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Another old-economy trade fight with Trump looms, but services matter much more than aluminum – TheChronicleHerald.ca

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Chrystia Freeland, who marshalled Canada’s troops during the North American trade wars of 2017-19, revisited her greatest rhetorical hits when she returned to the field of battle last week, threatening to hit back if Donald Trump goes ahead with punitive duties on Canadian aluminum this weekend, which he surely will.

“We do not escalate, we do not back down,” Freeland, now the deputy prime minister,

said

(again) in front of cameras in Ottawa on Aug. 7.

The suggestion that an alleged surge in unwrought aluminum from the Canadian operations of global behemoths such as Alcoa Corp. and Rio Tinto Ltd. represents a threat to American security was “absurd,” just as it was when the United States targeted Canadian metal in the spring of 2018 on the same grounds.

“I think Canadians will agree with me, it’s very important to react,” Freeland said.

So here we go again. Prime Minister Justin Trudeau’s government might have turned the other cheek and left an industry dominated by a few massive corporations to fight its own battles. Instead, Trudeau took the bait. That means Canadian consumers will be punished with higher prices in order to “protect” exports that were worth some $609 million in June, or about 1.2 per cent of the $47.8 billion in goods and services that Canada sold abroad that month,

according to Statistics Canada’s most recent figures

.

If the deputy prime minister is comfortable going into this new fight with refried talking points, then I’m going to recycle some old columns. This Canadian doesn’t agree that it’s “very important” to react. We’re suffering from this tit-for-tat nonsense, all for the benefit of a few industries whose lobbying muscle exceeds their contribution to gross domestic product.

The tangle over revising the North American Free Trade Agreement was disappointing because Canada’s “wins” were scored by legacy interests, such as auto-parts manufacturing and milk production. That means that during negotiations, Freeland cashed her chits on economic engines that have probably maxed out, rather than insist on rules that might benefit sectors more closely aligned with the digital economy.

It’s fine that supply management was preserved, and that the makers of auto parts and their unions got much of what they wanted, but what advantages did companies such as Amazon.com Inc. and Facebook Inc. retain? We have little idea, because the Canadian political class put farmers and autoworkers ahead of everyone and everything else.

All the momentum in trade is in services, which represented 24 per cent of total trade in 2019, compared with 19 per cent in 1995, according to a

report

published this week by Western Union Business Solutions and Oxford Economics. Those numbers are based on official statistics, which tend to undervalue services because things such as research and development get wrapped up in the price of goods. The Western Union study estimates that services actually represent about 55 per cent of total trade.

The trend is the same in Canada. The value of commercial services exports surged to $6.8 billion in February, roughly equivalent to oil exports and greater than auto exports, according to Statistics Canada data. That was six months ago, before COVID-19 changed everything. There is no longer any contest. The recession hammered exports of every kind, but commercial services had recovered to 85 per cent of their February value in June, while oil shipments stood at thirty per cent of their worth at the start of the year.

“Services have been under the radar,” Roy Farah, head of North America at Western Union Business Solutions, said in an interview earlier this week. “To a certain degree, that’s a good thing,” he added, given the Trump administration’s tendency to harass exporters of tangible goods such as steel, automobiles, airplanes and wine.

Instead of getting bogged down in a new trade war over aluminum, we should focus on the future.

A friend of mine runs IMBA Medical Inc., an Ottawa-based developer of billing applications for physicians that realized its software could be rejigged to help hospitals, schools and other institutions manage all the new COVID-19 requirements. IMBA started cold calling U.S. school boards by the dozens and is starting to get traction. That is what trade looks like now. The Western Union study projects that global trade in services will increase 30 per cent by 2025.

Instead of getting bogged down in a new trade war over aluminum, we should focus on the future

Canada is good at the services game, but not great. Western Union and Oxford Economics identified Japan, South Korea, Australia, New Zealand, Saudi Arabia and the United Arab Emirates as “hot spots,” while the U.S. stands out because of its size and collection of world-beating companies. Canada and some other rich economies are in the second tier.

“It wouldn’t take much for Canada to get where Japan and the U.S. are,” Farah said. An emphasis on education and research and development is key. We’re strong on the former, while the latter is a matter of reallocating resources. Farah also noted that the cost of telecommunications here is “much higher” than in other countries. “This is having a big effect on technology readiness,” he said.

Fixing that problem will require a tough fight with the telecom oligopoly. The payoff would be far greater than another scrap with Trump over aluminum.


Financial Post


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India's central bank to keep rates on hold, provide economic forecasts – The Journal Pioneer

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By Swati Bhat

MUMBAI (Reuters) – The Reserve Bank of India is expected to keep key rates unchanged this week, but may for the first time since February provide guidance on how the economy is performing amid the coronavirus pandemic.

All 66 respondents in a Reuters poll expect the repo rate to remain unchanged at 4.0% after its policy review on Thursday, and a large majority see no cuts until the January-March quarter. The RBI will then likely stay on hold until the end of 2021.

The central bank must manage high retail inflation while keeping policy accommodative to support an economy which nosedived 23.9% last quarter, the weakest performance on record.

It has so far slashed rates by 115 basis points in response to the COVID-19 pandemic since late March.

“India’s inflation-constrained central bank is unlikely to deliver a rate cut, and we expect all policy rates to stay unchanged,” said Rahul Bajoria, economist with Barclays adding that the RBI will however provide economic projections.

India is gradually reopening its economy from a lockdown but economic activity remains depressed as coronavirus cases top six million, the second-highest globally.

The South Asian country was already facing a cyclical downturn before the pandemic struck and is now expected to mark its first full-year contraction since 1979 this year as millions are left unemployed in the world’s second-most populous country.

The RBI has so far refrained from providing any forecasts on growth or inflation due to the heightened uncertainty and risk of projections having to be revised frequently.

However, the central bank is required by law to provide economic forecasts once every six months.

“Data projections from the central bank will be critical, as it would lay out the RBI’s assessment of the extent of the current slowdown and the medium-term implications of the current crisis,” Bajoria said.

The RBI has maintained that it sees the current rise in inflation as transitional and expects to see prices come down, giving it room to reduce rates to support growth.

August inflation, at 6.69%, held above the top end of the RBI’s medium-term target range of 2-6% for the fifth consecutive month amid supply disruptions.

(Editing by Jacqueline Wong)

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Economy Week Ahead: Factories, Consumer Spending and Employment – The Wall Street Journal

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The Grove retail and entertainment complex in Los Angeles drew shoppers as restrictions on gatherings have eased.

Photo: valerie macon/Agence France-Presse/Getty Images

The U.S. jobs report for September highlights a week of data that will show how economies are recovering from coronavirus-induced recessions and from continued disruptions related to the pandemic.

Wednesday

China’s official purchasing managers index for manufacturing is expected to show factory activity expanded for the seventh straight month in September. Economists said manufacturers have sped up production to avoid shipment delays in the event buyers experience a return of Covid-19 this winter.

Thursday

The
Bank of Japan’s
tankan corporate sentiment survey for the third quarter is expected to improve, reflecting a gradual resumption of economic activity. In the second quarter, sentiment among Japan’s large manufacturers deteriorated to its lowest level in 11 years and even a significant gain will still show that more companies say business conditions are unfavorable than favorable.

The number of workers covered by Europe’s furlough schemes has been declining since lockdowns were eased, but without causing a surge in the number of people without jobs. That trend likely continued in August, with figures released by the European Union’s statistics agency expected to show that the jobless rate rose to 8.1% from 7.9% in July.

U.S. jobless claims have steadied at an elevated level in recent weeks, suggesting a slowdown in the labor market’s recovery. Economists expect only a slight decline in the number of applications for unemployment benefits during the week ended Sept. 26, underscoring continued labor-market disruption and a historically high number of layoffs.

U.S. consumer spending is expected to post another monthly increase in August, though at a slower pace than recent months. That would likely reflect several trends, including a partial rebound in employment, the expiration of some federal government benefits tied to the pandemic, and strong demand for many goods alongside a weaker recovery in the service sector.

The Institute for Supply Management’s September purchasing managers index for manufacturing is likely to reflect a strong rebound in factory activity amid a slow global recovery and strong domestic demand for autos, electronics and other goods.

Friday

Consumer prices in the eurozone were lower than they were a year earlier in August, and figures to be released by the European Union’s statistics agency are expected to show that they remained so in September, increasing the likelihood that the European Central Bank will have to provide further stimulus if it is to meet its inflation target.

U.S. nonfarm payrolls are expected to post another strong gain and the unemployment rate to decline in September as more businesses recall workers. But the pace of hiring might have slowed and the overall level of employment will likely remain millions of jobs short of pre-pandemic levels, underscoring the severe damage from the pandemic and the long road to full recovery.

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Economy

Economy Week Ahead: Factories, Consumer Spending and Employment – Wall Street Journal

Published

on


The Grove retail and entertainment complex in Los Angeles drew shoppers as restrictions on gatherings have eased.

The Grove retail and entertainment complex in Los Angeles drew shoppers as restrictions on gatherings have eased.

Photo: valerie macon/Agence France-Presse/Getty Images

The U.S. jobs report for September highlights a week of data that will show how economies are recovering from coronavirus-induced recessions and from continued disruptions related to the pandemic.

Wednesday

China’s official purchasing managers index for manufacturing is expected to show factory activity expanded for the seventh straight month in September. Economists said manufacturers have sped up production to avoid shipment delays in the event buyers experience a return of Covid-19 this winter.

Thursday

The
Bank of Japan’s
tankan corporate sentiment survey for the third quarter is expected to improve, reflecting a gradual resumption of economic activity. In the second quarter, sentiment among Japan’s large manufacturers deteriorated to its lowest level in 11 years and even a significant gain will still show that more companies say business conditions are unfavorable than favorable.

The number of workers covered by Europe’s furlough schemes has been declining since lockdowns were eased, but without causing a surge in the number of people without jobs. That trend likely continued in August, with figures released by the European Union’s statistics agency expected to show that the jobless rate rose to 8.1% from 7.9% in July.

U.S. jobless claims have steadied at an elevated level in recent weeks, suggesting a slowdown in the labor market’s recovery. Economists expect only a slight decline in the number of applications for unemployment benefits during the week ended Sept. 26, underscoring continued labor-market disruption and a historically high number of layoffs.

U.S. consumer spending is expected to post another monthly increase in August, though at a slower pace than recent months. That would likely reflect several trends, including a partial rebound in employment, the expiration of some federal government benefits tied to the pandemic, and strong demand for many goods alongside a weaker recovery in the service sector.

The Institute for Supply Management’s September purchasing managers index for manufacturing is likely to reflect a strong rebound in factory activity amid a slow global recovery and strong domestic demand for autos, electronics and other goods.

Friday

Consumer prices in the eurozone were lower than they were a year earlier in August, and figures to be released by the European Union’s statistics agency are expected to show that they remained so in September, increasing the likelihood that the European Central Bank will have to provide further stimulus if it is to meet its inflation target.

U.S. nonfarm payrolls are expected to post another strong gain and the unemployment rate to decline in September as more businesses recall workers. But the pace of hiring might have slowed and the overall level of employment will likely remain millions of jobs short of pre-pandemic levels, underscoring the severe damage from the pandemic and the long road to full recovery.

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