APRIL 1993 Edition
NAFTA
President Clinton wants side deals on labour, environment
and trade-volumes before he will press Congress to adopt NAFTA. Canada has now
introduced NAFTA legislation to parliament and the Mexican ambassador to Canada
says that Mexico will pull out of the free-trade agreement if Canada and the
U.S. try to impose deals which infringe on Mexican sovereignty.
The U.S. is now talking about creating commissions and
tribunals to deal with these issues. However, disputes mechanisms are a two (or
three) way street and it is hard to imagine circumstances which would allow
Mexico to file a complaint against Canada and the U.S. because of pollution on
the Great Lakes, for instance. It
seems that the panels will likely undertake advisory roles, with the power to
investigate and publicize rather than issue
binding decisions.
CUSTOMS TRADE SEMINAR
Revenue Canada will host its next Customs Trade Seminar
in Vancouver on 26 May 1993. The seminar will concentrate on individuals in the
small and medium-sized business sector who are or will be importing goods to,
or exporting from, Canada.
It will address topics which will be of interest to the
importing community in general, including exporting from Canada\importing from
the United States; the basic Customs process; valuation; the adjustment
process; the New Business Relationship Initiative; and duties relief.
There will be an exhibit area staffed with officials from
National Revenue, U.S. Customs and other federal departments. The registration
fee is $100. For further information, please contact Roslyn MacVicar,
Registrar, Customs Trade Seminar '93, at 604-666-2973.
CROSS-BORDER SHOPPING
February saw 246,000 fewer Canadians crossing into
Whatcom County compared with a year earlier. A recent survey indicated only
slight cost differences on many of 33 popular items checked in metropolitan
Vancouver and Whatcom County. It showed that shoppers would pay US$1,337 for
the goods in B.C. and US$1,210 in the U.S. Twenty of the items were cheaper in
the U.S. and thirteen cheaper in B.C.
Cross-border shopping by mail is plummeting also, perhaps
by as much as 25 per cent, due to the declining dollar and the rules imposed
last year by Revenue Canada which added a $5 duty-collection fee by Canada Post
and reduced the entitlement for a single order from $40 to $20.
Now, Revenue Canada is examining a proposal by the
Frontier Duty Free Association which wants to sell untaxed gasoline to tourists
and Canadians leaving the country for at least 48 hours, though no one has
explained how the latter group would be monitored. The owner of West Coast Duty
free at Pacific Highway has stated that he would be prepared to invest
$2-$3-million in capital costs and hire 15 more people if the proposal is
approved.
PRESCRIPTIONS BY MAIL
Since opening last August, Toronto-based MediTrust
Pharmacy Inc has become the "Price Club" of pharmacies with 50 staff
and 50,000 square foot facility and has upset many competing retailers along
the way. MediTrust makes its money doing high-volume business and undercutting
the markups and dispensing fees of traditional pharmacies and should sell
$33-million worth of drugs in its first year.
The niche MediTrust is after is the employer-sponsored
drug plan market, worth about $1.4-billion in Canada. MediTrust charges a flat
dispensing fee of $5, against an Ontario average of $10.08, and a mark-up on
unregulated drugs of 10 per cent. On average, employee drug costs have been
rising at a rate of 12 per cent a year, which will be closer to 18 per cent in
1993. Many firms with expensive employee drug plans are faced with
reducing drug costs or
reducing benefits.
One company, with 150 employees, has saved 28 per cent on
drug costs in the first six months. Employees can phone or fax their
prescriptions from work during the day, and then have them delivered to the
office or their home within 24 hours.
MediTrust bills the insurer direct. MediTrust expects to be ministering to the prescription needs of
250,000 in Ontario by the fall when they will begin expanding to other
provinces.
ABSENTEEISM
According to the Conference Board of Canada, absenteeism
robs the economy of an estimated $15-billion a year, eroding productivity by up
to two percentage points.
The board states that working parents, an aging population,
increased job stress, abuse of sick leave and overly generous workers'
compensation are making absenteeism a growing and costly problem for employers
and the economy. 20 per cent of employees account for 50 per cent of all sick
days taken. The report suggests that fast-changing technology, increased
workloads and job insecurity have added to worker stress which is responsible
for one quarter of absenteeism. Older workers are more likely to suffer certain
types of illness or injury, such as back problems and the increase in working
parents, especially mothers, creates difficulties in balancing work and family
responsibilities.
JAPAN
Japan's trade surplus surged in February intensifying
pressure for it to stimulate the faltering economy and boost imports.
Canadian exporters looking to penetrate the Japanese
market are being extended a helping hand by the Japanese External Trade
Organization (JETRO) which has opened a Business Support Centre in Tokyo. The
Centre will offer a range of free services on a temporary basis to businesses
and trade organizations with a focused plan to approach the Japanese market for
ongoing export business, but without an established base in Japan.
The Centre offers private furnished offices, full-time
advisors on how to approach the Japanese market, a business library, use of the
JETRO database terminal, meeting rooms, support staff and a variety of other
valuable services. More information on this Centre may be obtained from the
JETRO office in Vancouver at 604-684-4174.
MARKETING
Hoover, the well known UK appliance manufacturer and a
division of Maytag, was recently in the news for contravening the European
social charter by closing a factory in France and opening another one in
Scotland where they are paying employees considerably less. They are in the
news again with a scheme that has cost the jobs of the company's top three
executives, including the managing director.
Consumers were offered two free return flights to Europe
or the U.S. (value up to $1000), if they purchased any appliance worth more
than $150. The company relied on the fine print in the offer, such as when the
flights can be taken and which hotels may be used, to deter purchasers from
actually collecting their tickets.
Purchasers were clearly better at maths than Hoover
executives and there have been 200,000 applications for flights since the
promotion was launched last summer with only 6,000 tickets issued so far. Even
worse, recent purchasers seem to have been more interested in free flights than
household appliances. The campaign has
not built up real demand but merely created a gigantic second-hand market in
unused Hoover appliances. Maytag said that it will take a $30-million charge
against after-tax profits to pay for the mess created by Hoover, which is
equivalent to nearly half of Maytag's net income for last year.
INTER-PROVINCIAL TRADE
Almost everyone agrees that tearing down provincial trade
barriers will contribute several billions of dollars to the economy. However,
two provinces are going the other way.
The New Brunswick government, frustrated by Quebec's
refusal to ease its strict labour code, has decided to take reciprocal action
against Quebec companies and labourers who want to work in the province. Quebec
companies bidding for construction and government contracts will now have to
follow the same strict guidelines that govern labour in Quebec. That means
Quebec companies will have to hire local, unionized workers.
Meanwhile, the Quebec government is close to signing an
exclusive deal for three hundred transit buses if a company agrees to keep an
assembly plant open in the province. The same buses obtained from Ontario could
each be acquired for $35,000 less.
SUNDAY SHOPPING
Last June, the Ontario government allowed Sunday shopping
in an effort to stem the tide of cross-border-shopping. This has had a dramatic
effect on corner stores, a $3.8-billion a year sector. It is now estimated that
they will lose $300-million in sales this year because of Sunday shopping. An
association representing corner stores warns that without government
intervention, the sales decline will result in closings and layoffs among the
52,000 employees of the 6,000 corner stores. 200 stores have closed since last
June and an unknown number of independent stores have filed for bankruptcy. To
offset their hardship, store operators want the right to sell beer and wine and
earn commission from the government for collecting sales tax and GST.
In New Brunswick, a survey of small businesses indicates
that 79 per cent of those responding are opposed to Sunday shopping as a way to keep consumers from crossing the
border saying that Sunday should remain a day of rest.
EMPLOYMENT
48,000 jobs were added to the economy in March and
employment has increased by 203,000 since April of 1992. The added jobs were
primarily in services but there were also 9,000 jobs in the manufacturing
sector bringing the total of additional manufacturing jobs to 42,000 in the
past five months. Manufacturing has benefitted in the past year from soaring
exports, but new jobs have been slow to appear as companies increased output
with less labour.
The economy has recovered 40 per cent of the 409,000 lost
during the recession according to the Bank of Nova Scotia. Despite the buoyant
job growth, the unemployment rate still edged up to 11 per cent as 85,000 job-seekers
returned to the labour market.
GOVERNMENT
The Newfoundland government has called an election to
underline its determination to cut program spending by $29 million and civil
service wages by $70 million. New Brunswick is eliminating 500 jobs and
limiting spending to a 1.7 per cent increase. Nova Scotia, which has already
frozen public service wages, announced plans to cut its spending by 10 per cent
and to pass legislation requiring a balanced budget within three years.
Manitoba has bought in a budget with a
1.2 per cent cut in expenditures. The Saskatchewan budget cut spending by more
than $100 million and the Ontario government is attempting to get union
agreement to slash the civil service before taking more drastic action. Quebec has frozen public service wages.
Only in B.C. is it business as usual. Tax increases of
$600 million to support a spending increase of 5.7 per cent and several
thousand new employees added to the public service. The Retail Merchants' Association of B.C estimates that the
recent increase in the provincial sales tax will result in 4,200 jobs lost in
the retail sector.
U.S. CUSTOMS AUDITS
An apparent rise in U.S. Customs Service audits is
causing many Canadian shippers to stop claiming tariff exemptions under the Canada-U.S.
Free Trade Agreement according to American trade lawyers and customs brokers.
Many Canadian shippers and U.S. importers have opted to pay the full tariff
rather than take the time to determine if the product qualifies for a duty
break. Many shippers are declining the opportunity for substantial duty
reductions for fear they will be audited by U.S. Customs, seeking to deny their
claim.
U.S. Customs have denied that Canadian companies are
targeted for audits but acknowledged that audits throughout the country are
rising.
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