Wednesday, December 01, 1993

DECEMBER 1993 Economic Digest - Importing and Exporting



DECEMBER 1993 Edition

POST NAFTA   
            While the recent NAFTA vote was very important, the subsequent Asia Pacific Economic Co-operation (APEC) meeting in Seattle was also of great significance. NAFTA opens a market of 90 million consumers, APEC represents a total market of more than 1.6 billion. The IMF estimates that East Asia will account for half the increase in the world's economic production between now and 2000. They will want to buy telephones, washing machines and refrigerators; their governments will want power plants, bridges and airports; their industries will want lumber, minerals, oil and gas.
            Canada, increasingly, is a Pacific trading nation. Our exports to the region ($15.7-billion in 1991) now exceed our exports to Western Europe ($13.4-billion). Economic growth in the Asia-Pacific should average about 7 per cent this year and next--compared to a world average of only 1.5 per cent. In China, growth has averaged 9 per cent a year for more than a decade, while in much-overlooked Indonesia, the size of the economy has doubled since 1985. According to the Asia Pacific Foundation,  Canadian firms are not taking advantage of the new opportunities in China and Asian leaders are perplexed by Canada's lack of aggressiveness.  

ANATOMY OF A TRADE DISPUTE
            As part of the trade-off to gather votes for the NAFTA vote in Congress, President Clinton is reported to be considering imposing emergency quotas on wheat imports from Canada. Specifically, the problem is with durum wheat used for pasta, certain cereals and some Italian breads. Imports of Canadian durum have increased in recent years and account for about 20 per cent of U.S. consumption. Farm-state senators have chosen an unfortunate time to denounce imports since U.S. durum wheat prices (roughly $4.50 a bushel) are far above federal target prices--the prices picked by congressmen to guarantee most full-time farmers a generous income.
            U.S. production of durum wheat has nose-dived since 1981, falling from 5.8-million acres annually to just over two million acres in 1993. The Conservation Reserve Program (CRP), under which the government pays farmers to leave their land idle for 10 years, is the largest single set-aside program. A North Dakota senator complained in 1992 that the CRP has wiped out small town after small town since land was taken out of production.
            Even though U.S. farmers do not grow enough durum to meet U.S. consumption, the government still spends lavishly to dump U.S. durum wheat on world markets. The U.S. will subsidize the exports of more than 30 million bushels of durum wheat this year--roughly equal to the amount of Canadian imports.
            On Sept. 23, the Agriculture Department announced massive subsidies of durum wheat exports to South Africa, entitling American taxpayers to pay a subsidy of $1.75 per bushel for the export of wheat. The department will spend roughly $700-million to dump wheat on world markets this year. Wheat export subsidies have become so generous that they undercut unsubsidized exports of U.S. corn. The combination of falling U.S. production of durum and artificially increased demand for durum caused by export subsidies has driven the U.S. durum prices above the world price. Naturally, the high prices have been a signal to foreign producers that the U.S. market needs more durum.
            If the U.S. restricts Canadian wheat imports, the U.S. price of durum will likely spike higher. This would put U.S. pasta makers at an even greater disadvantage against imports. Foreigners can buy U.S. wheat much more cheaply than American food manufacturers. U.S. imports of pasta and pasta products have doubled since 1985 when the U.S. Department of Agriculture began dumping U.S. wheat on the world market at fire-sale prices. The U.S. lavishly subsidized durum exports to Turkey, where the wheat was processed into pasta and exported back to the United States. Industry experts predict that if Canadian wheat imports are restricted, some U.S. pasta-making plants could move to Canada.
            U.S senators are loudly denouncing Canadians for exporting subsidized wheat. In 1991, federal farm policy forced American taxpayers and consumers to pay wheat farmers
subsidies  equal to 78 per cent of the total value of wheat produced in the U.S.
            U.S. federal farm policy has turned wheat production--a historic American strength--into a perpetual burden on the national economy. Mr Clinton should not export the U.S. food-manufacturing industry by restricting imports. [From the Wall Street Journal].

WIN EXPORTS
            Managed by External Affairs and International Trade, and used exclusively by 1200 trade staff at offices around the world, WIN Exports is a computer database of Canadian exporters and their capabilities. Over 100,000 requests for export information from foreign buyers are received annually by Canada's Trade Commissioners who use the WIN Exports information daily. A company's information in the WIN Exports database will include basic company details, exported products and services, foreign markets and a company marketing profile. A number of registration forms for this database are available by calling Brian Strehler at A & A Contract Customs Brokers at 538-1042, or 1-800-663-4270.

ENTREPRENEURSHIP
            A Vermont maple-syrup farmer observed that his young sons were transfixed watching a brief segment on bulldozers on Sesame Street. So he went out and shot a 30-minute video of yellow bulldozers building a new road in rural New England. Just bulldozers, moving masses of dirt around and into dump trucks. This is now the hottest thing on the pre-school market. At $20 each, more than 150,000 have been sold and the farmer has grossed over $3-million. A second tape has been released with fire and rescue vehicles. They may be ordered from 1-800-461-3800.

VOLUNTEERS
            The impact of voluntary work on the economy is rarely considered, yet without it, many institutions would grind to a halt. The estimated monetary value of volunteer work in Canada, based on an average service wage, is $12-billion, a wage bill that represents 53 per cent of all wages paid in Canadian retailing and 43 per cent of the public sector wage bill, including all levels of government and the armed forces.       27 per cent of Canadians volunteer their time and the higher their education and income, the more likely they are to give their time. A volunteer averages about 191 hours a year (3.7 hours a week) at his or her unpaid job. Canada's volunteer force put in more than one billion hours of work a year--the equivalent of 617,000 full-time jobs, or the number of hours worked annually by the full-time labour forces of New Brunswick and Saskatchewan combined.

PUERTO RICO
            With a population of 3.6 million consumers and an American-style approach to business, Puerto Rico is Canada's third-largest export market in Latin America, after Mexico and Brazil. In 1992, the island imported $500-million worth of goods from Canada, a figure that should rise in the coming years. More information on this market can be obtained from John Alexander at the Canadian Consulate General in Atlanta, Georgia. Tel: (404) 577-6810. Fax: (404) 524-5046.

WOOD
            22 members of the B.C. Wood Specialty Group have prepared a portable building products exhibition to tour Japan's trade shows. B.C. already exports $800-million worth of specialty sized lumber to the Japanese building industry and last year sold $40-million worth of finished wood products. The Japanese finished building products market is worth $200-billion a year. Products to be displayed at Japanese trade shows will include kitchens, windows and aboriginal crafts.
            Another market for housing products is in the former East Germany where at least one million units are required immediately with another 100,000 needed annually. West Germany needs 400,000 units a year on top of the two million units required right away. The Canadian Trade Commissioner in Berlin says housing is the biggest area of opportunity for Canadians right now in Germany but that there are not enough companies interested. A Toronto entrepreneur, trying to line up Canadian suppliers for windows and doors for houses that already had buyers in Germany, wrote 430 letters to Canadian suppliers and had only three responses.
            Last year, members of the Canadian Construction Association did $95-billion of construction work, less than one per cent was overseas business.    

CULTURE
            The U.S. Congress is considering legislation to deter Canada from ever using a so-called cultural trade exemption in the Canada-U.S FTA. It would not change the two-part deal which has been in effect for nearly five years under which Canada can break FTA rules to protect cultural industries such as magazines, books, television and movies from U.S. competition. But the U.S can hit back with actions of "equal commercial effect" against Canadian goods. Canada has never invoked the exemption and the U.S has never retaliated.
            The new measure, part of the law implementing the NAFTA, calls for an annual review by the U.S Trade Representative to see if Canada is hurting U.S. cultural interests. If so, it would be listed as a "priority foreign country" for possible retaliation. The review can go back to Dec 17, 1992, the date Canada signed the NAFTA. U.S Senate staff lawyers claim that this measure is really aimed at the Europeans, particularly the French, that are seeking to limit U.S. cultural influence in the GATT negotiations.

EUROPE
            Small businesses will soon have access to a computerized co-operation network run by the European Community. By tapping into BC-NET, companies will gain quick, confidential and reliable information about potential allies.          The Canadian Chamber of Commerce will be the agent for BC-NET which should be operating this month in B.C., Ontario, Quebec and Nova Scotia. BC-NET was created in the mid-1980s for European firms but quickly expanded. Canada is the 25th non-EC country to participate, joining countries from Asia, Latin America, and Eastern Europe. So far, 70,000 companies, mostly small and medium-sized have had their profiles sent across the system. When a company makes a request for a partner, a qualified consultant analyses it and sends a message or profile to the EC's central computer in Brussels. The computer goes through a "matching" process based on codes of reference--that is, type of business, co-operation sought (commercial or technical, for example) and so on.

B.C TRADE
            Premier Harcourt has announced a $900,000 program to assist exporters outside the Lower Mainland. B.C. Trade, which will administer the program, will also establish offices in Nanaimo and Kelowna with economic development officers to provide assessment of regional exporters' potential and needs. The new program will also provide reduced export loan guarantee rates to regional companies, conduct market research for regional exporters, identify and assess specific export opportunities and develop an inventory of regional export potential. International exports generate about 25 per cent of B.C.'s gross domestic product and provide more than one in five jobs.

MEXICO
            Last year, Canada exported under $1-billion worth of goods to Mexico (0.5% of exports) and imported $2.8-billion (5% of imports). The U.S exported $48.7-billion to and imported $39.1-billion from Mexico. The top five exporting states to Mexico in $ billions were: Texas, $15.5, California, $5.5, Michigan, $1.6, Illinois, $1.8 and Arizona, $1-billion.
            The American Embassy in Mexico has identified the following as the best export prospects to Mexico for 1994: auto parts, power systems, machine tools, franchising, pollution control equipment, oil and gas field machinery and services, computers and peripherals, telecommunications equipment, chemical products and wood products. Canada is also competitive in several of these areas.

Monday, November 01, 1993

NOVEMBER 1993 Economic Digest - Importing and Exporting



NOVEMBER 1993 Edition

U.S. EXPORT DRIVE
            President Clinton has unveiled a strategy to help American companies sell more products overseas which includes relaxation of Cold War restrictions on exporting computers and other high-tech equipment. Called the National Export Strategy, it aims at raising U.S. export of goods and services to $1-trillion (U.S.) by the end of the decade from $628-billion a year in 1992 and creating six million new jobs.
            It will also direct the 19 government entities encouraging exports to work together. And, starting with fiscal year 1995, it will create one multiagency trade promotion budget out of the $4.3-billion in separate programs scattered throughout the federal government.
The Administration is concerned that not enough assistance is devoted to export of manufactured goods and that the unified budget would direct aid more rationally. It stopped short of saying agricultural goods would lose out. Currently, about 80 per cent of export-promotion spending is devoted to agricultural products even though they represent only about 10 per cent of the export total. The strategy recommends the creation of "one-stop shops" around the country where employees of different agencies--the Commerce Department, the Export-Import Bank and the Small Business Administration--would work together to assist U.S. companies.

INTER-PROVINCIAL TRADE
            StatsCan has produced figures to show just how valuable is trade between provinces. In fact, Canada's provinces and territories export almost as much to each other as they do to the rest of the world.
            In 1989, provinces sold $160-billion worth of goods abroad and $146-billion worth to each other. Ontario and Quebec ran surpluses in their trade with other provinces. Everyone else ran deficits, with B.C., Alberta Saskatchewan and Nova Scotia leading the pack.
            On average, Canadians consume about 46 per cent of the resource and manufactured goods they produce within their own province; another 22 per cent is sold elsewhere in the country and the remaining 32 per cent on the world markets. The pattern seems to be that the more a province or territory relies on resources and the smaller the market, the more it sells outside its borders.
            Relative to what they produce, Yukon (minerals) and Newfoundland (forest, mineral and fish products) were the country's champion international exporters. Ontario (cars)
and B.C. (forest, mineral and fish products) are also big exporters, but since each can sell almost half its goods at home, relatively little goes to the rest of the country. (Ontario exports huge volumes to other provinces simply because it produces so much in the first place).            Quebec (forest products, metals and electricity) also consumes almost half its own goods, with the remainder fairly evenly split between foreign markets and the rest of Canada.
            The pattern for services is much different. Here fully 79 per cent are sold in the province that produces them; almost 14 per cent go to other provinces and a mere 7 per cent sold abroad.
Just what do we trade among ourselves?
* The biggest item is transportation services at $12.9-billion which reflects Canada's geographical vastness. This includes business travel, tourism and postal and courier services.
* Wholesale services, at $12.6-billion ranks second. Marketing goods across provincial boundaries is a huge business, dominated by Ontario.
* Food is next at $11.7-billion: meat products from Alberta, dairy products from Quebec and P.E.I.; fruit and vegetables from B.C. and the three Maritime provinces; fish products from B.C. and the four Atlantic provinces.
* Financial services are worth $11.3-billion. Ontario has most of it but B.C., Nova Scotia and Manitoba have notable chunks.
* Business services, worth $9.5-billion come mainly from Ontario, Quebec, B.C. and Alberta.
* Ontario and Quebec dominate the markets for metal products ($9.9-billion), chemical  products ($8.1-billion) and transportation equipment ($7.7-billion).

HONG KONG
            The Hong Kong Trade Development Council (HKTDC) has offices in Toronto and Vancouver and maintains a database that contains information on more than 90,000 Chinese and 3,500 Hong Kong companies which is available free to Canadian companies. The HKTDC caters especially to small and medium-sized companies looking for import connections and export business in Hong Kong and China. According to a recent HKTDC study, Hong Kong--a trading conduit between booming Southeast Asia and the outside world--now ranks 10th worldwide in both imports and exports, although it is just 90th in population size.

RICH AND POOR
            The poor nations of the South transfer annually more than $50-billion (U.S.) to the rich countries of the North than they receive in aid and investment. Trade barriers are a constant issue. The World Bank says a 50 per cent cut in trade barriers by the EC, the U.S. and Japan would raise exports from developing countries by about $50-billion a year--about equal to the total foreign aid to the poor countries. 

PACKAGING
            For years, manufacturers have spent considerable resources designing tops for containers that are child and tamper proof. The problem is that seniors have difficulty opening them, and often turn to children for help. Also, seniors have problems with bulky household cleaners, heavy spring water jugs, hard-to read  instructions and hard-to grasp bottles.             These are problems that the packaged goods industry is starting to address more seriously as seniors, already about 11 per cent of the population, represent a growing and lucrative market for manufacturers. By 2021 one in five Canadians will be 65 or older and as the baby-boom generation reaches retirement age, seniors will become a dominant consumer force.       Last month, the Seniors Packaging Advisory Council, made up of industry, seniors and government was given a federal grant of $436,700 to examine seniors complaints and try to come up with solutions over the next two years.

FOOD RETAILING
            By the year 2000, the 30 or so major food chains in North America could be reduced to about 10. Many food processors will be squeezed out of business and there will be less variety on the food store shelf. These are a few of Ernst & Young's predictions in their annual forecast of the food and beverage industry. Also, tougher competition, fewer players and a continued shift in power from the manufacturing sector to the supermarket giants. Nonetheless, the food and beverage industry will remain one of the most important in Canada. With 1992 sales of about $44-billion, it is the second largest industry in terms of sales in Canada, after the forest sector. It employs one of five Canadians, accounts for exports of about $13-billion and has a net trade balance of $3.9-billion.

EXPORTERS
            The supporting structure for what will be the world's largest optical telescope is nearing completion in Port Coquitlam. It weighs more than 150 tonnes, stands 26 metres high and will house a mirror 10 metres across. It is part of a $100-million project and will be assembled in Hawaii. The project has kept 65 employees busy for three years.
            A Kelowna company has designed from scratch, and built in six weeks, a seven-tonne army truck, work that would normally take six months. It required around 700 hours of engineering. The prototype is awaiting shipment to Kuwait where the company is hoping to win a contract for 2,200 vehicles which would create 350 jobs and earn $250-million.
            The giant Avis, Inc in Garden City N.Y., will use technology developed by a small Nelson company to equip thousands of its rental cars with daytime running lights. The system will be tested for a six-month period and the company hopes Avis will expand the program to its entire 100,000 vehicle fleet.
Research has shown that daytime running light reduced daytime multi-vehicle accidents by 23 per cent in Sweden, 40 per cent in Norway and 37 per cent in Finland.

LABOUR PEACE
            If trends continue, 1993 will end with the lowest rate of work stoppages in Canada in half a century. The reason, both labour and management say, is that the harsh economic climate has given the two sides a firmer grip on reality, and neither is willing to risk the disruption caused by a strike or lockout. The Labour Department reported recently that time lost as a result of major work stoppages in the first half of the year amounted to 187,730 person-days, or 0.01 per cent of estimated working time. This is in contrast to 1980, for instance, when 0.29 per cent of working time was lost. Canada has just seen the first strike-free round of negotiations with the Big Three Canadian automakers in more than 30 years. Average annual wage increases negotiated in collective agreements have also plummeted. The average reported in August was 1.5 per cent, compared with increases nearing 14 per cent in the early 1980s.

DATA
            Canada Business Report on Greater China offers subscribers economic analysis, trade and investment news, and reports on Canadian activity in one of the world's largest economic regions covering the PRC, Hong Kong, Taiwan and Macau. The preview issue included stories on Asian companies turning to the VSE for investment, BC Tree Fruits recent joint venture in Shandong province, and an overview of the recent large building projects underway in China. It is to be published 10 times a year and cost $295 a year and $160 for six months. It is available from Canada-Far East Business Publications, P.O. Box 23104, Wanchai Post Office, Wanchai, Hong Kong. Fax: (852) 527-9158.
            And now you can get over 250,000 business contacts on a disk. Companies International combines U.S. and international company data in one directory for a complete global source of business information. The directory allows you to access information by company name, geographical location, sales volume, number of employees, industries served and types of products made. It is on CD-ROM, print volumes, magnetic tape or diskette. Details can be obtained from Gale Research at 1-800-877-4253.

STATISTICS
            Recently, The Economist asked a panel of international statisticians to rank the official statistics agencies in 13 industrial economies. They were asked to judge countries' statistics according to the objectivity of the agency (ie, whether it is free from political interference), the reliability of the figures, statistical methodology, and the relevance of published figures, such as coverage of service industries.
Canada came top, followed by Australia --the same result as in 1991. In terms of timeliness, the U.S. is the fastest at getting figures out while fastidious Canada is one of the slowest. Canada's advantage is considered to be its centralised system using a single agency. In contrast, the U.S. is highly decentralised with statistical units in 70 agencies. Holland is the most up-to-date in the use of computers, particularly for collecting information directly from companies and has made the biggest advances in environmental accounting.

POTATOES
            Maine's two Republican lawmakers have asked the U.S. Trade Representative to send a fact-finding team to Maine to investigate Canadian potato subsidies. They claim that Maine's struggling potato farmers are being threatened by a flood of government-subsidized imports from Canada. Maine, once the second-largest U.S. potato producer, has seen acreage devoted to potatoes fall to 81,000 from 108,000, while New Brunswick and Prince Edward Island have expanded to 138,000 from 110,000.

ONLY IN AMERICA
            The shoeshine concession in the courthouse in Hackensack, N.J., is open for bids from those who can meet the contract specifications--all 18 pages of them. All this for a job that involves eight to 10 shoeshines a day at $2 each.