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Economy

Ambassador Bridge blockade brings major economic artery to standstill, exposes Canada's fragile trade infrastructure – The Globe and Mail

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Sami Mandalawi holds an American/Canadian flag on Feb. 10 at the Ambassador Bridge in Windsor, Ont.Barbara Davidson/The Globe and Mail

On any given day, the Ambassador Bridge – the 2.3-kilometre steel span that ties Windsor and Detroit – carries upwards of 10,000 freight trucks between Canada and the United States.

Auto parts moving from here to there and there to here, produce and meat carried in chilled trailers, electronics and other things we typically take for granted, all of it going to businesses and consumers on both sides of the border. It’s $300-million worth of goods per day, give or take, shuttled across a hulking teal arc that is otherwise invisible to the rest of the country.

Then suddenly on Monday, all of that hustle and bustle of commerce ground to a halt. Cars and trucks lined up with no end in sight, the traffic marshalling on either side. Just like that, a few dozen cars, pickup trucks and big rigs stopped the flow through Canada’s most vital economic artery.

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Exactly how a protest that has displayed the hallmarks of a glorified tailgate party brought a significant chunk of Canada’s major economic artery to a standstill and forced emergency bilateral talks between President Joe Biden and Prime Minister Justin Trudeau is at once comically absurd and deeply troubling.

Protestors gather in the early morning on Feb. 11 around a propane heater inside a pop up tent.Barbara Davidson/The Globe and Mail

It also reveals how much more fragile Canada’s trade infrastructure is than the pandemic-related supply chain crisis has already revealed.

As the mayor of Windsor put it starkly and succinctly this week: “You have 100 people who are holding hostage part of our national economy.”

Regardless of how the blockade unfolds in the coming days, the length and severity of the impact on the economy has led many to wonder why police weren’t quicker to clear the group at the start of the week and why politicians have struggled to contain it.

The protest’s roots certainly suggested little in the way of co-ordination and forethought.

By some accounts from protesters, the Ambassador Bridge blockade started with a rumour that a convoy of 300 tractor trailers, similar to the fleet that has crippled downtown Ottawa for weeks in what began as a protest about vaccination mandates, was on its way to Windsor.

The protests have made one thing clear – the importance of the Ambassador Bridge, and Canada’s apparent exposure to its limitations, can no longer be ignored.Barbara Davidson/The Globe and Mail

That prompted a line of cars and trucks festooned in Canadian flags, as well as Stars and Stripes, pro-Trump flags and expletive-laced anti-Trudeau flags, to crawl up and down Huron Church Road, which leads to the bridge, in support of the approaching trucker convoy.

The convoy never arrived.

“We were going along like a line of ants and at some point somebody stopped and that’s where we set up,” said Sami Mandalawi, a Canadian veteran who has spent the past week camped out in his Toyota Rav4 along with about 80 other vehicles and 100 to 400 protesters.

Almost immediately, many in the logistics and auto industries began to warn the protest could wreak havoc, although neither police or political action followed.

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Politicians at all levels pointed fingers at each other while a backlog of deliveries piled up on both sides of the border.

The episode has provided ample fodder for partisan attacks. Critics of Ontario’s Progressive Conservatives took every opportunity to blame Premier Doug Ford for the mess, while those opposed to the federal Liberals said it was all Mr. Trudeau’s fault.

One thing is now clear. The importance of the Ambassador Bridge, and Canada’s apparent exposure to its limitations, can no longer be ignored.

Windsor Police keep a watchful eye on Feb. 10 at the Ambassador Bridge in Windsor, Ont.Barbara Davidson/The Globe and Mail

In 2020, about $111-billion in goods crossed the link, equal to 17 per cent of trade between Canada and the United States that year, according to a 2021 report from Transport Canada. On an average day, the bridge handled about $300-million in cross-border trade. And that was during a rough year for trade – and the economy at large – due to the onset of the pandemic.

The auto industry in particular looms large. In December, about half of Ontario’s $2.2-billion in imports from Michigan were in vehicles and auto parts, based on figures from Statistics Canada. It’s not uncommon for a single part to cross the border several times on its way to completion, evidence of the complex supply chains under the North American trade pact.

The auto makers are “the ones most immediately impacted” by the closure, said Ambarish Chandra, an economics professor at the University of Toronto. “But Detroit-Windsor is used by companies across North America, whether they’re shipping furniture or lumber or beer or food.”

Many trucks are being diverted to the crossing between Sarnia, Ont., and Port Huron, Mich., around 100 kilometres north of the Ambassador Bridge on the American side. In 2021, around 850,000 trucks crossed into the U.S. from Sarnia, or 60 per cent of the volume from Windsor. Delays at the Sarnia crossing were running about three hours for commercial truckers on Friday afternoon.

There’s inherent trouble in being so reliant on the Ambassador Bridge – nearly a century old and privately owned by the billionaire Moroun family – for such a large chunk of trade, said Prof. Chandra, who has long worried about disruptions.

“My thinking was more, there could be infrastructure damage, a natural calamity, earthquake or terrorist attack,” he said. “I didn’t foresee this sort of struggle. Closing that one bridge is sort of calamitous, especially the longer it goes on.”

The presence of the children at the protests has sparked sharp criticism on social media, but has also made police plans for removing the protesters more complicated.Barbara Davidson/The Globe and Mail

By Thursday, the makeshift encampment featured tents, couches, BBQs and a DJ blaring classic rock tunes. That night, the children of some protesters played in a bouncy castle and on trampolines.

The presence of the children has sparked sharp criticism on social media. Many accused the group of using the children as human shields, particularly after a photo of a dozen kids standing hand in hand across the road went viral.

The children’s involvement has also made police plans for removing the protesters more complicated.

As the protest unfolded over the week, the absurdities of the situation mounted.

On Friday, as rain and sleet fell on the scene, one protester complained aloud that a pair of couches someone had brought “make us look lazy,” so several men hauled them away to the back of a pickup truck.

At one point, as rumours of an impending crackdown by police spread and a hearing got under way on an application for an injunction to end the protest, the group agreed to move trucks, camper trailers and cars out of one lane as a “goodwill gesture.”

If the goal was to head off the injunction, it failed. Windsor police warned drivers that the lane from the bridge was not open.

The gesture raised the ire of some protesters. One irate man parked his truck in the empty lane screaming at others that they should “hold the line.” He was eventually told by the rest of the group to move.

A single lane would have made little difference to the economic crisis the blockade has brought on, says John D’Agnolo, president of a UNIFOR local that represents 1,700 employees at two Ford plants. Both plants, along with several other factories, had been forced to suspend activity due to parts shortages.

Mr. D’Agnolo said while it’s been difficult to see some unvaccinated long-time workers face the possibility of losing their jobs over vaccine mandates, the protesters have taken things too far. “This has been a nightmare for the industry,” he said. “This is starting to hurt people’s families. The protesters want to end the mandates by shutting down the bridge, but it’s shutting everything else down.”

In the coming weeks and months, Canada’s political and law enforcement leaders will face difficult questions about why they were so paralyzed in the face of a ragtag clutch of protesters.Barbara Davidson/The Globe and Mail

Many protesters said they were aware the blockade has caused problems for other workers, but defend their actions by pointing to the widespread economic shutdown in 2020 as COVID-19 spread across the world.

“What about all the businesses the government destroyed, what about the effect on children’s IQs, what about all the lives they destroyed,” Mr. Mandalawi said. “We’ve formed an effective constraint on the flow of traffic that’s sending a message to the federal and provincial governments to stop these mandates.”

Another message was on the minds of some protesters, who include a large evangelical and Mennonite contingent, and that was a religious one.

Among four men taking a break from the protest in the nearby McDonald’s, discussion about the aims of the protest soon devolved into complaints about abortion and what they saw as society’s abandonment of religion. Mr. Mandalawi said he would not answer “to anybody but God.”

In the coming weeks and months, Canada’s political and law enforcement leaders will face difficult questions about why they were so paralyzed in the face of a ragtag clutch of protesters, and how they will safeguard the country’s roads and trade paths against the whims of more unconventional actors.

In the meantime, Mr. Mandalawi vowed on Friday afternoon the group would not leave until vaccination mandates were removed or police took them away in handcuffs. “We will be here as long as it takes,” he said.

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Economy

Biden's Hot Economy Stokes Currency Fears for the Rest of World – Bloomberg

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As Joe Biden this week hailed America’s booming economy as the strongest in the world during a reelection campaign tour of battleground-state Pennsylvania, global finance chiefs convening in Washington had a different message: cool it.

The push-back from central bank governors and finance ministers gathering for the International Monetary Fund-World Bank spring meetings highlight how the sting from a surging US economy — manifested through high interest rates and a strong dollar — is ricocheting around the world by forcing other currencies lower and complicating plans to bring down borrowing costs.

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Opinion: Higher capital gains taxes won't work as claimed, but will harm the economy – The Globe and Mail

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Canada’s Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland hold the 2024-25 budget, on Parliament Hill in Ottawa, on April 16.Patrick Doyle/Reuters

Alex Whalen and Jake Fuss are analysts at the Fraser Institute.

Amid a federal budget riddled with red ink and tax hikes, the Trudeau government has increased capital gains taxes. The move will be disastrous for Canada’s growth prospects and its already-lagging investment climate, and to make matters worse, research suggests it won’t work as planned.

Currently, individuals and businesses who sell a capital asset in Canada incur capital gains taxes at a 50-per-cent inclusion rate, which means that 50 per cent of the gain in the asset’s value is subject to taxation at the individual or business’s marginal tax rate. The Trudeau government is raising this inclusion rate to 66.6 per cent for all businesses, trusts and individuals with capital gains over $250,000.

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The problems with hiking capital gains taxes are numerous.

First, capital gains are taxed on a “realization” basis, which means the investor does not incur capital gains taxes until the asset is sold. According to empirical evidence, this creates a “lock-in” effect where investors have an incentive to keep their capital invested in a particular asset when they might otherwise sell.

For example, investors may delay selling capital assets because they anticipate a change in government and a reversal back to the previous inclusion rate. This means the Trudeau government is likely overestimating the potential revenue gains from its capital gains tax hike, given that individual investors will adjust the timing of their asset sales in response to the tax hike.

Second, the lock-in effect creates a drag on economic growth as it incentivizes investors to hold off selling their assets when they otherwise might, preventing capital from being deployed to its most productive use and therefore reducing growth.

Budget’s capital gains tax changes divide the small business community

And Canada’s growth prospects and investment climate have both been in decline. Canada currently faces the lowest growth prospects among all OECD countries in terms of GDP per person. Further, between 2014 and 2021, business investment (adjusted for inflation) in Canada declined by $43.7-billion. Hiking taxes on capital will make both pressing issues worse.

Contrary to the government’s framing – that this move only affects the wealthy – lagging business investment and slow growth affect all Canadians through lower incomes and living standards. Capital taxes are among the most economically damaging forms of taxation precisely because they reduce the incentive to innovate and invest. And while taxes on capital gains do raise revenue, the economic costs exceed the amount of tax collected.

Previous governments in Canada understood these facts. In the 2000 federal budget, then-finance minister Paul Martin said a “key factor contributing to the difficulty of raising capital by new startups is the fact that individuals who sell existing investments and reinvest in others must pay tax on any realized capital gains,” an explicit acknowledgment of the lock-in effect and costs of capital gains taxes. Further, that Liberal government reduced the capital gains inclusion rate, acknowledging the importance of a strong investment climate.

At a time when Canada badly needs to improve the incentives to invest, the Trudeau government’s 2024 budget has introduced a damaging tax hike. In delivering the budget, Finance Minister Chrystia Freeland said “Canada, a growing country, needs to make investments in our country and in Canadians right now.” Individuals and businesses across the country likely agree on the importance of investment. Hiking capital gains taxes will achieve the exact opposite effect.

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Economy

Nigeria's Economy, Once Africa's Biggest, Slips to Fourth Place – Bloomberg

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Nigeria’s economy, which ranked as Africa’s largest in 2022, is set to slip to fourth place this year and Egypt, which held the top position in 2023, is projected to fall to second behind South Africa after a series of currency devaluations, International Monetary Fund forecasts show.

The IMF’s World Economic Outlook estimates Nigeria’s gross domestic product at $253 billion based on current prices this year, lagging energy-rich Algeria at $267 billion, Egypt at $348 billion and South Africa at $373 billion.

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