Thursday, July 31, 2008

Forecasters Are Sharpening Their Pencils

(Video: Bloomberg TV • Story: Export Development Canada)

It is the forecaster’s prerogative to revise the outlook. And whether it’s the weather, a flight arrival or the economy, the closer we are to the event, the clearer the forecast becomes. Recent turmoil has prompted sizable changes to the near-term economic outlook. What are pundits now saying?

At the beginning of last year, forecasters were quite bullish about prospects for 2008. The world’s largest economies, together accounting for half of global output, were expected to average growth of 2.5%, roughly in line with long-run trend performance. One year later, the outlook was scaled back to 1.9%, and by mid-2008 was trimmed further to just 1.5%. By any standard, that’s a pretty dramatic revision, putting certain economies at or close to recession levels. Will forecasts be downgraded further? Not likely. The 2008 cake is getting more firmly baked; the year is half over, and barring a substantial surprise, what the prophets now see is probably what we’ll get.

Sights have turned to 2009, and what is unfolding is more disquieting. Back in January, the seers were optimistic that prospects in the big economies would improve, collectively predicting growth would accelerate to 2.3%. Since then, revisions have been fast and furious. The 2009 forecast has been reduced by as much as the 2008 forecast was, but in just one-third of the time. At present, large-economy growth is pegged at just 1.3%, now a shade lower than the call for 2008.

Changed prospects for the US economy have played a big role in the overall revisions. Following a weak first quarter, the average projection was chopped by 1.2% to a meagre 1.5%. But the US is not alone; UK growth was halved to just 1%, Spain’s outlook fell from 2.4% to just 1.1%, and Ireland suffered a larger-than-average reduction. All of the large Western economies participated in the downward revision, and most are facing slower prospects in 2009 than at present.

Canada is a rare exception to the rule. On average, forecasters believe that, after a sluggish 2008, growth will nearly double next year. EDC Economics’ Summer 2008 Global Export Forecast sees Canadian economic growth of 1.1% this year and 2% in 2009, as exports stabilize and domestic demand remains firm. Low activity levels will keep exporters on their toes in 2009, but a slightly weaker Canadian dollar will provide some relief.

What about the rest of the world? Other industrialized countries are generally expected to see growth slow in 2009 as well. The trend is also affecting emerging markets. Following torrid growth just under 12% in 2007, China’s growth slowed to 10.1% in the second quarter of this year. Reactions to rising inflation, a deteriorating current account and fiscal concerns threaten India’s near term outlook. In addition, South America saw first quarter growth weaken, owing to tighter monetary policy, currency appreciation and softer trade performance. In fact, economies that are not sharing in the slowing trend are in rare company.

The bottom line? A slim minority just a year ago, those who believe that the slowdown is truly global have become a large majority in the forecasting community. And most have also swung over to the view that the recovery isn’t imminent. Under these circumstances, exporters should brace for lean times and be selective about near term international ventures.

Capture Progress and Continue Work, WTO Members Say

(World Trade Organization)

Issues settled in nine days of talks among ministers should be preserved and work in the Doha Round should continue despite the ministers’ talks collapsing the previous day, WTO members said on 30 July 2008.

They were speaking on the record, in a formal meeting of the Trade Negotiations Committee, the forum for the full membership to oversee the negotiations. The focus was on the talks among ministers, which broke down on 29 July when a small group of them could not agree on details of a new “special safeguard mechanism” for developing countries (explained below).

The members were echoing WTO Director-General Pascal Lamy’s opening comments in the meeting.

He spoke of “a collective responsibility” to reflect on next steps. The progress made in agriculture, non-agricultural market access and other subjects should be preserved, Mr Lamy said. “This represents thousands of hours of negotiation and serious investment by all the members of the WTO. This should not be wasted.”

Special safeguard mechanism

The talks among minister broke down on 29 July over the special safeguard mechanism (SSM). What exactly was the problem?

This is not about protecting poor farmers in general – that is already covered by what has been agreed on the formula for cutting tariffs, smaller or no cuts for “special products”, different treatment for small and vulnerable economies, recent new members and special cases such as Bolivia, exemptions for least-developed countries. It was not even about the SSM itself. This is about one particular circumstance.

The SSM would allow developing countries to raise tariffs temporarily to deal with import surges and price falls. The blockage was only about import surges, and in a particular instance of that.

Agreed already: All WTO members have agreed that developing countries will have an SSM. They have more or less agreed on how big the import increase would be to trigger the temporary tariff rise, and they have agreed on how high the rise should be in general.

The blockage is about the situation where the SSM raises tariffs above commitments countries made in the 1986–94 Uruguay Round – the “pre-Doha Round bound rates”. In the case of new members, that means commitments made in their membership agreements.

So, essentially, the blockage is about the SSM reaching into a disputed zone: above pre-Doha bound rates. More details can be found here and here.

Minister Ritz Responds to U.S. Department of Agriculture Ruling on Mandatory Country-Of-Origin Labeling

(Agriculture & Agri-Food Canada)

Federal Agriculture Minister Gerry Ritz today [Wednesday] responded to the U.S. Department of Agriculture (USDA) recently published rule regarding the implementation of the mandatory country-of-origin labeling (COOL).

“The Government of Canada is disappointed with the U.S. COOL legislation, and remains concerned that it may discriminate against Canadian products,” said Minister Ritz. “We will analyze the recently released rule to determine the economic impacts on integrated North American markets”.

The U.S. Congress passed the Food, Conservation and Energy Act of 2008 (the 2008 U.S. Farm Bill) in June. This legislation requires the mandatory COOL rule for beef, lamb, pork, chicken and goat meat, along with perishable agricultural commodities, peanuts, pecans, ginseng and macadamia nuts, to be implemented by September 30, 2008.

The implementation of the COOL rule for food products has happened in stages. Implementation for fish and shellfish was effective April 4, 2005. However, implementation for all other commodities was delayed until September 2008.

Since the Canada-U.S. Free Trade Agreement, and then the North American Free Trade Agreement, trade between Canada and the U.S. has tripled. Eliminating obstacles to trade has contributed to mutually-beneficial supply chains, making both countries more competitive domestically and internationally. The Government of Canada understands that this new rule could have an impact on highly integrated sectors like the beef and pork sectors.

“The Government of Canada will continue to work with industry and the provinces and territories to minimize any impact on Canadian farmers and ranchers,” said Minister Ritz. “Should the implementation of the rule result in undue restrictions on the exportation of any products or animal from Canada, the Government will have to consider its options.”

As it did in 2003, 2005 and 2007, the Government of Canada will submit comments to the U.S. Federal Register, outlining its views on the rule.

Freight Index Rises in June, but Hurdles Remain

(CNN Money – Associated Press)

Truck tonnage increases in June, but trade group economist suggests recovery might be far off

The American Trucking Associations (ATA) said total goods shipped by truck in the U.S. rose for the second consecutive month in June, but the trade group’s chief economist suggested the nation’s overall economy might not yet be on the road to recovery.

Truckers are considered gauges of the nation’s economic health because they often recover ahead of the broader economy, as they transport goods to stock retailers’ shelves in preparation for a rebound in consumer spending. Almost 70% of manufactured and retail goods in the U.S. are carried by truck, according to the ATA.

The ATA said its seasonally adjusted tonnage index, which measures the weight of freight hauled by U.S. truckers based on membership surveys, rose 1.3% in June. The index also hit its highest mark since February. It rose 0.5% in May.

The trade group’s Chief Economist Bob Costello said despite the uptick, the fate of the overall economy still remains unknown. “It seems that truck tonnage is once again leading the U.S. economy,” Costello said in a statement. “Unfortunately, truck tonnage could slow later this year as the overall economy is expected to be quite weak in the fourth quarter and the first quarter of next year.”

Costello noted that during the economic downturn in 2001, trucking demand recovered before the economy fell into a recession.

A key driver in the last two months may have more to do with capacity cutbacks across the sector. High fuel prices have driven many carriers to cut their fleet sizes or sell trucks to foreign buyers in an effort to bring U.S. supply and demand back into balance. Costello predicts that additional fleet reductions will probably continue in the near future.

The Arlington, Va.-based trucking group’s members include FedEx Corp., United Parcel Service Inc., Con-way Inc. and Knight Transportation Inc. Most trucking stocks advanced in morning trading Wednesday as the broader market continued a two-day rally.

CBP Proposes Revision of Country of Origin Rules

(American Shipper)

U.S. Customs and Border Protection is proposing to revise the rules used to determine the country of origin of imported merchandise.

The proposal would apply the so-called “tariff shift” rules, which CBP said “have proven to be more objective and transparent, and provide greater predictability in determining the country of origin of imported merchandise than the system of case-by-case adjudication they would replace. The proposed change also will aid an importer’s exercise of reasonable care.”

The proposal was published Friday in the Federal Register in a notice of proposed rulemaking and comments on the proposal are being accepted through Sept. 23.

Merchandise imported into the United States is subject to a country of origin determination, and under most circumstances that is done by CBP.

In a memo to clients, the law firm of Katten Muchin Rosenman explained that for customs purposes, all imported products must have a single country of origin. When products are composed of materials from more than one country, or undergo processing operations in more than one country, the country of origin is the country in which the product last underwent a “substantial transformation” prior to entry into the United States.

“For nearly a century, both CBP and courts have interpreted substantial transformation to mean the creation of a new or unique article of commerce having a distinctive name, character or use,” the firm explained. “This analysis, which applies to labeling and preferential trade systems, such as the Generalized System of Preferences or the Caribbean Basin Trade Partnership Act, has been applied in a case-by-case basis, which CBP argues has led to subjective or inconsistent results.”

So more recently, CBP has applied the “tariff shift” rules laid out in Part 102 of its regulations that looks for specific changes in the tariff classification of a product before and after processing or combination with other materials. The Part 102 rules are used to determine the country of origin for all goods imported from Canada and Mexico under NAFTA, for nearly all imports of apparel or textile products, and for imports of products under certain free-trade agreements.

Under the new proposal, CBP would apply the Part 102 rules “to all country of origin determinations made under the customs laws of the United States, with only a few exceptions as mandated in certain trade agreements,” said Katten Muchin Rosenman. CBP claims the new test will be more transparent to importers, can be objectively applied, and will result in more predictable country of origin determinations.

Another law firm, Tompkins & Davidson, noted the Part 102 rules “will not be used for purposes of determining origin for preferential trade agreements, if the agreements specify another origin test for that purpose. For example, application of tariff benefits under NAFTA are determined by the preference origin rules set out in Chapter Four of that agreement.” Read the complete article.

Wednesday, July 30, 2008

Eliminate Middlemen and Save on U.S. Customs Duties

(Tom Travis — via MSNBC)

Importers today are typically being told they’re buying directly from the factory, that it’s the manufacturer who is selling to you. In fact, you’re usually buying through multiple parties, each that’s taking its own markup on the goods, adding to the amount of duty paid once the goods arrive in the United States. As a result, importers are trying to reduce U.S. duties by using a “first sale” concept.

Simply stated, the First Sale Rule allows the value entered to U.S. Customs to be based on the purchase price between the middleman and the factory, rather than the middleman and the importer. Importantly, the First Sale Rule may also apply to U.S. imports where the middleman is related to the importer and/or the factory or when there are multiple levels of middlemen. Working back to the price between the actual manufacturer and the immediate buyer substantially reduces the amount of duties, provided that all the appropriate requirements of the customs valuation statute are satisfied. This concept currently may be utilized in both the U.S. and the European Union.

It’s not always possible to work backward from your immediate seller to the actual manufacturer. Sometimes the parties in the transaction are afraid of giving away too much information about their markups or are concerned about revealing too much about the parties they do business with. However, even working back one level in the sales transaction can result in significant duty savings. While at times it seems almost impossible to penetrate the wall of silence and obtain the needed pricing information, experience shows that your suppliers are key to overcoming this problem. Read the complete article.

Canada to Turn to Bilateral Agreements After WTO Trade Talks Collapse

(Video: Bloomberg TV / Story: The Canadian Press)

Canada will move aggressively to negotiate individual country-to-country trade deals to protect its economic interests amid an abrupt collapse of global talks in Geneva, Trade Minister Michael Fortier said.

Canada would be at the table whenever talks resume, but is not waiting for a multi-national agreement, Fortier said.

“We are a trading nation. We depend on the ability for exporters to access markets worldwide and in particular markets in emerging and developing economies,” he said in a conference call from Geneva.

Fortier is most interested in reaching agreement with countries in the Americas, noting recent successful talks with Peru and Colombia, as well as in emerging markets such as China and India.

Canada has free trade agreements in place with the United States, Mexico and Chile. It has recently negotiated an agreement with Iceland, Liechtenstein, Norway and Switzerland, and is seeking deals with South Korea and Europe, among others.

But the Canadian Chamber of Commerce questioned whether the country could get the same concessions from other countries in bilateral agreements that could have been won at the WTO.

“We had a real potential to see some significant gains in (exports) in agriculture and services and some limited gains in tariffs, and now all of that is off the table,” said Shirley-Anne George, the chamber’s head of policy.

“This is not good for Canada because we don’t have the economic might to force what we need in bilaterals the way the U.S. and Europe does.”

The Canadian Agri-Food Trade Alliance has estimated that a breakthrough in the agricultural sector of the talks, known as the Doha development round, could potentially mean $3 billion in additional exports for Canadian farmers.

The farm trade alliance said in a statement Tuesday that a new deal was needed “not just to increase our access to world markets, but to maintain what we got.”

But the bigger losers, said trade alliance president Darcy Davis, are the world’s poor countries, which stood to gain greater access for their farm exports into the developed world, and protection from subsidized imports from countries such as the United States and Europe.

“This is the development round,” he explained in a telephone interview from Geneva. “This was supposed to bring trade and lots of good things for developing countries. If we can get rid of export subsidies that hamper the ability of subsistence farmers to make a living, that would have been good.”

Fortier and Agriculture Minister Gerry Ritz were cautiously optimistic WTO chief Pascal Lamy could kick start a resumption of talks soon, but they admitted there were obstacles.

Ritz said several countries were entering election cycles, which could mean some of the players at the table in Geneva in the past nine days will likely not return.

As well, although some progress was achieved, the hurdles remain “significant.” Read the complete article.

Tuesday, July 29, 2008

Canada Better Than U.S. For Corporate Taxes: KPMG

(CBC News)

Canada has a more competitive tax system for companies than the United States, according to a KPMG study released Monday.

KPMG says Canada, often thought of as a high-tax country, scored third-best out of 10 countries according to the consultancy’s total tax index.

The Canadian score placed this country ahead of seven other major industrialized economies, including the U.S., the United Kingdom and Japan. Only Mexico and the Netherlands posted a better, or lower score, than Canada.

“A lot of governments have been trying to make Canada more competitive for business. And that quest is continuing,” says Greg Wiebe, KPMG’s Canadian managing partner for tax.

“The average person on the street has a view of Canada (as a high tax country) because of their personal tax rates. But, the U.S. has one of the highest corporate income tax rates in the world,” he said.

KPMG’s total tax index attempts to look at taxes at all three levels of government rather than merely adding up the posted corporate tax rates. KPMG examined corporate rates, capital taxes, sales taxes, property taxes among other factors to arrive at its index.

Overall, Canada scored 78.3 in the KPMG study compared to 100 for the United States and 120.8 for Japan.

A lower score indicates a tax system that is more favourable to business while a higher score would mean that country is less business-friendly.

One reason for Canada’s strong showing is the policy whereby some provinces reduce corporate taxes by implementing a variety of tax holidays and tax credits for various firms, according to the study. Read the complete article or view the KPMG competitiveness report here.

WTO Talks Collapse Over Import Rules

(Video: CCTV / Story: CBC News)

A bid by the world’s major trading powers to salvage trade talks collapsed on Tuesday after the United States, India and China failed to agree on farm import rules, according to officials.

The failure of the discussions between seven commercial trading powers likely signals the end to efforts by the World Trade Organization to gain an overall global trade pact.

The WTO has been trying since 2001 to secure a deal on the rules governing trade. But the prospects for such an agreement have been damaged by continual disagreements between Western nations and emerging economic powers, such as India and China, over manufacturing and agricultural rules.

In mid-July, trade officials from a smaller group of countries began meeting in an effort to get the large WTO talks back on track.

This most recent setback, however, could mean the larger negotiations will also fail, a senior source told the Associated Press.

The United States and the European Union have been pushing hard for a reduction of tariffs on manufactured products and the lessening of restrictions on farm trade.

India and China, however, have been demanding emergency powers that would allow those countries to protect domestic farmers against import surges from other countries.

These newly-industrializing powers say they need these rights to prevent small-scale farmers from being pounded by global agricultural producers, who could drive produce prices down.

Canada defends supply-management regime

The United States has argued that such rules could wind up raising farm tariffs in those countries, an unacceptable result from Washington’s perspective.

For its part, Canada has consistently defended this country’s supply-management regime, a system of rules and production quotas that, critics say, keeps consumer prices for products, such as chicken, overly high.

“There’s no doubt this is a significant setback,” federal Agriculture Minister Gerry Ritz told reporters during a conference call from Geneva. “But we will push ahead with our trade agenda.”

Canada will now focus on negotiating more bilateral deals with other countries and trade blocks, said International Trade Minister Michael Fortier.

Canadian farmers sounded alarm bells over a possible failure to get a trade deal.

“To not get a new WTO agreement would mean tariffs can be raised and domestic supports increased to further distort trade,” said Darcy Davis, president of the Canadian Agri-Food Trade Alliance, a group representing Canadian beef and pork producers and grain growers.

Saturday, July 26, 2008

Particularly Bad Timing

(New York Times Editorial)

With the global economy slowing, prices soaring for oil and food and protectionist passions boiling up everywhere, it is an especially dangerous time to give up on international trade negotiations. Unfortunately, the world’s leading trading nations seem ready to abandon the World Trade Organization’s seven-year effort to reduce some of the world’s obstacles to trade.

The talks, initiated in 2001 in Doha, Qatar, were supposed to help the world’s poorest countries. An agreement would open markets to their main products, like food and textiles, and reduce the lavish farm subsidies in the rich world that have put poor farmers out of business. After years of wrangling, the negotiations now appear to be deadlocked.

While the reluctance to cut farm subsidies in Europe and the United States had been a main obstacle, the big developing countries also bear a lot of responsibility.

At marathon meetings this week in Geneva, the United States offered to further lower the ceiling for its agricultural subsidies — to roughly $15 billion a year from the current $48 billion. Europe — with France objecting — also fleshed out a new offer.

Big developing countries, notably Brazil and India, however, are insisting on even deeper subsidy cuts. And they are refusing to submit any offers of their own to reduce tariffs on industrial imports. They argue that the wealthy countries really aren’t giving up much. American agricultural subsidies, they note, have already fallen sharply as food prices have soared, to about half the proposed new ceiling.

We fear the whole process is on the verge of collapse. This is the last chance to get a deal during the Bush administration, experts say. And if talks fail to make substantial progress, the new American president will probably want to start from scratch rather than pick up where his predecessor left off. Read the rest.

Canadians Semi-Pumped Up to Hit the Road

(James Mennie — The Gazette)

High gasoline prices were supposed to force Canadians to change their travel habits, and statistics made public this week suggest we are spending less on fuel.

But at U.S. Customs and Border Protection, the impression is that while a road trip to the United States might cost Canadians more than last year, it's a price we're prepared to pay.

"There hasn't been any significant increase or decrease in the traffic that's been coming across the border," U.S. Customs spokesperson Ted Woo said. "Weekend traffic is busier and Mondays and Tuesdays it might lighten up.

"But whether it's a small (crossing) like Derby Line (in Vermont) or elsewhere, there's been no real change."

Woo's comments follow a report by Statistics Canada this week that shows even though the price of gasoline increased by 8.8 per cent from April to May, revenues from sales at the pump rose by only 2.4 per cent. That gap represents a nearly six-per-cent drop in the amount of fuel sold, some analysts have calculated.

That apparent frugality with fuel, however, might be manifested in the choices Canadians make about how to get to work, rather than where they vacation. Read the complete article.

Friday, July 25, 2008

Shipping Federation Works to Free Containers

(Montreal Gazette – Mike King)

A national group representing owners, operators, charterers and agents of vessels engaged in Canada’s overseas commerce is attempting to break a backlog of shipments being held excessively long at ports on both coasts because of new customs testing rules for cargo containers.

“We’re working with the Canada Border Services Agency to get rid of the backed-up shipments,” James Moram, director of marine administration at the Shipping Federation of Canada, said yesterday from Halifax before returning to Montreal headquarters.

“Things are being done to try to clear up the Port of Halifax,” where he said there is a 77-container backlog with an average 17-day delay before they are cleared for delivery to their final destinations – more than three times the normal turnaround period.

“It’s costing importers an arm and a leg as well as lots of frustration,” Moram said.

One of the 40-foot containers carrying a wide variety of goods for eight Montreal customers, including Bombardier Inc., and five clients in Toronto, including Ford Canada, has been sitting there since June 14. Gillespie-Munro Inc., the Montreal-based international freight-forwarding firm responsible for the shipment, has been fielding angry calls from the increasingly impatient importers.

“Now everybody is yelling at us because they all think we’re lying to them,” said Chris Gillespie, president and CEO of the family company. “My staff is getting pummeled every day from the importers. “It has gone beyond all common sense,” Gillespie added. “We’re being brutalized.”

The problem began last month when the border services agency ordered all marine containers randomly selected for inspection for contraband also be tested for formaldehyde – one of six common gases used for fumigation – as a means of protecting customs employees from any possible exposure to hazardous chemicals.

But the levels of formaldehyde deemed safe by Customs on instructions of Health Canada – 0.15 parts per million, less than is found in hardwood floors, for example – have meant virtually every container has tested positive and had to be held for ventilation.

Although ventilation should not take more than a day, border services isn’t giving any explanation why the containers are being kept longer.

While the CBSA recognizes the testing and ventilation of containers is causing delays with the movement of containers and is subsequently taking action, Moram’s shipping federation, the Canadian International Freight Forwarders Association and the Canadian Association of Importers and Exporters, argue the testing for formaldehyde has caused and continues to cause serious harm to the entire importing and exporting community.

They say Canadian importers are facing cancelled orders, back-to-school goods aren’t reaching the retail shelves on time, late project and construction materials are creating fines and delays while administration and tracking expenses are skyrocketing.

There have also been big backlogs at the Port of Vancouver, but Patrice Pelletier, Port of Montreal president and chief executive officer, said yesterday there are no such delays here.

New NEXUS Card Offers Security

(The Windsor Star – Craig Pearson)

NEXUS border-crossing cards are changing to add security, though a U.S. government official says they should also help speed the process. Sometime in the fall, current NEXUS cards – in use for five years to help regular commuters move quickly across the border – will be swapped for second-generation NEXUS cards.

“It’s leaps and bounds more secure,” Chief Ron Smith of U.S. Customs and Border Protection said Wednesday. “But beyond the security issue it will also make us more efficient.”

Smith said the new cards are being issued in conjunction with the introduction of new card readers that improve upon the radio-frequency-identification-device technology – which can read nearby cards without having to swipe them. The chip in the old NEXUS cards sent information 15 feet. The new card will send it only 10 feet, which lessens the chance someone can intercept the information.

That said, cards only contain an ID number. Border officials then retrieve personal information from a protected data bank. As well, the new cards are harder to counterfeit or alter.

Furthermore, the new U.S. card readers can handle more information, making them faster. With the previous system, the card readers could only identify one or two people at the same time. With the updated system, the readers will be able to identify four NEXUS commuters in one car all at once.

“It’s an all-around better system,” Smith said. “It should also help us increase our NEXUS usage.”

About 355,000 people currently hold NEXUS cards. Both Canadian and American officials hope that number will climb significantly, since NEXUS cardholders typically cross land borders with less delay than those using other government-issued ID.

Smith also noted that the Western Hemisphere Travel Initiative will require all Canadians and Americans to use passports to enter the United States, including through land borders, starting June 1, 2009. NEXUS cards can be used as a passport at the border,” Smith said. “It’s simple.”

Current NEXUS cardholders will receive new, more secure cards by mail sometime in the fall. NEXUS cards cost $50 and are good for five years. You can apply for NEXUS cards online at The entire process, including interviews with border officials, takes about six weeks.

Border Trade Alliance Renews Call for Border Funding

(Truck News)

The Border Trade Alliance (BTA) is pushing leaders in Washington to expedite funding earmarked for improving the flow of goods through land ports-of-entry.

The trade organization wrote to the Senate Committee on Homeland Security and Government Affairs to emphasize the importance of funding to upgrade aging infrastructure at U.S. border crossings. It says inadequate infrastructure and increased security is a hindrance to NAFTA trade, which is up 172% since 1993, now totaling US$797 billion.

The group claims millions of dollars are lost each day due to supply chain inefficiencies. U.S. Congress has already committed funds to the Department of Homeland Security and the General Services Administration (GSA) to help upgrade border crossings. The BTA is also urging impending GSA administrator Jim Williams to use any leftover funding to expedite the delivery of port infrastructure projects.

“GSA has made great strides and taken positive steps toward delivering much needed border infrastructure, however we need to continue to stress the importance of land ports of entry to our national economy,” said Maria Luisa O’Connell, president of the BTA.

The U.S. Customs and Border Protection estimated that $500 million per year is needed over the next 10 years to fund much needed border infrastructure improvements. BTA points out the average truck crossing into the U.S. at El Paso now experiences a one hour delay, with delays as long as four hours not uncommon, at the crossing, which costs shippers more than $100 million per year.

New Food Labelling Rules Call for Listing of Allergens, Gluten, Sulphites

(CBC News)

Federal Health Minister Tony Clement announced new food labelling regulations Wednesday which will force food manufacturers to list specific allergens, gluten sources and sulphites on the labels of the products they sell.

“Canadians want to know what it is in the packaged food that they eat. They have come to expect detailed information on every label of the products on the grocery store shelves,” Clement said at a press conference in Ottawa.

The upcoming changes will mean food labels will have to list any key ingredients in a food item that may have been created with an allergenic substance. Clement said that will include some ingredients that are currently listed as “spice” or “seasoning,” for example.

Any allergenic products used to create an ingredient will also have to be listed, Clement said. He used the example of gluten; labels will now have to specify where the gluten comes from, such as barley, wheat or rye.

“These changes will help Canadians manage these allergies and celiac disease,” said Clement. “We believe that better information can only lead to better nutrition, and better nutrition, of course, means better health.”

Even though the regulations have yet to be implemented, Clement called on the food industry to take action now. “While these food allergen regulations are being submitted, I’m making a request to the food industry now: improve their labelling for common allergens, sulphites and gluten sources.”

The proposed regulations follow Prime Minister Stephen Harper’s food and consumer product action plan announced last year.

Last week, federal Agriculture Minister Gerry Ritz announced new labelling guidelines for food, which will ensure that all foods labelled as products of Canada will contain food that is both produced and processed here.

At Wednesday’s press conference, Clement also mentioned changes to the regulation of health products. He said pharmaceutical products will now be closely watched before and after they are approved for sale. He said that recent reports of adverse drug reactions have highlighted the fact that many new drugs only show serious side effects after they reach the market. The regulations are meant to stop that.

Minister Clement’s announcement is here. Health Canada is publishing its proposed regulatory amendments in Canada Gazette, Part I, on July 26, 2008 to allow for public comment. The background document is available here.

Thursday, July 24, 2008

Energy Prices Only Lift To Exports This Year Before Decline In 2009, Says EDC

(Export Development Canada)

Canada’s total exports are expected to jump by 4.2% in 2008 as a result of soaring energy prices, according to a Global Export Forecast issued today by Export Development Canada (EDC). EDC forecasts export earnings to decline by 1 per cent as key commodity prices pull back in 2009.

“Since our Spring Global Export Forecast, there hasn’t been much good news for Canadian exporters. Losses due to the U.S. sub-prime crisis and its spill over effects into Canada continue to mount, the impact of soaring commodity prices upon consumers continues to increase, and proof of slowing global production is rampant,” said Peter Hall, Vice-President and Chief Economist for EDC. “The gain of 4% in exports in 2008 is actually an energy price story, but when all price effects are removed, Canadian exports are actually on track to tumble by 4% this year.”

EDC expects the Canadian dollar to trade near parity with the U.S. dollar during the summer period before pulling back by year-end, trading in the USD 0.94 to USD 0.97 range during the first half of 2009. The forecast for the currency is largely based upon an expected decline in the price of oil through 2009. The outlook sees crude prices sinking below USD 100 per barrel by the end of this year, and averaging USD 84 per barrel in 2009. Bolstered by higher prices for natural gas, Canada’s energy exports are expected to rise by almost 40% this year, before falling 7% in 2009.

“While EDC recognizes that global supply and demand for crude is tight, we sees signs that a large price correction is on the horizon”, Mr. Hall continued. “On the demand front, growth expectations are likely to moderate as the global slowdown spreads and oil price subsidies in emerging markets are scaled back. On the supply front, the Energy Information Administration is already forecasting a doubling of OPEC surplus capacity, to 4 million barrels per day in 2009, and non-OPEC supply gains of 1 million barrels per day.”

EDC’s forecast noted that a significant portion of the recent spike in oil prices is the result of speculative investors seeking safe haven from a falling U.S. dollar. EDC’s forecast also noted that the exchange rate between the U.S. dollar and the Euro is more tightly linked to the price of oil now than in the past. EDC believes that when the U.S. dollar stops falling against the Euro, speculators will exit crude and prices will fall accordingly.

On a sectoral basis, robust global demand for grains and high prices should help buoy the agri-food and fertilizer sectors. Exports of industrial commodities continue to benefit from soaring prices, but an expected correction in 2009 should pull earnings down. Weakness continues to be concentrated among forestry, automotive and consumer goods – areas that rely heavily on the struggling U.S. market. The expected drop in the Canadian dollar, however, will provide some relief in 2009. Read the complete press release here.

CBSA Testing of Ocean Containers for Formaldehyde

(IE Canada)

I.E.Canada joined with the Canadian International Freight Forwarders Association and the Shipping Federation of Canada in a letter to CBSA Executive Vice-President Greta Bossenmaier last week expressing concerns about the introduction of testing for formaldehyde and the serious harm it is causing to the trade community.

The letter reads in part as follows:

The introduction of testing for formaldehyde on containers identified for inspection by the CBSA on June 12, 2008 has caused, and continues to cause, serious harm to the entire importing and exporting community. There are several issues which we have identified as contributing to the problem.

1. The CBSA introduced this test for formaldehyde without notification to the community. No communications were sent to the importers, carriers, ports or international freight forwarders that the testing protocols were being changed.

2. There has been no communication as to the reason behind this increased testing, validation of ‘positive test levels’ or additional resources required to manage this increased testing.

3. There is no apparent reason for the Health Canada ‘safe levels’ of .15ppm. The containers which are testing positive have not been ‘fumigated’ at origin and do not bear ‘fumigation’ marks and so cannot have abnormally high levels of formaldehyde due to fumigation.

4. Increased testing and the new need for container ventilation have stressed examination facilities’ capabilities by tying up equipment, creating massive backlogs and severely frustrating human resources.

Confusion and misinformation reign; due primarily to the uncertainty now introduced into the inbound flow of goods. Neither carrier, freight forwarder, customs broker, nor cartage company can provide accurate information to the importer as to when an identified container will be inspected (backlogs are now more than eight days in Halifax, ten days in Vancouver and fourteen days in Prince Rupert). Once a container is entered into the examination warehouse, because the ‘test positive’ rate is so high – upwards of 95% in many inspection facilities, and because the CBSA is not adequately resourced to handle proper ventilation, we are experiencing additional delays of up to three weeks.

Canadian import capabilities are being severely compromised. Canadian importers are facing cancelled orders, back-to-school goods are not reaching the retail shelves on time, late project and construction materials are crating fines and delays, administration and tracking expenses are skyrocketing. Canadian export containers identified for inspection by the CBSA have also been delayed — in one instance by five sailing rotations — severely compromising Canada’s export capabilities. The impact of this testing for formaldehyde at the current ‘safe levels’ will have a dramatic, negative effect on the Canadian economy and on Canada’s competitiveness. We respectfully ask the CBSA to review and rescind the decision to test for formaldehyde.

A copy of the letter is available here. If your marine containers are being delayed due to testing for fumigants, IE Canada would like to hear from you. Please contact Amesika Baeta at

Tuesday, July 22, 2008

EU Offers to Cut Farm Tariffs by 60% in Global Trade Pact

(The Canadian Press)

The European Union says it will slash farm tariffs by 60% as part of a new global trade pact, a deeper cut than it has ever offered.

EU Trade Commissioner Peter Mandelson told reporters today at the World Trade Organization that the offer is meant to kick-start a week of crunch global commerce negotiations. The EU has previously proposed to cut the tariffs by 54%.

Mandelson says he now hopes emerging economies like Brazil, India and China will respond by improving offers on industrial tariffs.

Rich and poor countries have clashed repeatedly in the seven-year WTO talks. Developing countries want more agricultural openings, while the U.S., EU and others seek better access for their manufacturers andbanks.

Product of Canada, Made in Canada

(Canadian Food Inspection Agency)

The Canadian Food Labelling Initiative was recently posted on the Canadian Food Inspection Agency (CFIA) web site and can be viewed here.

Modifications to the 2003 Guide to Food Labelling and Advertising (2003 Guide) Section 4.19 Product of Canada, Made in Canada are available here, and An Industry Advisory – New Guidelines Defining Product of Canada and Made in Canada on food labels and advertising here.

Move Faster to Fix Border Delays, Van Dongen Urges

(Vancouver Sun – Derrick Penner)

Lineups for truckers and tourists a concern

The Canadian and U.S. federal governments need to move faster to fix the delays truckers face at border crossings, according to John van Dongen, B.C.’s minister of public safety and solicitor-general.

At a major intergovernmental conference on Monday, van Dongen said that while governments have moved to implement programs that expedite the passage of “trusted travellers” across the border, he still sees long lineups at the Fraser Valley’s Pacific Border Crossing.

He contends that those lineups result in fewer vehicles taking more time to get across, “which represents huge lost dollars.”

The situation has improved over the past four years, according to other speakers at the breakout session of the Pacific North West Economic Region (PNWER) conference in Vancouver.

However, van Dongen said that while things are moving in the right direction, “Rome is burning while we’re trying to get this stuff implemented.”

The issue of the border, which has become a stickier line to cross in the security-conscious 9/11 era, was a key topic of discussion at the PNWER annual meeting, which brings together top government and business representatives to talk about common issues. Van Dongen serves as one of PNWER’s vice-presidents.

The potential for visitors to Vancouver and Whistler’s Olympics in 2010 to face delays dominated a morning session on border issues.

Premier Gordon Campbell reprised that theme as part of his keynote address during lunch.

Recalling an uncomfortably long wait for transportation at the 2004 Athens Olympics that still sticks out in his memory, Campbell said he wants to make sure the thing that people don’t remember about the 2010 Games is a long wait at the border to get into Canada.

Campbell credited PNWER with advancing the border-delay issue with both the Canadian and U.S. federal governments, and pushing for innovative solutions, such as the enhanced drivers licences being piloted by Washington and B.C. as acceptable border identification.

Cargo crossing the border was the afternoon topic, when it was mentioned strides have been made towards improving the two-way flow. Click here for the complete article.

Sunday, July 20, 2008

Parts Makers Win Trade Dispute

(David Shepardson — Detroit News)

WTO rules that China’s hefty import tariffs discriminate against U.S. auto suppliers.

The World Trade Organization ruled Friday that China violated trade laws by hiking taxes on auto parts imported from the United States, — a decision that could boost struggling Canada and the European Union U.S. auto parts makers.

Critics of China’s policy said it encouraged suppliers to relocate to China, costing jobs in their home markets.

The “report leaves no doubt that China’s discriminatory treatment of U.S. auto parts has no place in the WTO system,” said U.S. Trade Representative Susan Schwab. “We will not stand idly by when China or any other country adopts regulations or industrial policies that tilt the playing field against American goods or services.”

Schwab’s office said U.S. auto suppliers set up operations in China so automakers could avoid hefty tariffs they had to pay if they used less than 51 percent Chinese-made parts in vehicles built in China. The policy has helped China’s auto parts companies, resulting in a steadily rising Chinese auto parts trade surplus.

Bob McKenna, president and CEO of the Motor Equipment Manufacturers Association, a trade group that represents many U.S. auto parts makers, said the WTO’s decision would “ensure a more level playing field for our products in China.”

The U.S. first objected to the Chinese policy in March 2006, and a hearing panel was formed in October. China has the right to appeal Friday’s decision, but an appeal likely would be resolved within six months.

It could take years before the United States would be allowed to impose economic sanctions on Beijing for failing to comply with the ruling. If it opts not to appeal, China has an undefined “reasonable period” to end the tariffs. If it does not, the United States would have to appeal to a separate WTO panel and win a ruling that China had not taken corrective action before it could impose sanctions. The process is designed to convince countries to work out their differences. Read the complete article.

Saturday, July 19, 2008

New Intermodal Rail Container Yard Will be Huge

(Regina LeaderPost – Veronica Rhodes)

The planned Canadian Pacific intermodal facility (IMF) could be bringing national distribution centres to Regina, the size of which the Queen City has never seen.

“This will be an area with extremely large warehouses. Think of the biggest warehouse you know and multiply by a factor of two, three or four and you get a sense of the scale of these,” Jeff Lehman, a principal with MKI, an independent consulting firm contracted to prepare a concept plan and cost analysis for the IMF, said Wednesday. “Some of these are one million square feet so it’s a type of land use that isn’t in Regina yet – a very, very large warehouse.”

Lehman explained that intermodal facilities are central to distribution networks, particularly for retailers who will send out goods to their stores across the country. The IMF is to be built west of the city and will replace the current CP yards in downtown Regina.

The estimated $93-million project has already received $27 million in funding from the federal government and will also result in the creation of an interchange at Lewvan Drive and the Trans-Canada Highway.

Mayor Pat Fiacco explained the IMF is basically an inland port, allowing retailers to be able to move product by air, road and rail. Regina is the ideal location due to its central position in the country.

“This is about the creation of not hundreds of jobs but literally thousands of jobs over the next few years. That’s not just including the construction portion of it, this is ongoing jobs,” said Fiacco.

Lehman said each warehouse could be located on roughly 50 hectares of land by the IMF, but won’t match the size of such facilities seen in Chicago and Calgary. Read the complete article.

Friday, July 18, 2008

Economy Will Recover, BoC Says

(National Post – Jacqueline Thorpe)

The Canadian economy looks to have escaped a recession in the first half of 2008 and will pick up momentum through the end of the year, despite extreme turmoil in financial markets and continued weakness in the United States, the Bank of Canada said yesterday.

Still, 2008 as a whole will be the worst showing for the economy since 1992, when it was crawling out of the recession of the early 1990s, according to bank forecasts. Indeed, the bank believes growth will be weaker than what will be seen in the United States, which is facing no immediate end of troubles.

The bank said a wave of income from rising commodity prices will keep the economy afloat through the end of the year.

“Recent increases in commodity prices lead to higher wages and salaries, higher government revenues, higher corporate profits and equity valuations and stronger investment growth, particularly in the energy sector,” it said in its quarterly review of the economy.

The bank forecasts the economy will grow at an annualized pace of 0.8% in the second quarter, up from an earlier forecast of 0.3%. The economy contracted 0.3% in the first quarter. Two back-to-back quarters of declining activity are required to meet the widely accepted definition of a recession.

Businesses drew on inventories in the first quarter after importing heavily at the end of 2007. This idled factory production and weighed heavily on growth, but the bank believes this process has now been worked through and growth should bounce back in the second quarter.

But this will by no means be a stellar year for the economy. Growth is projected to be just 1% for all of 2008, its slowest rate since a 0.9% expansion in 1992.The economy is expected to bounce back more strongly to 2.3% in 2009 and 3.3% in 2010. Read the complete article.

Ontario and Quebec Urge Stronger Ties to EU

(The Canada Press – Canada NewsWire)

Two Canadian provincial cabinet ministers, one from Ontario and one from Quebec, joined the Canada Europe Roundtable for Business (CERT) at a meeting with European Union Trade Commissioner Peter Mandelson in Brussels, Belgium today.

The meeting demonstrated strong support from Canadian political and business leaders for the negotiation of a trade agreement between Canada and the EU.

CERT Co-Chairs Roy MacLaren and William Emmot presented a declaration in support of such an agreement signed by 96 prominent business leaders from Canada and Europe. Quebec cabinet minister Raymond Bachand and Ontario cabinet minister Sandra Pupatello presented a common position on behalf of the two Canadian provinces in support of commencing Canada-EU trade negotiations.

A Canada-EU trade agreement would provide European companies with a gateway into the vast North American market, while increasing Canadian opportunities in the European Common Market – boosting transatlantic economic growth over the medium- to long-term.

“Today’s meeting clearly demonstrates the desire of the Canadian and European business communities, and the political support, to work towards the creation of a Canada-EU trade agreement bringing benefit for trade in services, as well as goods, and promoting investment,” said Roy MacLaren, Co-Chair CERT.

Thursday, July 17, 2008

New Partners in Protection Program Now in Effect

The CBSA recently issued notification of changes to the Partners in Protection (PIP) program. According to Customs, steps have been taken to ensure that PIP is better aligned with the WCO Framework of Standards to Secure and Facilitate Global Trade (SAFE), and the WCO Authorized Economic Operator concept.

As well, it aligns PIP with the US C-TPAT (Customs-Trade Partnership Against Terrorism) program; both CBSA and US Customs and Border Protection will “apply high security standards and perform similar site validations when approving companies for membership in their respective programs”, according to a news release issued on 30 June by US Customs. “The goal of these arrangements is to link the various international industry partnership programs, so that together they create a unified and sustainable security standard that can assist in securing and facilitating global cargo trade.”

The revised Security Profile can now be downloaded from the links indicated below (English and French versions). This is a fillable PDF form. Note that you will require the latest version of Adobe Acrobat Reader in order open the file.

Mutual recognition between modernized PIP & C-TPAT

In 2007, under the Security and Prosperity Partnership of North America (SPP), the Government of Canada announced $11.6 million in funding to strengthen the PIP program in order to achieve mutual recognition and compatibility with the U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) program.

This milestone was reached on June 28, 2008, when the CBSA signed an arrangement with U.S. Customs and Border Protection.

On balance, stakeholders such as the Canadian Trucking Alliance have given the thumbs up to the announcement, while expressing disappointment that the programs weren’t more fully integrated.

Carriers and other participants who were members of the PIP program before June 30th, 2008, will have six months to re-apply to the re-vamped program. They will be required to complete a security profile, which will be reviewed by CBSA. A follow-up site validation may be required, but CBSA has indicated that this step may not be undertaken if a C-TPAT validation has been carried out within the past two years. Ultimately carriers will be required to sign a Memorandum of Understanding with CBSA that sets out the roles and responsibilities of the respective parties.

“If a carrier is already a C-TPAT member, this should be a relatively straightforward exercise, and they will continue to receive the benefits these programs provide, such as access to FAST lanes at busy international crossings,” said CTA Chief Executive Officer David Bradley. “I’m also pleased to see that CBSA listened to CTA and others in the business community and significantly revised an initial suspend/cancel policy that would have literally driven carriers out of the program. I am confident that the trucking industry, the single largest industry sector in PIP, will be able to comply with these tougher new requirements.”

However, Bradley admitted that he “remains disappointed that CBSA and CBP have fallen short of the goal of full mutual recognition – that is, a situation where a carrier need only apply to PIP or C-TPAT, but not both. But we have at least taken an important step forward, and I’m hopeful that we will get there eventually.”

Related Links:
CBSA Partners in Protection (PIP)
CBP Customs & Trade Partnership Against Terrorism (C-TPAT)
WCO SAFE Program (PDF file)
WCO Authorized Economic Operator Guidelines (AEO)

Download Links & Passwords

Adobe Acrobate Reader v. 9
PIP Security Profile–English (Password: PIPpep041987)
PIP Security Profile–French (Password: PEPpip041987)

Exporter Jitters Deepen

(Export Development Canada – Peter G. Hall)

For most Canadian exporters, 2008 will be a year of red ink. Few exporting industries are exempt from the recession currently hitting the trade sector, which is weighing heavily on overall economic growth this year. Getting out of this predicament depends on a lot of factors, not the least of which is the fear factor. How are Canadian exporters feeling about their prospects?

Twice a year, Export Development Canada surveys Canadian exporters to gauge their confidence. The most recent survey was conducted during April and May, and the results are sobering. EDC’s Trade Confidence Index (TCI) tumbled to 66.1, a second successive drop and a new all-time low for the 8-year-old series. The decline over the last year is a marked departure from the narrow range the Index has fluctuated in since 2003.

Exporters were most worried about global economic conditions in the recent survey. Last fall, less than a third of exporters expected global conditions to worsen. This spring, that number shot up to 51%. Only 9% of those surveyed expected improved conditions, the smallest share of optimists on record. The results are hardly surprising, given deteriorating economic data, runaway commodity prices and an international financial sector that is still finding its feet.

Worries weren’t confined to the international economy, though. In the past few years, many exporters have relied on Canada’s strong domestic economy for relief, but the effects of this antidote seem to be wearing off. In fact, those surveyed have never been more pessimistic about the domestic economy, with 42% expecting conditions to worsen, up 10 percentage points since last fall. Just 11% expected the economy to get better, again, the smallest share on record.

These results suggest that exporters expect an extended drought. Even so, the survey holds hints of hope. First, most respondents feel that international sales have hit bottom. Almost half of those polled believe that international sales will improve in the near term, while the share expecting worse conditions fell 10 percentage points to just 15%. Second, perceptions of international trade opportunities brightened. Pessimism spiked in the Fall, 2007 survey, only to be reversed in the spring; 77% of exporters now expect similar or improved near-term opportunities.

A third glimmer of hope – perhaps wishful thinking – is exporters’ view of the Canadian dollar. Most believed that the dollar’s ascent will be checked. Just under a quarter of exporters thought that the loonie would keep climbing, down sharply from 52% a year ago, while the remainder expected a static or declining currency. As such, exporters’ top coping strategy is simply to ride out the storm, absorbing the loss. Fewer are passing on higher costs; their ranks shrunk from 27% to just 18% in the past six months. Not surprising, given intensifying global competition.

Among industries, only the oil and gas/mining and transportation sectors bucked the overall trend in confidence. The index for light manufacturing fell the most, and is now ranked second-lowest.

The bottom line? Make no mistake, the latest TCI results are sombre. But the lingering scent of hope, amid very trying times, is inspiring.

More Border States Plan to Ease Travel with Enhanced Licenses

(USA Today)

A growing number of states on the borders with Canada and Mexico are establishing or considering enhanced driver's licenses designed to give residents a more convenient identification option for border crossings.

In February, Washington became the first state to establish the new licenses. To receive a license labeled “enhanced,” applicants are required to show proof of US citizenship in addition to the other identification documents required for obtaining traditional licenses.

Since then, 21,000 Washington residents have received the licenses, which allow them to get back into the USA through any border crossing or seaport without a passport, according to Department of Licensing spokeswoman Gigi Zenk.

New York and Vermont will follow in coming months. Arizona Gov. Janet Napolitano has proposed the idea for residents there, and Michigan is working toward a plan. Click here for the complete article.

Wednesday, July 16, 2008

Canadian International Trade Tribunal Issues Order: Carbon Steel Pipe Nipples and Adaptor Fittings From China


The Canadian International Trade Tribunal today issued an order following the expiry review of its finding made on July 16, 2003, as amended on June 8, 2007, concerning carbon steel pipe nipples and adaptor fittings, in nominal diameters up to and including 6 inches or the metric equivalents, originating in or exported from the People's Republic of China.

The Tribunal found that the dumping of carbon steel pipe nipples and adaptor fittings from China was likely to result in injury or retardation. 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. More information available at the CITT website.

Everyone’s Wondering: What’s This ‘Americas Strategy’?

(Embassy – Michelle Collins)

Twelve months ago, as Prime Minister Stephen Harper embarked on a tour of Latin America to raise Canada’s profile in the region and demonstrate that his foreign policy would be geared toward these hemispheric neighbours, many took the trip as a sign that he was indeed serious about the Americas.

Yet one year later, there are few updates from the government about what is involved in this pillar of its foreign policy, the mainstream media say there’s no story to report, and most Canadians have nary a notion that their government ever committed itself to an “Americas Strategy.”

On his six-day trip through Colombia, Chile, Barbados and Haiti, Mr. Harper visited aid projects built with Canadian funds, met with Canadian investors, and delivered speeches to economists and business crowds, all with parliamentary reporters in tow.

While in Chile, Mr. Harper delivered a speech declaring Canada a country of the Americas and said that expanding political and economic engagement in the Americas would be a major foreign policy goal for his government. “Re-engagement in our hemisphere is a critical international priority for our government. Canada is committed to playing a bigger role in the Americas and to doing so for the long term,” Mr. Harper said.

Mr. Harper and his officials, such as former foreign affairs minister Maxime Bernier, repeatedly declared that the policy is built on “three key objectives” of prosperity, security and governance.

Since that time, the government has made a handful of funding announcements for increased aid projects in Latin America and moved ahead on free trade agreements with Peru and Colombia. Most recently, Foreign Affairs Minister David Emerson announced that the Department of International Trade was opening four new trade offices in the region; two in Mexico and two in Brazil.

Beyond developments in the area of trade, however, little else about the strategy has been released publicly.

Although a Memorandum to Cabinet on the Americas Strategy was delivered in the last two months, ministers and officials at the Foreign Affairs Department refuse to talk about what’s in it.

When Mr. Harper’s government began ramping up the rhetoric about re-engaging the Americas, Latin American diplomats based in Ottawa were encouraged that this would be their chance to finally reap more of the benefits of globalization and tap into Canada’s economic prowess.

But more than a year later, those same diplomats are left with more questions than answers about what Mr. Harper’s plans really are and are expressing concern that, like other prime ministers before him, Mr. Harper’s commitment to the Americas has tumbled on his list of foreign policy priorities.

Meanwhile, Secretary of State for Foreign Affairs and International Trade Helena Guergis has travelled to the area several times over the last few months, but only her announcements about domestic sports programs get reported in the media.

Additionally, aside from a media advisory, the government says little about the trips and Ms. Guergis herself is difficult to track down. Embassy made several requests to interview the minister about her trip to Belize and Guatemala this past week, but to no avail.

Indeed, Maclean’s political affairs columnist Paul Wells believes that the fact Ms. Guergis is the one being sent on these trips is evidence that the Americas are no longer a genuine priority. “I do get the impression this was an interesting idea, but the idea of an American Canada, understood in the Americas, it’s not automatic, it’s not driven by market forces, not driven by the attention space of ordinary Canadians, and would have to be artificial and built,” Mr. Wells said.

Mr. Wells said “serious distractions” to the west, east and the north – from China to Europe and Russia – are more interesting and geographically closer to Canada. Plus, he notes, Canada’s top foreign policy challenge remains Afghanistan, and the Latin American countries have not made any significant troop contributions to the conflict. “It’s just one example of how far away we are from the idea of this having a concrete application to the rest of the foreign policy universe,” Mr. Wells said.

Toronto Star reporter Allan Woods said that given the way Mr. Harper kicked off this foreign policy strategy, one might expect to have heard more about it by now. He said Mr. Harper’s trip last year was really the first Conservative-led foreign policy initiative since the party rose to power in early 2006, and the government itself billed it as the grandest one up to that point.

Mr. Woods said that at the time, he did plan to follow the issue over the next several months, but that since then, he hasn’t seen all that much happen. “A couple of trips does not a foreign policy make, and a couple of free trade agreements does not a foreign policy make,” Mr. Woods said. “It’s unfortunate because I’ve been on many trips with Harper, and that one was by far the most interesting; it was something of their own making and they just didn’t seem to follow up on it. The onus was on them to explain this.”

CTV reporter Robert Fife points out that if this were a focus, Mr. Harper would be talking about it. He said that if the Conservatives want to promote the Americas, they are going to have to convince people that free trade with these countries is a good thing. “If the prime minister wants to shine a light on it, he usually gets pretty good coverage on any issue he talks about,” Mr. Fife said. “If this issue is such a central plank in the Conservative foreign policy, then it should speak for itself; if you’re not going down there, then it can’t be much of a priority.” Read the complete article.

Europe Looks No Longer Immune to U.S. Economic Storm

(International Herald Tribune – Mark Landler)

Europe, which held the world’s economic storms at bay for the last year, has finally succumbed.

Spain, Ireland and Denmark are either in, or on the brink, of a recession. Italy is stagnating. France is weakening fast. And Germany, the sturdy locomotive of European growth, is suddenly faltering – dashing most residual hopes that Europe could escape the upheaval in the United States.

On Tuesday, an influential poll of German investors by the Center for European Economic Research in Mannheim found that confidence has plummeted to its lowest level since the survey was started in 1991.

Shares in Spain swooned after that country’s housing crisis claimed its first big casualty: a property developer that filed for protection from creditors. And in Britain, the inflation rate surged – as it has elsewhere in Europe – to 3.8% because of soaring prices for food and fuel.

“We’ve seen a sea change in Europe,” said Thomas Mayer, the chief European economist at Deutsche Bank in London. “All the bad news around the world has finally come to us.”

While most economists had predicted that Europe would suffer fallout from the financial market chaos and the broader American malaise, the speed of the deterioration has surprised the soothsayers.

As recently as June, Mayer noted, the European Central Bank was projecting only a modest dip in growth in the second quarter. Two weeks ago, it raised interest rates, citing the risk of inflation. Now the risk is that Europe could face a shrinking economy this summer.

In that sense, Europe finds itself on a precipice similar to that in the United States, which is already in or verging on a serious slump. But given the historic resilience of the U.S. economy, some economists give the Americans slightly better odds of avoiding a classically defined recession – in which economic growth shrinks for two quarters in a row – than the Europeans.

“It is not impossible that the euro zone will dip into recession while the U.S. manages to skirt it,” said Holger Schmieding, the chief European economist at Bank of America in London.

Such a statement would have been far-fetched four months ago, when investor confidence and industrial output was rising in Germany and France, despite a buoyant currency that makes European exports more expensive in the United States and other dollar-linked markets.

One dynamic that has not changed since then is the euro, which hit a new record high against the dollar Tuesday.

The tense mood in the United States is pushing investors to sell dollars and seek refuge in the euro. For all the storm clouds here, Europe still looks like a safe harbor next to the United States, where fears about the solvency of Fannie Mae and Freddie Mac have rattled the broader market.

Still, the strong euro – combined with high oil prices – is finally exacting a toll on Europe’s export machine.

German exports slumped 3.2% in May from the previous month, the largest monthly decline since June 2004. The country’s once-robust trade surplus shrank to €14.4 billion, or $23 billion, from €18.8 billion, according to government statistics. Click here for the complete article.

Tuesday, July 15, 2008

Bush Touts Mortgage Plans, Offshore Drilling


Under the backdrop of a deteriorating economic picture, President Bush said Tuesday he is taking action to help people with falling home values and high gas prices.

Bush highlighted plans to stabilize the mortgage lenders Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and lift the ban on offshore oil drilling as two steps his administration is taking to address some of the nation's economic ills.

On the gas price front, Bush reiterated his call for more drilling off the East and West Coasts and in Alaska.

“The only thing standing between these vast resources and the American people is action from Congress,” he said. “The sooner Congress lifts the ban, the sooner we can get these resources from the ocean floor to the refineries to the gas pump.”

There were two bans restricting drilling off most of the U.S. coast - one from the President and one from Congress.

On Monday Bush lifted the executive ban, putting pressure on the Democratic-controlled Congress to do the same.

So far, the Democrats have resisted calls for more drilling, arguing the amount of oil it would bring to market would have little effect on prices, and the nation's efforts would be better spent developing alternatives to oil and focusing on conservation. Complete article here, and more on lifting of the offshore drilling ban here.

“Made in Canada” Food Labelling Rules to Kick in Next Year

(Canadian Press)

The Conservative government has fleshed out food labelling guidelines unveiled earlier this year by Prime Minister Stephen Harper.

Agriculture Minister Gerry Ritz announced in Cornwall, Ont. that the new rules come into effect on Jan. 1, 2009, and apply to all foods produced from that day forward.

Under the new rules, foods labelled as a Canadian product must contain “all or virtually all contents” that are from Canada.

It’s currently legal to call a product “made in Canada” if 51 per cent of the production costs were incurred here and the final transformation of product was in Canada.

The government says 90 per cent of the 1,500 Canadians who filled out an online survey after Harper’s announcement in May agreed with the new guidelines.

The new guidelines come from the Food and Consumer Safety Action Plan announced by Harper in December.

Australian Dollar to Reach Parity with USD in September

(Adelaide Now – Meredith Booth)

The Australian dollar will reach parity with the U.S. dollar in September then overtake it for a few months, a currency expert with Australia’s largest bank said yesterday.

As Australia’s currency soared to a 25-year high today, trading at US97.64c triggered by a surging gold price, Commonwealth Bank chief currency strategist Richard Grace expected it to soon surpass the greenback on strong income from Australia’s exports and an ailing U.S. economy.

At 1700 AEST, the Australian dollar was trading at 97.77 US cents, up from yesterday’s close of 96.80 US cents.

It was the local currency’s highest closing level since January 25, 1983 – in the days of a fixed exchange rate – when the Australian dollar ended the local session at 97.90 US cents.

“Our thinking is it will spend three months beyond parity ... it’s not just a U.S. dollar story, we think the Aussie will appreciate across the board with the pound the yen and the euro,’’ Mr. Grace said. “We have got a very strong Australian dollar story; we’ve got an investment boom going on in this economy and we think the Aussie dollar is adjusting to export and import prices and strong terms of trade,’’ he said. More here.

Note: The current exchange rate with the Canadian dollar is 0.973.

The WTO Launches World Trade Report 2008: Trade in a Globalizing World


The World Trade Report is an annual publication that aims to deepen understanding about trends in trade, trade policy issues and the multilateral trading system.

The theme of this year’s Report is “Trade in a Globalizing World”. The Report provides a reminder of what we know about the gains from international trade and highlights the challenges arising from higher levels of integration. It addresses a range of interlinking questions, starting with a consideration of what constitutes globalization, what drives it, what benefits does it bring, what challenges does it pose and what role does trade play in this world of ever-growing inter-dependency.

The Report asks why some countries have managed to take advantage of falling trade costs and greater policy-driven trading opportunities while others have remained largely outside international commercial relations. It also considers who the winners and losers are from trade and what complementary action is needed from policy-makers to secure the benefits of trade for society at large. In examining these complex and multi-faceted questions, the Report reviews both the theoretical gains from trade and empirical evidence that can help to answer these questions. More information on the report at the WTO website.

Memorandum D3-5-2: Marine Cargo – Import Movements


This memorandum has been revised to reflect current carrier and cargo policies and reporting procedures, including Advance Commercial Information (ACI) program requirements. It has been revised to update the contact information at the Canada Border Services Agency (CBSA).

The contents of the following customs notices related to the ACI program have been incorporated into this memorandum (as well as in D3-1-1, Policy Respecting the Importation and Transportation of Goods; D3-2-1, International Air Traffic; D3-2-2, Air Cargo – Import Movements and D3-5-1, Vessels in International Service):

• Customs Notice N – 605, Advance Commercial Information – Updates on Cargo and Conveyance Electronic Reporting for Air Mode and for Marine Shipments Loaded in the United States;

• Customs Notice – 630, Advance Commercial Information (ACI) – Updates on the Implementation of ACI Phase II Air and Marine; and,

• Customs Notice – 652, Advance Commercial Information (ACI) – Updates on the Implementation of ACI Phase II Air and Marine.

Procedures and guidelines regarding loading or discharge of cargo at non-CBSA port have been moved from D3-5-2 to D3-5-1.

ACI data elements have been added to Appendix B of this memorandum. Full document available here (PDF file).

CN Decision Couldn’t Have Come at Worse Time For Port

(Tom Peters—Chronicle Herald)

CN has announced it will reduce the number of trains serving the Port of Halifax from two to one, citing the decline in container cargo as the main reason.

The two trains were each running at less than 50 per cent capacity, so they will be combined. There will be one train with the same number of cars and with capacity for additional volume, according to CN spokeswoman Julie Senecal.

She says merging the two trains will have minimal impact on shipping times to Montreal, Toronto and Chicago. CN will discuss the move with its customers “in order to accommodate their specific needs, but CN sees no impact on import or export traffic over Halifax as a result of this change,” she said.

Calvin Whidden, general manager at Cerescorp, operator of the Fairview Cove terminal, is pretty much on track with CN’s thinking.

“My feeling is, with the volumes going through the terminals today, one train can handle them, but I can’t say if the shippers or lines have a concern,” he said.

CN’s decision couldn’t have come at a worse time for the port.

The reasoning behind the decision is understandable. But what kind of a message does this send to port customers and potential customers, both shipping lines and cargo owners? CN claims to be a strong partner of the port and says it is working hard with the port and others to develop more business. In that context, it is difficult to understand the cut.

And no matter how one tries to disguise it or talk around it, Halifax is a one-rail-line port. It’s a known fact in the global shipping industry and it has had an influence on decisions by shipping lines whether to include Halifax as a port of call. Whether having more than one rail line actually results in lower rates for shippers, only the shippers would know. But there is the perception two or more rail lines are better than one.

That is not in Halifax’s future.

In the meantime, Mr. Whidden is optimistic things will work out under the new CN schedule.

“I truly believe customers can be served by one train a day, providing CN ramps up when the business gets bigger, and we hope that is soon. But two half-trains equal one full train, and I’m hoping that’s as simple as it is,” he says. Read the complete article.

Premier Doer Praises NAFTA


Manitoba Premier Gary Doer praises NAFTA and the benefits the trade agreement provides for the three countries involved at a recent trade conference in the U.S.

Fannie and Freddie Symptoms of Larger Problem

(Video: Real News/Text: Globe & Mail)

AFL-CIO economist says this system amounts to “Socialism for the rich and capitalism for the poor” and predicts that the two mortgage lenders may eventually be nationalized.

Fannie and Freddie: Wards of the State

Former treasury secretary Snow says White House had to bail out mortgage giants or face ‘a catastrophe’

John Snow devoted much of his tenure as U.S. treasury secretary trying to convince investors they were wrong to assume the federal government would bail out housing behemoths Fannie Mae and Freddie Mac if the two companies ever got into trouble.

Owners of the debt issued by Fannie Mae and Freddie Mac gave the warning about as much heed as a teenager would over a threat to make curfew or face a locked door – what parent is going to leave his or her child out in the cold?

The teenagers bet right. With Fannie Mae and Freddie Mac on the brink of collapse, President George W. Bush's administration moved late Sunday to guarantee solvency for two companies that buy or finance almost half of the $12-trillion (U.S.) of U.S. mortgages.

“The market has been proven right,” Mr. Snow, treasury secretary from February, 2003, to July, 2006, and now chairman of New York-based Cerberus Capital Management, said in an interview Monday. “The systemic risk became so large. It could be a catastrophe.”

The reversal is remarkable for an administration that has spent almost eight years trying to reduce the government's role in the world’s largest economy. Mr. Bush's tax cuts were the most obvious example of the administration's market-based orthodoxy, but the White House tangled regularly with legislators in a failed bid to restrain Fannie Mae's and Freddie Mac’s growth. Read the complete article.

Monday, July 14, 2008

Companies Hurt While Inventories Waylaid at Ports by CBSA Rules

(CBC News)

Newly expanded rules at the Canada Border Services Agency to test for fumes in containers arriving at ports across the country are putting businesses — and Canadian trade — under threat, business owners say.

The backlog of containers docked at ports across the country has been growing since the CBSA added formaldehyde to the list of fumigants its employees must test for before the marine containers can travel to their final destinations.

Port authorities say many more containers have come up positive since formaldehyde was listed in June, making them too dangerous for examination by inspectors and leaving their cargo stuck at port for weeks, instead of days.

“Sales orders are being cancelled because goods are not being delivered as per the sales contracts. Canadian importers are suffering, Canada’s trade is suffering,” Ruth Snowden, executive director of the Canadian International Freight Forwarders Association, told CBC News.

CBSA regulations dictate that containers that test positive have to be ventilated until fumigants reach an acceptable level. Freight companies, however, are demanding the government agency reconsider the rules in order to get the containers moving again, and to keep their customers in business.

One woman who owns a coffee roasting business in London, Ont., said that if her beans — which were supposed to be delivered from South America three weeks ago — arrive spoiled, they will ruin her business too.

“I can’t sell coffee, I don’t have revenue,” said Maria Fiallos, owner of Las Chicas del Café. “I don’t have revenue for my Canadian business, I don’t have revenue for the coffee growers in Nicaragua.”

Another business owner, Mike Calnan, is still waiting for a shipment of antique vehicles from Britain that were scheduled to appear at the Ottawa air show on Canada Day. He said their absence was an incredible disappointment after he put almost a year’s work into getting them to Canada.

Both Calnan’s and Fiallos’ shipments are sitting idle at the Port of Halifax, where almost every container that has arrived in the last three weeks and has been targeted for testing has come up positive for formaldehyde — a chemical commonly found in glue and used in everything from cars to furniture.

“We’re very concerned about it and we urge the CBSA to work to improve the process to basically minimize the delays,” said the Halifax port’s manager of business development, Patrick Bohan.

The CBSA has said it is looking into new “highly sensitive detection technology” that may make the testing process more efficient, but that the health and safety of its employees is its top priority.

Some experts say formaldehyde could lead to cancer if people are exposed to very small amounts over long periods of time, as evidenced in experiments with animals.

“At no time will the CBSA compromise the health and safety of its employees. CBSA has the appropriate measures in place to protect its employees from any possible exposure to hazardous chemicals,” the CBSA agency said in a statement this week.

Government of Canada Bans More Harmful Chemicals

(Environment Canada)

Canada’s Environment Minister, the Honourable John Baird, and the Minister of Health, the Honourable Tony Clement, announced today [Friday] that the Government of Canada will publish final regulations to reduce the levels of Polybrominated Diphenyl Ethers(PBDEs) that could be entering the environment. Today’s announcement is just one more example of how our the Government’s Chemicals Management Plan is taking action to protect our environment from harmful chemicals.

“Once again, when it comes to taking action on toxic chemicals, our Government is leading the way,” said Minister Baird. “Right now, we’re taking action to address all PBDEs, and today we are banning those substances that have been identified as an immediate concern to the environment” said Minister Baird.

“The Government of Canada is committed to taking action on chemical substances,” said Minister Clement. “These regulations will achieve real results by minimizing the amount of these substances in our environment.”

PBDEs are used to slow the spread of fire in a wide variety of plastics, fabrics, glues, sealants and foams. While they were not found to be harmful to human health, they are toxic to the environment because they build up and last a long time in the environment.

PBDEs are not manufactured in Canada but are imported for use in commercial and consumer products. There are three commercial mixtures that contain PBDEs: PentaBDE is used mostly in flexible polyurethane foam, which is used as cushioning in upholstered furniture, automotive seating and carpet backing; OctaBDE is used in acrylonitrile butadiene styrene (ABS) plastics as a flame retardant for computer housings, pipes, appliances and automotive parts; DecaBDE is primarily used in the high impact polystyrene component of electronic equipment housings, and is also the main commercial PBDE product used as a flame retardant in upholstery and drapery textiles.

The new regulations will prohibit the manufacture of all PBDEs and restrict the import, use and sale of PentaBDE and OctaBDE which meet the criteria for virtual elimination under the Canadian Environmental Protection Act, 1999.

The regulations are a first step in mitigating the risk posed by PBDEs in Canada. Additional actions are being developed to complement these Regulations, including: a regulation to control PBDEs already contained in manufactured products; a voluntary approach to minimize releases to the environment from the use of the DecaBDE commercial mixture in manufacturing operations in Canada; a detailed review of newly published science on DecaBDE, to determine if there is a need for further controls on the DecaBDE commercial mixture; and monitoring of Canadians’ exposure to PBDEs and concentrations in the environment.

These actions, collectively, will minimize Canadians’ exposure to PBDEs and help to ensure that Canada’s environment is protected.

For more information on the PBDEs Regulations and further actions to manage PBDEs is available here.

CN Cuts Back on Port Calls to Halifax

(Tom Peters — Chronicle Herald)

Declining container cargo at the Port of Halifax has prompted CN to cut back on the number of trains calling the Port of Halifax.

The lone rail operator into the port said Friday it will only have one train a day serving Halifax instead of two.

CN spokeswoman Julie Senecal said the decision takes effect immediately.

“CN is eliminating one train in both directions between Halifax and Central Canada,” she said. But the serving train will have adequate capacity for the cargo that is moving daily and will have space available if volumes increase, she said.

Because of the port’s declining volumes, the two trains were operating at less than half capacity.

“We will move the same footage (train length) in and out of Halifax but we will do it with one train,” Ms. Senecal said. “It will have minimal impact on transit times.”

The Halifax Port Authority released its six-month container cargo figures this week and TEUs (20-foot equivalent units) are down 16.3 per cent from the same period last year.

The port authority said there were several factors contributing to the decline: the 2007 loss of two weekly services, the high Canadian dollar, the weakening U.S. economy impacting both imports and exports, the high cost of bunker fuel and continued consolidation of international shipping lines.

Karen Oldfield, port authority president and CEO, said Friday that when it comes to rail service, the authority’s priority is its customers.

“We understand that CN has spoken directly to port customers and has advised there will be absolutely no impact or change or effect to customer service,” she said. “Our job is to be very vigilant and monitor that assurance and to make sure that the rail service is seamless.”

Ms. Oldfield said the next step will be for CN to explain to terminal operators and some key stakeholders next week how it plans to alter its service without negative impact.

She said the key to this move by CN is service and reliability “and CN is telling customers there will be no change in service and that is what we have to focus on.”

A Flame-Throwing Frenchman

(Washington Post – Editorial)

Mr. Sarkozy jeopardizes prospects at the next trade talks

The world economy could use an injection of expanded trade. But prospects for a global agreement to slash subsidies and tariffs are dim as trade ministers and other officials from 30 leading member-states of the World Trade Organization prepare for a crucial meeting in Geneva next Monday. At stake is the Doha Round of trade liberalization talks, which began with great promise in 2001 but have moved fitfully ever since. The Doha Round was conceptually sound: On the theory that trade has already lifted millions of people out of poverty around the world, its goal was for industrial countries to open their agricultural markets to the developing world in return for greater access to developing-country markets for manufactured goods and services. This objective has proven politically ambitious – it required sacrifice not only from Europe and the United States but also, as it turned out, from emerging markets such as China, India and Brazil, which are as eager to protect their booming industries as they are to sell more crops.

The latest threat to the Doha Round comes from an all-too-familiar source: France, that bastion of anti-globalization sentiment. President Nicolas Sarkozy came to office promising fresh French thinking about economics. But, temporarily doing double duty as titular head of the European Union, Mr. Sarkozy has launched a series of verbal attacks on the European Union's representative at the talks, Peter Mandelson of Britain. Mr. Sarkozy, at variance with the view of E.U. economists, has accused Mr. Mandelson of selling out Europe's workers to the tune of "100,000" lost jobs, and its farmers to the tune of a "20%" drop in production. To these off-the-cuff figures, Mr. Sarkozy has added the assertion that "in a world where there are 800 million poor people who cannot satisfy their hunger and where a kid dies every 30 seconds from hunger, I will never accept a reduction in agricultural production on the altar of global liberalism." Actually, as Mr. Mandelson's spokesman replied in a remarkable point-by-point rebuttal, the less market share the developed world's farmers take up with the help of subsidies, the more opportunities there will be, over time, for poor countries to feed themselves.

At the Group of Eight summit in Japan, Mr. Sarkozy toned down his remarks a bit, indicating that he would like to see an agreement but just doesn't think it's in the cards. This is still disappointing. Mr. Sarkozy has, to some extent, kept his promises of a shakeup in one of Europe's most statist economies – for example, by challenging the entrenched privileges of state employees. But perhaps a fight with France's farmers is one more battle than he cares to wage. If so, Mr. Sarkozy could at least keep quiet until the ministers have had a chance to look over the draft proposals their subordinates have developed with the aid of WTO officials. They are said to represent bridgeable differences among the various countries, even if the ultimate reductions in trade barriers might be modest. The Doha Round might indeed fail, as Mr. Sarkozy implies. Why he would want to share the blame is beyond us.