Goldy Hyder is the president and chief executive officer of the Business Council of Canada.
Ukraine’s new ambassador-designate in Ottawa, Yulia Kovaliv, describes her country’s economy as the “third front” in the war caused by Russia’s unprovoked invasion. This is a decisive front on which Canada can engage. Just as we are already supplying humanitarian aid and military equipment, we must also help support Ukraine’s economy.
Ukrainians have committed countless heroic acts of resistance since Russian troops poured over the border in February. Any such list must include those who risk their lives daily to protect Ukraine’s economy. Every morning, millions of Ukrainians go to work even though their places of business could be targeted by missile strikes.
Remarkably, despite the devastation in those areas subjected to the most horrific fighting and bombing, as of last month less than half of all Ukrainian-based businesses had been forced to scale back operations because of Russia’s invasion, and fewer than 5 per cent of Ukrainian companies had been forced out of business entirely.
Still, no modern, advanced economy can sustain itself without trade and investment. Ukraine wants to do business with Canada and, to that end, here are three ways Canada’s public and private sectors can answer the call.
First, we must update our 2017 free-trade agreement. Our two countries had committed to doing so prior to the invasion and those efforts must now be given greater priority. We should focus, in particular, on expanding the agreement to cover investment and trade in services as Ukraine’s services sector has proven especially resilient.
In recommending this, we know Ukrainian officials are seized with the tragically urgent situation at home. Canada should therefore look to areas where it can act unilaterally. That is why the Business Council of Canada supports the removal of tariffs on goods from Ukraine and urges the removal of other unnecessary barriers to trade.
The reopening of our embassy in Kyiv is an important development given that negotiating in person is always more efficient, effective and conducive to reaching an agreement. The gradual restoring of greater access to our trade commissioner service will also help Ukrainian businesses connect with potential Canadian customers.
A second way we can help support and sustain Ukraine’s economy is by looking for opportunities to work with Ukraine’s agricultural sector. Ukraine and Canada are among the world’s Top 5 wheat exporters. Notwithstanding the war, Ukrainian farmers have planted crops in 70 per cent of the country’s arable land.
Given the Russian offensive in eastern regions of the country, a looming challenge to the Ukrainian economy may be a shortage of agri-food processing and exporting capacity for the resulting fall harvest. Here, Canadian food processors, equipment manufacturers and others in the agri-food sector may be able to help.
During his recent visit to Ukraine, Prime Minister Justin Trudeau pledged that the government would help Ukraine find ways to export grain that it has in storage and is ready to ship. Here, again, Canadian businesses, those in the transportation and logistics sectors, may be able to offer some assistance.
Finally, a third area where we should seek to expand bilateral business ties is the energy sector. Russia’s invasion has had a seismic effect on global energy markets, particularly in terms of oil and gas. Both Ukraine and Canada have called for the acceleration of the energy transition to renewable and low-emission resources.
In this, we must deal with both geopolitical and geological realities. Canadian companies have been working for years with Ukrainian partner agencies to help reduce reliance on Russian resources, including uranium. This work continues even now, and it has never been more important to Ukraine or to the rest of Europe.
Russian forces have damaged – and in some cases destroyed – vital energy infrastructure in Ukraine. Hence their greatest need may be for Canadian engineering and construction companies to help with the rebuilding and recovery effort both now and, as Ms. Kovaliv asserts proudly, “after the victory.”
All of us look forward to the day when Ukraine’s sovereignty and territorial integrity have been restored, and when circumstances allow business leaders to travel to Kyiv and meet with their Ukrainian counterparts. In the interim, the best way for Canada to help Ukraine – outside of military support – is to support their economy.
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Germany Risks a Cascade of Utility Failures, Economy Chief Says – BNN
(Bloomberg) — Germany should prepare for deeper cuts in Russian gas supplies because President Vladimir Putin is pursuing a conscious strategy of driving up prices to undermine European unity, Economy Minister Robert Habeck said.
“We aren’t dealing with erratic decisions but with economic warfare, completely rational and very clear,” Habeck, the deputy chancellor in Olaf Scholz’s government, said Saturday on a panel. “After a 60% reduction, the next one logically follows.”
German leaders are stepping warnings of impending turmoil and natural-gas shortages in Europe’s biggest economy, which relies on Russia for about one-third of its energy. Putin has gradually reduced supplies after European countries imposed sanctions in response to Russia’s invasion of Ukraine.
German utilities are at risk of cascading failures that might require activating a legal clause that would allow them to pass on price increases outside of contract commitments, Habeck said.
Germany has refrained from activating the measure for now because it would lead to an “immediate price explosion” for consumers, he said at an event sponsored by the Die Zeit weekly. The government is working on an alternative, he said, without elaborating.
“If one company were to fail, or other companies were to fail, it’s like a domino effect that would very quickly lead into a deep recession,” he said.
European energy companies are facing a squeeze after Russia curbed flows on a key gas link earlier this month, forcing utilities to buy fuel on the spot market at elevated prices. High power prices are increasingly prompting German factories and businesses to curb demand and the government has activated the second stage of a three-stage gas emergency plan.
Russia has reduced shipments through Nord Stream by 60% and the pipeline is scheduled for a full shutdown this month for maintenance. Germany has raised doubts that Nord Stream will resume supply after that.
Russia’s goal is to keep energy prices high and “destroy the unity and solidarity of the country,” Habeck said.
Germany’s government and energy giant Uniper SE are discussing stabilization measures. Finance Minister Christian Lindner said any additional government assistance would be in the form of a loan guarantee.
Gas rationing — if it came to that — presents challenges because the grid often isn’t separated between residential and commercial customers, Habeck said.
If a factory is connected to the gas network and a whole part of the city is connected to it, then this factory can’t be taken out of the network.
“That will probably then be regulated at the expense of the factories that are not connected to a mixed network,” Habeck said.
Household customers in Germany are protected by law from gas shutoffs.
©2022 Bloomberg L.P.
Argentines Seek Hedging in Crypto After Economy Minister Resigns – BNN
(Bloomberg) — The cost of buying Tether with Argentine pesos surged Saturday after Economy Minister Martin Guzman resigned.
The resignation marked the biggest departure of President Alberto Fernandez’s government after infighting escalated within the ruling coalition. No replacement was immediately named.
The price of Tether measured in Argentine pesos jumped on major exchanges soon after the minister announced his resignation on Twitter, according to the CryptoYa website, which reports minute-by-minute prices. The coin fetched 257 Argentine pesos on the Binance exchange, up 6.6%. On the Lemon Cash exchange, prices jumped 11% to 279 pesos.
Crypto is the only market trading in Argentina on Saturday. While volumes are small, the moves could indicate unease, at least among some traders, over the growing rift within the ruling coalition and concern over the government’s ability to tackle rising inflation and other economic challenges.
Argentina is one of the nine countries with the highest adoption of cryptocurrencies, according to Chainalysis, a site specializing in crypto and blockchain. In a country with recurring currency crises and inflation running around 60% annually, two-thirds of Argentines who invest in crypto say they do so to protect their savings, according to a study by Buenos Aires-based Wunderman Thompson.
©2022 Bloomberg L.P.
Charting the Global Economy: Factories Slow Down From US to Asia – BNN
(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.
Manufacturing from the US to Asia is very much in a slowdown as factories continue to struggle with supply snarls, labor shortages and elevated materials costs.
A measure of US manufacturing activity weakened in June to a two-year low, and several regional Federal Reserve surveys indicated business activity shrank. Factory purchasing managers’ gauges across Asia eased, with South Korea, Thailand and India among those showing the biggest declines, according to S&P Global.
Similar indexes in Poland, Spain and Italy also showed weaker activity compared to May.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
Consumer spending fell in May for the first time this year and prior months were revised lower, suggesting an economy on somewhat weaker footing than previously thought amid rapid inflation and Fed interest-rate hikes.
Regional Fed manufacturing surveys have taken on a grimmer tone, with four of five indicating business activity shrank in June. Separately, a measure of overall manufacturing slid to a two-year low as new orders contracted, restrained by lingering supply constraints and some softening in demand.
The pandemic housing boom is careening to a halt as the fastest-rising mortgage rates in at least half a century upend affordability for homebuyers, catching many sellers wrong-footed with prices that are too high.
Confidence in the euro-area economy slipped as households become more pessimistic amid fears a Russian energy cutoff will spark a recession. At the same time, they’re less worried about inflation than they were a month ago, though there’s a split between core and peripheral euro-area countries.
After suffering from unprecedented shocks in recent years, the UK is succumbing to more intractable problems marked by plodding growth, surging inflation and a series of damaging strikes.
China’s economy showed some improvement in June as Covid restrictions were gradually eased, although the recovery remains muted. That’s the outlook based on Bloomberg’s aggregate index of eight early indicators for this month. The overall gauge returned to the neutral level after deteriorating for two straight months.
Japan’s factory output shrank at the fastest pace since the height of the pandemic as the lagged impact of China’s virus lockdowns continued to disrupt supply chains and economic activity in the region. The weakness in manufacturing extended across Asia, particularly in South Korea, Thailand, India and Taiwan.
Colombia’s central bank delivered its biggest interest rate increase in over two decades. Policy makers are bracing for another spike in annual inflation that’s already above 9%.
Two years after Argentina emerged from its latest default, a debt crisis in brewing once again. This time, the immediate trouble is in the local bond market, where creditors have become reluctant to roll over maturing government bonds.
Zambia’s inflation rate dropped below 10% for the first time in almost three years in June, bucking a global trend of record consumer-price growth. Optimism over the nation’s economy since the election of Hakainde Hichilema as president in August, a potential debt restructuring and a $1.4 billion bailout package from the International Monetary Fund has seen a rally in the local currency, which has helped contain prices.
Differences in underlying inflation trends call for different policy outlooks among the world’s top central banks, according to Bloomberg Economics. The Fed will have to go well into restrictive territory, the Bank of England may go a little above neutral and the European Central Bank might not even get that far.
©2022 Bloomberg L.P.
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