Companies that laid off workers due to COVID tell Bank of Canada they plan to rehire this year

Companies that laid off workers due to COVID tell Bank of Canada they plan to rehire this year

Companies that have laid off workers are telling the Bank of Canada they plan to refill some positions over the next year, but many hiring plans remain muted over COVID-19-related uncertainty.

The bank’s quarterly business outlook survey published Monday suggests many service sector and energy companies don’t expect a return to pre-pandemic employment levels.

About one-third say they have used a federal wage subsidy to reduce or avoid layoffs, while other firms looking to rehire or hire new staff cited an emergency federal benefit for workers as a hurdle to their plans.

The latest figures from the federal government show the $45-billion wage subsidy has paid nearly $17.1 billion to 245,160 companies as of June 29. Meanwhile, the Canada Emergency Response Benefit, or CERB, has paid $53.53 billion in benefits to 8.16 million people as of June 28 since it was introduced in late March.

The worry among workers about losing their job rose to the highest level seen in the bank’s regular survey of consumer expectations, released alongside the business outlook survey.

As well, workers’ expectations of how easily they could find new work dropped to the lowest level since the 2015 oil price shock.

Consumers’ expectations for wage growth were below what they anticipated for inflation, while the outlook for growth in household income dropped to its lowest level in the survey’s history.

Lockdowns and stay-at-home requests from governments have put the economy in a deep freeze since mid-March, with the thaw beginning in recent weeks as restrictions are rolled back.

The central bank’s business survey detailed some of the impact.

Nearly half of all businesses reported an outright decline of their sales in the past 12 months because of COVID-19, low energy prices and the uncertainty both wrought.

More than half of businesses expect their total sales over the next 12 months to be lower than they were in the last year, with future sales indicators at record lows.

About half of firms expect their sales will “mostly recover” within the next year as COVID-19’s effects recede, but the expectations of a return to pre-pandemic levels often depend on lifting government-mandated restrictions. Some companies said they could get back to normal operations within a month of public health restrictions being lifted.

Companies’ plans to invest in themselves have been cut back. Those companies planning a bump in capital budgets are often trying to digitize their operations, or boost productivity in the context of staff working from home.

Adding to the business uncertainty is how consumers will respond as economic activity continues to restart.

The consumer survey said spending expectations have tumbled, which the banks says suggests consumers have become more cautious due to the economic impact and health risks related to the pandemic.

The bank said consumers expect to spend mostly on essentials. They expect to spend less on durable goods like cars and furniture, as well as for services that involve face-to-face interactions like eating out, travel or going to the movies.

“Another sign of caution is that many respondents expect their work to return to normal sooner than their spending and social habits,” the survey report says. “This points to some excess supply and disinflationary pressures.”

The business outlook survey and Canadian survey of consumer expectations come ahead of the Bank of Canada’s next interest rate announcement and monetary policy report on July 15.

The central bank is expected to keep its key interest rate on hold at 0.25 per cent, while the monetary policy report will include an update to its economic forecast.

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Global oil demand rebound from pandemic’s lows prompts price spike forecasts

Global oil demand rebound from pandemic's lows prompts price spike forecasts

Oil analysts say a rebound in the world’s hunger for oil has already started after demand destruction caused by the COVID-19 pandemic fell far short of what many experts had expected.

Amrita Sen, co-founder and director of research for international consultancy Energy Aspects, says the bounce in demand will outstrip the ability of producers to restore supply, resulting in average Brent oil prices rising from about US$43 per barrel this year to US$66 next year and US$83 in 2023.

In a presentation at the virtual TD Securities energy conference, Sen says pandemic lockdowns of countries and industries resulted in forecasts for a 30 to 40 per cent decline from pre-pandemic global oil demand of about 100 million barrels per day.

She says her organization expected the decline to reach 28 million bpd but the maximum drop was 18 million bpd in April. The industry’s “spare capacity” has now has fallen to about 12 million bpd.

Sen says the shallower drop in demand and quick recovery illustrates how dependent the world is on crude and suggests that its oil dependence will not be diminished in the near term.

In an energy price forecast released Monday, accounting firm Deloitte also makes note of the oil demand recovery and predicts Brent crude prices will rise from an average of US$39 per barrel this year to US$46.50 in 2021 and US$64 in 2023.

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State grip on economy means foreign sanctions won’t shift Chinese resolve: Don Pittis

State grip on economy means foreign sanctions won't shift Chinese resolve: Don Pittis

Last week, former prime minister Brian Mulroney urged that this country begin an “urgent rethink” on its relations with China.

A front-page story in the Globe and Mail on Canada Day declared that the former Progressive Conservative PM had backed off on his previous suggestion of sending a high-level business negotiating team to Beijing to resolve Canada-China differences. Instead, he advocated a firmer stance.

“There has to be an immediate and urgent rethink of our entire relationship,” Mulroney told the Globe. That included kicking Chinese telecom company Huawei off Canada’s 5G systems and staying close to the U.S.-led Five Eyes spy network.

But those who think taking a hard economic line on China — a country that is neck and neck with the biggest economy on Earth — will change its aggressive and anti-democratic outlook must understand Chinese exceptionalism.

Change from within

Instead, as many China scholars have told me in the past, change within China must come from the Chinese people — and not necessarily as represented by the Chinese Communist Party.

That may seem far-fetched to those watching Beijing’s crackdown on Hong Kong, its vicious police tactics backed by central government financial support to help keep the Chinese region’s business community sweet.

As the New York Times reported last week, “The business world has largely fallen in line behind China’s campaign to tighten its grip on Hong Kong.”, owner of this fresh food chain, raised $3.9 billion US in Hong Kong at the end of last month — one of many Chinese firms helping to keep the former colony’s economy healthy. (Tingshu Wang/Reuters)

While officials have offered moral and cash support for the former British colony, the most significant reason for the latest burst of business activity comes from a different source.

U.S. regulatory restrictions on Chinese firms and fear that the U.S. administration and Congress may impose financial penalties have made Hong Kong’s sophisticated marketplace a more-than-tolerable second choice to New York for raising cash.

As Walid Hejazi, an associate professor of international business at the University of Toronto’s Rotman School of Management, suggested in the context of threatened U.S. trade restrictions, squeezing China out can have perverse effects.

“Given there is a trade war, it can push China into doing things that could really help it over the longer term in terms of diversifying itself into Asia, into other markets, but also developing its domestic economy,” Hejazi told me at the time.

Like the U.S. in an earlier stage in its own development, China may be on the verge of building a domestic economy so large, exports become of decreasing importance.

Unlikely impact

Even if Canada and the U.S. could do without China’s increasingly high-level technology, of which Huawei is only a single example, even if they could withstand a reduction in the Chinese market for their exports of food and resources, the Asian country’s increasing self-sufficiency means some sort of new economic cold war is unlikely to have the desired impact.

Even if, as some credible sources have suggested, Chinese economic data is fudged, there is no question that the country’s economy is huge and growing. Beijing is spending a fortune on the education of its billion-plus population. It seems serious about trying to bring its poorest into the wage economy.

Condemned by human rights groups for forced birth control for minorities and other abuses, nonetheless the power of a command economy gives it strategic advantages at this point in its evolution. Unlike the U.S. and Canada, it does not have to negotiate with wealthy taxpayers to create university places or make what it considers to be essential investments.

But while Beijing rejects attempts at outside coercion, developments in Hong Kong may reveal a path to domestic transformation.

People power

While Beijing’s strong-arm tactics can work on powerless Uighurs, Hong Kong may be a Chinese microcosm of what can happen when an authoritarian government runs out of legitimacy with informed and educated citizens who do not want to be imposed upon.

People who think of South Korea and Taiwan as healthy pluralistic democracies may not realize that in my lifetime, both were run by nasty militarist — anti-communist in those cases — dictatorships. The running street battles between police and students before the removal of South Korea’s Park Chung-hee are legendary.

WATCH | Nathan Law flees Hong Kong:

‘I think the future’s grim,’ Law said, but noted he will continue to voice Hong Kongers’ demands for democracy. 2:09

Even as Hong Kong becomes more like China, the former colony may have inoculated the entire country with a taste for self-government and some ideas on how to get it. By alienating so many Hong Kongers, China has wasted an opportunity.

Now, the self-exile of Hong Kong democracy leader Nathan Law harks back to earlier times, when Russian anti-government leader Vladimir Lenin retreated to England and Vietnamese revolutionary Ho Chi Minh hid out in France.

Without even trying, places where you are allowed to think and say just about what you like create a refuge for dissent. Canada’s suspension of extradition rules is a sign that Hong Kong has strayed too far from that ideal.

Canada need not give up on China as a place where pluralism and democracy will one day help its people rule themselves.

In years gone by, North American economic sanctions may have had the clout to pressure even large countries into adjusting their policies. It is implausible to think that China, with an economy that the IMF says is still growing — while Canada, the U.S. and Europe will shrink about eight per cent this year — will be pressured.

That will be the job of its own people.

Follow Don on Twitter @don_pittis

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The new NAFTA tried not to change too much — and then the pandemic changed everything

The new NAFTA tried not to change too much — and then the pandemic changed everything

As negotiators shook hands on the revised North American free trade agreement, they couldn’t have foreseen the fundamental upheaval their countries would soon be facing thanks to the COVID-19 pandemic.

If the Trudeau government is looking to celebrate something this Canada Day, it may be the relative security of the status quo that was more or less preserved in the talks.

“Bullet dodged” — that’s how Brett House, Scotiabank’s deputy chief economist, summed things up for CBC News last weekend.

“Sometimes,” he said, “the biggest victories are the bad things prevented, rather than new things built.”

Unlike Canada’s original trade deals with the U.S. and the other major trade deals the Trudeau government has implemented with European and Pacific Rim partners, the new NAFTA doesn’t substantially liberalize more trade. Most North American tariffs had been eliminated already.

The new automotive chapter, in contrast, adds more protectionism by requiring manufacturers to use more local components and higher labour standards to avoid tariffs.

When Global Affairs released its economic impact study for the new agreement last winter, it was criticized for basing its comparisons not on the terms of the original NAFTA but a hypothetically devastating scenario in which President Donald Trump completely pulled the plug on preferential trade with Canada.

WATCH | The new deal brings changes to the duties and taxes paid on items shipped from the U.S.

The new North American trade deal took effect on Wednesday. CUSMA, often called “the new NAFTA,” brings changes to the duties and taxes paid on items shipped from the U.S. 2:27

How likely was that? Opinions still vary as to whether the Trudeau government had any real alternative to going along with the renegotiation.

As last week’s threat to reimpose aluminum tariffs suggests, this White House remains unpredictable and, sometimes, unthinkable, even in the face of strong economic arguments about the value of free trade with one’s neighbours.

‘Negative on balance’

In attempting to modernize NAFTA for the 21st century, did negotiators meet the standard of “first, do no harm”?

In a paper released Tuesday by the C.D. Howe Institute, consultant trade economist Dan Ciuriak revisited the economic modelling done by the International Monetary Fund, the U.S. International Trade Commission and Global Affairs Canada, as well as his own figures, and tried to make sense of how things look now — amid the chaos of a pandemic that’s disrupted international supply chains, shut down all but essential cross-border travel and introduced a new public health rationale for constricting trade on national security grounds.

“There are many sources of uncertainty that at present do not lend themselves to a robust quantification,” his summary concludes. “The known knowns promise to be negative on balance; as for the known unknowns, time will tell.”

“Just as companies were starting to prepare and think about [NAFTA implementation], COVID came,” said Brian Kingston, outgoing vice-president responsible for trade issues at the Business Council of Canada.

“Their focus is turned 100 per cent to survival and making sure that they can get through this pandemic intact.”

Prime Minister Justin Trudeau and U.S. President Donald Trump arrive to take part in a plenary session at the NATO Summit in Watford, Hertfordshire, England, on Dec. 4, 2019. (Sean Kilpatrick/The Canadian Press)

Despite the pandemic (or perhaps to distract from it), Trump demanded a June 1 implementation date. When he couldn’t get that, he insisted on a July 1 implementation, to make sure a done deal was ready to campaign on this fall.

Rather than risk more punishment and political grief by stalling, Canada and Mexico agreed, paving the way for the Canada Day starting line.

For Canada, starting in July instead of August is very expensive for its dairy sector — and perhaps for the taxpayers who ultimately will compensate farmers for it. The dairy fiscal year begins in August, and since NAFTA concessions ramp up at the start of each new dairy year, that ramp is steeper with this timing.

One innovation in the original NAFTA now begins to vanish from the corporate toolkit: the investor-state dispute system (ISDS), which let companies bypass regular courts and challenge the regulatory decisions of Canadian governments directly through NAFTA arbitration (ISDS is also referred to by its location in the original text: “Chapter 11”).

The ability of multinationals to seek millions in damages in such lawsuits “was always something that critics of the original NAFTA deal hated,” said cross-border trade lawyer Mark Warner. “So that’s a pretty big change.”

Other changes businesses need to adapt to, like the copyright changes in the intellectual property chapter, are “largely a wash,” Warner said.

Bumpy road for carmakers

The new NAFTA’s uniform regulations for automotive manufacturing have only been out for a couple of weeks — during a time when carmakers have been preoccupied with reviving their supply chains and factories from the relative coma of this spring’s lockdown.

“Without COVID, this would have been the most important issue facing that most important industry, and now this is probably a distant second,” said Warner.

“I don’t think anyone in auto … has really had time to concentrate the mind on [the new NAFTA] coming into effect. I think we’re going to see a delayed reaction that plays out over time.”

Will the revised agreement eventually fulfil Trump’s pledge of returning more automotive jobs and investment to the U.S. (and Canada)? Or will manufacturers opt to comply by paying Mexican workers more, as some Japanese facilities are already signalling? Could some skip NAFTA compliance altogether?

Trade law professor Elizabeth Trujillo from the University of Houston said that while the new labour provisions are consistent with the populist values of Mexico’s current president, complete compliance with new labour standards on the Mexican side is “unlikely.”

“Will that be enforced? If it is, what does that mean? More tariffs?” she said.

It’s now possible for claims of labour violations to be pursued against Mexico under NAFTA’s now-revised state-to-state dispute resolution process.

“The more likely scenario is that a lot of these manufacturers will just not use the new NAFTA … they’ll work outside of it,” Trujillo said. “Just pay what they have to pay [in tariffs] and not have to adjust their way of doing things to the new rules.”

As it reworks its supply chain strategy, Mexico may collaborate with other countries — especially other Latin American countries that also have free trade agreements with the U.S., like Colombia, she said.

Trade professor Meredith Lilly of Carleton University, a former adviser to Stephen Harper’s government, predicts “real bumps” ahead as this sector transitions to the new rules while trying to remain globally competitive.

“Over the long term, eventually the price of cars is going to go up,” she said, pointing out that North American components and labour will be more expensive.

De minimis, dairy changes kick in

Not every sector faces as many new rules as the automotive industry. For regular consumers, changes attributable to NAFTA may be almost undetectable.

“The biggest win is that Canadians won’t see a lot of change,” Kingston said. “The less that we see is actually a sign that the agreement is working as planned.”

There are a few small consumer gains.

With online shopping and shipping more popular than ever, goods shipped by courier into Canada from the U.S. or Mexico no longer face customs duties if they’re valued under $150, and won’t incur sales taxes if they’re worth less than $40.

If purchases are shipped by mail, however, anything worth more than $20 will continue to face duties and taxes.

Dairy cows walk in a pasture at Nicomekl Farms, in Surrey, B.C., on Thursday August 30, 2018. (Darryl Dyck/THE CANADIAN PRESS)

While the market access conceded to the U.S. for supply-managed agricultural products like dairy, eggs and poultry should, in theory, spur more competitive pricing and add more choice to store shelves, it’s not a given that will happen.

The pandemic has dramatically disrupted food supplies and prices, which might make any concurrent NAFTA changes hard to spot.

The new licences to import American products will also be given mostly to Canadian processors, not retailers — something the Americans have threatened to fight because they don’t trust Canada’s domestic industry to deliver the market share promised to U.S. farmers.

Sour relations

While the implementation of the new NAFTA could have been an opportunity to relaunch Canada-U.S. trade relations with a more positive attitude, Lilly said she fears this opportunity has been lost. Instead, the pandemic has left Canadians with a bad taste in their mouths about their neighbours.

The Trump administration’s attempt to prevent 3M from shipping N95 masks to Canada is an example of how there’s “no loyalty and no love lost” between the partners in the North American trading bloc right now, she said.

“It’s caused Canadians to reflect a great deal,” she said, adding she worries the Trudeau government’s ambitions for diversified trade aren’t shared by the general public.

Hassan Yussuff, the president of the Canadian Labour Council who also served on Canada’s NAFTA advisory council during the negotiations, said he hopes the deal brings positive changes to the lives of working people in Mexico. He said he also hopes the new NAFTA regulations, in turn, will make employers think twice about leaving Canada in the first place — easing the resentment workers felt about the original NAFTA deal.

COVID-19 is prompting countries to re-examine how far they have pushed the envelope on international trade, and to revisit the idea of making certain things at home, he said.

“We cannot be this vulnerable,” Yussuff said. And even if there is a new president in the White House after November, he added, domestic political pressures will remain.

“Americans always act in their own self-interest. We should not think we’re special. We have to be vigilant, and get used to this.”

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U.S. top trade official promises enforcement of new North American trade deal

U.S. top trade official promises enforcement of new North American trade deal

North America’s new trade agreement finally became the law of the land Wednesday, complete with a celebratory warning from the Trump administration that the United States intends to make sure Canada and Mexico live up to their end of the bargain.

U.S. trade ambassador Robert Lighthizer lauded the Canada-U.S.-Mexico Agreement (CUSMA) as President Donald Trump’s signature achievement, a landmark trade pact that tilts the benefits of continental managed trade back towards workers, farmers and labourers and away from the giant corporations that reaped the rewards of its NAFTA predecessor.

“That’s a monumental change,” Lighthizer said in a statement that promised more jobs, protections for workers, wider access to continental markets and new growth opportunities for businesses of all sizes.

“We have worked closely with the governments of Mexico and Canada to ensure that the obligations and responsibilities of all three nations under the agreement have been met, and we will continue to do so to ensure the [CUSMA] is enforced.”

While the White House and scores of Trump allies in Washington tweeted partisan support for the occasion, the president himself spent the morning preoccupied with some of his favourite foils: the “fake news” mainstream media, Black Lives Matter supporters and presumptive Democrat presidential nominee Joe Biden.

U.S. Trade Representative Robert Lighthizer lauded the Canada-U.S.-Mexico Agreement as President Donald Trump’s signature achievement. (Kevin Lamarque/Reuters)

The USTR also named 10 people to its roster of arbitrators under the agreement’s dispute-settlement mechanism, a list that includes Julie Bedard, a former Supreme Court of Canada clerk who heads the international litigation and arbitration group for the Americas at Skadden, a prominent New York law firm.

Other names on the U.S. list include former chief federal claims judge Susan Braden, D.C. arbitration expert John Buckley Jr., former international trade commissioner Dennis Devaney and ex-federal prosecutor Mark Hansen.

The panel also includes Stephen Vaughn, the USTR’s former general counsel and key lieutenant to Lighthizer himself who served as acting trade ambassador in the early days of the administration.

The trade agreement is designed to ensure more people in all three countries can reap its benefits — the principal U.S. complaint about the old NAFTA, said Kirsten Hillman, Canada’s ambassador to the U.S. and a key player over the course of the often-arduous 13-month negotiation.

“The original NAFTA was extremely successful for us economically, and that’s important to remember,” Hillman said in an interview.

“It was, though — as we all know — dated, and also it was perceived to be, I think fairly so in some respects, not sufficient for ensuring that the benefits of trade were fully utilized by all segments of our society.”

Deputy Prime Minister and Intergovernmental Affairs Minister Chrystia Freeland speaks with Canada’s top CUSMA trade negotiator Steve Verheul as they wait to appear before the House of Commons Standing Committee on International Trade Tuesday on Feb. 18 in Ottawa. (Adrian Wyld/The Canadian Press)

Canada’s negotiators focused on reaching a deal that would improve the lot for workers at home, reduce red tape for small- and medium-sized businesses and smooth the growth of digital trade — an especially important component given the impact the COVID-19 pandemic has had on traditional commercial models.

Alberta’s economic development, trade and tourism minister welcomed the deal, saying it’s an important milestone for the province and Canada.

“For Alberta businesses, this means we can broaden our commercial ties with certainty and forge bonds with job creators across the continent,” Tanya Fir said in a statement. “We have the opportunity to accelerate the flow of Alberta’s goods and expand our exports throughout North America.

Canadian dairy producers and processors have assailed the federal government for allowing the agreement to come into force before August. (Nicole Williams/CBC)

Not everyone is celebrating the agreement coming into force.

Canadian dairy producers and processors, who will see increased U.S. competition in their domestic markets and limits on exports of key products like diafiltered milk and infant formula, have assailed the federal Liberal government for allowing the agreement to come into force before August.

Waiting a month would have given the industry a full year to adjust to the terms of the deal, since Canada’s dairy year begins Aug. 1. But now, producers and processors have just 31 days before the Year 2’s provisions in the agreement take effect next month.

Both the Dairy Farmers of Canada and the Dairy Processors Association of Canada have insisted they were assured by Ottawa the agreement would not take effect before Aug. 1.

Public Citizen, a left-leaning U.S. consumer advocacy group and outspoken opponent of trade agreements, in particular the original NAFTA, acknowledged that the new deal makes an effort to improve labour and environmental standards and expand the impact of the benefits of global trade.

But it falls far short of the ideal, said Lori Wallach, director of the group’s international trade watchdog, Global Trade Watch.

“Renegotiating the existing NAFTA to try to reduce its ongoing damage is not the same as crafting a good trade deal that creates jobs, raises wages and protects the environment and public health,” Wallach said in a statement.

“The new NAFTA is not a template, but rather sets the floor from which we will fight for trade policies that put working people and the planet first.”

Wallach also said that the agreement is coming into force with a prominent labour lawyer behind bars in Mexico. Susana Prieto Terrazas, known for leading a crusade for higher wages and union protection for workers in border assembly plants, was arrested June 10 on charges of inciting riots, threats and coercion.

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U.S. economy adds record 4.8 million jobs in June, but still well below pre-COVID peak

U.S. economy adds record 4.8 million jobs in June, but still well below pre-COVID peak

The U.S. economy created jobs at a record clip in June as more restaurants and bars resumed operations, further evidence that the COVID-19 recession might be over, though a surge in cases of the coronavirus threatens the fledgling recovery.

Nonfarm payrolls increased by 4.8 million jobs in June, the Labour Department’s closely watched monthly employment report showed on Thursday. That was the most since the government started keeping records in 1939. Payrolls rebounded by 2.699 million in May.

Economists polled by Reuters had forecast payrolls increasing by three million jobs in June.

Despite the record-setting month for job gains, the U.S. economy has yet to replace even half of the record 20 million jobs it lost in April.

The job gains added to a stream of data, including consumer spending, showing a sharp rebound in activity. But the reopening of businesses after being shuttered in mid-March has unleashed a wave of coronavirus infections in large parts of the country, including the populous California, Florida and Texas.

Data doesn’t factor in scaled back reopenings

Several states have been scaling back or pausing reopenings since late June and sent some workers home. The impact of these decisions did not show up in the employment data as the government surveyed businesses in the middle of the month.

Federal Reserve Chair Jerome Powell this week acknowledged the rebound in activity, saying the economy had “entered an important new phase and (had) done so sooner than expected.” But Powell cautioned the outlook “is extraordinarily uncertain” and would depend on “our success in containing the virus.”

The unemployment rate fell to 11.1 per cent last month from 13.3 per cent in May. Employment is increasing largely as companies rehire workers laid off when non-essential businesses like restaurants, bars, gyms and dental offices, among others, were closed to slow the spread of COVID-19.

Economists have attributed the burst in job gains to the government’s Paycheck Protection Program, which gives businesses loans that can be partially forgiven if used for wages. Those funds are drying up.

In an economy that had already fallen into recession as of February, many companies, including some not initially impacted by lockdown measures, are struggling with weak demand.

Economists and industry watchers say this, together with the exhaustion of the PPP loans, has triggered a new wave of layoffs that is keeping weekly new applications for unemployment benefits extraordinarily high.

In another report on Thursday, the Labour Department said initial claims for state unemployment benefits totalled a seasonally adjusted 1.427 million in the week ended June 27, down from 1.482 million in the prior week.

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Whether you’re a Toronto banker or a Montreal tech whiz, Jason Kenney wants you to come west

Whether you're a Toronto banker or a Montreal tech whiz, Jason Kenney wants you to come west

Look out Montreal, Toronto … even you, Houston.

Jason Kenney has named names. And he’s looking to lure away your entrepreneurs and businesses with low taxes and incentives, and a pitch for a better life in Alberta.

“I think they’re being irresponsible if they don’t consider moving operations to Alberta,” the province’s premier said this week.

A major push to draw business to the province — including Bay Street financial firms — is one part of the province’s aggressive drive to reboot and diversify its economy.

“We are going to be placing a huge emphasis on finance and financial technology,” Kenney said Monday.

“What do you think we’re going after? Well all of those banks and insurance companies down on Bay Street that are paying way more taxes. Their workers are paying way more taxes. They are paying way more for rent. They are fighting Toronto traffic. 

“We are going to be telling them that they can save money for their shareholders, for their workers, for their operations, by relocating financial and fintech [financial technology] jobs to places like downtown Calgary, downtown Edmonton.”

There’s a sore need for new businesses in those cities as the oil sector’s struggles drag on and the ranks of Albertans who’ve lost jobs have swollen to more than 300,000.  

But the challenge confronting Alberta’s strategy in trying to attract some of the world’s most sought-after talent is twofold. 

“I think they’re being irresponsible if they don’t consider moving operations to Alberta,” Alberta Premier Jason Kenney said Monday. (Jeff McIntosh/The Canadian Press)

First, its plan will need to demonstrate it has the right tax and policy incentives to be competitive as well as provide the kind of long-term certainty companies are looking for. 

Second, even if the economic siren call is heard, would Alberta’s charms be enough to convince businesses to pick up sticks and choose Calgary or Edmonton rather than, say, Austin or Vancouver? 

The competition is fierce — even before the COVID-19 pandemic strew havoc throughout the global economy, there were a host of geographic voices all vying to woo businesses and talent.

Cutting corporate taxes

One key part of the new Alberta strategy is lower taxes.

The UCP government  is speeding up the implementation of corporate tax cuts, slashing the rate to eight per cent from 10 per cent starting from the start of July.

Kenney said it will give the province among the lowest rates in North America. 

How much that could actually spur job creation — and how soon — is a fierce political debate. NDP Leader Rachel Notley branded it another giveaway to “already profitable” corporations.

But when it comes to making Alberta more attractive for business, corporate tax rates are often a key issue, according to one expert who tries courting companies to Calgary.

“Depending on where you are in the world, the things that they’re looking for are low tax rates and great talent,” said Mary Moran, president of Calgary Economic Development (CED).

“And I think with this lower tax rate, it’s going to be hard for jurisdictions to compete with that.”

Calgary Economic Development CEO Mary Moran says when it comes to making Alberta more attractive for business, corporate tax rates are often a key issue. (CBC)

Albertans will have to wait to see how many companies find those lower taxes too alluring to pass up, but taxes will be only one part of the pitch. There’s also volumes of low-cost office space.

And Kenney teased a number of other sector-specific strategies to be unveiled in greater detail in the coming days and weeks.

These include efforts to help the three pillars of Alberta’s economy: energy, agriculture and tourism. 

But it also includes high-growth sectors, like technology and innovation. 

Tech companies, and all those tech jobs, are often spoken of in terms that make them seem like golden rings to be captured, and boost an economy.

Back in the tech game

Kenney described an “innovation employment grant” as the most attractive incentive for job creation in the tech and innovation sector in Canada. Details are pending. 

Another is the province’s additional $175 million investment in Alberta Enterprise Corporation, helping to connect investors with entrepreneurs and technology start-ups who need access to capital.

Adam Legge, who sat on a working group that wrote a report to the government on how to grow Alberta’s tech industry, says what’s been announced so far shows the province is back in the technology-and-innovation game. 

This, after some previous concerns voiced by the sector that a lack of support could have companies packing up and moving on

“Every jurisdiction now is competing for technology, innovation companies,” Legge said.

Premier Jason Kenney said the province will seek to attract “banks and insurance companies down on Bay Street” in Toronto. (Michael Wilson/CBC)

Thus, he said it was important the province create a pool of capital for entrepreneurs and start-ups from which to draw, and enable early investments in research and development.

“What [this does] is put Alberta back on solid competitive footing with other jurisdictions, including our counterpart provinces, but also other jurisdictions in North America.”

Not everyone was as impressed, though. 

American video game developer Keith Warner opened an office in Calgary last year because of the tax credits that the then-NDP government offered, and the UCP subsequently scrapped.  

He told CBC News on Monday that he didn’t hear anything in the government’s announcement for him. His Canadian growth plans are now in Montreal, not Calgary.

The situation speaks in part to the high competition Alberta faces in attracting new businesses to the province, but perhaps also the opportunities.

Fierce competition

When Calgary bid for Amazon’s second headquarters three years ago, it revealed just how many cities, provinces and states in North America are fighting for many of the same jobs.

And how difficult it is to stand out.

Yet there are places around North America that have retooled, diversified and thrived in new ways. Communities like Raleigh, in North Carolina, have become startup hubs.

“There’s so many things to consider that drive the decision of where to locate your business,” said Andreas Park, an associate professor of finance at the University of Toronto. (University of Toronto)

“There’s so many things to consider that drive the decision of where to locate your business,” said Andreas Park, an associate professor of finance at the University of Toronto.

Park, research director of the Rotman FinHub, the Rotman School’s financial innovation hub, said a jurisdiction (such as Alberta) might attract a few firms with tax incentives. 

But what tech firms need most is “talent.”

Places like Toronto, Montreal and Vancouver, says Park, are hubs for young talent and entrepreneurs in the tech field. 

“A better approach is the other way round,” he said. “If you actually enable people who want to be innovators, who are already there, to start something up.”

In fact, the sector has had some homegrown wins in Alberta, including financial giant Morgan Stanley’s $1.1-billion US purchase of Calgary-based Solium last year.

But those kinds of successes take years to achieve. Some say Alberta needs to take a similarly long view when it comes to diversifying its economy — perhaps itself a hard sell considering the immediate economic concerns in the province.

Calgary-based tech entrepreneur James Lochrie, who has invested in tech enterprises across Canada, believes Alberta is really at the beginning of a decade-long process.  (Colin Hall/CBC News)

Calgary-based tech entrepreneur James Lochrie, who has invested in tech enterprises across Canada, believes Alberta is really at the beginning of a decade-long process. 

It’s one that will necessarily include working with universities, making adjustments to the workforce and taxation, as well as a host of other policies — and taking into consideration what competing jurisdictions around the world have to offer. 

“I hope the government continues to focus on what’s working, can refine the things that aren’t working, and can ignore the naysayers and just stay optimistic,” Lochrie said.

‘Convince my wife’

As the details of the Alberta government’s strategy to lure business to the province are made public, government officials won’t be going door-to-door to convince people to move.

Kenney says Investment Alberta will use its international offices to pitch the province to potential investors.

And the premier will continue to pitch — as he did on Monday — the Alberta lifestyle as part of the draw. But there’s no formula with a guarantee of success.

One Toronto-based financial executive, asked what it would take for Kenney to get him to move to Alberta, laughed and said: “Convince my wife.”

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Cenovus oil shipment leaves West Coast bound for eastern refineries — via Panama Canal

Cenovus oil shipment leaves West Coast bound for eastern refineries — via Panama Canal

Cenovus Energy is sending a shipment of crude oil down through the Panama Canal as part of its first-ever transaction with New Brunswick’s Irving Oil.

The oil shipment will make the 11,900-kilometre journey to Irving’s refinery in Saint John by tanker ship, Cenovus announced in a social media post on Wednesday.

The news comes two months after Irving Oil, the operator of the country’s largest refinery, surprised the sector with its plans to begin receiving more crude from Western Canada by using tankers starting this summer. 

Cenovus vice president Keith Chiasson said in a statement provided to CBC News that it’s a “one-off “shipment for now.

“But we believe this Canadian success story has the potential over time to create significant value for both companies and the entire country,” he said, adding Cenvous is pleased with the economics of the transaction.

On Friday, Alberta Premier Jason Kenney said he considered Irving Oil’s decision to seek more oil from the West to be an “important expression of confidence” in Canada.

But he said the long journey via tanker also underscores the need for national pipeline infrastructure.

“On the one hand, it makes me happy that we’re finally going to be able to supply a Canadian refinery on the East Coast with Alberta oil, but it just underscores how crazy this whole situation is,” said Kenney, pointing to the cancellation of the Energy East pipeline nearly three years ago.

The Energy East project would have carried more than one million barrels of oil every day from Alberta and Saskatchewan across the country to be refined or exported from facilities in New Brunswick and Quebec.

The energy giant then known as TransCanada — since renamed TC Energy — had proposed adding 1,500 kilometres worth of new oil pipelines to an existing network of more than 3,000 kilometres, which would have been converted from carrying natural gas, to carrying oil.

About 99 per cent of Canada’s exports now go to refiners in the U.S., where limits on pipeline and refinery capacity mean Canadian oil sells at a discount.

Privately held Irving applied this spring to the Canadian Transportation Agency (CTA) to use foreign tankers in order to increase the amount of domestic crude it gets from offshore Newfoundland and Western Canada. 

Irving Oil’s application included a proposal for the tankers to transport oil from a terminal in Burnaby, B.C., through the Panama Canal and on to Irving Oil’s refinery in Saint John.

The company said at the beginning of May that it wanted to increase the mix of Canadian crude it uses, which at that time was in the range of 20 per cent.

Increasing the amount of Canadian oil that the refinery uses would displace the crude imports the company gets from around the world, but it wasn’t clear which shipments might be affected. 

An official with the refinery said at the time that it uses a “significant” amount of oil from the United States.

Chiasson said the transaction shows the ability of the two companies “to help drive Canada’s economy even during these unprecedented times of turbulence created by the COVID-19 pandemic and the resulting challenges for the energy industry.”

Tanker shipment comes as TMX, Keystone XL pipelines move forward

News of the Cenovus shipment via tanker to the East Coast came as the Supreme Court released a decision dismissing a First Nations’ legal challenge to the Trans Mountain expansion project.

The Trans Mountain pipeline will allow Canada to diversify oil markets and vastly increase exports to Asia, where they can command a higher price than those sent to the U.S.

Some experts said the top court’s decision to end the years-long legal battle demonstrates stability to potential investors and provides clarity about what constitutes adequate consultations with Indigenous groups.

And on Friday, Alberta’s premier visited the small town of Oyen to mark the start of construction within the province of the Keystone XL pipeline. Work is already underway in three U.S. states. 

The 1,947-kilometre project will be able to carry 830,000 barrels of crude oil per day from Hardisty, Alta., to Steele City, Neb., where it will connect with TC Energy’s existing facilities and eventually reach refineries on the Gulf Coast. 

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How fashion retailers are surviving COVID-19 on the long road back to normalcy

How fashion retailers are surviving COVID-19 on the long road back to normalcy

COVID-19 has slammed Canada’s fashion sector like a hurricane, causing serious damage and likely leaving a few casualties in its wake.

The mass closing of malls and offices along with the cancellation of celebrations and big events has been devastating, says the head of Harry Rosen, one of the country’s leading men’s clothing retailers.

“We’re surviving,” said company chairman and CEO Larry Rosen, adding that online orders have surged almost 500 per cent.

“It’s been very, very strong, but it still doesn’t make up for our national retail footprint.”

Rosen said the coronavirus has accelerated trends facing the sector, including the growing “casualization” of the workplace and e-commerce sales.

“I mean, people aren’t wearing a sports jacket when they’re working from home,” he said.

While some office-wear sales may never come back even after offices reopen, Rosen believes most will because there will always be times for people to dress up for business or special occasions.

“If people can sit at home and wear a pair of sweats, they’re going to wear a pair of sweats, but this will change. It will come back. How quickly no one’s really sure, but it will come back.”

The company has responded to the challenges by taking advantage of federal support programs, cutting costs, shoring up its liquidity and marking down products earlier, with the summer sale starting before Father’s Day.

Rosen said the 66-year-old company will continue but competitors that came into the crisis with a lot of debt will be at risk.

“I think a number of companies will seek statutory protection. I don’t believe it’s over. I believe there’s still more to go.”

Reitmans (Canada) Ltd. announced last month that it will close two of its retail chains and lay off roughly 1,400 workers as the company continues a restructuring amid the pandemic.

The Montreal-based retailer plans to shutter its 77 Addition Elle stores on Aug. 15 and 54 Thyme Maternity locations on July 18.

Well-run brands are feeling the pain but will likely survive, experts say. Many others that faced problems before the pandemic will not. (Hannah McKay/Reuters)

Modasuite Inc., which operates Frank and Oak, recently filed a notice of intention that it plans to file a proposal under the Bankruptcy and Insolvency Act.

Total retail apparel sales will decrease 28 to 32 per cent in 2020, while luxury apparel sales should drop 16.8 per cent, says Trendex, a marketing intelligence company specializing in the Canadian and Mexican apparel markets.

It expects 10 to 15 major apparel chains will either close or drastically reduce their retail footprint.

“Bottom line, apparel retailing five years from now will be almost the same as it is today,” it wrote in its monthly report, adding that sales will not revert to 2019 levels until 2023.

Luxury brands like Harry Rosen aren’t likely to be hurt as much as the mid- to lower-end apparel and footwear retailers, says Bruce Winder, a retail analyst and author of the book Retail Before, During and After COVID-19.

“Some of the losers will be sort of those folks who are living at the margin,” he said in an interview.

“They’re not the best brand, they have a bit of a weak value proposition and their balance sheet was a little weak before all this hit. All this is doing is it’s pushing them over the edge.”

Among the chains that are likely hurting is Hudson’s Bay, said Winder, which may be forced to reduce its national footprint by 30 to 40 per cent.

“They are hurting big time. The Bay is literally sinking quickly and we don’t see the carnage because they aren’t public anymore.”

The chain, which recently reopened its Canadian stores and Saks locations, didn’t respond to requests for comment.

Strong fashion retailers like Aritzia Inc., H&M and Zara have been hit but will survive, Winder added.

Vancouver-based Aritzia said while interest in casual wear has increased as clients adapted to working from home, it believes there will be an appetite to refresh wardrobes as social and work environments reopen.

“As warm weather arrives and office work gradually resumes, we’re seeing encouraging customer response to both our office wear and more casual styles for summer 2020,” founder and CEO Brian Hill wrote in an email.

He noted that e-commerce sales grew by more than 150 per cent after its 96 stores were closed in mid-March.

The virus’s impact on the retail industry has been “without precedent” but the company’s financial position is strong and the affinity for its brands will help it to weather the storm, Hall recently told analysts, adding he’s expected a “long slow ramp” to a new normal.

Working from home has also been positive for yoga pants maker Lululemon Athletica Inc,. which has seen one of the largest quarterly gains in market share in recent years, says CEO Calvin McDonald.

“A new normal emerged, and we were encouraged to see how quickly our guests were embracing both working and sweating from home,” he said during a quarterly earnings call.

Unlike some fashion retailers, Lululemon has a high percentage of core products with a shelf life beyond the current season and has limited markdown risk.

McDonald believes virtual workouts will continue even as studios reopen and be part of the lifestyle shift to less formal wear.

“I think the things that won’t change play to our strength, and that’s living an active, healthy lifestyle. And the things that will change equally play to our strength, and that is more work-from-home, looking for comfort.”

Roots Corp. said it experienced the same benefit from a change in individual habits as business shifted to work from home.

“We benefited from higher demand for our extensive sweats offering in our online channel. To capitalize on this demand, we created a new sweats focus section of our website,” said CEO Meghan Roach.

She said there was a little extra pickup in sales of sweats for men as they sought comfort “below the screen.”

One of the tools retailers have used to offset the challenges is to renegotiate monthly rents.

Roach said Roots didn’t pay its April rents and will assess each store’s profitability to determine “the right store footprint for us to have in Canada, and how we balance it off … with our e-commerce business.”

Rosen also expects to see its retail footprint reduce over time after closing one store when the lease expired.

“Over time, I think it’ll be reduced and particularly as online is becoming such a much bigger share of our business.”

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Canadian drivers with U.S. licence plates harassed by fellow Canadians

Canadian drivers with U.S. licence plates harassed by fellow Canadians

Some Canadians driving cars with U.S. licence plates say they’ve endured vandalism, harassment and even a minor assault from fellow Canadians convinced that they’re Americans illegally in Canada. 

Lisa Watt said she was harassed twice in Calgary last month — she believes because of her Texas licence plates. 

In one incident, she said a driver stopped right behind her car in a parking lot and glared at her, and in another situation, a driver tailgated her car for several kilometres before pulling up beside her and flipping her the finger. 

“It made me angry,” said Watt, a Canadian citizen who moved to Houston in 2000 for work. She drove to Calgary in June to visit her 84-year-old mother, who was feeling isolated during the COVID-19 pandemic. 

“I’m here to help my mother. I have every right to be here.”

To help stop the spread of the coronavirus, the Canada-U.S. land border remains closed to non-essential traffic. As a result, some Canadians are alarmed when they spot cars with U.S. licence plates, especially as COVID-19 cases south of the border escalate.

There is reason for concern. Alberta RCMP said that since mid-June, they have fined 10 Americans $1,200 each after they sneaked in to Banff National Park. 

RCMP have issued 10 tickets to Americans since mid-June at Banff National Park. There are legitimate reasons for a U.S.-plated vehicle in Canada during the pandemic but stopping to see the sights is not one of them. (Jeff McIntosh/The Canadian Press)

Americans are allowed to drive straight through Canada to Alaska for work or to return home, but they can’t stop in Banff — or anywhere else — to see the sights.

However, not all drivers of cars with U.S. plates in Canada are breaking the rules. 

Watt wants Albertans to know she’s a patriotic Canadian who’s taking every precaution while in the country. She self-quarantined for 14 days when arriving in Calgary and wears a face mask in stores. 

She said both incidents of harassment happened on June 21, the day she finished her quarantine and headed to town to run errands.

Watt, right, and her mother, Maureen, pictured in Calgary. (Submitted by Maureen Watt)

‘You can’t judge a book by its cover’

As a result of her experiences, Watt started driving her mother’s car — which has Alberta plates. 

“I’m a little afraid to leave my car parked anywhere for fear somebody does something to it,” she said. “I’d like people to understand that people with U.S. licence plates have legitimate reasons for being here.”

Mayor Phil Harding of the Township of Muskoka Lakes also wants to spread that message. 

“You can’t judge a book by its cover,” said Harding, whose township is part of the Muskoka region, a vacation hot spot in Ontario. 

The mayor said he recently heard from several Canadians with U.S.-plated cars in the region, who claimed they were accused of being Americans unlawfully in Canada.

“‘You shouldn’t be here. Americans aren’t allowed. How did you get across the border?'” said Harding, about the types of accusations the drivers have fielded from local residents. 

Car keyed at marina

In one case, a woman reported that her husband’s car — which has Michigan plates — was scratched with a key, said the mayor. 

CBC News confirmed the incident with the woman who said the approximately metre-long scratch appeared after the car had been parked at a marina on June 6. 

The woman said she and her husband are Canadian but that her husband works for an American company and drives a company car with U.S. plates. The woman asked that their names be kept confidential because her husband doesn’t want his workplace associated with this story. 

“We think it’s terrible and are really aware that we are a target with our U.S.-plated company vehicle,” said the woman about the incident in an email. “This makes you aware that the cross-border tension is building.”

WATCH | COVID-19 could close Canada-U.S. border for a year, expert says:

Infection control epidemiologist Colin Furness predicts the Canada-U.S. border will only open if a COVID-19 vaccine is created or if enough people have been infected with the virus and build herd immunity. 9:17

Snowbird accosted

In another incident in Huntsville, also in the Muskoka region, Ontario Provincial Police (OPP) said a Canadian filed a police report after he was allegedly accosted by two men upset over the Florida plates on his car. 

OPP spokesperson Jason Folz said the incident happened on June 12 at a car wash. 

“They harassed him, and the assault was they poked him in the chest, demanding to know why he was in Canada.”

Folz said the man is a snowbird who spends winters in Florida and owns a car with Florida plates. 

“People are stressed [about COVID-19], and it comes out in strange ways. This is perhaps one of those ways,” said Folz about the incident. 

Lawyer avoids crossing border

U.S. immigration lawyer Len Saunders said several of his clients — who are dual Canadian-U.S. citizens or essential workers crossing the border — have complained of mean looks when driving their U.S.-plated car in Canada. 

As a result, Saunders said he avoids crossing the border, even though he can as an essential worker and a dual citizen. 

“I’m concerned about being socially shamed up there in B.C., driving a U.S.-plated car because I’ve heard from multiple clients, stories of dirty looks,” said Saunders, whose office sits close to the British Columbia border in Blaine, Wash.

He said he can understand why some Canadians get upset when spotting U.S. licence plates in the country, considering COVID-19 cases are spiking in some U.S. states.

But they must remember that many people driving U.S.-plated cars in Canada are there for a valid reason, Saunders said. 

“They really have to look at the big picture before they pass judgment.”

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