Chinese Imports Didn’t Cause Job Woes: Report

(The Vancouver Sun – Paul Vieira, Postmedia News)

Cheap Chinese imports cannot be singled out as a “culprit” for employment woes in Canadian manufacturing in the last decade, says a report to be released today on the importance of trade to Canada's economy.

Research from a Toronto think-tank said data indicate a “very mild” relationship between growth in Chinese imports in a specific sector to job losses during the 2002-2008 period.

A stronger Canadian currency – which rose after a prolonged period of weakness – was likely a bigger factor in determining employment levels in manufacturing, says the report from the Institute for Competitiveness and Prosperity. Read more here.

When Everybody Exports, Nobody Wins

(Bloomberg BusinessWeek – Simon Kennedy)

Japan’s yen intervention may be a bad omen for global trade

On Sept. 15, Japan sold yen for dollars to slow the yen’s climb to a 15-year high against the dollar. Japan decided to take on the market to protect its exporters from the devastating impact of the super-yen. It’s a logical move, from Japan’s point of view. Yet it exposes a flaw at the heart of the current global recovery effort: The world’s major industrial economies can’t all export their way to prosperity.

Governments from Tokyo to Washington are counting on exports to keep their economies growing at a time of painfully high jobless rates and record budget deficits. The danger is that the race to hand companies such as Hitachi and Boeing an edge in the international marketplace will lead to a series of currency devaluations and protectionist measures that threaten global growth – a reprise of the 1930s-era beggar-thy-neighbor trade policies that worsened a global depression. Read more here.

Global Imbalances Threaten Recovery

(CTV News)

Even as Canada’s economy roars back to life, policy makers are pointing to an enduring problem lurking in the background and menacing a lasting global recovery.
In a statement Tuesday accompanying its decision to raise interest rates, the Bank of Canada cautioned that “the required rebalancing of global growth has not yet materialized.” In other words, some countries still spend more than they should, while others save far too much.

It’s a message that Canadian officials are carrying to China this week, as Finance Minister Jim Flaherty and Trade Minister Peter Van Loan visit Shanghai ahead of a meeting of the Group of 20 senior finance officials in South Korea.

They’re urging China to allow greater flexibility in its currency, something they say will help it boost the purchasing power of its own citizens. It would also be a major step in remedying the lopsided arrangement of the global economy, where China and other export-driven economies rely on demand from U.S. consumers to fuel growth. Read more here.

Demise of Dollar as International Currency?

(Fora TV)



Niall Ferguson and James Fallows debate the statement by Zhou Xiaochuan, head of China’s central bank, calling for the replacement of the dollar as the dominant world currency with the creation of an international reserve currency.

View the complete video Fora TV.


Related: Mercosur Promotes Use Of Local Currencies For Regional Trade (WSJ)

Government of Canada Eases Tax Compliance Burden for Internationally-Engaged Canadian Businesses

(Department of Finance Canada)

The Honourable Jim Flaherty, Minister of Finance, today [June 27] proposed changes to the Income Tax Act for Canadian businesses with foreign affiliates and those that report earnings in a foreign currency.

“Our government is committed to creating a corporate tax system that is both fair and internationally competitive,” said Minister Flaherty. “The proposals I am announcing today will improve the tax system and will assist Canadian businesses in complying with the tax law.”

Foreign Affiliates
Bill C-28, the second Budget 2007 implementation bill, provided substantial tax relief for Canadian businesses, including the historic corporate income tax rate reductions announced in the 2007 Economic Statement. In addition, the bill, which received Royal Assent on December 14, 2007, implemented a number of amendments to the Income Tax Act relating to foreign affiliates.

Included in the bill were provisions which allow taxpayers to elect retroactive application of some of these foreign affiliate amendments. However, in response to concerns that the deadline for filing these elections is too tight – for example, a taxpayer with a December 31, 2007 year-end must file these elections by June 30, 2008 – the Government is proposing to extend the filing deadline for these elections by 18 months. These proposals are set out in more detail in the attached annex.

Functional Currency Tax Reporting
Bill C-28 also included amendments to the Act that implemented the Budget 2006 proposal to introduce functional currency tax reporting rules. In response to representations from stakeholders concerning the amended rules, the Government is proposing several technical revisions. The revisions, which are described in detail in the attached annex, include:

• Extending the deadline to elect functional currency tax reporting to October 31, 2008;

• Amending the definition of “functional currency” to address concerns about its practical application to the situations of certain taxpayers; and

• Introducing symmetry in foreign exchange rate calculations used in the reporting of assets and debt obligations.

Minister Flaherty indicated that the Government will introduce legislation at an early opportunity to implement these proposed technical changes to the Income Tax Act. Further details can be obtained at the Dept. of Finance website.