a second list that will be subject to a 10% tariff.
25 percent and 10 percent are the tariff rates imposed today by the United States on Canada. These countermeasures will only apply to goods originating from the United States. These countermeasures will take effect on July 1, 2018, and will remain in place until the United States eliminates its trade-restrictive measures against Canada.
Our steel and aluminum workers have our government’s full support. That is why we have included American steel and aluminum products in our lists. As for the other products listed today, we have ensured these can be easily sourced from Canadian companies or non-U.S. trade partners, in an effort to avoid any costs being passed on to Canadian families and consumers.
We are today beginning a 15-day consultation period with Canadians so they may express support for, or concerns about, the proposed countermeasures and the list of goods. These lists of goods will be made available publicly, immediately, and online for all Canadians.
The unilateral trade restrictions by the United States are also in violation of NAFTA and WTO trade rules. Canada will therefore launch dispute-settlement proceedings under NAFTA Chapter 20 and WTO Dispute Settlement. Canada will also closely collaborate with like-minded WTO members, including the European Union, to challenge these illegal and counterproductive U.S. measures at the WTO.
It is entirely inappropriate to view any trade with Canada as a national security threat to the United States.
I want Canadians to know that their government will always stand up for Canadian workers and Canadian businesses.
The Globe and Mail. 1 Jun 2018. Ottawa strikes back. U.S. imposes tariffs on steel and aluminum, triggering targeted levies from Canada, Mexico and EU. Trade war erupts as Ottawa retaliates dollar for dollar
STEVEN CHASE, OTTAWA
GREG KEENAN, TORONTO
ADRIAN MORROW, WASHINGTON
Canada is firing back against punitive U.S. steel and aluminum tariffs as part of what is becoming a full-fledged global trade war, with the Trudeau government announcing it will retaliate against American protectionist actions on a “dollar for dollar” basis.
This followed news from the White House that the United States will impose tariffs of 25 per cent on Canadian steel and 10 per cent on Canadian aluminum starting Friday after the Trump administration removed an exemption sparing Canada and the European Union from measures first announced earlier this year. U.S. Commerce Secretary Wilbur Ross blamed this move on a lack of progress in North American free-trade renegotiations with Canada and Mexico.
Prime Minister Justin Trudeau said Canada will respond by slapping levies on $16.6-billion of U.S. imports starting July 1, saying the action taken by the Trump administration is “an affront to the long-standing security partnership” between Canada and the United States.
“This is the strongest trade action Canada has taken in the postwar era,” Foreign Affairs Minister Chrystia Freeland said.
The Canadian countermeasures came shortly after the EU and Mexico announced similar retaliatory measures against U.S. imports and decried the White House’s decision. “Today is a bad day for world trade,” EU trade commissioner Cecilia Malmstrom said. “We did everything to avoid this outcome.”
The protectionist attack from Donald Trump – and Mr. Trudeau’s pushback – ignites the most serious trade war between Canada and its largest trading partner in decades, as the nationalistic U.S. President threatens to undo the globalized freetrade order his country worked generations to build.
Canada’s proposed target list of American products includes U.S. steel and aluminum as well a slew of goods from sailboats to whisky, plywood to refrigerators, and washing machines to herbicides.
The list has been drawn up to exert maximum political pressure on the congressional districts of U.S. lawmakers by hitting products from their regions, a Canadian official said. The list skews more Republican than Democrat in its design, reflecting Republican dominance in Washington.
Mr. Trump has justified his tariffs on foreign steel and aluminum by saying, controversially, that they were necessary to ensure American “national security” because they would expand the U.S. capacity to construct its own tanks and warships.
Ms. Freeland called this rationale “absurd” and Mr. Trudeau said the notion that “Canada could be considered a nationalsecurity threat to the United States is inconceivable” to him.
“For 150 years, Canada has been America’s most steadfast ally … From the beaches of Normandy to the mountains of Afghanistan, we have fought and died together,” Mr. Trudeau said. “We came to America’s aid after 9/11 … We are fighting together against Daesh [the Islamic State] in northern Iraq.”
The proposed Canadian retaliation will impose a 25-per-cent levy on more than 40 categories of U.S. steel imports. The remainder of targeted goods – more than 80 categories including aluminum – will face a 10-per-cent levy. Ottawa will consult on this list for 15 days before finalizing it.
Canada will also challenge the U.S. tariffs at the World Trade Organization in concert with other countries and will file a complaint under NAFTA rules as well.
The Trudeau government would not say how it will spend the revenue it collects from the tariffs or whether it will distribute some of the money to the Canadian steel and aluminum industries.
“That discussion [about tariff revenue] will come later,” Finance Minister Bill Morneau said.
He said for now the Canadian government wanted “to send an absolute message, a message that these tariffs don’t … make sense economically. They hurt Canadians. They hurt Americans.”
Mr. Ross sounded a negative note on the NAFTA renegotiations, suggesting they were stalled. “The talks are taking longer than we had hoped. There is no longer a very precise date as to when they will be concluded.”
Mr. Trudeau told reporters Thursday he tried to schedule a White House meeting with Mr. Trump and Mexican President Enrique Pena Nieto to close a deal on NAFTA this week. But the sit-down was scrapped after the United States demanded Mr. Trudeau agree to a sunset clause, a provision that would automatically terminate the deal in five years unless all three countries agreed to extend it, as a condition of the summit.
Mr. Trudeau said he pitched Mr. Trump on the meeting during a phone call last Friday. The U.S. President was receptive, Mr. Trudeau said.
“I stated that I thought we were quite close to reaching an agreement, and perhaps the time had come for me to sit down with the President in Washington in order to finalize the NAFTA agreement,” Mr. Trudeau said.
The Prime Minister was aiming to come to Washington on Wednesday, said one source with knowledge of the planning, a day after Ms. Freeland made a lastminute pitch of her own to U.S. Trade Representative Robert Lighthizer in the U.S. capital in a bid to avoid the tariffs.
But on Tuesday, Vice-President Mike Pence called Mr. Trudeau to demand that he agree to insert a sunset clause into NAFTA. Without Mr. Trudeau’s concession on the matter, Mr. Pence told him, there would be no meeting.
“I answered that, unfortunately, if that was a precondition to our visit, I was unable to accept,” Mr. Trudeau told reporters.
The source said that the sunset-clause demand appeared to be something of a ploy: The administration wanted to scuttle the meeting and go ahead with tariffs, so it made a demand they knew Mr. Trudeau would refuse.
The White House’s tariffs were criticized in Canada on Thursday.
The U.S. levies “place Canadian producers at an unfair competitive disadvantage in our largest export market, undermine our shared North American competitiveness in steel and do nothing to advance the national security of the United States of America,” Joseph Galimberti, president of the Canadian Steel Producers Association, said in a statement.
News of the U.S. tariffs on Canadian, European and Mexican goods emerged just as key leaders from the Group of Seven most developed countries addressed a panel in Whistler, B.C., where finance ministers, development ministers and central bankers are gathered for a summit.
In an interview, Jean Simard, chief executive officer of the Aluminium Association of Canada (AAC), said it makes no sense for the United States to impose tariffs on Canada given how much its own economy relies on imports of Canadian supplies.
Veteran Canadian trade lawyer Lawrence Herman called the U.S. action “a destructively badfaith move on the part of Trump and his White House, bringing Canada-U.S. relations to an historic low,” and one that “almost certainly torpedoes NAFTA negotiations.”
The U.S. tariffs would have no impact on Mr. Trump’s stated economic goal of eliminating the U.S. trade deficit. The United States has a US$2-billion surplus in steel trade with Canada – and Canada buys more American steel than any other country in the world. Canada is also a secure supplier of aluminum and steel to the U.S. defence industry.
Mr. Trump faced an outcry at home against the tariffs from business figures and tradefriendly politicians.
Nebraska Senator Ben Sasse, whose state depends heavily on corn and soy exports to Mexico, blasted Mr. Trump for mistreating U.S. allies and warned of dire economic consequences.
“This is dumb. Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents,” Mr. Sasse, a Republican, said in a statement.
The Globe and Mail. 1 Jun 2018. U.S. move heightens tensions ahead of G7 leaders’ summit
BILL CURRY, PARLIAMENTARY REPORTER
WHISTLER, B.C. - Bill Morneau will be expressing Canada’s strong objections to new U.S. tariffs when he meets directly with Treasury Secretary Steven Mnuchin during closed-door G7 meetings this week.
Canada’s Finance Minister acknowledged the U.S. decision to impose punitive new tariffs on Canadian, European and Mexican imports − over what it cited as national security concerns − has effectively taken over the agenda of this week’s summit of Group of Seven finance ministers, development ministers and central bankers in Whistler, B.C.
“I have a strong relationship with Steven Mnuchin. We’ve worked together over the course of the time that we’ve been in office, but among friends sometimes there are disagreements,” Mr. Morneau said on Thursday.
“I’ll be stating very clearly our disagreement with the action they’ve taken. We think it’s absurd that Canada is considered in any way a security risk, so that will be very clearly stated by me and [there is] every expectation that our other allies around the table will express the same sentiment. With that, we’ll try to move forward in a way to encourage them to reconsider.”
News of new U.S. tariffs hit just as key leaders from the G7 − a group of the world’s most developed countries − were addressing a public panel on the side-lines of the official ministerial meetings.
International Monetary Fund director Christine Lagarde lashed out Thursday at the U.S. decision to impose punitive tariffs. “If trade is massively disrupted … those who will suffer most are the poorest,” she warned.
Ms. Lagarde, a leading international voice for trade liberalization, called on citizens and business leaders around the world to push back against the new tariffs. She noted that protectionist measures make basic goods more expensive, creating an immediate and direct impact on consumers and businesses.
“I know that asking civil society to engage in supporting globalization seems the ultimate anathema, but it doesn’t have to defend the current globalization as it is,” she said.
Senior Canadian officials are working behind the scenes in Whistler to reach a consensus agreement for G7 leaders to announce at next week’s leaders’ summit in Quebec’s Charlevoix region. But the U.S. tariff move is creating a high level of tension within a group that is normally consistent in promoting free trade.
Bank of England Governor Mark Carney also expressed his concern and said it will clearly be on the agenda as finance ministers and central bankers talk behind closed doors this week.
“This focus on goods’ trades and bilateral goods’ imbalances is not the right focus, if you will, for a hyperconnected world,” Mr. Carney said when asked to react to the new U.S. tariffs. “Obviously the authorities here, the ministers who have direct responsibilities and the leaders who have direct responsibilities have to try to resolve this.”
The Treasury Secretary is not directly responsible for U.S. trade policy, but it will be up to Mr. Mnuchin to respond in Whistler to the strong negative reaction Washington’s actions have quickly garnered.
Former Canadian prime minister and finance minister Paul Martin, who is also in Whistler, said the G7 must react to the growing “navel-gazing nationalism” that is fuelling tariffs as well as anti-immigration sentiment in several parts of the world.
“Facing up to the rise of counterproductive nationalism is a major issue that the G7 cannot avoid,” he said.
Mr. Martin, a veteran of many G7 summits, predicted the U.S. trade moves will make for a lively discussion behind the scenes in Whistler.
“You can’t help but think that, in fact, calmer heads are going to prevail at this particular meeting,” he said.
“[Friday] is going to be a lot of fun.”
The Globe and Mail. 1 Jun 2018. Trump is undermining the one thing that holds the West together. U.S. President’s new steel, aluminum tariffs undermine trust among long-time allies
JOHN IBBITSON, Columnist
Bretton Woods. The Marshall Plan. GATT. NATO. In the late 1940s, the United States forged a military and economic alliance with its European, Canadian and Pacific allies that we call the West, which brought peace and prosperity such as the world had never seen.
For the past seven decades, there has been no major war between great powers. Over those decades, extreme poverty fell from three-quarters of the world’s population to less than a tenth, and global life expectancy increased to 70 years from 48 years.
But Donald Trump doesn’t like the Western alliance − for reasons that we must leave to future historians − and Thursday, he took a big step toward wrecking it by imposing tariffs on steel and aluminum imports.
This particular blow is serious because “it is directed, not just at Canada and Mexico but also at the European Union, so that’s your broad Western alliance,” said Rohinton Medhora, president of the Centre for International Governance Innovation, based in Waterloo. But it is only the latest in a series of blows to that alliance, he adds.
Withdrawing the United States from the Trans-Pacific Partnership trade agreement and U.S.-EU trade talks; withdrawing from the Paris accord on climate change; withdrawing from the treaty to limit Iran’s development of nuclear weapons; moving the U.S. embassy to Jerusalem.
“It’s a train that keeps chugging along, to the detriment of the Western world,” he said.
By imposing punishing tariffs on steel and aluminum against Canada and the European Union, the President is further undermining the one thing that holds the West together: trust in U.S. leadership.
How important was that trust? Consider: The European Union announced Thursday it would file a complaint with the World Trade Organization over the U.S. tariffs. The European Union was forged out of the earlier European Coal and Steel Community and the European Economic Community, which ended a millennium of intra-European war and which was only possible because U.S. military power and American economic aid created the safe space that allowed Europe to heal and then flourish after the Second World War.
The WTO is the successor to the General Agreement on Tariffs and Trade, which, along with the World Bank and the International Monetary Fund, grew out of the 1944 Bretton Woods agreement in which the United States and Britain convinced the allied countries to lower tariffs and promote global trade, based on the U.S. dollar as the world reserve currency.
In other words, the United States’ allies are using tools that are integral to the U.S.-led Western alliance to fight against American actions aimed at undermining that alliance.
There could be worse to come. The Trump administration is examining whether automobile imports should be added to steel and aluminum as subject to tariffs on the grounds of national security − grounds that Foreign Affairs Minister Chrystia Freeland on Thursday described as “absurd.” Such a decision would be even more disruptive.
Marianne Schneider-Petsinger, a geoeconomics fellow at the British think tank Chatham House, believes the dispute over steel and aluminum tariffs leaves the WTO “between a rock and a hard place.”
If the WTO sides with the Americans, she observes, then any country could impose tariffs against anyone on the grounds of national security. If it sides with the Europeans, who are being joined by the Canadians, then Mr. Trump may simply pull the United States out of the WTO. “It’s not a good scenario in either case,” she says.
Earlier this week, U.S. Trade Secretary Wilbur Ross told European officials that the WTO is too slow and rigid. And the administration is undermining the organization by blocking key appointments.
Can the West survive Mr. Trump? In the short term, Mr. Medhora believes it can.
“Two more years of this we can ride out,” he says. Even six more years − to the end of a second Trump administration − may be survivable.
“But if this becomes a pattern in U.S. public policy after him, then the Western alliance as we know it, and the institutions that uphold it, are in way more trouble than we think,” he believes.
We are still waiting to hear from special counsel Robert Mueller whether Russian President Vladimir Putin’s government actively colluded with people in the Trump campaign to make him president.
If he did, he got his money’s worth.
The Globe and Mail. 1 Jun 2018. OPINION. Get ready for a long, destructive trade war. The U.S. President has unleashed havoc with the introduction of steel and aluminum tariffs
LAWRENCE MARTIN, Columnist
U.S. President Donald Trump promised Prime Minister Justin Trudeau he would not impose steel and aluminum tariffs on Canada. It happened not just once over the past few months but on three separate occasions, Canadian officials say.
So much for presidential promises. So much for the idea that playing nice with the mercurial man works. Canada got slammed with the tariffs anyway. It didn’t matter that the United States has a large surplus in steel trade with Canada. It didn’t matter that the national security rationale for the tariffs, as Mr. Trudeau rightly pointed out, is bogus. The attempts, to be reasonable, to temper the retrograde Hoover-era protectionists in Washington failed.
On their own, Mr. Trump’s steel and aluminum tariffs are serious enough. Ninety per cent of Canada’s steel exports go to the United States. But the reverberating impact, the potential collateral damage, is worse. The continent now appears headed for commercial turmoil. A brutal extended trade war is well possible.
The Trudeau government couldn’t sit idly by in the face of Mr. Trump’s aggression. Mr. Trudeau has played kid-gloves diplomat with nothing in return from this President for long enough. For self-respect and for economic justice, he had to hit back hard and his retaliatory measures are strong.
Of the Americans, the Prime Minister said, “we have to believe that at some point their common sense will prevail.”
But with the Trump administration you can never count on common sense. Mr. Trump, whose protectionist views appear to have hardened lately, has another threat looming; the one to impose heavy duties on imports of automobiles and trucks. In the face of the Canadian retaliatory measures he could well move on them, dramatically heightening tensions.
There’s also the question of the fate of the NAFTA renegotiation. It was already on perilous ground with one deadline to present a new deal to Congress already missed. The steel tariff imbroglio could be the nail in the coffin. No deal is likely now before the election of a new Congress in the fall. The new Congress could have a Democratic majority thus necessitating a new beginning.
In the meantime, given that the NAFTA renegotiation has not proceeded as he wished, Mr. Trump could well carry out his initial campaign threat to torpedo the accord.
Canada, the United States and Mexico were close to an agreement on a new deal in the auto trade sector, which was a high Trump priority. Washington and Ottawa, officials say, had things quite well worked out but U.S. and Mexican negotiators couldn’t come to terms. Mexican elections are a month away and there’s a good possibility that a new government with different trade priorities could be in place.
The negotiating dynamic has placed Ottawa in a hostage-like position to Mr. Trump’s whims and to decisions in Mexico. The latter are where Mr. Trump’s bigger issues lie. Canada and the United States, however, are still far apart on several other NAFTA issues. In meetings with Foreign Affairs Minister Chrystia Freeland this week, U.S. Trade Representative Bob Lighthizer was insistent on a sunset clause for any new NAFTA deal, a proposal Ottawa strongly opposes.
With the steel dispute eruption and NAFTA on the ropes, the prospect of an eventual scenario in which a new bilateral trade pact has to be worked out with Ottawa and Washington heightens.
Lumping trade in with national security has given Mr. Trump a cover for his hostile actions. It also brings the administration’s new superhawk, national security adviser John Bolton, into play on the trade file. The administration contends that a surfeit of steel and auto imports could shrink the U.S. manufacturing base, endangering the U.S. capacity to produce its national defence needs.
Never mind the fact that the United States enjoys an overwhelming military advantage and a defence budget leagues ahead of all countries. Never mind that with respect to Canada, it has the steel trade surplus and that the two countries have been defence partners for a century and recently celebrated the 60th anniversary of NORAD (the North American Aerospace Defense Command.)
In announcing the new tariffs, Commerce Secretary Wilbur Ross said of, “Without a strong economy, you can’t have a strong national security.” The American economy with a remarkably low unemployment rate of 3.9 per cent, is the strongest it has been in a long time.
As Thomas Donohue, president of the U.S. Chamber of Commerce says of the tariffs, “This isn’t about national security. This administration has already signalled its true objective is to leverage this tariff threat in trade negotiations …”
The leveraging is being applied – and with potentially havoc-bearing consequences.
The Globe and Mail. JUNE 1, 2018. Trump blasts ‘highly restrictive’ Canada, threatens lumber in latest salvo
ADRIAN MORROW, WASHINGTON
U.S. President Donald Trump is blasting Canada – and threatening its lumber industry – a day after starting a trade war with his neighbours to the north.
Mr. Trump took to Twitter Friday morning to falsely claim that Canada has a “really high” trade surplus with the U.S.; according to the U.S.’s own numbers, Canada actually ran an $8.4-billion trade deficit with the U.S. last year.
“Canada has treated our Agricultural business and Farmers very poorly for a very long period of time. Highly restrictive on Trade! They must open their markets and take down their trade barriers!” the President tweeted. “They report a really high surplus on trade with us. Do Timber & Lumber in U.S.?”
The President on Thursday hit steel and aluminium from Canada, Mexico and the European Union with tariffs of 25 per cent and 10 per cent respectively. Prime Minister Justin Trudeau fired back with tariffs on $16.6-billion worth of U.S. products, from beer kegs to pizza to coffee.
Canada’s retaliation list included numerous American agricultural products, including cucumbers, yoghurt and some types of beef.
Mr. Trump has also long complained about Canada’s protectionist supply management system for dairy, eggs and poultry. The system levies hefty tariffs on imported products to protect Canadian producers.
Canadian softwood lumber already faces U.S. tariffs, which the Trump administration imposed last year. It was not immediately clear what other actions Mr. Trump was considering taking against Canadian-produced wood.
Relations between Canada and the U.S. are at a nadir, with the two countries girding for their most serious trade war in recent memory.
The two countries, along with Mexico, are also renegotiating the North American free-trade agreement, which Mr. Trump accuses of moving jobs out of the U.S. Canada and Mexico made repeated proposals to wrap up negotiations over the last month, all of which were turned down by Mr. Trump.
The President has repeatedly accused Canada of cheating the U.S. on trade over the last year, accusing Canadian leaders of being “very smooth” because they have “outsmarted our politicians for many years” and been “very rough” with the U.S.
On Thursday, Mr. Trudeau revealed that he had offered to come to the White House this week to hash out NAFTA with the President. But the meeting was scuttled after Vice-President Mike Pence told him Canada would have to agree to add a sunset clause to NAFTA – a provision that would automatically terminate the deal in five years unless all three countries agreed to extend it – as a condition of sitting down with Mr. Trump.
Late Thursday, the White House said the U.S. had delivered a stark message to Mr. Trudeau.
“The United States has been taken advantage of for many decades on trade. Those days are over,” Mr. Trump said in a statement. “Earlier today, this message was conveyed to Prime Minister Justin Trudeau of Canada: The United State will agree to a fair deal, or there will be no deal at all.”
He was less verbose earlier in the day on Twitter.
“FAIR TRADE!” he wrote.
The Globe and Mail. REUTERS. JUNE 1, 2018. EU initiates WTO case against U.S. steel, aluminum tariffs
The European Union on Friday submitted a request for consultations with the United States on steel and aluminum tariffs announced by Washington, a first step in the WTO dispute settlement process, a World Trade Organization official said.
“The WTO Secretariat has received the EU request for dispute settlement consultations on the US Section 232 measures,” the official told Reuters, adding that the text would only be made public once it was circulated to all WTO member states.
Earlier, EU Trade Commissioner Cecilia Malmstrom announced the bloc would take the United States to the WTO to challenge the legality of the new tariffs, saying negotiations with Washington were not currently possible
The Globe and Mail. MAY 31, 2018. EDITORIAL. Globe editorial: Trump steel tariffs are the work of a reckless bully
The slightly comic array of American products targeted by Canada for retaliatory tariffs on Thursday (gherkins, playing cards, inflatable boats) belies the seriousness of the moment we find ourselves in.
The Trump administration has slapped a 25-per-cent tariff on Canadian steel products and a 10-per-cent tariff on aluminum, removing Canada, Mexico and the European Union from a list of trade partners exempted from those levies.
That grace period was extended to Mexico and Canada because of ongoing NAFTA negotiations; the slow pace of those talks prompted the U.S. to slam it shut.
Canada has responded in kind, throwing in a range of foodstuffs (toffee, mustard) and consumer products (fungicide, bobbins) to reach an equivalent dollar figure. We have entered the most serious skirmish yet in the low-level Canada-U.S. trade war that has been simmering ever since Donald Trump was elected president.
Of course, the tariffs on Canada are senseless and self-harming, but President Trump’s motivations are clear: This is a power move aimed at extracting NAFTA concessions.
The U.S. administration’s nominal argument, that unfettered steel imports imperil national security, is obviously bogus – Canada and the U.S. are the closest of allies. Nor can this move be laid at the door of the President’s frequently invoked soft spot for industrial workers, because the tariffs will harm American factories that use Canadian steel.
No, this is all about leverage, an obsession of a bullying President who styles himself a deal-maker. That has led him into a foolish way of doing business, especially with close partners, something we hope his administration will see.
Tit-for-tat tariffs probably won’t help as much as the fact that U.S. steel production can’t meet domestic demand for some products, so manufacturers will simply pay the levy and pass it on to American consumers. Or shut down.
Of course, all this ascribes a certain amount of reason to Mr. Trump, a man who tweets manically about conspiracy theories. Canada has reacted appropriately so far. But it’s hard to predict how things will play out in a confrontation with a reckless and erratic bully.
The Globe and Mail. MAY 31, 2018. Canadian investors, do not fear the bargaining ploys of Trump
IAN MCGUGAN
Buckle up. The next few months will be trying times for Canadian investors. But there’s no need to panic – at least, not yet.
Washington’s decision to start levying import tariffs on Canadian steel and aluminum, and Ottawa’s tit-for-tat reaction, may signal the beginning of a mutually destructive trade war. More likely, though, the episode will turn out to be another of Donald Trump’s famous bargaining ploys, in this case one that owes a lot to midterm U.S. elections.
The U.S. President is fighting to keep Republican control of Congress intact. His party has made big gains in popular support since January, but still trails narrowly in the polls.
Most analysts continue to rate the Democrats as favourites to win back control of the House of Representatives. To avoid that result, Mr. Trump has every reason to trumpet his America First gospel as loudly and aggressively as he can right up until voting day on Nov. 6. After that date, his desire to punish some of his country’s firmest allies may suddenly fade.
To be sure, there’s no guarantee we’ll see a kinder, gentler Mr. Trump after November. But ever since his election, the President has demonstrated an awe-inspiring capacity for sudden swings of direction. And other than the midterm election, it’s difficult to see what would motivate him to persist in an all-out trade war against longstanding friends such as Canada, Mexico and Europe.
The United States is not in dire economic shape. Just the contrary. Its unemployment rate is hovering around its lowest level since 2000, while the U.S. Federal Reserve is hiking interest rates to tamp down the rising inflation that goes along with an economy operating close to capacity.
Given all that, the idea of erecting tariff barriers to bring back even more jobs to an already fully employed economy makes no sense. The likely outcome, if the tariffs were to continue indefinitely, would be even more inflationary pressure in the United States and even faster and more punishing rises in interest rates. The result would be a victory for no one.
For now, Canadian investors should sit tight. For one thing, there’s no obvious safe place to move your money. The United States, where stock prices are at some of their most expensive levels since the dot-com bubble? Europe, where Italy could bolt the euro? China, where rampant credit growth has created a mountain of debt?
Despite all of Canada’s issues, ranging from NAFTA renegotiations to a cooling housing market, it’s difficult to spot any clearly superior alternative. Canadian stocks, while not cheap, are at least less pricey than their U.S. counterparts.
For fixed-income investors, Canada’s fiscal situation also appears fundamentally sounder. Massive tax cuts put through by Congress last year have opened up a gaping hole in the U.S. federal budget. The nonpartisan Congressional Budget Office expects U.S. federal debt to rise from its current 77 per cent of gross domestic product to 96 per cent in 10 years. The tab will soar even higher if Mr. Trump’s tax cuts for middle-class families don’t expire as planned.
In contrast, Canada’s net federal debt stands at slightly less than 31 per cent of GDP. Adding in provincial debt more than doubles that total, but still leaves us short of the equivalent U.S. figure, according to the Organization for Economic Co-operation and Development.
All of this provides good reason for Canadian investors to wait out this trade spat. The wild card, of course, is what happens to the North American free-trade agreement. Perhaps Mr. Trump is truly committed to driving a draconian deal that would lay waste to supply chains across Canada and Mexico. More likely, though, is a deal – some time after November.
REUTERS. JUNE 1, 2018. Trump tell allies to fix trade after U.S. tariffs strike
Susan Heavey, Philip Blenkinsop
WASHINGTON/BRUSSELS (Reuters) - U.S. President Donald Trump told Canada and the European Union on Friday to do more to bring down their trade surpluses, a day after hitting the two U.S. allies and Mexico with import tariffs on their steel and aluminum.
Trump castigated Canada in a tweet on Friday morning, saying it had treated U.S. farmers “very poorly for a very long period of time”.
“Highly restrictive on Trade! They must open their markets and take down their trade barriers! They report a really high surplus on trade with us,” he wrote.
He also told French President Emmanuel Macron of the need to “rebalance trade with Europe,” the White House said.
His strong words followed swift responses to his tariffs by Canada, Mexico and the European Union, which all plan to retaliate with levies on billions of dollars of U.S. goods from orange juice and whiskey to blue jeans and Harley-Davidsons.
The EU took the United States to the World Trade Organization to challenge the legality of the new tariffs and the Trump administration’s national-security justification. Brussels has lodged an eight-page list at the international trade body of goods it would hit with retaliatory measures.
Canada and Mexico, embroiled in talks with the United States to modernize the North American Free Trade Agreement (NAFTA), responded swiftly. Canada, the largest supplier of steel to the United States, will impose tariffs covering C$16.6 billion ($12.8 billion) on U.S. imports, including whiskey, orange juice, steel, aluminum and other products.
The EU’s planned measures hit U.S. exports running the gamut from big motorcycles like the Harleys, built on the home turf of House Speaker Paul Ryan, to “canoes”, “manicure or pedicure preparations” and even “sinks and washbasins, of stainless steel” — the proverbial kitchen sink.
“We are determined to protect the multilateral system,” European Union Trade Commissioner Cecilia Malmstrom said of the WTO challenge. “We are expecting everybody to play by the rules.
Trump’s tariffs on Washington’s closest allies also drew condemnation at home from Republican lawmakers and the country’s main business lobbying group and sent a chill through financial markets on Thursday.
Tariffs of 25 percent on steel imports and 10 percent on aluminum were imposed on the EU, Canada and Mexico from midnight in Washington, 0400 GMT on Friday.
“We look forward to continued negotiations, both with Canada and Mexico on the one hand, and with the European Commission on the other hand, because there are other issues that we also need to get resolved,” U.S. Commerce Secretary Wilbur Ross said.
But the EU’s Malmstrom said there would be no such wider trade talks as long as the U.S. measures were in place.
“We were not at the negotiating table. Our offer was: ‘You take this gun away from us, we sit together as friends and equals and we discuss,’ and this would eventually lead to negotiations,” Malmstrom told a news conference in Brussels. “We never got this. So now this door for the moment is closed.”
A DECISION WE DEPLORE
Canadian Prime Minister Justin Trudeau, announcing his country’s retaliatory measures on Thursday, said: “The American administration has made a decision today that we deplore, and obviously is going to lead to retaliatory measures, as it must.”
Mexico announced what it described as “equivalent” measures on a wide range of U.S. farm and industrial products, including pork legs, apples, grapes, cheese, steel and other goods.
For the EU, a decision on just how far to push back will require agreement among the 28 member states that make up the world’s biggest trade bloc.
Germany, by far the biggest exporter to the United States, is keen to avoid a wider trade war, especially as the Trump administration has floated the prospect of tariffs on cars, which would potentially be devastating to German exporters.
Other EU countries such as France favor a more robust stance against what they see as American bullying.
EU members have so far given broad support to a European Commission plan to set duties on 2.8 billion euros ($3.4 billion) of U.S. exports. These could come into force from June 20, although EU officials said it might take a little longer.
EU exports subject to the U.S. duties are worth 6.4 billion euros ($7.5 billion).
While the U.S. administration’s decision to hit its European and North American allies with the metals tariffs was not aimed directly at China, it also sets the background for negotiations with Beijing, where Ross was headed on Friday for talks.
The Trump administration wants China to buy more U.S. goods to lower a trade deficit. Opponents of the tariffs on European and North American metals say the administration is hurting allies when it needs them most to put pressure on Beijing.
“All countries, especially the major economies, should resolutely oppose all forms of trade and investment protectionism,” China’s foreign ministry spokeswoman Hua Chunying told a media briefing, when asked about the U.S. move.
Malmstrom said over-production from China, not Europe, was to blame for the glut of steel that prompted the U.S. action. She also announced a case against China at the WTO over the alleged infringement of intellectual property rights, saying the action simultaneous with the case against the United States showed that the EU was being even-handed.
U.S. Chamber of Commerce President Tom Donohue warned in a letter to the body’s board that current trade policies could threaten economic progress and cause the loss of more than 2 million jobs, mostly in states that voted for Trump.
Reporting by Eric Walsh, David Shepardson and David Chance in Washington, Ingrid Melander and Michel Rose in Paris, Madeline Chambers in Berlin, Philip Blenkinsop in Brussels and Allison Martell in Toronto; Writing by Peter Graff and Philip Blenkinsop; Editing by Mark John, Larry King and Peter Graff
REUTERS. JUNE 1, 2018. Trump blasts Canada over trade, hints at lumber action
WASHINGTON (Reuters) - U.S. President Donald Trump on Friday fired back at Canada after Ottawa and other American allies retaliated against Washington’s steel and aluminum tariffs, and appeared to threaten possible action against Canada’s lumber industry.
“Canada has treated our Agricultural business and Farmers very poorly for a very long period of time. Highly restrictive on Trade! They must open their markets and take down their trade barriers! They report a really high surplus on trade with us. Do Timber & Lumber in U.S.?” Trump tweeted.
Reporting by Susan Heavey; Editing by Chizu Nomiyama
INTERNATIONAL TRADE
The Globe and Mail. 1 Jun 2018. OPINION. Uncertainty drags on Canadian exports
GLEN HODGSON, Senior fellow at the Conference Board of Canada
In normal circumstances, these should be boom times for Canadian exports. The U.S. economy is expected to pick up steam in 2018. Bolstered by higher government spending and tax cuts, as well as solid gains in household consumption and investment, U.S. growth should approach 3 per cent. As Canada’s largest trading partner by far, a rise in U.S. economic activity is generally good news for Canada’s trade sector. Canada’s relatively low dollar is also a positive factor for exports.
But these are not normal times. The Trump administration’s unpredictable policy agenda is creating havoc in many areas; for Canada, trade policy is at the top of the list. Protectionist actions by our southern neighbour on a number of key goods, and uncertainty about the outcome of the North American freetrade agreement renegotiations, are acting as drags on Canada’s exports to the United States in the near term. But U.S. actions are not the only hindrances. Due to years of limited growth in private-sector investment, Canadian exporters are near capacity and therefore constrained in meeting rising U.S. demand. Over all, the Conference Board of Canada projects that Canadian exports to the United States will grow only marginally in 2018, below 1 per cent.
Over the medium term, the renegotiation of NAFTA will remain the central factor shaping future economic relations between the two countries, thereby steering Canada’s trade and overall economic performance. Yet, economic conditions in other parts of the world are increasingly shaping Canada’s export profile. Trade with other leading trading partners, notably China and the European Union, is taking on growing prominence. About a quarter of Canada’s merchandise exports, and 45 per cent of services exports, are now destined for non-U.S. markets. Exports to China and the EU are projected to steadily expand in the coming years, and the Conference Board forecasts exports to these countries to grow much faster than those destined for the United States.
China is now Canada’s secondlargest trading partner for goods, and the fastest-growing export market. The steady rise of the Chinese middle class will translate into solid demand growth for Canadian agricultural products, manufactured food products and beverages. The Chinese food market will continue to expand thanks to urbanization and rising income levels across Chinese society. Services exports to China should also grow at a steady pace, as China continues its transition to a services-based economy. However, growth of Canadian merchandise exports to China is expected to decelerate, due to slower growth or outright declines in demand for commodities.
In the EU, the coming into force of the Comprehensive Economic and Trade Agreement in September, 2017, combined with a rise in overall economic growth in the EU, also bode well for Canada’s trade sector. Exports to the EU should pick up pace and be part of a slow, but steady diversification away from the dominant U.S. market.
Britain and Japan are also important Canadian trading partners, but economic growth is expected to remain subdued in both markets this year and next. Uncertainty stemming from Brexit means that British consumption and business investment growth will be weak until an agreement is finalized. Canadian merchandise exports to Britain will likely grow at a moderate pace in the coming years, while the Conference Board projects services exports to contract in the near term. Japan is facing structurally weak growth, although the exclusion of the United States from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership may give a competitive advantage to Canadian exports in specific sectors such as food products.
Global growth is currently robust, which should be good for trade, but risks abound. Free trade advocates are increasingly confronted by the forces of protectionism. The U.S. announcement of tariffs on steel and aluminum imports will certainly hurt trade in those sectors, and could fuel a trade war and hurt global economic activity. The recently added threat of tariffs on auto imports is another risk factor. The long-term impact of a British exit from the EU is still uncertain, and will depend on the details of the deal that is reached. Geopolitical risks, especially on the Korean peninsula and in the Middle East, could alter prospects in oil and other market segments.
Many conditions are in place for solid Canadian export growth, but the challenge for firms and governments is to navigate the turbulence through long-term thinking, and being prepared to venture beyond North America.
REUTERS. JUNE 1, 2018. Global trade skirmish puts factories, recovery at risk
Jonathan Cable, Elias Glenn
LONDON/BEIJING (Reuters) - Factory growth in major manufacturing hubs showed signs of cooling last month as companies braced for potential damage from rising global trade tensions while also grappling with accelerating inflation and a strong dollar.
U.S. President Donald Trump’s moves to slap tariffs on some of the country’s most important trading partners have rattled financial markets, and many are now fretting about the potential threat to what is now mostly synchronized world growth.
Stocks rose and bond yields fell on Friday as investors welcomed an apparent end to a political crisis in Italy but prospects for a full-blown trade war put a dampener on gains.
“The uncertainty about future trade and Trump’s contempt for international rules can deal a significant blow to business confidence especially in trade-oriented nations,” said Holger Schmieding, chief economist at Berenberg.
That danger was made all the more real on Thursday when the United States and its key allies announced tit-for-tat tariffs.
A U.S. trade delegation is in Beijing this weekend for a third round of talks between the two countries in the last month after Washington said it would slap tariffs on $50 billion of Chinese imports.
The risk is that a full-blown Sino-U.S. trade war will ripple through global supply chains, hurting economies from Europe to Mexico through to Australia and Japan.
EUROPE LOSING MOMENTUM
Euro zone factory growth stayed strong but slowed to a 15-month low in May, hampered by extra holidays, and forward-looking indicators suggest it will at best remain subdued in coming months, a business survey showed.
Higher prices appear to have hurt demand and IHS Markit’s May final manufacturing Purchasing Managers’ Index for the bloc slipped for a fifth month, falling to a 15-month low of 55.5 from April’s 56.2, in line with a flash reading.
Anything over 50 indicates growth.
German factory growth was also at a 15-month low and French manufacturing activity picked up less than expected, highlighting a more uncertain trade outlook.
British manufacturers bucked the global trend in May and picked up speed for the first time in six months. But the slight improvement masked underlying weakness among the country’s factories.
Chinese manufacturing, meanwhile, has grown steadily so far this year. The Caixin/Markit Manufacturing PMI was unchanged at 51.1 in May, although new export orders fell for a second straight month.
“Forthcoming trade tensions could put pressure on trade and related supply chain activities ... We believe that investment decisions in potentially affected industries have been delayed,” ING China economist Iris Pang said in a note.
The Markit/Nikkei Japan Manufacturing PMI fell to a seven-month low of 52.8 for May, with domestic business growth slowing and only a modest pick up seen in export orders.
Corporate capital expenditure in Japan rose at a slower pace in the first quarter compared with the previous one, a separate report showed. Further stress on exports is likely to restrain any rebound from an economic contraction at the start of the year.
South Korea, another major export hub, reported strong shipment growth in May. But a factory survey found activity contracted for a third straight month as new orders continued to decline, prompting companies to cut staff at the fastest pace in almost a decade.
BUT RATES STILL SET TO RISE
Higher oil prices and a rising dollar have hammered currencies of late, with trade friction and heightened geopolitical uncertainties around North Korea, Iran and Italy adding to pressure.
Economies are seeing inflation flare up while currencies have taken a hit, raising expectations for interest rate hikes.
The European Central Bank will finish its stimulus program by the end of 2018, according to a Reuters poll of economists last month, although nearly half of those surveyed said it was not in control of inflation, which had remained stubbornly below target.
But prices in the bloc rose a faster-than-expected 1.9 percent last month from a year earlier, official data showed on Thursday, pretty much spot on the ECB’s target.
The Bank of England, facing inflation above its target, is expected to raise interest rates in August.
Indonesia’s central bank has already raised rates this year and Indian policymakers might tighten policy soon.
India on Thursday reported its quickest pace of economic growth in nearly two years in January-March and the Reserve Bank of India is expected to hike rates in August — a dramatic turnaround from just a month ago, when a survey predicted no increase until the second half of 2019.
Editing by Catherine Evans
REUTERS. JUNE 1, 2018. Where's the data? Angst for commods traders as China trade figures held in limbo
Chen Aizhu, Tom Daly
BEIJING (Reuters) - Commodities traders have been waiting more than a week for China to release overdue monthly import-export data, frustrating many market watchers and fuelling speculation about reasons for the delay.
The prolonged wait for final April commodities trade statistics from the world’s top buyer of oil, metals and grains comes as negotiators from Washington gather in Beijing for a round of talks aimed at avoiding an all-out trade war.
The April data, initially due on May 23, will show the scale of market disruptions since Washington and Beijing embarked on escalating tit-for-tat tariff threats, roiling flows of commodities such as soybeans, sorghum and corn.
Traders were hoping to glean from the final April data signs that China had stopped buying American agricultural goods, or started to switch to buying more from other countries, such as Brazil, Russia and Australia.
The company which collates and sells the data, China Cuslink Co Ltd, which is operated by customs, was ordered to delay publication indefinitely due to technical reasons, three officials at the company told Reuters.
One said the instructions came from customs, while another said it was from another government agency. The officials, who declined to be identified, gave no further details.
A spokesman for General Administration of Customs confirmed the suspension, but gave no reason.
While the timing of the delay may be coincidence, some traders speculated Beijing may want to conceal statistics that could somehow undermine its negotiating stance.
But Michael Mao, senior energy analyst in Shandong province at China Sublime Information Group, doubted there was a link.
“If Beijing wants to adjust the April data to sweeten trade talks, it won’t work for obvious reasons,” Mao said. “If the official data and shipping data don’t match, analysts are smart enough to tell that authorities massaged official data.”
Companies like Thomson Reuters and other media companies and consultancies pay to receive the final statistics, which give a breakdown by import origin and export destination for everything from sorghum to natural gas and steel.
Mao said speculation had circulated in the market that Beijing was considering stopping the sale of the data to some companies. Reuters was not able to verify this.
Traders and analysts seeking to use the data to devise trading strategies expressed frustration at the delay and lack of information. “It is such nonsense to delay the data for political reasons,” said one veteran Beijing-based oil trader, who declined to be identified as he is not authorized to speak to the media.
NOT UNUSUAL
It’s not unusual for statistical releases to be postponed by a day or two, and many analysts and trade experts have anyway long questioned the accuracy of official Chinese economic data.
The delay also comes as China’s customs department undergoes a major overhaul, taking on extra functions, including import safety, which was previously handled by a separate agency, as part of a broader effort to make policymaking more efficient.
Still, an indefinite delay without a clear explanation is extremely rare, experts say.
Preliminary numbers showing total imports and exports earlier in the month revealed upheaval in flows of grains, such as sorghum, which were temporarily hit with anti-dumping sanctions by China.
The wait for the data comes as U.S. Commerce Secretary Wilbur Ross heads to Beijing for talks aimed at narrowing China’s $375 billion trade surplus, an effort Washington hopes results in China significantly ramping up purchases of American farm products and energy.
Ross is due in Beijing on June 2 to 4. On Wednesday, a delegation of more than 50 U.S. officials arrived in the Chinese capital for talks, according to China’s commerce ministry.
Michael Lion, a China metals industry veteran who is president of Lion Consulting Asia in Hong Kong, said the delay may be a strategic decision while trade talks continue.
“It would be consistent from my experience for (the Chinese authorities) to withhold information that they might believe could be used by counterparties in negotiations,” Lion told Reuters by email.
Some market participants are resigned to a long wait, as the veteran oil trader noted: “Customs will probably delay the data until China solves the trade dispute with the U.S.”
Reporting by Chen Aizhu, Tom Daly, Meng Meng, Hallie Gu and Dominique Patton; Writing by Josephine Mason; Editing by Tony Munroe and David Holmes
REUTERS. JUNE 1, 2018. China stands up for free trade on eve of U.S. commerce chief's visit
Matthew Miller, Ben Blanchard
BEIJING (Reuters) - China reiterated its commitment to the global trade order on Friday, hours after Washington imposed new tariffs on imports from key allies and a day before U.S. Commerce Secretary Wilbur Ross was due in Beijing for talks to avert a trade war.
While many countries share U.S. frustration over Chinese trade and economic practices, critics of U.S. policy under President Donald Trump have warned that Washington risks alienating the European Union, Canada and Mexico with 25 percent tariffs on steel and 10 percent on aluminium.
“All countries, especially the major economies, should resolutely oppose all forms of trade and investment protectionism,” foreign ministry spokeswoman Hua Chunying told a regular media briefing, when asked about the U.S. move.
This weekend’s trade talks come as Washington is engaged in fragile negotiations towards what would be a historic summit between Trump and North Korean leader Kim Jong Un, whose main diplomatic backer is China.
Ross, who was preceded in Beijing this week by more than 50 U.S. officials, is expected during a two-day visit starting on Saturday to press China to commit to buying more U.S. agriculture, energy, and other products to narrow the $375 billion trade deficit.
While U.S. officials have sent conflicting signals during the dispute with China, one person familiar with planning for Ross’ visit said the aim was to keep dialogue going.
Ross is “going there to tread water”, the person said, declining to be identified due to the sensitivity of the matter.
What had appeared to have been a trade truce between Beijing and Washington was upended this week when the White House said it would follow through on its threat of tariffs on $50 billion worth of Chinese imports, as well as restrictions on Chinese investments in the United States and tighter export controls.
Washington and Beijing have threatened tit-for-tat tariffs on goods worth up to $150 billion each.
“The more Trump is irritating allies and asking Chinese to buy stuff, the better off they are, because he’s not sitting there and attacking the hard issues,” the person said.
Those hard issues include what the U.S. complains is rampant theft of intellectual property, as well as Beijing’s support for cutting-edge technologies under its Made in China 2025 policy.
QUALCOMM STILL IN QUESTION
On Friday, China’s markets regulator said it was still reviewing San Diego-based Qualcomm Inc’s (QCOM.O) $44 billion acquisition of NXP Semiconductors (NXPI.O).
Some people familiar with the matter have told Reuters that approval may depend on progress of broader talks and a reprieve from a U.S. government ban on sales by U.S. companies to China’s ZTE Corp (0763.HK)(000063.SZ), penalised for illegally supplying gear to Iran and North Korea.
Reuters reported on Sunday that Qualcomm was expecting to meet this week in Beijing with China’s antitrust regulators in a final push to secure clearance for the deal.
Qualcomm made its latest submission regarding the deal to China’s State Administration for Market Regulation early this week, people familiar with the matter told Reuters.
China’s exports have mushroomed since joining the World Trade Organisation in 2001, making it the world’s second-largest economy. It has positioned itself as a defender of the global trade system in the face of Washington’s tougher stance under Trump.
China hopes its people and those of the United States, especially consumers, will continue to gain from mutually beneficial U.S.-Sino trade relations, Vice Finance Minister Zhu Guangyao said on Friday.
Asked about Ross’ visit, the China’s foreign ministry spokeswoman declined to give any details, referring the question to the commerce ministry, the government department that will host him and which has not given details, either.
Qualcomm Inc
58.19
QCOM.ONASDAQ
+0.07(+0.12%)
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QCOM.ONXPI.O0763.HK000063.SZ
“Of course, we have said that China’s door to dialogue and consultations is open,” Hua said.
“We believe that when it comes to the problems in Sino-U.S. trade and business both sides should take a sincere attitude in the spirit of equality and mutual respect to use dialogue and consultations to seek a mutually beneficial win-win solution.”
Additional reporting by Michael Martina; Writing by Tony Munroe; Editing by Kim Coghill
G7
Department of Finance Canada. May 31, 2018. G7 Symposium on Investing in Growth That Works for Everyone
Canada's 2018 G7 Presidency: https://g7.gc.ca/en/
Whistler, British Columbia – With a robust and growing global economy, now is the right time to make progress in Canada and around the world to ensure everyone can contribute to, and share in, the benefits of growth.
Today, Canada's Minister of Finance, Bill Morneau, the Minister of International Development and La Francophonie, Marie-Claude Bibeau, and the Governor of the Bank of Canada, Stephen Poloz, hosted the G7 Symposium around the theme of "Investing in Growth That Works for Everyone" at a live streamed event. The event provides a public window into the themes and discussions taking place at the G7 Finance and Development Ministers and Central Bank Governors Meeting taking place in Whistler, British Columbia until June 2.
The event—moderated by BNN Bloomberg host Amanda Lang—featured prominent policy makers including former Prime Minister of Canada, the Right Honourable Paul Martin, and the Managing Director of the International Monetary Fund, Christine Lagarde. The panelists discussed some of the key pillars of Canada's 2018 G7 Presidency, such as preparing for the jobs of the future, advancing gender equality and women's empowerment, and investing in growth that works for everyone.
As highlighted in Budget 2018, Equality + Growth: A Strong Middle Class, Minister Morneau emphasized that Canada is a great place to invest, create jobs and do business due to its solid fiscal position, strong economic performance, and commitment to uphold and abide by rules-based international trade. The fact that the Government's fiscal house is in order allows it to continue to deliver real change for Canadians, and position Canada as a leader in an increasingly competitive world.
The G7 Symposium also featured a panel discussion on the importance of gender equality in growing and strengthening the middle class and sustaining economic growth. Opening the panel discussion was a short video featuring Organisation for Economic Co-operation and Development (OECD) Secretary-General José Angel Gurría, who presented the OECD's report entitled Gender Equality in Canada: Mainstreaming, Governance and Budgeting. The report notes that while there is still work to be done, Canada scores highly on several metrics of gender equality, particularly in the areas of educational attainment and employment.
Panelists underscored the need to include more women in the economy and to ensure that growth created through investment and international trade benefits those who contribute to its success.
Quotes
"Governments around the world have important roles to play in investing in growth that works for everyone, regardless of gender, and ensuring that the benefits of growth are shared with the middle class and people working hard to join it. Providing a window into some of the debates and discussions that too often take place behind closed doors is an opportunity to showcase the importance of global cooperation on issues that matter in our everyday lives. When we ensure that everyone, including women, have a real and fair shot at success, it can lead to a prosperous future for all."
- Bill Morneau, Minister of Finance
"Canada has clearly positioned itself as a feminist government. We firmly believe that advancing gender equality is essential to eradicating poverty and building a more peaceful, inclusive and prosperous world. In our international assistance, we are committed to using innovative financing to support women and girls to fully participate in the economy, contributing to growth that works for everyone."
- Marie-Claude Bibeau, Minister of International Development and La Francophonie
"Canada is proud to be a global leader in advancing gender equality—and specifically, gender budgeting and Gender-based Analysis Plus—because we know that when we invest in women and girls, we strengthen the economy for everyone. The Gender Equality in Canada report by the OECD recognizes Canada's successes, but we know there is still work to be done. We welcome these recommendations and remain committed to working to advance gender equality, not just because it is the right thing to do, but because it is the smart thing to do."
- Maryam Monsef, Minister of Status of Women
"Ensuring that more people feel the benefits of growth is crucial to a strong and sustainable global economy. While rapid technological change and innovation hold great promise, they also risk leading to rising income inequality, which undermines economic resilience and long-term economic growth. The G7 is playing a leadership role through policies that lead to better and more balanced outcomes for our citizens."
- Stephen S. Poloz, Governor of the Bank of Canada
Quick Facts
- The G7 is an informal grouping of seven of the world's advanced economies consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. The European Union is also a member of the G7 and is represented by the European Council and the European Commission.
- RBC Economics estimates that if women participated in Canada's workforce at the rates that men do today, we would boost the size of the Canadian economy by 4 per cent.
- To support young families and gender equality in both the workplace and the home, Canada's Budget 2018 is introducing a new Employment Insurance Parental Sharing Benefit that will help support an equal distribution of home and work responsibilities.
- Through Budget 2018, the Government of Canada is taking a leadership role in addressing the systemic undervaluation of women by announcing legislation to reduce the gender wage gap in federally regulated workplaces.
Government of Canada. June 1, 2018. G7 development and finance ministers discuss investing in growth that works for everyone
Whistler, British Columbia - Canada and its G7 partners recognize that the ambitious push needed to accelerate progress toward the achievement of global sustainable development objectives requires a step change in both the quantity and quality of financing for development, as well as the full and equal participation of women.
Today, G7 development and finance ministers concluded their meeting, the first of its kind, to support the G7 theme Investing in Growth that Works for Everyone. During the meeting they discussed innovative and gender-responsive mechanisms that can leverage public resources and attract new partnerships and sources of finance for sustainable development.
The meeting was co-chaired by the Honourable Bill Morneau, Minister of Finance, and the Honourable Marie-Claude Bibeau, Minister of International Development and La Francophonie. The meeting also included a presentation by members of the G7 Gender Equality Advisory Council for Canada’s G7 presidency.
In particular, they discussed:
- the promotion of women’s full and equal economic participation to achieve growth that works for everyone by measures such as the promotion of women’s financial inclusion, the integration of gender-based analysis, the enabling of gender-responsive policy development and implementation, and the support of women entrepreneurs;
- innovative financing approaches to mobilize private capital for sustainable development, including supporting new partnerships to connect the public sector and private investment communities; and
- the building of economic resilience against extreme weather events, particularly for small island developing states and least-developed countries, which are most vulnerable to such events.
The G7 can play an important role in advancing innovative solutions that can be tested and expanded to other international forums and partners. The outcomes of the G7 finance and development ministers’ meeting lays the groundwork for further discussions at the June 8 to 9, 2018 leaders’ summit in Charlevoix, Quebec.
Quotes
“Creating opportunities to ensure that growth benefits everyone can lead to a prosperous future for all. The G7 is uniquely positioned to support innovative financing approaches that mobilize more investments and capacities for sustainable development.
- Bill Morneau, Minister of Finance
“When women and girls have greater equality in education, employment, entrepreneurship and full enjoyment of their human rights, they can transform and generate economic growth that lasts. This is why the empowerment of women and girls is critical to our efforts to achieve growth that works for all.”
- Marie-Claude Bibeau, Minister of International Development and La Francophonie
Quick facts
- Economic cooperation through the G7 plays a crucial role in maintaining a level global playing field and ensuring that the benefits of economic growth are shared by everyone.
- The G7 is an informal grouping of seven of the world’s advanced economies, consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, as well as the European Union.
- Co-chaired by Melinda Gates and Isabelle Hudon, Ambassador of Canada to France, the Gender Equality Advisory Council is advising Canada in the context of its G7 presidency on how to integrate gender equality and women’s empowerment across all themes, activities and initiatives.
FULL DOCUMENT: https://www.canada.ca/en/global-affairs/news/2018/06/g7-development-and-finance-ministers-discuss-investing-in-growth-that-works-for-everyone.html
CO-CHAIRS’ SUMMARY: G7 JOINT DEVELOPMENT AND FINANCE MINISTERS’ MEETING. June 1, 2018
- Meeting under the 2018 G7 Presidency theme of “Investing in Growth that Works for Everyone”, the first ever joint meeting of G7 Development and Finance Ministers took place in Whistler on June 1st, 2018.
- Seizing an unprecedented opportunity to collaborate in support of their shared commitment to global sustainable development, discussion focused on two themes: Innovative Financing for Development, including Mobilizing Private Capital for Sustainable Development and Building Economic Resilience against Extreme Weather Events; and Women’s Economic Empowerment. In pursuing potential solutions to pressing global development challenges, participants laid the foundations for action by G7 Leaders at the Charlevoix Summit on Financing for Development issues.
- In maximizing the use of public and private financial assets, catalyzing new and diverse partnerships, and leveraging their participation in international institutions, Ministers stressed that the G7 has a unique role in accelerating the impact of poverty reduction efforts to “leave no one behind”, and to contribute to a more inclusive, prosperous and peaceful world.
- The following reflects a summary of the discussions, as understood by the co-Chairs.
Innovative Financing for Development
Mobilizing Private Capital for Sustainable Development
5. Ministers acknowledged that the ambitious push needed to accelerate sustainable development efforts requires a step change in both the quantity and quality of financing for development. Advancing the global “Billion to Trillions” agenda and the Addis Ababa Action Agenda will mean that public, private, domestic and international resources are optimized, and the links between them made stronger.
6. Ministers emphasized the need to have a common understanding regarding the effective deployment of blended finance which includes promoting greater transparency and accountability in blended finance operations. In this regard, Ministers agreed to broaden awareness of the OECD Blended Finance Principles (2017) in an effort to help advance the use of innovative financing to increase the flow of capital into emerging and frontier markets. As these new instruments are pursued, Ministers emphasized the continued importance of Official Development Assistance, especially in Least Developed Countries.
7. Ministers recognized that Development Finance Institutions (DFI) can mobilize significant resources, and are well positioned to prioritize women and girls with access to capital, jobs, skills and services. As such, Ministers encouraged the DFIs to work toward collaboration that would enable them to increase their support for Women`s Economic Empowerment.
8. Ministers stressed the importance of strengthening the capacities for public financial management, and underscored the importance of domestic resource mobilization, including effective tax administration, to advance sustainable development in developing economies.
Building Economic Resilience against Extreme Weather Events
9. Ministers took note of the progress made with multilateral initiatives such as the 2015 G7 InsuResilience Initiative, the 2017 InsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions. They also underscored that the world`s most vulnerable countries, including Least Developed Countries and Small Island Developing States, continued to be disproportionately affected by extreme weather events.
10. Ministers called on international financial institutions to assess the role of disaster risk insurance coverage for vulnerable countries, including Least Developed Countries and Small Island Developing States, as part of the broader global resilience toolkit, and to develop proposals to support more gender responsive disaster risk financing mechanisms while enhancing global coordination and the exchange of best practices. A few Ministers pointed to some initiatives under way in this regard, including the World Bank`s Global Risk Finance Facility.
11. Ministers observed that the Paris Club has achieved significant advancements in work on resilient debt-instruments that support faster economic recovery and stability in the international financial system. G7 Ministers endorsed Paris Club work to develop a voluntary resilient debt instruments term sheet, particularly in Small Island Developing States prone to extreme weather events.
Women’s Economic Empowerment
12. Ministers hosted an active and engaging discussion with members of the G7 Gender Equality Advisory Council that underscored the strong, shared commitment to gender equality and the empowerment of women and girls. Consistent with past G7 actions, including the 2017 Taormina “Roadmap for a gender responsive economic environment”, Ministers reiterated the importance of working together in support of women’s economic empowerment, emphasizing its vital role in generating sustainable growth opportunities that will benefit entire communities, countries and regions – in developing and developed countries alike.
13. Ministers noted there are a range of barriers that need to be overcome to foster greater economic opportunity by women, such as unpaid care work, education, safe and accessible public transportation, and access to land, capital and credit. On capital, participants agreed on the importance of financial inclusion as a key enabler of resilience and poverty eradication. They agreed to work closely with G20 and other partners to continue to promote the importance of women’s financial inclusion and reinforce efforts to improve the quality of disaggregated data provided by financial institutions.
14. Ministers highlighted the importance of better integrating gender analysis in policy development and implementation. As such, Ministers considered continuing discussions with the International Financial Institutions and the UN system on ways to enhance developing countries’ capacity to pursue gender-responsive policy development, building upon the work undertaken by UN Women and the International Monetary Fund.
15. Ministers recognized the need to support women’s entrepreneurship and participation in the labour market and in global value chains, and encouraged Multilateral Development Banks to consider opportunities to assist women-owned businesses and women entrepreneurs, leveraging the benefits generated when Multilateral Development Banks operate as a system.
INTERNATIONAL TRADE
Canadian International Trade Tribunal. May 31, 2018. Tribunal Continues Finding—Liquid Dielectric Transformers from Korea
Ottawa, Ontario — The Canadian International Trade Tribunal today continued its finding made on November 20, 2012, in Inquiry No. NQ-2012-001, concerning the dumping of liquid dielectric transformers from the Republic of Korea.
The Tribunal found that the dumping of liquid dielectric transformers from Korea was likely to result in injury. The Canada Border Services Agency will therefore continue to impose anti-dumping duties on these products.
The Tribunal is an independent quasi-judicial body that reports to Parliament through the Minister of Finance. It hears cases on dumped and subsidized imports, safeguard complaints, complaints about federal government procurement and appeals of customs and excise tax rulings. When requested by the federal government, the Tribunal also provides advice on other economic, trade and tariff matters.
FULL DOCUMENT: http://www.citt-tcce.gc.ca/en/whats-new
GOVERNMENT PROCUREMENT
Public Services and Procurement Canada. May 31, 2018. Keynote Address from Minister Qualtrough at CANSEC 2018. Speech. Speaking Notes for The Honourable Carla Qualtrough, Minister of Public Services and Procurement. CANSEC 2018 (Paddy O'Donnell Mentorship Breakfast)
Introduction
Good morning everyone.
Before I begin, I would like to recognize that we are meeting on the traditional territory of the Algonquin nation.
I would like to thank Curtiss-Wright Defence for sponsoring this morning’s networking reception, as well as Alion Science & Technology and Seaspan Shipyards for sponsoring this breakfast.
As someone who has been lucky to receive encouragement over the years from people I admired, I am also delighted to be part of an event that is named for an illustrious mentor, one who had a huge impact on the Royal Canadian Air Force and the defence sector.
Lieutenant General Paddy O’Donnell is remembered for his selflessness and helping younger colleagues develop their own careers. The award in his name is a reminder of the positive impact we can have on those around us, if we care enough to take the time and effort.
CANSEC is always a reliable reminder that spring has arrived, and is just about as eagerly anticipated by a lot of people. So I am delighted to be making my first visit to this important event.
Our government deeply appreciates the jobs, R&D, and export activity the defence and security industries generate for Canada. We also value the mutually beneficial working relationship we share with CADSI, your leadership, your staff and your members.
A year ago, my colleague, National Defence Minister Sajjan, released our government’s new vision for defence. Strong, Secure, Engaged. This is the first new defence policy since 2008. It is a transparent, long-term, fully funded plan for the future, built around people.
In support of the policy, yesterday Minister Sajjan announced the release of his department’s new Investment Plan and Defence Capabilities Blueprint, which together provide a clear, forward looking direction on Defence procurement priorities over the next two decades.
My department works in partnership with DND, ISED, Treasury Board and others to deliver the aircraft, ships and other goods and equipment the policy and the Investment Plan call for.
Collectively, we know that our efforts are equipping our brave women and men so that they can protect us and help those in need. We take our roles very seriously, and we’re committed to making defence procurement as effective and efficient as possible.
With that in mind, I want to update you on two things this morning:
First, I want to outline the progress made by our government over the last three years in advancing some of our major defence and shipbuilding procurements.
Second, I want to talk about some of the ways we are modernizing our processes and improving our practices to shorten timelines while ensuring we get the right equipment for the Canadian Armed Forces, at the right price and with economic benefits for our country.
Fighter Jets Procurement
Let me begin with the purchase of fighter jets – which is the most significant investment in the Royal Canadian Air Force in more than 30 years. Renewing Canada’s fighter fleet is essential for protecting the safety and security of Canadians and meeting our international obligations.
I’m proud to say that this process is in the best place it’s been in many years.
In December, we launched an open and transparent competition to purchase 88 advanced fighter jets, and we are making substantial progress.
We said that stakeholder engagement would be an important part of the competitive process. We want all suppliers who can meet our needs to be able to participate on a level playing field.
To that end, in January, we held our first open industry day, attracting over 200 participants from more than 80 companies and 7 countries.
In order to maximize competition and focus on outcomes, we invited interested governments and manufacturers to form teams and to demonstrate their joint ability to meet Canada’s needs, as defined by the Suppliers Invitation List document shared with industry.
In February, we published a list of eligible Suppliers and invited them to participate in the formal supplier engagement, which began in March.
In parallel to this engagement, a few weeks ago officials conducted regional forums in six cities across the country that drew over 600 participants from 200-plus companies.
These information and discussion sessions are meant to make sure Canadian aerospace and defence industries are well-positioned to participate in the contracting opportunities created by the fighter jet procurement.
Businesses were able to meet with potential prime contractors to explore opportunities for partnerships and become better informed about the potential Industrial and Technological Benefits Policy and value proposition objectives.
This is a complex procurement, with the potential for a diversity of solutions. Throughout the last months, and the many months of planning and consultation that preceded the launch of the competition, we have maintained an open dialogue to ensure clarity around challenges and timelines. And we will continue to do so.
Over the next few months, we will begin sharing draft solicitation documents with eligible suppliers. Government officials will visit suppliers’ facilities, and eligible suppliers will visit major CAF bases to see the existing infrastructure and operations.
This engagement will continue into spring 2019, when we anticipate formal solicitation documents will be released to eligible suppliers.
A contract award is anticipated in 2021 to 2022, with delivery of first replacement aircraft in 2025.
These busy last five months have created enormous momentum.
This contrasts with three years ago, when the effort to replace our country’s fighter fleet was at a complete standstill.
Interim Australian Jets Procurement
Our end game is the procurement of a new fighter fleet, but we’re also taking action to fulfill shorter-term needs.
We are now ironing out the details to take delivery of 18 existing Royal Australian Air Force F-18s and spare parts to complement our existing fleet, while the replacement jets are being procured.
Since the Australian jets are similar to our existing CF-18s, they will be easily integrated into the fleet.
We are currently working with Australia to develop a delivery plan and secure necessary approvals to finalize the agreement. We expect to take delivery of the first two jets in 2019.
Maritime Helicopter Project
We are also making progress toward achieving another important milestone for the Maritime Helicopter Project.
We have already taken delivery of the first two Block 2 CH-148 Cyclone maritime helicopters. These Block 2 aircraft incorporate the second last configuration upgrades, and the full complement of 28 final configured Cyclones are expected to be delivered by the end of December 2021.
The CH-148 Cyclone helicopters are developed for operation aboard the Royal Canadian Navy’s Halifax-class frigates, and future surface combatant ships and Joint Support Ships. A little sidebar, my son is in the Navy. He could be in these ships. I’m super proud of that actually.
These new aircraft are replacing Canada’s Sea King helicopters, which have served Canada in the maritime role for the past 50 years.
With the retirement of Canada’s Sea King helicopters in December this year, the cyclones are being integrated into service and operational roles.
National Shipbuilding Strategy
I could talk about many other army and air force procurements underway, but let me turn now to the projects to equip the Royal Canadian Navy and the Canadian Coast Guard under the National Shipbuilding Strategy.
On the west coast in December, Seaspan as was said, launched the first large vessel built under the National Shipbuilding Strategy: an Offshore Fisheries Science Vessel. Another two vessels are under construction.
The first of three Arctic and Offshore Patrol Ships currently being built at Irving is expected to enter into trials and testing for the Royal Canadian Navy later this year, with final delivery expected in 2019.
But it’s not just the large shipyards that are delivering under the National Shipbuilding Strategy.
Chantier Naval Forillon of Gaspé, Quebec, and Hike Metal Products Limited of Wheatley, Ontario, have delivered 2 of 12 Search and Rescue Lifeboats to the Canadian Coast Guard.
Kanter Marine of St. Thomas, Ontario, has delivered 7 Hydrographic Survey Vessels to the Canadian Coast Guard.
Additionally, last August, Thales was awarded a contract for in-service support for the future Arctic and Offshore Patrol Ships and Joint Support Ships. This contract, valued at up to $5.2 billion over 35 years if all options are extended, ensures we are ready to support the vessels once they are delivered.
In the eight years since its inception, the National Shipbuilding Strategy has not been without challenges.
In the course of building new classes of ships, in new shipyards, with new workforces, we have had to adjust plans and budgets set many years ago. But with every build, we learn more, and we are applying these lessons.
Two years ago at CANSEC, my predecessor Judy Foote announced a renewed shipbuilding strategy, one that put a greater emphasis on accurate planning and budgeting, and open communications with Canadians.
We are already seeing the impact of these course corrections.
Treasury Board Secretariat is leading the development of a robust approach to cost estimates with periodic reviews and regular reporting to Ministers.
And my department, along with DND and the Canadian Coast Guard, continues to work closely with both shipyards to monitor costs and ensure timelines are met.
JSS Announcement
This close collaboration is critical to ensuring we meet the goals of the Shipbuilding Strategy -- one of which is to ensure a continuous program of work, putting an end to the series of boom-and-bust cycles that plagued our marine industry.
For example, when we learned of potential production slowdowns at Vancouver Shipyards, government officials worked together with Seaspan to arrive at a solution to keep the employees there, on the job -- supporting their families -- while also helping to equip the women and men of the Royal Canadian Navy.
As a result of this collaboration, I am very pleased to announce today that the Government of Canada has signed a contract for the construction of up to 52 blocks of the Royal Canadian Navy’s 2 Joint Support Ships at Vancouver Shipyards.
This is not only good news for the future of the Royal Canadian Navy’s fleet, it will also help to alleviate potential production slowdowns at Seaspan.
This work will begin in June and will advance the delivery of the new ships.
This demonstrates the value of the long-term strategic partnership established between the Government of Canada and Seaspan under the National Shipbuilding Strategy.
More importantly, as an integral part of Canada’s future “Blue Water Navy,” these support ships will deliver fuel and other vital supplies to vessels at sea – ensuring our women and men of the Canadian Armed Forces are able to carry out their missions for decades to come.
Possible Production Slowdown at Irving
Planning is also underway to address a projected production slowdown at Irving, between construction of Arctic and Offshore Patrol Ships and the Canadian Surface Combatants.
We expect to have a better sense of potential options later this year, once we have selected the Canadian Surface Combatant design.
Canadian Surface Combatant Update
With respect to the Canadian Surface Combatant project, the Government and Irving Shipbuilding Inc. are currently evaluating bids.
The Canadian Surface Combatant is the largest, most complex procurement undertaken by the Government of Canada. These ships will form the backbone of the Royal Canadian Navy.
Given the magnitude and importance of this project, we are employing innovative procurement practices to ensure we have maximum competition. We also want to ensure that we are picking from the best possible solutions bidders can put forward.
This is why the evaluation plan provides bidders with an opportunity to adjust their proposals if they have not demonstrated compliance or conformance with the RFP requirements.
This step is referred to as the Cure Process. This week, the evaluation team began providing bidders with feedback on areas that need attention.
Once the Cure Process is complete and we receive the financial component of the bids, we will proceed to the next, and final, step in the evaluation process. Once the evaluation is complete we will announce the selection of a preferred bidder. Contract awards will follow later in 2018, and the start of ship construction remains scheduled for the early 2020s.
As with all projects under the National Shipbuilding Strategy, we remain committed to providing updates as this important procurement progresses.
Icebreakers Update
We also recognize the need to remain agile to respond to interim requirements.
In this vein, we are continuing discussions with Chantier Davie to support the Canadian Coast Guard’s requirement for interim icebreaking capability.
We remain committed to supporting the Canadian Coast Guard in carrying out its crucial work on behalf of all Canadians.
How we are improving military procurement
I am proud of the progress we have made in military procurement. But I also want to talk about how we are doing things differently.
We aim always to ensure that all our military procurements are fair, open and transparent, and provide best value and benefits for Canadians.
Beyond that, we are also working hard to improve our procurement processes and strategies, so that we ‘deliver the goods’ more efficiently and effectively, increase transparency and competition and reduce the burden on suppliers.
In general, we are developing better vendor management tools to improve contractor performance and behaviour, particularly in large scale procurements.
And we’re publishing clear metrics to measure government performance on the competitiveness, and timeliness of procurements.
Canada’s pricing framework is undergoing renewal, and contract clauses and templates are being simplified and standardized.
Our Sustainment Initiative is a major undertaking aimed at improving how we balance the principles of performance, value for money, flexibility and economic benefit to Canada.
Finding more efficient ways to sustain the military equipment that can be directly reinvested back into the military we procure is critical.
We also want to be as open as possible with you, our industry partners, as we work together to foster innovation and job creation. Industry engagement is key, and as you can see from the fighter jets procurement, we are practicing what we preach.
To streamline smaller procurement processes, as of this year, DND has a delegated contracting authority of up to $1 million for goods and $2 million for services. DND’s authority will also increase to $5 million for both goods and services by 2019.
Economic Benefits
All of this work is creating jobs and economic growth across the country.
Contracts related to the National Shipbuilding Strategy alone between 2012 and 2017 are contributing $8.9 billion, or $812 million a year, to Canada’s GDP, and creating or maintaining 8,800 jobs a year.
Congratulations to all of you, those are fantastic numbers!
More than half of these businesses are small- or medium-sized enterprises. The thousands of workers involving are building skills and pushing innovation forward.
In addition, partnerships are being developed with schools, research centres and First Nations joint-venture companies.
In all of our procurements, military and otherwise, we are also looking at ways to ensure opportunities for businesses owned or led by Canadians from under-represented groups, such as women, Indigenous Peoples, and persons with disabilities.
Under an Irving Shipbuilding Centre of Excellence program launched in April, for example, 20 African Nova Scotians have the opportunity to study welding at Nova Scotia Community College and secure careers with Halifax Shipyard.
Under the Women’s Entrepreneurship Strategy announced in Budget 2018, my department will work with women-owned small and medium-sized businesses to increase their participation in the federal procurement process supply chain from 10% to 15%.
Conclusion
We know much more remains to be done. But the message I want to leave you with today is how far we have come over the last three years.
We are meeting our commitment to transparency and openness, to improving procurement processes, and to ensuring defence procurement generates innovation, jobs, and opportunities for Canadians.
Above all we are ensuring the women and men of the Canadian Armed Forces have the equipment they need to handle the serious challenges they face in the course of the very important jobs.
Thank you.
FULL DOCUMENT: https://www.canada.ca/en/public-services-procurement/news/2018/06/keynote-address-from-minister-qualtrough-at-cansec-2018.html
ECONOMY
BANK OF CANADA. May 31, 2018. A Progress Report on the Economy. Remarks. Sylvain Leduc - Deputy Governor. Association des économistes québécois and CFA Québec. Québec, Québec
Introduction
I am very happy to be here in Quebec City. People come from all over to visit this city, not only for its beauty, its fine dining and its hospitality, but also for its historical significance to North America. There is a lesser-known anecdote from this region that I quite like because it teaches us a lesson on monetary policy that is still relevant today.
In 1685, as New France faced a shortage of coins, Jacques de Meulles—the intendant of the colony—decided to use playing cards as paper money by writing a value on them. And when I say “playing cards,” I really do mean cards like the ones we use to play hearts or bridge. I would say that gives a whole new meaning to the phrase “play money.”
These playing cards were the first form of paper money distributed in North America.1 Although this series of cards was repurchased only three months later, it marked the beginning of a tradition that would last more than half a century.2 So why did people agree to get paid in playing cards? Because they trusted the authorities would manage them rigorously.
While monetary policy has changed dramatically over the past 300 years, one thing remains the same: trust is key. Today, this trust is buttressed by explaining—in a way that is transparent—what the Bank of Canada is doing and why. I would like to thank the Association des économistes québécois and CFA Québec for allowing me to do that here today.
My speech is part of an initiative the Bank launched at the beginning of this year. The Bank makes policy interest rate decisions eight times per year. On four of these occasions, we accompany our rate decisions with the Monetary Policy Report (MPR) and a press conference. The other four times, the rate decision is now followed by an economic update speech, where a member of our Governing Council explains how we considered the key elements related to the economic outlook in our decision-making process.
Yesterday, the Bank maintained its policy interest rate. The ongoing backdrop for these policy rate discussions is a Canadian economy that, after some challenging years in the wake of the oil price shock, is operating near its potential and inflation that is very close to our 2 per cent target. Here in the province of Quebec, growth was above 3 per cent last year—its best performance in more than 15 years.
The broad-based growth since the beginning of 2017, and its implications for inflation, has led us to raise the policy interest rate three times since July. With the economy facing uncertainty on a few fronts, each decision, including yesterday’s, is less straightforward than the picture I just painted might suggest.
The context for the decision
Before diving deeper into the economic environment we are operating in, let me remind you what we are trying to achieve and how we do it. The Bank targets an inflation rate of 2 per cent, within a band of 1 to 3 per cent. It is worth noting that inflation has averaged close to 2 per cent in the past 25 years, and that this success can be attributed in part to our policy, adding to its credibility and increasing public trust in our framework.
To reach our goal sustainably, aggregate demand in the economy must be in balance with aggregate supply. Our main tool for achieving this is the policy interest rate, which allows us to stimulate or temper demand. The policy interest rate is currently below our estimate for the “neutral” rate—that is, the equilibrium interest rate when inflation is at target and the economy is growing at potential, once the effects of any shocks have faded. That means our policy stance remains accommodative. Another way to see this is by noting that once adjusted for inflation, our real policy rate is -0.75 per cent.
Our accommodative stance reflects the presence of some factors that continue to weigh on the economy and, in turn, on our forecast for inflation. For example, two such factors are the uncertainty surrounding trade policy, which is restraining business investment, and the impact of the new mortgage financing guidelines on housing activity.
With this context in mind, I will share our assessment of global and Canadian economic developments and elaborate on the issues that we are watching closely.
Global economic developments and exports
First, let me talk about the global economy. It plays an important role in our forecasts because we rely on exports for one-third of our gross domestic product (GDP).
Our main trading partners—including the United States, the euro area, China and other emerging markets—continue to show solid growth. Such synchronous growth across these regions has not been seen in many years.
Data we have received since mid-April, notably with respect to the US economy, continue to suggest the global economy is expanding roughly as expected. And while global financial markets continue to function well, financial stresses have recently developed in some emerging-market economies as well as in Europe. Though global growth will eventually moderate over time as excess capacity is absorbed, the world economy is nonetheless expected to remain strong and to contribute to our export growth.
Despite a rather slow start to the year, the growth of our goods exports jumped to 3 per cent in March. Their contribution to Canadian GDP in the first quarter should be greater than what we had forecast in the April MPR. This is encouraging.
That said, we know that our exporters are facing increased foreign competition. As we noted in April, the market share of Canadian non-energy goods in the United States has shrunk by almost half since the early 2000s. We see this competition in many sectors—from automobiles to electronic goods to forestry—which is why we are monitoring competitiveness very closely, and expect to publish further analysis on this issue in the months ahead.
We also know that international trade has undergone some significant changes in the past 10 years. Before that, international trade was growing at roughly twice the rate of the global economy. It is now growing at the same rate as the global economy. This, together with more competitive world markets, has been restraining our exports.
Another important factor is the fact that many of our exporters are already operating at full capacity. At an industrial level, three-quarters of the sectors are at their highest capacity utilization rates since 2003. So investments would be needed to meet rising demand. Given ongoing trade policy uncertainty, some firms are waiting to invest in new capacity, while others are deciding to expand outside of Canada. This could limit exporters’ ability to grow further even as foreign demand rises.
For their part, Canadian oil exports are likely to be stronger than expected in April, following pipeline outages last year. Large upward revisions to oil exports in January suggest that oil exporters recovered much faster from these outages than suggested by earlier data.
Canadian economic developments
Turning now to the domestic economy more broadly, in April we forecast that activity would grow at roughly 2 per cent over the next two years, a little higher than our estimate of potential growth. Over this horizon, we expected the composition of growth to shift, with a higher contribution from exports and investment, alongside a decline in the contribution from household spending. Despite some short-term fluctuations, we also expected growth to average about 2 per cent in the first half of the year.
Overall, the data we have received since April support our near-term projection. Recall that we saw some weak data at the beginning of the year, but the tenor of the more recent data has improved. In addition to the growth in exports I mentioned previously, manufacturing output was especially robust and investment appears to have been stronger than expected. This good news was partly offset by declines in housing resales and retail sales, which suggest that household spending could be a bit weaker than expected in the first quarter. Taken together, all these factors point to growth for the first half of the year around what we forecast in April.
This continued growth of the Canadian economy is contributing to strong labour markets and higher wage growth. Indeed, recent data from the Labour Force Survey show that wages in April were 3.6 per cent higher than a year earlier. However, the signal we get from this reading is muddied by the high volatility of this series and the fact that last year at the same time wages were surprisingly weak.
Because our different wage indicators are all volatile and sometimes send conflicting signals, the Bank developed a wage measure to help us better capture the trend: the wage-common.3 According to this measure, wage growth has strengthened considerably from its low in mid-2016, reaching about 2.6 per cent in the first quarter of this year.
This stronger wage growth is consistent with what firms surveyed in our quarterly Business Outlook Survey have been telling us. They have indicated that it is becoming more difficult to hire, although firms in energy-producing regions still see little wage pressure. Still, at this point in the business cycle, wages would be expected to increase at an annual rate of around 3 per cent—which is the sum of the inflation rate, about 2 per cent, and trend productivity growth, which is close to 1 per cent. And, given that the recent increase in minimum wage in Ontario is temporarily contributing to their growth, wages are rising somewhat more slowly than we would expect to see in an economy operating at capacity. This may indicate that some slack remains. For example, the share of workers who have been unemployed for more than six months remains significantly higher than it was before the Great Recession.
So a key question is to what extent wage growth could increase as further tightening of the labour market takes place, given that some sectors and regions already face a shortage of workers.
Historically, wage growth accelerates only after a large and sustained period of excess demand, often with a de-anchoring of inflation expectations. We are not expecting such a situation to develop. Indeed, empirical work by Bank staff shows that, in the past, when the economy was operating only slightly above its potential, wage growth did not increase substantially.4
What is more, in many sectors, persistently high unemployment in the wake of the financial crisis and subsequent oil price shock has had a profound effect on the labour market. Workers may have also become more concerned about the impact on their jobs from greater automation and outsourcing. As a result, they may be more reluctant now to ask for bigger raises, even when the economy strengthens.
We can look at regional data to examine how labour markets are adjusting in situations of excess demand. The strong economic growth in British Columbia is a valuable example. While rising labour shortages there should eventually put upward pressure on wages, our regional wage-common measure still shows only moderate wage growth in that province. This evidence is consistent with labour supply adjusting to strong demand. Indeed, higher inbound migration and participation rates among youth and prime-age workers have increased the labour supply in British Columbia in the past couple of years.
Similarly, Quebec has also seen strong job creation, a historically low unemployment rate and sustained wage increases in recent quarters. But the growth in Quebec’s labour force is slower than that in British Columbia, contributing to relatively stronger wage growth.
Interestingly, we also see the impact of labour supply adjustment in regional housing markets.
How the labour supply adjusts in the face of rising demand conditions is an issue we are watching closely because it affects the evolution of our economic capacity.
For example, given revisions to past investment and our anticipation that trend labour input will rise over the next three years, we increased our estimate of potential output growth in April to 1.8 per cent. Still, with the uncertainty inherent in measuring potential output, we carefully monitor our measures of underlying inflation to ensure they are consistent with our assessment of economic slack.
As such, core measures of inflation remain essentially at 2 per cent, consistent with the economy operating at close to capacity. However, higher crude oil prices, on average, relative to our April forecast are expected to lead to a higher headline inflation rate in the near term. Monetary policy typically looks through transitory fluctuations such as this, as we did last year when inflation was held down by other temporary factors.
Yesterday’s decision
This brings me to our decision yesterday to leave our policy rate unchanged at 1.25 per cent.
As we have emphasized several times in the past, our policy decisions remain guided by incoming data, since they inform our outlook for growth and inflation. As such, in reaching yesterday’s decision, we carefully weighed the information we have received since our April MPR. Let me take a few moments to summarize the developments that factored the most into our deliberations.
First, I want to reiterate that the economy is evolving largely as expected, with inflation roughly at our 2 per cent target and economic activity near potential. Given this context, we began by acknowledging the better-than-expected tenor of many recent economic indicators. As I outlined earlier, manufacturing and investment activity has been solid, and exports are proving to be stronger than we expected in April, helped by increased energy exports. Another positive sign is the 11 per cent increase in nominal service exports in the first quarter, which reinforces our view that services will continue to lead export growth, as they have in recent years.
Similarly, higher prices, on average, for Canadian oil since April should be positive, on net, for the Canadian economy. These higher prices help boost profits of Canadian oil producers and improve our terms of trade—the price we receive for our exports relative to the price we pay for our imports. That said, given the uncertainties the oil sector faces, the prospect of substantial increases in investment are not likely to be as high as in past cycles.
We also noted in our discussions that housing resale activity remained soft into the second quarter, as the housing market continues to adjust to new mortgage guidelines and higher borrowing rates. With other measures of activity in the housing sector more generally holding up, we are still expecting resale activity to pick up over the second quarter. More data from a range of sources in the coming weeks will help further inform our understanding of this adjustment process.
As I discussed earlier, the labour market continues to improve and wages are rising at rates closer to what would be expected in an economy operating at potential. Together with sustained high levels of consumer confidence, this should continue to support housing construction and consumption growth more generally.
Finally, Governing Council still sees elevated trade policy uncertainty as a factor restraining business investment. We expect business investment to increase, but not by as much as it could without this uncertainty. That said, business sentiment and investment intentions remain positive, suggesting that firms are getting on with business and adjusting to this more volatile environment. As such, the greater-than-expected increase in imports of machinery and equipment in the first three months of the year bodes well for business investment growth. This is encouraging because it is consistent with our broader narrative of a rising contribution coming from investment and exports, and it is important to the evolution of economic capacity.
A final point before I conclude. Uncertainty is everywhere and can come from many sources. Regardless of the source, it’s important to note that households and businesses continue to make economic decisions as they plan for the future. And so does the Bank of Canada in setting monetary policy. Monetary policy decisions are always made with an imperfect picture of the future, and they must be forward looking, always with our mandate—the inflation target—in mind.
Conclusion
Allow me to conclude. Yesterday, we decided that the current policy stance remains appropriate. Overall, developments since April further reinforce Governing Council’s view that higher interest rates will be warranted to keep inflation near target. Governing Council will take a gradual approach to policy adjustments, guided by incoming data. In particular, the Bank will continue to assess the economy’s sensitivity to interest rate movements and the evolution of economic capacity.
I would like to thank Patrick Sabourin and Lena Suchanek for their help in preparing this speech.
Notes
- W. J. Eccles, “MEULLES, JACQUES DE,” in Dictionary of Canadian Bibliography, vol. 2, University of Toronto / Université Laval, 2003.
- J. Powell, A History of the Canadian Dollar (Ottawa: Bank of Canada, 2005).
- The wage-common is created by extracting the common signal from four sources of wage data (the National Accounts; the Productivity Accounts; the Survey of Employment, Payrolls and Hours; and the Labour Force Survey) and filtering out indicator-specific movements. See D. Brouillette, J. Lachaine and B. Vincent, “Wages: Measurement and Key Drivers,” Bank of Canada Staff Analytical Note No. 2018-2 (January 2018); and J. Lachaine, “Applying the Wage-Common to the Provinces,” Bank of Canada Staff Analytical Note No. 2018-16 (May 2018).
- See D. Brouillette, M. Dockrill, H. Lao and L. Savoie-Chabot, “Bending the Curves: Wages and Inflation,” Bank of Canada Staff Analytical Note No. 2018-15 (May 2018).
FULL DOCUMENT: https://www.bankofcanada.ca/wp-content/uploads/2018/05/remarks-310518.pdf
The Globe and Mail. 1 Jun 2018. Economy expected to power ahead despite disappointing first-quarter GDP
DAVID PARKINSON
The Canadian economy stumbled in the first quarter of the year, tripped up by weakness in consumer spending and housing markets, but a solid finish to the quarter has spurred optimism that the economy is headed into better times.
Statistics Canada reported on Thursday that real gross domestic product rose at a seasonally adjusted pace of 1.3 per cent annualized in the first three months of the year, the slowest quarter in nearly two years.
It was the third consecutive quarter that the economy grew at less than a 2-per-cent rate, a considerable moderation from the nearly 4per-cent average in the four quarters before that.
Residential investment slumped 7.2 per cent annualized in the quarter, reflecting the slowdown in the housing sector after the implementation of stricter federal mortgage regulations.
Household final consumption spending grew a tepid 1.1 per cent, its slowest in three years. On the other hand, non-residential business investment – an important component for future economic growth potential – surged nearly 11 per cent annualized, its best quarter in a year.
While the result disappointed economists, they noted that the quarter finished strong, with March GDP up 0.3 per cent month over month, building on February’s 0.4per-cent rise. This implies the economy entered the second quarter with stronger momentum, prompting several economists to raise their second-quarter forecasts.
“While the headline quarterly GDP result was a bit disappointing … the recent robust monthly readings and the strength in business investment provide a nice counterweight,” Douglas Porter, chief economist at Bank of Montreal, said in a note to clients.
Economists had grown optimistic in recent weeks that first-quarter growth would be significantly stronger, based on a string of economic indicators that suggested the economy had picked up as the quarter wore on. Just a day before the GDP numbers were released, the Bank of Canada said it believed first-quarter growth “appears to have been a little stronger” than the central bank’s formal estimate of 1.3 per cent, issued in its quarterly economic projections in mid-April. The consensus estimate among private-sector economists was 1.8 per cent.
The disappointment was reflected in the currency market, where the Canadian dollar fell four-tenths of a cent against its U.S. counterpart in the hour after the GDP news – although the currency was also hurt by concerns over the U.S. decision to impose steel and aluminum tariffs on Canada and other countries.
The market reaction reflected concerns that the first-quarter GDP result could reduce the likelihood of a Bank of Canada interest-rate increase in the near term. In its ratedecision announcement on Wednesday, the central bank hinted strongly that it is leaning toward a rate increase at its next decision in July – based partly on its belief that growth was ahead of the bank’s target in the early months of the year.
But in a news conference after a speech in Quebec City, Bank of Canada deputy governor Sylvain Leduc indicated the central bank was quite satisfied with the GDP report.
Bank of Nova Scotia economist Derek Holt suggested the markets may have overreacted to the lowerthan-expected headline GDP number for the quarter, while overlooking the more positive details.
“The incrementally stronger rebound evidence in March, following February’s solid growth, is encouraging,” he said in a research note. “This plays to the narrative of a rebound from transitory softness at the start of the year that distorted the quarter.”
In particular, the economy suffered from transportation backlogs early in the quarter that have cleared up, economists noted.
While trade was a net negative in the quarter, subtracting 0.3 percentage points from GDP growth, economists said this was largely owing to rising imports – evidence of improved domestic demand and the strong business investment. They also suggested a decline in inventories, which also weighed on GDP in the quarter, will likely reverse itself when businesses replenish their stocks. Economists now think second-quarter GDP growth could exceed the Bank of Canada’s forecast of 2.5 per cent annualized.
“Even the weak spots in today’s report shouldn’t last,” Toronto-Dominion Bank senior economist Brian DePratto said in a research report. “The bottom line is that the Canadian economy clearly still has some gas left in the tank.”
REUTERS. JUNE 1, 2018. Canada manufacturing growth accelerates to seven-year high in May
(Reuters) - Growth in the Canadian manufacturing sector accelerated in May to its fastest pace in more than seven years as new orders and inventories climbed, data showed on Friday.
The IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI), a measure of manufacturing business conditions, rose to a seasonally adjusted 56.2 last month, its highest since April 2011, from 55.5 in April.
A reading above 50 shows growth in the sector.
New orders rose to 57.6 from 55.7 in April, helped by the strongest pace of growth for new export orders in more than seven years, IHS Markit said.
“The combination of rising workloads and increased stock building bodes well for near-term output growth,” said Tim Moore, associate director at IHS Markit.
Stocks of purchases rose to 53.1, the highest since May 2012, from 51.3 in April, due to concerns about the availability of materials and efforts to guard against an anticipated rise in input prices, said IHS Markit.
Input prices climbed to the highest since March 2014 at 68.0 from 67.3 in April.
Reporting by Fergal Smith, Editing by Chizu Nomiyama
DEFENCE
Innovation, Science and Economic Development Canada. May 31, 2018. Federal government supporting diversity and skills development through defence spending. New Value Proposition Guide will bring greater economic benefits and jobs for Canadians
Ottawa, Ontario - The federal government is using its purchasing power to ensure Canada’s men and women in uniform have the equipment and services they need, while promoting diversity and gender balance and creating skills training opportunities for all Canadians.
The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, today released the new Value Proposition Guide, which updates the government’s approach to assessing economic benefits to Canada under the Industrial and Technological Benefits (ITB) Policy.
Under the new guide, the Government of Canada will leverage its contracts in the defence sector to promote skills development and diversity.
The ITB Policy requires that for every dollar the government spends on equipment for our Armed Forces and Coast Guard, the supplying company reinvests a dollar back into the Canadian economy. That translates into a robust research and development environment and hundreds of well-paying middle-class jobs for Canadians.
The new guide also recognizes the contributions of a skilled and agile workforce to Canada’s innovation economy, encouraging bidders to provide skills development and training opportunities for Canadians. Bidders will also be required to describe their efforts to achieve gender balance and increase diversity within the Canadian defence industry as part of future Value Proposition proposals.
Quotes
“Using our government’s purchasing power to promote gender balance and skills training for Canadians is not only the right thing to do but also the smart thing to do. The updated Value Proposition Guide will see more investments in people, ensuring our future workforce has the skills and diversity to make Canada resilient as it services the men and women that serve our country.”
– The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development
Quick facts
- Enhancements to the guide include the integration of Key Industrial Capabilities, which Minister Bains announced in April 2018. These capabilities will motivate defence contractors to invest in emerging technologies and in areas where Canada has developed globally competitive capabilities.
- To ensure continuous improvement in growing Canada’s defence industry, the Value Proposition Guide will be reviewed periodically and evolve through ongoing engagement with stakeholders.
- The Canadian defence industry includes over 660 firms, with more than $10 billion in sales in 2016, and supports close to 60,000 jobs in Canada.
- The industry is both innovative, with a research and development intensity that is 4.5 times the Canadian manufacturing average, and export-oriented, with 60 percent of its sales in 2016 taking place in the global market.
- From 1986 to 2016, the overall portfolio of ITB obligations included 137 contracts valued at $41.5 billion, with $28.3 billion in business activities already completed, $9.4 billion of activities in progress and $3.8 billion in unidentified future work opportunities.
FULL DOCUMENT: https://www.canada.ca/en/innovation-science-economic-development/news/2018/05/federal-government-supporting-diversity-and-skills-development-through-defence-spending.html
CLEAN TECHNOLOGY INNOVATION
Innovation, Science and Economic Development Canada. May 30, 2018. Government of Canada invests in world-leading clean technology innovations. Minister Bains announces $26.3-million investment in clean technology with the potential to transform industries
Ottawa, Ontario - To benefit Canadians, our economy and the environment, the Government of Canada is contributing to the development of technologies that lead to less pollution, healthier communities and the creation of well-paying middle-class jobs.
Today, the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, announced a federal investment of $26.3 million in four companies. The Minister made the announcement at Sustainable Development Technology Canada’s (SDTC) Cleantech Leadership Summit. This third annual summit brought together 150 clean tech CEOs and thought-leaders from across Canada to discuss opportunities for Canadian clean technology producers to compete and win in the global economy.
The four companies receiving funding today join the more than 300 others that SDTC has invested in since 2001. The investment announced today by Minister Bains includes:
- 10 million to D-Wave Systems Inc. of Burnaby, British Columbia, which is developing quantum computing systems that are more energy-efficient and help reduce emissions from high-performance computing.
- $2.3 million to Ionomr Innovations Inc. of Vancouver, British Columbia, which has developed a more efficient, durable and cost-effective membrane system for water treatment and purification, grid-level energy storage, and clean-tech energy generation.
- $4 million to MineSense Technologies Ltd. of Vancouver, British Columbia, which is making the mining process cleaner and more efficient using sensor technology and data analytics.
- $10 million to MEG Energy Corp. of Calgary, Alberta, which is developing a way to improve bitumen recovery in oil sands development and production while reducing greenhouse gas emissions and water consumption.
These investments demonstrate that the environment and the economy can go hand in hand.
Investments in clean tech are part of the Government’s Innovation and Skills Plan, a multi-year strategy to create well-paying jobs for the middle class and those working hard to join it.
Quotes
“Our government’s investments in clean tech reflect our commitment to protecting the planet and growing our economy. They also point to a clear direction for economic development through innovation. That’s because innovations in clean tech have the potential to create thousands of well-paying middle-class jobs for Canadians. That’s how innovation leads to a better Canada.”
– The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development
“These companies are great examples of how Canadian innovations are poised to improve Canada’s economy while protecting the environment. SDTC’s investments in D-Wave, MEG Energy, MineSense and Ionomr will deliver environmental benefits to multiple industries and demonstrate our government’s commitment to helping businesses scale and compete on the global stage.”
– Leah Lawrence, President and CEO, Sustainable Development Technology Canada
Quick facts
- Budget 2017 set aside more than $2.3 billion to boost the growth of Canada’s clean tech space. That’s the largest public investment ever committed to this field in Canada.
- Sustainable Development Technology Canada (SDTC) is a foundation created by the Government of Canada to advance clean technology innovation in Canada by funding and supporting small and medium-sized enterprises in developing and demonstrating clean technology solutions.
- SDTC has invested almost a billion dollars in close to 350 ideas and more than 300 companies. These companies have created more than 9,400 well-paying jobs, generated approximately $1.9 billion in annual revenues and reduced greenhouse gas emissions by 10.1 megatonnes of carbon dioxide equivalent annually (as of March 31, 2017).
FULL DOCUMENT: https://www.canada.ca/en/innovation-science-economic-development/news/2018/05/government-of-canada-invests-in-world-leading-clean-technology-innovations.html
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LGCJ.:
