Economy

Bad Russian Economy Provides Lessons For U.S. Trade And Immigration – Forbes

Published

2 years ago

September 11, 2022

Russia’s economic problems caused by the sanctions imposed after its invasion of Ukraine provide lessons for U.S. trade and immigration policies. Blocking imports and new workers seem like good ideas to opponents of trade and immigration, but economists have found such policies harm consumers and damage the economy. The long-term impact of sanctions is a disaster for Russia from which American policymakers can learn.

Russian government officials have concluded (in private) that their economy is in trouble. “Russia may face a longer and deeper recession as the impact of U.S. and European sanctions spreads, handicapping sectors that the country has relied on for years to power its economy, according to an internal report prepared for the government,” reports Bloomberg, which viewed a draft of the report.

Losing Skilled People: “The report estimates as many as 200,000 IT [information technology] specialists may leave the country by 2025, the first official forecast of the widening brain drain,” according to Bloomberg. Russian economist Alexander Isakov has concluded, “With diminished access to Western technologies, a wave of foreign corporate divestment and demographic headwinds ahead, the country’s potential growth is set to shrink to 0.5%-1.0% in the next decade.”

Events in Russia raise obvious comparisons to problems facing the United States. Low numerical limits caused U.S. Citizenship and Immigration Services to reject about 400,000 (80% of) applicants for new H-1B petitions in April 2022. (Most H-1B professionals work in the technology fields.) Economists Giovanni Peri and Reem Zaiour found 2 million fewer working-age immigrants because of the pandemic and U.S. immigration policies during the Trump administration. The “immigration shortfall” has contributed to inflation, rising prices and an inability to fill job openings across the skill spectrum.

“The report on the Russian economy confirms what should be as obvious as the nose on one’s face, which is that highly educated immigrants promote the economic growth of any nation, including the United States,” said Randel Johnson, a visiting scholar at the Cornell Law School with years of experience on immigration policy in and out of government. “That the U.S. Congress has not yet acted on this fact by increasing the number of H-1B visas is nothing short of a travesty.”

Johnson notes U.S. problems go beyond tech talent. “The uncontested demographic projections of an aging workforce in the United States, as in Russia, threatens the viability of Social Security and shows we need to find a way to bring in more immigrants through an expanded legal flow of workers. That would allow America to meet the needs of its economy, particularly in the service industry, such as the healthcare sector, to address the needs of our growing numbers of seniors.”

Imports Are Vital: U.S. elected officials typically cite the benefits of exports when arguing for expanded trade or new trade agreements. During the Trump administration, levying costly tariffs on imports became a priority, and the Biden administration has largely maintained those tariffs. Economists point out imports are vital to providing consumers with lower prices and a greater variety of goods while supplying companies with inputs needed to make products, including for export.

A Bank of Finland report on Russian foreign trade found, “Overall, our analysis implies that the war and sanctions will take an increasing toll on the Russian economy in the months ahead. The latest forecasts foresee a total decline of Russian GDP [gross domestic product] of roughly 10% in 2022 and 2023.”

Russian companies and consumers have found out the hard way just how vital and beneficial imports can be. “Western governments have made it compulsory for a range of domestic industries to seek licenses before selling to Russia, and they are rarely granted,” reports The Economist. “The restrictions go well beyond ‘dual-use’ products—those with both military and commercial applications, like drones and lasers—to cover advanced kit such as chips, computers, software and energy equipment. They also target low-tech goods, such as chemicals and commodities . . . That is bad news for the country’s manufacturing sector, which needs imported inputs.”

The Economist paints a bleak future for a Russia with fewer imports and high-skilled workers: “So long as America and its allies maintain their sanctions, Russia’s industrial backbone, intellectual brawn and international links will fade, and its future will be one of sagging productivity, little innovation and structural inflation. Economists were wrong to predict an instant crash. What Russia is getting, instead, is a one-way ticket to nowhere.”

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Economy

Liberals announce expansion to mortgage eligibility, draft rights for renters, buyers

Published

6 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.

She says the changes will come into force in December and better reflect the housing market.

The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.

The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.

On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.

Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.

Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.

The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.

The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.

This report by The Canadian Press was first published Sept. 16, 2024.

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Economy

Statistics Canada says manufacturing sales up 1.4% in July at $71B

Published

7 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.

The increase followed a 1.7 per cent decrease in June.

The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.

Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.

Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.

In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.

This report by The Canadian Press was first published Sept. 16, 2024.

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Economy

S&P/TSX gains almost 100 points, U.S. markets also higher ahead of rate decision

Published

3 days ago

September 13, 2024

Anne Joseph

TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.

“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.

In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.

The S&P/TSX composite index closed up 93.51 points at 23,568.65.

While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.

Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.

But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.

Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.

“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.

“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.

A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.

It would also be “counter to what they’ve signaled,” he said.

More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.

“That’s going to be more important than the size of the cut itself,” he said.

In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.

“Here, the labour situation is worse than what we see in the United States,” he said.

The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.

The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.

The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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