Entries in trade (3)

Wednesday
Apr292015

A tale of two budgets: federal and provincial

In a tale of two budgets, the federal and provincial budgets were delivered last week. The federal budget is a pre-election document with something for everyone.  The provincial budget is one of a majority government with an eye to transportation infrastructure and getting the province fiscally on solid ground. 

Provincially  

Ontario Chamber of Commerce (OCC) policy analysts were in the budget lockup at Queen’s Park last Thursday and came away with the following analysis:

Provincial deficit has risen

Budget 2015 makes the right commitments but is vague on details when it comes to how the government will meet its deficit reduction targets (eliminating the deficit by 2017-2018).  Total provincial debt is projected to grow to $284 billion this year – equivalent to $20,772 of debt for every Ontarian.  The OCC applauds the government for making difficult decisions in terms of wage restraint measures and holding average annual growth in program spending to 1.5 percent.  This should be a top priority area for the government as eliminating the deficit is the most important step government can take to improve Ontario’s competitiveness and create jobs in the province.

Government is plowing ahead with the Ontario Retirement Pension Plan (ORPP)  

The OCC remains concerned about the impact that the ORPP could have on the economy.  Budget 2015 provides little in the way of clarity for employers on the details of the ORPP.  We continue to call on government to develop a comprehensive understanding of the impact of the ORPP and to re-examine the narrow exemption rules it has in place.  These narrow parameters ignore the contributions that many employers are already making to their employees’ retirement through defined-contribution plans.

Employers will continue to be shocked by rising electricity rates

Budget 2015 does little to address business’ concerns over rising electricity rates.  According, to the OCC’s most recent survey, rising electricity prices are the number one factor hurting business competitiveness.  While the Industrial Conservation Initiative (ICI) and the extension of the Northern Industrial Electricity Rate (NIER) program are encouraging, we remain very concerned about out-of-control electricity rates.  

Government is making important investments in transportation infrastructure

The OCC welcomes increased spending in areas of strategic, economic importance, including transportation infrastructure.  Budget 2015 increases dedicated transportation infrastructure funds by $2.6 billion to $31.5 billion available over 10 years.  These funds will be used for transit, transportation, and other priority infrastructure projects across Ontario. The Province should continue to make use of its world-leading Alternative Financing and Procurement (AFP) expertise in order to ensure it is getting the best bang for its infrastructure buck.

Government is aggressively pursuing an asset recycling strategy

The OCC supports the government’s goal to maximize the value of its assets. Budget 2015 increases the asset optimization target to $5.7 billion, up from a $2.6 billion target in 2014.  As it undertakes its asset review, government must ensure that its actions do not hurt domestic industry and, as it relates to the sale of electricity infrastructure, do not put the rate payer at risk. 

Innovation initiative:  The government is investing $20 million to establish a Health Technology Innovation Fund and appoint a Chief Innovation Strategist.

Cuts to the Apprenticeship Training Tax Credit: Funding is being returned to pre-recession levels, resulting in $30 million in cost savings. 

Youth Employment: Ontario Youth Jobs Strategy is being renewed to the tune of $250 million in the next two years. 

Full Provincial Budget 

Federally

“Oil prices have recovered slightly, to around $56, and we expect them to be back in the $65 range by year-end.  The government also enjoyed a $3.4 billion windfall from the sale of GM shares,” says Hendrik Brakel, Senior Director, Economic, Tax and Finance Policy, Canadian Chamber of Commerce.  “As a result, there is room for some helpful measures to support Canadian business, a few things that will make life easier for business.”

Taxes

Small Business Tax Rate will be reduced from 11 percent to 9 percent by 2019 (0.5 percent reduction each year starting January 1, 2016), resulting in $2.7 billion in tax savings through 2020.  

The federal government also committed to extending the accelerated capital cost allowance to 2025.  

On payroll taxes, the Canadian Chamber was pleased by the government reconfirming the EI premium rate freeze.  

Trade and International Affairs 

There was a significant increase in funding for agriculture exports, including $18 million to promote
competiveness and trade opportunities and $12 million to market Canadian food.  

Technology and Innovation

The federal government promised $1.3 billion over six years starting in 2017-18 to the Canada Foundation for Innovation for advanced research infrastructure at universities and research hospitals. 

As well as, $1 billion over five years for technical demonstrations in the aerospace industry plus $30 million over four years for Canada’s satellite communications sector.  

People and Skills

The investment of $65 million will allow business and industry trade associations to work with post-secondary institutions to better determine the needs of the market.

The Canadian Chamber has been advocating for improved labour market information, so it was pleased to see $4 million over two years to launch a new one-stop national labour market information portal.  We welcome this as a first step toward more investments in actual surveys.  

Missing from the federal budget were discussions around climate change.

Full Federal Budget

The business community is fighting for a business climate that functions at the utmost efficiency and look to the government at all levels to set the framework so that goal can be realized.   The economic health of our country and our province are key to moving us forward.  However, both budgets reflect a common tension that governments must balance through the best of times and the worst of times. 

Comment through the "Peterborough Chamber" group of LinkedIn.

Friday
Nov142014

CCC: Is China Slowing Down or Charging Ahead?

In recent weeks, we’ve seen many stories in the media about a major slowdown in China. As Canada’s second largest trading partner with $70 billion per year in bilateral trade, it could have a big impact here at home. Should we be worried or is China charging ahead?

Official figures show China growing at around 7.3%, a decline when you consider that for the 20 years up to 2007, the country’s average real GDP was rising by an average of 11% per year. But that’s OK. China’s economy is now US$9 trillion, so that 7.5% increase is on a much larger pie and is a much bigger boost to the global economy. The growth is also more balanced, shifting away from investment and export dependence towards a more broad-based expansion of consumption, thanks to rising wages.

Are there vulnerabilities in China? Certainly, China has high debt levels, but the banks are well capitalized and with $4 trillion in foreign exchange reserves, there is more than enough of a safety cushion to weather any downturn. China also has soaring real estate prices and areas that are overbuilt. But don’t forget that two million people per month move from rural areas to the cities.

This means that China has to add the equivalent of three New York Cities every year to keep up with the rise in urban dwellers. China’s government has been trying to clamp down on rising home prices by raising mortgage rates and downpayment requirements, although they’ve eased off recently.

A consumer revolution is underway.

So what does it all mean for business? China’s economy is changing dramatically but growth will remain over 7% for the foreseeable future. More importantly a consumer revolution is underway. Each year, almost 30 million people, a population roughly the size of Canada, join the Chinese middle class. And they love to spend online.

In 2013, China surpassed the U.S. as the world’s largest ecommerce market. By 2015, KPMG is forecasting that China’s ecommerce transactions could reach USD 540 billion, roughly 10% of total retail transactions. By 2020, the firm estimates that China’s ecommerce market will be larger than those of the U.S., Britain, Japan, Germany and France combined.

Here at the Canadian Chamber of Commerce, we’ve been lobbying hard to establish a renminbi trading hub right here in Canada to make it easier to do business in China’s currency. Last week in Hangzhou, our President, Perrin Beatty, and the Prime Minister of Canada met with Jack Ma, the head of Alibaba, to talk about boosting trade.

What is Alibaba? It’s only the world’s largest ecommerce company, roughly twice the size of Amazon. Alibaba’s transactions last year totaled nearly $250 billion, compared with $116 billion for Amazon. Every second, Alibaba handles an average of 500 orders, worth more than $9,000. Ecommerce is the best way to penetrate the Chinese consumer market because it’s more developed and trusted than the traditional bricks and mortar retail networks. Mr. Ma often says that “in the U.S., ecommerce is dessert. But in China, it’s the main  course.”

It’s time to feast. Canadian companies looking to list their products on Alibaba should click here. 

For more information, please contact : Hendrik Brakel, Senior Director, Economic, Financial & Tax Policy, 613.238.4000 (284) | hbrakel@chamber.ca 

 

Thursday
Sep112014

A funny thing happened on the way to a trade agreement

As Canada negotiates the Comprehensive Economic Trade Agreement (CETA) with the European Union, it is also setting, consciously or subconsciously a framework that has the potential to improve trade barriers between this country’s provinces and territories. 

Internal trade barriers have been a concern for many years by many groups, including local chambers such as the Peterborough Chamber of Commerce, provincial chambers such as the Ontario Chamber of Commerce (OCC) and the Chamber Network’s federal arm the Canadian Chamber of Commerce. 

At the provincial level, delegates at the OCC’s Annual General Meeting in May voted in favour of a policy resolution called “Eliminating Inter-Provincial Trade Barriers before CETA takes effect.” 

As explicit tariffs between provinces are forbidden under section 121 of the Constitution Act of 1867, most interprovincial barriers are the result of differing rules, regulations, licensing requirements and regional programs. These barriers to internal trade are often enforced by provincial legislation in attempts to protect local interests (OCC Policy Resolution, 2014). 

The resolution asks the provincial government to: 

 

  • Pursue trade liberalizing agreements with other Canadian jurisdictions through the use of Article 1800 of the Agreement on Internal Trade (AIT), that allows interested parties to move forward when consensus is not possible. 
  • Encourage all the parties of the AIT to conduct a full review and renegotiation of that agreement in order to eliminate barriers to trade, investment and labour mobility by 2015. A new agreement should: Cover all sections of the economy including ministries, crown corporations and regional and local governments. 
  • Institute a dispute resolution mechanism that includes access to a panel with binding and enforceable powers and contain significant fines for non-compliance. 

 

The Canadian Chamber of Commerce (CCC) has identified internal trade barriers as one of the Top 10 Barriers to Competitiveness. “Over the years, we have been calling on the government to significantly improve the Agreement on Internal Trade (AIT),” says Perrin Beatty, President & CEO, Canadian Chamber of Commerce in a recent blog. “We are encouraged that the federal government is now committed to eliminating remaining barriers to internal trade—an issue that has been costing Canadian companies billions of dollars over the years. We are ready to work with the various levels of governments to advance this issue and improve the competitiveness of the Canadian economy.” 

The Voice of Business continues to ring loud and clear as the CCC and a number of provincial chambers including the OCC wrote a letter to the Premiers. The letter was sent before the Premiers met in PEI recently. 

“While Canada faces many economic and social challenges, we believe that there is one issue that must be given significant attention by our governments: the removal of barriers to internal trade and mobility. 

Internal trade barriers continue to impede the free movement of people and goods between Canada’s provinces. Such barriers often arise as a result of minor differences in standards, certifications or regulations. The red tape that these differences impose on businesses and the economic toll they place on our competitiveness have become intolerable. 

The Agreement on Internal Trade (AIT) was negotiated twenty years ago and does not respond to today’s economic and commercial realities. While there have been some helpful changes over the years - in particular to the chapter on labour mobility- the agreement as currently written no longer does our economy justice. 

As Canada continues to remove the barriers between our country and the rest of the world, it is time to make the creation of an integrated, efficient Canadian economy a priority. In particular, as we move closer to a final agreement with the European Union, we run the risk of having a more open trading relationship with Europe than we have internally. How can we expect our businesses to be able to compete with the twenty-eight countries in the European Union if they are unable to efficiently access markets closer to home? 

The costs imposed by these internal barriers limit consumer choice, complicate unnecessarily the process for Canadians wanting to work in other regions of Canada, and impose a multi-billion dollar drag on Canada’s economy. These costs are being recognised both here at home and, increasingly, abroad. For example, the Organization for Economic Co-operation and Development (OECD) recently urged Canadian governments to harmonize certification requirements for apprenticeship programs as a means to improve interprovincial mobility. 

We urgently call on you and the federal government to adopt a renewed commitment to break down the remaining barriers to internal trade and mobility in Canada. We believe that all of Canada’s governments should strive for a more modern agreement on internal trade. At a minimum, the existing agreement should be strengthened and updated to reflect the realities of our modern, trade dependent economy, with the onus being placed on those proposing impediments to the ability to do business throughout Canada to justify these barriers and with the ability to resolve disputes in a timely manner. 

Together, our network of Chambers of Commerce is comprised of more than 450 local chambers of commerce and boards of trade representing more than 200,000 businesses and industry associations of all sizes and sectors in every region of Canada. We wish you every success as you prepare for your important deliberations and we stand ready to work with you and the Government of Canada to create an efficient and competitive Canadian economy.” 

Not only is there a cohesive attitude amongst the Chamber Network in Canada, but the letter and follow-up discussion at the Premiers meeting in PEI may be “very good news, if they mean what they say,” says Beatty in his blog. “For years, Canadian businesses have struggled to navigate the complex system of differing rules, regulations and standards. These minor differences increase costs, reduce our efficiency and warn foreign investors away from our country.” 

It also appears the government of Canada is truly taking notice and has issued One Canada, One National Economy: Modernizing Internal Trade in Canada. “Persistent barriers to internal trade, including regulatory differences, inconsistent standards, and restrictions on the free movement of people, goods and services, fragment our economy and put Canadian firms at a disadvantage,” James Moore, Minister of Industry. “The result is a weaker Canadian economy, lost jobs, and a less united Canada.” 

The proposal examines two ways Canada can develop a solution to the problem:  

  • Option One: Focus on priority areas for improvement 
  • Option Two: Completely redesign the internal trade framework for Canada  

The report concludes with a promise to Canadians and Canadian business: 

“These two pathways are each legitimate and viable routes to a renewed AIT and a stronger Canadian economy. They form a sound basis on which to move forward and represent approaches we can pursue over time to achieve meaningful outcomes. Going forward, the Government of Canada is committed to working with provinces and territories to forge agreement on a path forward and begin the essential work of renewing internal trade to the benefit of all Canadians.” 

With the business community, the province and the federal government having an eye to reform, the time is now to get it done. 

**More about the Industry Canada proposal can be found at:
http://www.ic.gc.ca/eic/site/081.nsf/ eng/00001.html 

To comment on this article please go to the "Peterborough Chamber" group of LinkedIn.