How Iran is using ‘ghost ships’ to flout Donald Trump’s oil sanctions

How Iran is using 'ghost ships' to flout Donald Trump's oil sanctions

It sounds like something out of a pirate story, but the normally staid world of international trade has been beset by a flotilla of ghost ships in recent weeks, and they’re weighed down by several million barrels of trouble for U.S. foreign policy.

Iran is one of the world’s biggest oil suppliers, and according to official records, the country shipped about 1.8 million barrels of oil per day last month, a slight decline from August’s level and 40 per cent below a peak of almost 3 million barrels in April.

All things being equal, that figure is likely to plunge even more in the coming weeks, as U.S. sanctions aimed at forcing Tehran to negotiate a new nuclear agreement are set to come into force next month. If fully implemented and adhered to, the sanctions will cut Iran’s oil exports to zero as long as the rest of the world plays along.

But the Iranian government seems to already have found innovative ways around those efforts by moving millions of barrels of crude on the sly.

People who monitor global tanker traffic noticed a curious new development last month, as about a dozen tankers known to be carrying Iranian oil mysteriously turned off transponders designed to track their movements via GPS.

Under an international law known as the International Convention for the Safety of Life at Sea, ship captains must keep their  transponders — known as Automatic Identification System or AIS — on at all times. But sometimes vessels wishing to move about without as much scrutiny will turn them off, and so far the international community doesn’t seem too interested in stopping them

Iran has lately become a hub for the tactic. And the journey of one ship, the Dino I, is a good example of how it works.

On Sept. 4, AIS data shows that the supertanker picked up 2 million barrels of Iranian oil at Kharg Island, a massive fill-up station in the middle of the Persian Gulf. From there, the ship made its way through the Straight of Hormuz and into the Indian Ocean, where the ship went dark from Sept. 15 onward.

It reappeared on the grid more than ten days later while passing through the busy shipping lanes near Kuala Lumpur, Malaysia, and its transponder stayed on while it paid a visit to the shipping hub of Singapore a day later, on Sept. 27.

Then it vanished again for more than a week, before reappearing off the coast of Taiwan on Oct. 5. It then went dark for another few days before checking in off the South Korean coast and delivering its cargo at the Chinese port of Dalian on Oct. 13.

Dino I is not the only such “ghost ship,” as experts have called them, and the eyebrow-raising voyage seems part of a targeted attempt to evade the coming sanctions.

“They think they’ll throw people off the scent [and] they want to confuse what they’re picking up,” says David Adesnik, research director at Washington, D.C.-based national security think-tank the Foundation for Defence of Democracies, of what the ships are up to.

“We’re still puzzling through their precise motives,” he says, “but broadly speaking, it’s about the money.”

The threat of Iran being locked out of the oil market has pushed up oil prices in recent weeks. So deploying an armada of cloaked tankers allows Tehran’s leaders to have their cake and eat it too by selling just as much oil as ever.

Oil prices have risen steadily in recent weeks ahead of sanctions that will theoretically lock Iranian crude out of the market. (Larry MacDougal/Canadian Press)

“They’re doing it more because they embraced the media narrative that exports are down hard,” says Samir Madani, co-founder of ship monitoring firm “It helps boost the price of oil. They don’t want OPEC to go into higher production,” he says. OPEC refers to the Organization of Oil Exporting Countries, a producers’ cartel that includes Iran as a member. 

In the first 13 days of October, TankerTrackers calculated that Iran shipped an average 2.2 million barrels per day. That’s an increase of 10 per cent from what the company was seeing in September, and several hundred thousand barrels more than what’s being reported in the official numbers from OPEC.

Madani’s firm supplements rudimentary AIS data with other technology to fill in the gaps, and he estimates that official numbers sometimes only capture about 20 per cent of the tanker traffic at any given time. “The other 80 per cent is a cat and mouse chase involving satellite imagery,” he says.

This isn’t the first time that Iran has tried such chicanery. Iranian ghost ships last criss-crossed the seas to this extent between 2011 and 2015, when the previous U.S. administration had sanctions on Iranian oil before signing the nuclear deal that the current inhabitant of the White House pulled out of. 

It’s not just oil destined to feed China’s voracious appetite for fuel, either. Madani says Syria and Israel “both instruct tanker operators to switch off their transponders prior to arrival.” Officially, there are U.S. sanctions on selling oil to Syria, but Iran shipped up to 60,000 barrels to Syria in August, worth some $150 million, TankerTrackers says.

In Israel’s case, tanker operators bringing oil from Arab states who don’t have relations with Israel will turnoff the tracking devices to keep up appearances that they aren’t “dealing with the Jewish state,” Adesnik says.   

Ghost ships aren’t the only type of subterfuge currently at play in the oil market. Madani has noticed a marked uptick in the amount of barrels that Iran is storing in idle tankers. That’s a great way for the regime to get oil off of its official ledgers, until it can find a buyer on the sly in future, he says.

On the last day of September, for example, Madani’s satellites witnessed 10 million barrels sitting in six supertankers floating just offshore of Kharg Island. They hadn’t moved in days, nor did they move for several days following.

The red dots represent oil tankers spotted by holding as many as 2 million barrels of oil on Sept. 30. The yellow dots represent smaller tankers that were holding a million barrels. (

That’s more than 10 per cent of all the oil the world consumes every day, just floating around, looking for a buyer — possibly one who’s willing to do business even after U.S. sanctions are in place next month.

“It would seem to be practice,” Adesnik says. “They’ll really need the cloaking after November 4, but they’re practicing with it now.” 

The risk isn’t only financial. In January, Iranian tanker the Sanchi burned and sank in waters 300 kilometres east of Shanghai after colliding with a freight ship. The Sanchi was carrying about a million barrels of condensate at the time, and all 32 members of the crew are missing and presumed dead. Rescue efforts were hampered by the fact that the Sanchi hadn’t broadcast an AIS signal for at least nine hours prior to the collision, Adesnik says.

More than 30 people who were on board the Sanchi when it exploded and sank in Chinese waters earlier this year are presumed dead. (10th Regional Coast Guard Headquarters/Reuters)

Tragedies like the Sanchi are likely to repeat for as long as the international community is willing to turn a blind eye to the shipping subterfuge. Tehran has an incentive to keep doing it and “authoritarian regimes are not known for their ability to confront the truth in an expeditious manner” Adesnik says.

“I’d imagine we’re interested in taking some pretty serious measures to prevent them from getting oil out illicitly,” he says. “But we have to prioritize who we’re going to be pressuring into compliance.”

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B.C. billionaire Chip Wilson uses his backside to sell ‘unauthorized story’ of Lululemon

B.C. billionaire Chip Wilson uses his backside to sell 'unauthorized story' of Lululemon

While there may be many chapters in the two-decade story of apparel company Lululemon Athletica Inc., founder Chip Wilson has looked to one iconic product to put a headline on it.

Chip Wilson, seen in a file photo from earlier this year, sold half of his remaining stake in Lululemon in 2014. (Jonathan Hayward/Canadian Press)

Little Black Stretchy Pants is Wilson’s new, self-published book about the clothing firm he founded, built into a large company and then parted ways with.

It’s billed as “the unauthorized story” of Lululemon, as told by the founder himself — and Wilson has marketed it by personally wearing those same stretchy pants in a close-up, backside-facing photo on the cover of the book.

The book is being sold as a hardcover, e-book and audiobook through Amazon ahead of a wider release as a paperback next month.

No more ‘throwaway clothes’

Wilson founded Lululemon in Vancouver in 1998. According to his book, that was the year he discovered yoga and saw a problem to be solved in the clothing worn by the people working out alongside him.

“I knew there was a much better solution than the sweaty, baggy, binding cotton the other students were wearing,” he writes in Little Black Stretchy Pants. “In 1998, gym fashion was simply your worst throwaway clothes.”

Wilson’s book Little Black Stretchy Pants is billed as ‘the unauthorized story’ of Lululemon, as told by the founder himself. Wilson modelled the pants in the cover image, a publishing spokesperson says. (Very Polite Agency)

Five years after founding the company, Wilson talked to CBC about what Lululemon was and the popular pants that helped the company stretch itself into a big brand.

“What women really like best in life is a pair of black, Lycra pants,” said Wilson in 2003, noting that Lululemon had been ahead of the game in selling low-rise pants.

‘The poseurs’ help profits

Wilson poses for a CBC camera in 2003. (Canada Now/CBC Archives)

He said the product had proven popular with athletes and non-athletes alike — creating a broader market than Wilson said Lululemon clothing was explicitly designed for.

“I understand that people buy it for fashion, but that’s their choice. My thinking is always athletic in function,” Wilson said.

“Of course, the poseurs are what makes any kind of clothing company financially successful, because, I mean, the people actually doing yoga maybe represent 25 per cent of the people we sell to, and our company would not be as financially stable if we had to just rely on that.”

Lululemon goes public

In 2007, Lululemon went public and started selling shares on stock exchanges in New York and Toronto.

Lululemon begins selling stock in July 2007. 0:32

“We must have had about 40 Lululemon people there, almost all of them from Canada,” Wilson said, when describing the moment to CBC News. “It was wonderful. It felt like a big family.”

At the time of the IPO, Lululemon had 59 retail stores in Canada, the United States, Japan and Australia.

Some questioned how far the company could go.

On the day Lululemon begins selling stock in the company, CBC looks at whether it can sustain its growth. 0:34

“I think the question is: Can this company — this Canadian company — of what, a mere 59 stores, successfully go south of the border into one of the world’s most competitive markets?” asked Wolfgang Klein of RBC Dominion Securities, speaking with CBC News. 

“Are these things fads? And again, only time will truly tell us the answer to that question.”

Today, the company has more than 400 stores, according to its most recent quarterly report.

A trend, then a backlash

As Lululemon grew and more people started wearing its products, some style watchers didn’t dig the look.

An MSN Travel story gives Vancouver an unwanted status and blames yoga wear. 1:06

In the fall of 2011, an MSN Travel story claimed Vancouver was the third worst-dressed city in the world, and it blamed the city for being the “birthplace of a certain, insanely popular yoga gear brand,” where the trend in “athleisure” clothing took off.

And when CBC Vancouver reported on the alleged unfashionable style of the city’s streets, it pointed to the company Wilson founded as a possible culprit.

In his new book, Chip Wilson, seen here in a 2012 photo, talks about his displeasure with the term ‘athleisure.’ (Darryl Dyck/Canadian Press)

“Chip Wilson may not have invented the yoga pant. But when he founded Lululemon on West 4th, he did seem to birth a trend,” the CBC’s Deborah Goble told viewers.

But Goble noted it might be Wilson having “the last laugh,” citing the fortune he had made from the company.

Wilson takes issue with the term athleisure, writing that it conjures up an image of “a non-athletic, smoking, Diet Coke-drinking woman in a New Jersey shopping mall wearing an unflattering pink velour tracksuit.”

Leaving Lululemon behind

In 2013, Chip Wilson announces he will step down from Lululemon’s board. 0:15

In 2013, Wilson announced he would be stepping down from Lululemon. His announcement followed controversial comments he made to Bloomberg TV about the company’s pants.

The exterior of a Lululemon store is seen in Vancouver in 2003. (Canada Now/CBC Archives)

During the November 2013 interview with Bloomberg, Wilson had been asked about the pilling of Lululemon pants and he said “some women’s bodies just actually don’t work for it.” 

In his book, Wilson says he “made a mistake” that ultimately cost him his role as chair of the Lululemon board.

“The Bloomberg interview gave the board the ability to re-frame me as the weird uncle that the family must put up with but wishes it didn’t have to,” said Wilson.

In 2014, Wilson sold half of his remaining stake in Lululemon, a transaction reportedly worth $845 million.

His net worth is routinely reported to be in the billions. Forbes has recently estimated Wilson’s net worth to be nearly $4 billion.

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WestJet’s Swoop forced to cancel 24 U.S. flights as regulatory approval held up

Passenger rights advocate launches complaint, calls Swoop's baggage fees 'deceptive'

WestJet’s new discount carrier Swoop is apologizing to travellers for cancelling 24 U.S.-bound flights.

The airline says it had hoped to have all regulatory approvals in place to operate south of the border — but one of those has not yet been approved.

That means all Swoop flights to the United States have been postponed until Oct. 27.

Swoop says it was able to operate some flights to the States using a leased aircraft from WestJet.

“We apologize to our travellers affected by the cancellations for the inconvenience and for their disappointment,” said spokesperson Karen McIsaac in an email to CBC News.

“We are focused on doing what is right and are working directly with those affected travellers to provide options including rebooking on an alternate flight or providing full refunds and compensation.”

Swoop announced a plan in August to fly to Las Vegas from Abbotsford, B.C., and to Phoenix, Ariz., from Edmonton, as well as to the Florida cities of Fort Lauderdale, Orlando and Tampa Bay from Hamilton, Ont.

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Canadian airlines tell Ottawa carbon tax will hurt revenues and domestic routes

Air Canada pilot union says airlines must address pilot fatigue

Canadian airlines are urging Ottawa to exempt them from the Jan. 1 imposition of a federal carbon tax, which they warn will boost airfares and push passengers across the border to rival carriers and airports.

The National Airlines Council of Canada sent a letter to three federal ministers Friday cautioning the government about the reduction the levy would cause to revenues as well as marginal domestic routes.

“A carbon tax is probably the worst tool that you can envisage for aviation if you want to reduce emissions,” said lobby group president Massimo Bergamini in an interview.

Prime Minister Justin Trudeau has committed to impose a carbon tax on provinces that lack their own form of pricing for greenhouse gas emissions.

As it stands, airlines will be required to pay the levy on flights within provinces that fall under the federal system. Meanwhile the government plans to work with jurisdictions to adopt a pricing scheme for interprovincial flights.

The governments of Saskatchewan Premier Scott Moe and Ontario Premier Doug Ford are each challenging the federal carbon tax in court.

All current provincial pricing plans — such as British Columbia’s and Quebec’s — exempt airlines from a carbon tax. But the impending federal tax in provinces that don’t put a price on emissions, such as Manitoba and Ontario — where Premier Doug Ford recently scrapped cap-and-trade — are slated to face Ottawa’s levy come Jan. 1.

That tax starts off at $20 a tonne in 2019 and rises to $50 in 2022. A higher Ontario aviation fuel tax would combine with the carbon tax to drive up the cost of a flight by as much as $45 for a family of four by 2022, the airline council said, citing a study it commissioned.

Bergamini said any notions about a carbon tax driving fuel-efficient innovation were “misplaced,” with airlines already investing heavily to reduce consumption of fuel — often their biggest expense — through light-weight materials and cargo volume.

“We’ve squeezed about as much blood as we can from that stone,” he said.

Higher airfares could push more Canadians to U.S. airlines and airports, particularly those near the border in New York state and Washington state, Bergamini said.

Carriers may have to cut the number of flights on marginal routes in Canada, he added. “This is particularly true in the North and in smaller communities.”

The airline council is advocating a federal system along the lines of cap-and-trade where carriers could buy credits from other industries that achieve greater emissions reduction.

The International Civil Aviation Organization recently adopted a cap-and-trade approach that seeks to keep emissions at 2020 levels.

The federal government is set to release details around the levy before the new year, including how it applies to various industries.

The office of Environment Minister Catherine McKenna did not immediately respond to requests for comment, but noted details on the tax are forthcoming.

The National Airlines Council of Canada represents Air Canada, WestJet Airlines Ltd., Air Transat and Jazz Aviation. The group sent a letter Friday to the ministries of Environment, Transport, and Finance.

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Feds dead set against ‘ridiculous’ quotas to replace steel, aluminum tariffs

Feds dead set against 'ridiculous' quotas to replace steel, aluminum tariffs

Canada is not about to agree to quotas or other limits on its exports in order to get the United States to lift punishing tariffs on steel and aluminum, says a source close to the ongoing talks to resolve the lingering tit-for-tat trade standoff.

Where the two sides ultimately end up remains to be seen, but the Canadian source — speaking on condition of anonymity in order to discuss sensitive negotiations — described the idea of a quota system as a non-starter and a concession that Canada is not prepared to make.

“They’re trying to get us to agree to a quota system, which we’re not going to do, because it’s ridiculous,” said the source.

“They know what they need to do to get a deal. The ball is entirely in their court.”

Other sources briefed on the talks, however, say quotas are indeed on the table as the two sides work towards getting the tariffs lifted before voters in the U.S. head to the polls for pivotal midterm elections Nov. 6 that could, depending on the outcome, have ramifications for the U.S.-Mexico-Canada Agreement.

Donald Trump imposed the so-called Section 232 tariffs — 25 per cent on steel and 10 per cent on aluminum — back in June on national security grounds.

But the levies, which the U.S. president has acknowledged publicly helped to expedite the new North American trade deal known as USMCA, did not go away when the agreement was reached recently at the 11th hour.

Trump’s now-infamous potshots at Canada, a fixture of his rally speeches and news conferences while the trade talks were ongoing, have largely been replaced by domestic political rhetoric as he ventures into the U.S. heartland, desperate to preserve Republican control of Congress.

But the anti-Canada commentary has not disappeared entirely.

In remarks to a dinner audience on Capitol Hill this week, Trump economic adviser Larry Kudlow related a story in which an unidentified White House official described Prime Minister Justin Trudeau as “that punk little kid running Canada.”

And a CBC report quoted Zekelman Industries chairman and CEO Barry Zekelman — Canadian-born, but head of a U.S.-based steel pipe and tube conglomerate and unabashed champion of American steel interests — telling a Commons committee that Foreign Affairs Minister Chrystia Freeland is “way out of her league.”

Carlo Dade, head of the Calgary-based Canada West Foundation, said it’s clear that there’s a degree of persistent cross-border animosity, particularly on the part of the office of the U.S. Trade Representative.

“The USTR really does not like Canada,” Dade said. “They’ve got a hate on for us, and they’ve had a hate on for us for a long time.”

Not so, said the source, who’s convinced that it’s all part of the Trump-fuelled U.S. negotiating playbook.

“It’s all pretty transparent — they’re doing exactly the same thing” they did during the NAFTA talks, the source said.

“They’ve got their spokespeople out there calling us names, and their steel people out there attacking Chrystia…. I think a lot of this is just show business.”

There is, however, a burning economic imperative: the mutually assured destruction of U.S. tariffs and Canadian dollar-for-dollar countermeasures on nearly $13-billion worth of trade, a stalemate that is making itself felt on both sides of the border.

With the midterms looming, Republican Senate majority leader Mitch McConnell has been urging the White House to resolve matters sooner rather than later, given the impact that retaliatory tariffs from Canada, Mexico, China and the European Union are having in the U.S. — including his home state of Kentucky.

“There is a strong call in the heartland for the president to lift those tariffs and end the retaliation by Mexico and Canada, particularly the countermeasures against U.S. farm country,” Dan Uczjo, an Ohio-based international trade lawyer and partner with Dickinson-Wright, said in an email.

“It is our understanding that the president is hearing about the pain inflicted by these tariffs as he hits the campaign circuit in Iowa, Ohio and other U.S. battleground regions.”

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Canada’s inflation rate slowed down to 2.2% last month

Canada's inflation rate slowed down to 2.2% last month

The annual pace of inflation slowed more than expected in September as increases in the price of gasoline eased compared with August.

Statistics Canada said Friday the consumer price index in September was up 2.2 per cent from a year ago compared with a year-over-year increase of 2.8 per cent in August.

Economists had expected the September figure to come in at 2.7 per cent, according to Thomson Reuters Eikon.

Statistics Canada said prices were up in all eight major components for the 12 months to September.

The transportation index, which includes gasoline, was up 3.9 per cent in September compared with a 7.2 per cent move in August as gasoline prices last month were up 12 per cent compared with a 19.9 per cent increase in August.

However, the transportation group remained the largest contributor to the overall year-over-year increase in the index.

Food prices were up 1.8 per cent, while shelter costs rose 2.5 per cent. Alcoholic beverages and tobacco products were up 4.4 per cent.

Bank of Canada set to raise rates next week

The inflation report comes ahead of the Bank of Canada’s rate decision next week when it will also update its forecast for the economy in its monetary policy report.

The central bank is widely expected to raise its key interest rate target, which sits at 1.5 per cent, by a quarter of a percentage point.

The Bank of Canada aims to keep inflation within a target range of one to three per cent and adjusts its interest rate target to help achieve that goal.

The average of the three measures of core inflation, which look to strip out more-volatile items like gas prices and are closely scrutinized by the Bank of Canada, was 2.0 per cent in September compared with 2.1 per cent in August.

Retail sales fell too

In a separate report, Statistics Canada said retail sales fell 0.1 per cent in August to $50.8 billion as sales moved lower in seven of 11 of the subsectors tracked by the agency.

Sales at gasoline stations were down 2.0 per cent, while clothing and clothing accessories stores fell 1.2 per cent. Motor vehicle and parts dealers saw sales increase 0.8 per cent.

Retail sales in volume terms were down 0.3 per cent

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‘Cannabis isn’t as easy to grow as people think’, and then there’s the paperwork

'Cannabis isn't as easy to grow as people think', and then there's the paperwork

Snags in the supply chains of legal retail pot stores across Canada are no big surprise for a fledgling industry trying to meet huge demand, experts say.

“There’s very few industries that flip the switch on one day,” said Jay Rosenthal, co-founder and president of Business of Cannabis, which produces content research and events related to the global cannabis industry.

“I think the idea that an industry that is really nascent can all of a sudden produce enough product for a fairly ravenous consumer audience —there’s gonna be challenges along the way.”

On Wednesday, it became legal in Canada to sell recreational cannabis, and Canadians lined up in droves at private and government-run shops that opened across the country.

But some stores reported they could not keep up with demand.

Manitoba Liquor & Lotteries told The Canadian Press that it is expecting product shortages in brick-and-mortar and online stores could last “up to at least six months.”

The Ontario Cannabis Store website, shown on a mobile phone, reports a high volume of orders and says, ‘We apologize for any inconvenience.’ (Sean Kilpatrick/Canadian Press)

“Every province — not just Manitoba — is receiving substantially less cannabis than originally requested. … Retailers in Manitoba will be receiving staggered shipments over the next few weeks (some daily) in an effort to meet their requests,” said a spokeswoman for the Manitoba Crown corporation in an email.

A B.C. Liquor Distribution Branch spokeswoman said, “Shortages are/were expected to impact all jurisdictions across Canada as some [licensed producers] look to opportunities in overseas markets.”

Licensed producers “point to a number of factors in reduced product volume and assortment, including issues with supply chain, lower than expected crop yields, and insufficient supply of packaging materials,” the spokeswoman said in an email.

 “We never really know when we’re going to be getting our shipment,” said Megan Kennedy, co-owner of St. John’s-based The Natural Vibe. “But … we did receive one box and that was gone probably within a half hour to an hour.”

Growing pains

Border Security and Organized Crime Reduction Minister Bill Blair said there are growing pains in a brand new retail system. He said the provinces, territories and licensed producers had asked for 12 weeks to prepare after the legislation that legalized pot received royal assent in June, and the government gave them 17 weeks.

But industry expert Brad Poulos said one of the main reasons for the shortages is that the licensed producers are having a difficult time delivering the cannabis that’s been ordered by the provinces.

“Cannabis isn’t as easy to grow as people think,” Poulos said.  “Although the licensed producers have had several months to build up inventories, the demand is such that they’re just not meeting it in the short run.”

The problem, he said, is the combination of big orders for companies that are still relatively new.

“A lot of this capacity that they’re building hasn’t yet been licensed, so we will see this problem diminish over the next few months,” he said.

When the capacity is developed, there will be plenty of cannabis to supply the roughly seven million Canadians who demand it, he said.

Getting a licence to sell takes time

Demand for cannabis is around 800,000 to a million kilograms a year, but the producers plan to grow twice that amount, he said. 

But receiving approval to sell cannabis can take time, and producers need two licences to sell the product. First, Health Canada inspects a facility and grants the producers a licence to cultivate. About 130 producers have that licence.

Then the producer must complete two grow cycles and the government agency must be satisfied they are growing cannabis without mould, mildew or any pestilence. At that point, a producer is granted a licence to sell, and only then can they make their cannabis available to the market.

So far, a little more than half the producers who have a licence to cultivate also have a licence to sell. 

It takes time to ramp up facilities to pass every level of Health Canada’s regulations, Rosenthal said. 

“And then you can sell it but then you actually also need to ramp up your production capacity. So most of these companies are really new and ramping up production is a challenge for any sort of agricultural-based enterprise.”

“It’s also difficult to do this right,” he said. “It wasn’t as if over the past 50 years people have been growing cannabis inside at scale to produce for a whole entire country. It’s been a much different kind of market up until now.”

Rosenthal said Ontario’s LCBO, for example, likely knows to the case how much beer and vodka and other alcoholic products are going to sell on big holidays like New Year’s Eve or Canada Day.

“They’re basing it on a really long history, a really well developed supply chain and having done it for decades. We don’t have any of that history.”

‘Turning on their jets’

Poulos predicted that given the shortages, Health Canada will be “turning on their jets” to license as many companies as possible. 

A lot of the capacity being built hasn’t yet been licensed. When that is complete, there will be plenty of cannabis for Canadians, says industry expert Brad Poulos. (Ryan Remiorz/Canadian Press)

“I’ve heard that from a couple of sources, that they just couldn’t get through all of the paperwork and get all the approvals and the licensing done in time,” said Jerome Konecsni, an industry expert and consultant.

“When you look at the bureaucratic processes,  they only dedicate so many resources for processing all of the licences and the regulatory approval.”

Konecsni said he believes that within a year the regulatory approvals, processes and  construction of new production facilities will be completed, meaning the supply chain will start moving more efficiently.

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MPs committee calling on Morneau to boost deduction for capital investments

MPs committee calling on Morneau to boost deduction for capital investments

Wayne Easter answered the phone in the middle of a quick lunch. The chair of the Commons finance committee was in Winnipeg yesterday with other committee members, listening to submissions on what should be in the next federal budget.

Wherever they stop, Easter said, the message heard by committee members is pretty much the same: Canada needs to do something quickly to encourage more corporate investment in this country after President Donald Trump slashed corporate taxes in the U.S., and allowed companies to write off 100 per cent of their capital investments.

“The rapid depreciation the U.S. allows for new technologies is drawing capital away,” the Liberal MP said. “We have heard that absolutely everywhere.”

The tone of these calls is urgent enough that the committee is planning to send a letter to Finance Minister Bill Morneau calling on him to increase the existing 50 per cent deduction for capital investments before the end of the year.

Making a direct appeal to the minister is an unusual step for the committee to take, but with Morneau now preparing the annual fall economic update (expected to be delivered within a month), time is of the essence.

“We’re certainly not focusing a year out,” Easter said when asked if increasing the maximum deduction isn’t the kind of measure that typically would be saved for an election year budget. “We’re looking at what we need to do now to encourage productivity and competitiveness of Canadian industry.”

Finance Minister Bill Morneau addresses the Vancouver Board of Trade in Vancouver, Tuesday, Oct. 2, 2018. (Jonathan Hayward/Canadian Press)

The Department of Finance is grappling with the issue already, weighing options and trying to answer some key questions. How much should the write-off be worth? How much would increasing the write-off cost the federal government? Should it apply across the board, or only to specific types of investment?

Business groups, including the Canadian Manufacturers and Exporters, already have called on Morneau to act.  The minister also has spent months consulting business leaders on the issue of Canadian competitiveness.

Still, there are reasons to think that Morneau can afford to proceed cautiously. Economic growth in Canada’s second quarter rose to 2.9 per cent from 1.9 per cent in the previous quarter. Exports are up. Unemployment is down. And Morneau has consistently downplayed the need to respond to Trump’s corporate tax cuts with his own.

Conservatives have their own set of numbers, taken from industry groups, which point to declining investment in Canada as Canadian companies increase their investment in the U.S.

“Why are the Liberals giving so much help to Donald Trump?” asked MP Gerard Deltell during question period a few weeks back.

The Liberals’ position is that investment is going up here as well — by eight per cent over the last six quarters. It’s one of the reasons Morneau downplays the importance of matching Trump’s corporate tax cuts.

And when compared to the Americans’ $1 trillion federal deficit projection in a year of strong economic growth (fuelled in part by the tax cuts), Canada’s deficit financing — particularly when viewed as a percentage of the overall economy — looks modest.

But that’s not the only source of pressure the finance minister is feeling in the lead-up to the fall update. Liberal MPs are looking for clarity on the government’s plan to impose a national price on carbon in those provinces refusing to act on their own. Others want to see a signal that the deficit for 2018 is on a downward track from the $19.4 billion forecast last spring.

A number of Liberal MPs say caucus is still being consulted on the rollout of the carbon price, which includes the promise that families in the non-participating provinces — Saskatchewan, Ontario, Manitoba and possibly New Brunswick — will receive a rebate cheque directly from the federal government.

Morneau also is grappling with the impact of the continuing U.S. tariffs on steel and aluminum. While many companies on both sides of the border stockpiled metals, those supplies are running out and the added cost will start cutting into the bottom line soon.

Foreign Affairs Minister Chrystia Freeland, who led the trade talks with the U.S. and Mexico, acknowledges those tariffs — and the retaliatory duties imposed by Canada on a broad range of U.S.-made products totalling $16.7 billion — are bad for the economies of both countries.

“I think what makes the most sense for both countries is to lift the tariffs on both sides and we’re ready to do it as soon as the U.S. is ready,” she said.

Senate Majority Leader Mitch McConnell (R-KY) speaks during an interview with Reuters in Washington, U.S., October 17, 2018. (Joshua Roberts/Reuters)

There’s some support for a quick resolution to the tariff standoff from an unlikely source south of the border. Senate Majority Leader Mitch McConnell — a Republican — suggested Trump’s trade disputes are threatening to undercut economic growth.

“The tariffs are beginning to have an impact in a negative ways so I hope that we make some progress quickly on some of these other fronts, in particular with China,” he said in an interview with the Reuters news agency on Wednesday.

With a provisional North American trade deal now in place, trade uncertainty may be less of a factor as Morneau prepares his fall fiscal update. But the ability of Canadian businesses to compete with their American rivals is still something he has to worry about.

Easter said the questions that need answering are simple, even if the answers are anything but.

“How do we attract and hold investment in Canada? That’s the question. What is the cost of doing that versus the cost of doing nothing?”

Canadians will find out the answer in just a few weeks.

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Are investors right to finally be worried about higher interest rates?

Are investors right to finally be worried about higher interest rates?

One of the big fears that sparked a sell-off in stock markets last week seems to be surfacing again this week.

Investors are mulling over what higher borrowing costs would mean for investments after the U.S. Federal Reserve’s minutes on Wednesday confirmed that the central bank is, indeed, planning for even higher interest rates.

Markets fell across the board on Thursday with the tech-heavy Nasdaq composite leading losses. The benchmark Dow Jones index and S&P/TSX composite in Toronto were not far behind with triple-digit point declines.

But, are investors right to be spooked by higher interest rates when a rise has been expected from central banks in the U.S. and Canada for some time now?

Analysts are split over whether higher interest rates could put the stock market’s impressive run in jeopardy. Some suggest equities are heading for another big tumble because of this.

Economists at research firm Capital Economics said investors have reason to “fret” about higher interest rates, and there are already signs that rising borrowing rates are weighing on more sensitive sectors of the U.S. economy.

“We think markets are right to be alarmed. Real two-year Treasury yields have already risen by over 200 basis points [two percentage points] over the past few years, matching the increases ahead of each of the past three recessions,” the economists said in a note on Thursday.

As the U.S. economy’s boost from fiscal stimulus measures like the Trump administration’s tax cuts starts to fade, Capital Economics expects U.S. growth to slow sharply next year, prompting the Fed to stop raising interest rates sooner than most anticipate.

In contrast, analysts at CIBC argued that rising U.S. bond yields on their own don’t necessarily point to a looming recession, and markets need to see much more significant declines before central banks put the brakes on rate hikes.

“You’d need a very serious and dramatic decline in equity markets for central banks to reassess the current gradual approach to tightening. Most likely in the neighbourhood of a 20 to 30 per cent drop,” said Bipan Rai, executive director at CIBC Capital Markets.

U.S. stocks hit their lowest level in eight months last week.

More volatility ahead

Rai warns that investors should brace themselves for more volatility ahead as rising interest rates have reduced capital in the markets.

“The key difference to note is that we’re in an environment where the flow of liquidity is being reduced globally — partially leading to the uptick in rates,” Rai said. “That implies that there are fewer marginal dollars to buy into those equity price dips, and that the chance of volatility spikes increases further.”

The drop in stock markets comes after the S&P 500 hit a new record for the longest bull market in history in August. (Kim Kyung-Hoon/Reuters)

Brian Belski, chief investment strategist at BMO Capital Markets, thinks investors should actually welcome, not loathe, higher interest rates, despite conventional thinking.

“We found that some of the strongest periods of market performance have coincided with rising interest rates over the past few decades,” Belski said in a note. “Despite overall market trends, certain stocks do better than others when interest rates rise.”

He thinks investors should take advantage of a higher interest rate environment by focusing on companies that have low leverage and strong cash flow. 

Not just interest rates

Meanwhile, some strategists say current nervousness in the markets isn’t just about interest rates, because they are still low by historical standards.

Sadiq Adatia, chief investment officer at Sun Life Global Investments, said investors are worried about the bull market in the U.S. ending. 

Ten years of a bull market is “a long time in people’s minds, and they do not see further catalysts to drive markets higher,” Adatia said. “During the year, we have earnings that were good, tax cuts …  and a strong global economy.”

“There is some worry about what drives the market higher going forward given that earnings have been great, and it would be hard to beat them going forward,” he added.

In August, the biggest U.S. stock index — the S&P 500  — hit a new record for the longest bull market in history. It went  3,453 days without dropping 20 per cent or more.

Overall, analysts also agree that higher yields were making bonds more attractive for investors as they buckled in for the market ride ahead.

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Edmonton Girl Guide sells out of cookies in cannabis store lineup

Edmonton Girl Guide sells out of cookies in cannabis store lineup

As Edmontonians lined up to buy legal cannabis from retail stores on Wednesday, Elina Childs saw a business opportunity.

The nine-year-old Girl Guide and her father showed up at Nova Cannabis just south of Whyte Avenue, pulling a wagon filled with top-shelf munchies: sandwich cookies and mint thins.

She sold all 30 boxes in less than 45 minutes, earning $120 for Girl Guides.

“It amazed me how quickly they went,” said her dad, Childs. “Even people in cars driving on the avenue there would stop and roll down their window and ask for cookies.” 

Elina had to go back to school Thursday, so she couldn’t come to the phone to talk to CBC News. But Seann Childs said his daughter has previously sold cookies door to door in their neighbourhood. People aren’t always home, Childs said, so it’s not always successful. Last year, Elina was bitten by a dog.

Her dad came up with the idea of selling Girl Guides cookies to customers in line for legal cannabis after hearing that Scouts had used similar sales tactics when cannabis was legalized in California.

He asked Elina if she’d want to try, and said she was excited to give it a shot. 

Elina has cystic fibrosis, so she usually can’t be around people who are smoking. But Childs said he saw it as an opportunity for her to benefit from smoking for one day — and demystify cannabis legalization.

“We were looking at it as an opportunity to educate her on what marijuana is and the fact that it’s legal in Canada now,” Childs said.

The pair walked up and down the lineup, which stretched around the block the entire day. Elina got to see that those looking to buy cannabis weren’t just one type of person, Childs said.

They met people of all ages; some with their dogs.

Childs said his daughter has always had an adventurous entrepreneurial spirit.

“Everybody we met was incredibly friendly, it was a great atmosphere and there was not a single thing going on in that line that I saw that I would just say, ‘Oh, my god, I need to shield your eyes from this,'” he said.

“Everybody was respectful, everybody was happy, and she walked away from it as this incredibly positive experience as well as selling out all her Brownie cookies. She can go and be happy that she’d done that and help support the Guides too.”

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