DECEMBER 1995 Economic Digest - Importing and Exporting

DECEMBER 1995 Edition

EXPORT DATA

            The Department of Foreign Affairs and International Trade (DFAIT) has created a directory of electronically available international business data sources to help Canadian firms seeking to obtain business data on foreign markets. Persons can now obtain a wealth of information that is useful in developing an export plan or implementing an export strategy. The directory can be accessed through menu M22 of the InfoCentre BBS from which it can be downloaded. To access the InfoCentre BBS, dial (613) 994-1581 from your computer modem, or 1-800-628-1581 (line parameters set at 8-N-1, baud speed up to 14,400, terminal emulation set for ANSI/ASCII standards). The directory is organized by geographic region--Canada, United States, Europe and Asia-Pacific.

CHINA

            China has suddenly exploded into a global export power. It now produces half the world's toys and two-thirds of its shoes. Most of the world's bicycles, lamps, power tools and sweaters also come from China. More worrisome to export giants like Japan and the United States, China's export surge is now being powered by coveted, high-tech products. Exports of machinery and electronics--from alarm clocks to video camcorders--have jumped 60 per cent so far this year Chinese statistics show, becoming its top export category for the first time. If China's current trade trajectory holds, it will export $38 billion more than it imports from the U.S. Next year, U.S. officials estimate the surplus could reach $50 billion putting it close to Japan whose bilateral trade advantage with the U.S. is $66 billion.

LICENSING

            The Vatican Library has given its blessing to a lucrative licensing project that could put its official seal on everything from luggage to bed linens. You can already buy Vatican costume jewellery and will probably soon find Vatican watches, greeting cards and T-shirts at the mall. Over the first five years, licensing revenue is projected to average about $5 million (U.S.) annually jumping to $10 to $20 million annually after that. When Pope John Paul II visited Denver in 1993, roughly $400 million of Pope-related material was sold in a 30-day period. The Vatican joins Queen Elizabeth II who approved the sale of goods under the House of Windsor name including furniture and Scottish throw rugs. The Mormon church has also begun expanding its licensing activities.

RESTAURANTS

            An analysis of the financial results of 1,151 restaurants by Dun & Bradstreet Canada has pinpointed the restaurant industry as the most unstable field of all the businesses it studies, with low profit margins and high failure rates. The average restaurant had an after-tax return on sales of just 2.1 per cent last year, while return on assets was a dismal 4.77 per cent. Costs of food and beverages increased to 34.9 per cent of total sales in 1994, up from 32.7 per cent in 1992 while other operating expenses, such as salaries and rents, accounted for 55.2 per cent of sales in 1994, up from 53.4 per cent. Introducing the GST in 1991 caused sales to drop 10 per cent that year alone and they have never recovered to prior levels. Restaurants are most stable in Quebec and the Maritimes and least stable in Ontario. The average restaurant faces a 3.66 per cent risk it will close in the next six months and business failures are surprisingly high in the eighth and ninth years of operations.

GLOBAL ECONOMY

            According to the World Trade Organization, world trade in goods, spurred by the integration of the global economy, is expected to grow 8 per cent in volume in 1995. The WTO says that the strong global trade figures indicate protectionism is losing out to liberalization. Though the 8 per cent figure is down from the 9.5 per cent increase in 1994, it will still keep trade expansion at nearly three times that of overall world economic growth which is projected to be 3 per cent. In 1994, the value of world merchandise trade rose to $4.09 trillion.

EUROCOWS

            As far as European Community cows are concerned, 1996 will not be a leap year. Rather than recalculate production formulas based on 365 days, Brussels bureaucrats have decided that any milk the animals produce on February 29th will be credited to the two months before or after that date.

RETAIL

            Zellers Inc., with more than 300 stores, used to be the undisputed king of discount retailing in Canada. For more than a year now, Zellers and Wal-Mart Canada, with its 129 Canadian stores, have been trading punches with one retailer dropping its prices only to be matched or outdone by the other. While the consumer has benefitted, the impact on both companies' earnings is noticeable. Wal-Mart absorbed a loss last year and in the first quarter of 1995 while Zellers operating profits have been sliding. Zellers is about to open its biggest store yet, about 147,000 square feet, close to a Wal-Mart store in Montreal. The store will serve as a laboratory of sorts as it tests various strategies for boosting sales across its entire chain. Wal-Mart claims to have boosted its share of the discount market to 40 per cent from the 22 per cent when it bought the Woolco chain.

NAFTA

            The Canadian government has acknowledged for the first time that it won't achieve a comprehensive deal with the U.S. and Mexico by year-end on getting rid of arbitrary trade laws within the North American free-trade agreement. Instead, the partners are expected to issue an interim report that will include recommendations for some technical and administrative changes to anti-dumping and countervailing duty rules. The Canadian government has long argued that absence of clear rules and arbitrary U.S. trade remedy measures are to blame for a deluge of cross-border disputes in recent years, including those involving steel and softwood lumber.

COMMUNICATIONS

            Telephone users in Regina, Saskatchewan, can now call a business by dialling a three-digit code and speaking the company's name into a computer. Sask'Tel, is the first phone company in North America to begin testing the new application of voice-recognition developed by Bell-Northern, a division of Northern Telecom. After the first month of the trial, the 325 businesses that have agreed to participate will pay a monthly fee to have their name stored on the computerized system which has an almost limitless vocabulary and does not have to be trained to recognize speakers. If successful, the system will go into service across the country.

COMPETITION

            The inefficiency of Japan's offices contrasts sharply with the legendary productivity of its factories. Last year, only 25 per cent of white-collar workers had personal computers. When Compaq and Dell Computers invaded Japan's market three years ago with personal computers selling at half the price of Japanese products, Japan's computer makers braced for declining market share and falling profits. But instead of killing Japan's PC market, the U.S. invasion has liberated it. Japanese manufacturers have become fierce competitors, cutting prices dramatically, and the results have been a boom in sales for both Japanese and U.S. manufacturers with sales climbing by a third in 1994. Sales in 1995 are expected to jump by 50 per cent. Leading the U.S. companies was Apple Computer Inc. which has now become the No 2 personal computer vendor behind NEC Corp. with a 15 per cent market share.

EDUCATION

            Officials at some of Canada's major banks are discussing a loyalty credit card that would allow users to put a percentage of their purchases into a fund for their children's post secondary education. The Student Co-operative Canada Project--Scoop for short--would award card users points for up to five per cent of purchases from designated companies.. The points would be transferable to a post-secondary education savings plan that would be managed by mutual funds for individual students. The card proposal is being designed to include accumulating points for debit card purchases and even cash purchases. It would also allow card users to convert points from Air Miles and other existing loyalty programs.

BIOTECHNOLOGY

            According to Ernst & Young, Canadian biotechnology companies are continuing to use strategic alliances with bigger, better capitalized partners to replace other sources of capital. Biotechnology product sales rose to $9.3 billion (U.S.) as of June 1995, an 18 per cent rise over the previous year. Market capitalization of companies in this business rose 27 per cent to $52 billion. The Canadian industry now has about 200 biotech companies and about 30 publicly listed biotech companies. They are also capitalizing on the need of large pharmaceutical companies to buy research from outside sources to attract funds.

WORK

            By overwhelming majorities, Canadian and U.S. employees say they are fulfilled by their work, but many express dissatisfaction with their pay, opportunities to advance and employers' concern for their needs. Canadian employees (77 per cent), more so than Americans (72 per cent) say their job "provides a sense of personal accomplishment" even though fewer Canadians (41 per cent) than Americans (45 per cent) believe they have a chance to advance. Employees of both countries say they can "have a direct impact" in helping their firms succeed through their day-to-day-efforts, including "high-quality" customer service.

MEXICO

            Mexican exports to Canada increased 24 per cent in the first eight months of the year, while imports from Canada fell 8.5 per cent. Their exports have been helped by a weaker peso which was devalued last December and has fallen 54 per cent against the U.S. dollar in the past 11 months. This has also put a brake on Mexican imports but those from Canada have fallen at a lower rate than those from Japan and Europe. 51.8 per cent of Mexican exports to Canada were consumer goods, 31 per cent were raw materials and 10.7 per cent capital goods.

GENERIC DRUGS

            According to a study by IMS Canada, growth in sales of generic drugs outpaced that of brand-name pharmaceuticals by more than five times in the 12 months ended September 1995. Generic drug producers saw their sales rise 13.8 per cent compared to a 2.7 increase reported by brand-name manufacturers. Generic drugs now represent 14 per cent of retail drug store sales, up from 11 per cent in 1991 and it is projected that this figure will reach 16 per cent of retail sales by the year 2000.

LOANS

            Loans of up to $250,000 are to be made available to asset-poor, idea-rich, knowledge-based businesses in Western Canada under a $25 million program announced by the federal government and its Business Development Bank of Canada. One appealing feature is that repayments of both principal and interest can be deferred for up to three years. The bank will charge a base interest rate plus a royalty on a borrower's sales. Major banks have traditionally turned down knowledge-based businesses, even when they have signed contracts in hand, because they don't have buildings, machinery or inventory to assign as security on loans.

INCENTIVES

            "Stop smoking for three years and save enough money to buy an ox."--The slogan of China's new anti-smoking campaign.

DUST TO DUST

            A devotee of the Real Betis soccer team in Spain who died last year asked his son to take his ashes to every game. The son went one better by renewing his father's club membership entitling the ashes to a seat. Security officials balked when he carried the ashes in a glass jar which they considered to be a dangerous object. So now he takes his father in a one-litre milk carton.

NOVEMBER 1995 Economic Digest - Importing and Exporting

NOVEMBER 1995 Edition

TRANSPORTATION

            Intense pricing pressure, chronic excess capacity and weak shipper demand are all contributing to problems for U.S. trucking companies. The average truckload carrier--which typically moves shipments of more than 10,000 pounds--is expected to show a 28 per cent decline in earning for the third quarter of 1995. The average less-than-truckload, or LTL, carrier--which hauls loads of less than 10,000 pounds--is expected to post a 40 per cent decline. Although a slower economy is a contributory factor, the carriers seeing the biggest declines are the ones that have chosen to accelerate capacity growth instead of curtailing it to bring supply more in line with demand.

MINING

            Representatives of the mining industry have told the federal government that they are pushing mining investment out of the country because of bureaucratic red tape. Until the early 1990s, investment averaged around $800 million annually. This year it is expected to be $300 million. The flight of capital results from too many overlapping and inconsistent regulations, particularly in the area of the environment. The provinces and the federal government each have their own sets of rules for how lands are to be set aside for parks and conservation areas and their own requirements for monitoring outflows of chemicals into the environment. In Latin America, where governments are anxious to attract mining investment, a company will usually meet the criteria to open a new mine in six months. In Canada, it could take from five to ten years.

STRAW

            It is estimated that over six million tonnes of straw is available on the Prairie provinces to be converted into new uses. If a domestic industry isn't developed soon, Canada may be importing crop residue fibre for industrial uses in the near future. That six million tonnes could be producing more than $1 billion in products. Also, it is estimated that there will be a global shortfall of wood of over 10 billion tonnes by 2010. A straw industry could greatly diminish this shortfall by reducing the number of trees harvested for lumber. 

REDUCING REVISITED

            Recently, we reported on a rush by the Japanese to buy soap from China which supposedly has reducing properties. In September, the soap recorded sales of $32.4 million, double the sales in the first seven months of 1995. The soap was invented by experts during three years of research into traditional Chinese medicine and has been approved by the Ministry of Health. A survey says it was successful in reducing weight in 76 per cent of cases. It has yet to be explained how the soap works.

RETAILING

            A new $400,000 study of Canadian retailing by the Ontario Retail Sector Advisory Board is painting a bleak picture and warns that up to half of existing companies could be out of business by the year 2000 if they don't become more competitive. It points to lack of innovation, risk-taking, skilled workers and other factors needed to meet the challenge of U.S. competitors. Among factors cited that put Canadian retailers at a competitive disadvantage to their U.S. counterparts are:

* Canadian stores are less competitive and don't respond to new competitive pressures.

* Management structures are too hierarchical.

* Canadian retailers do less market and location research and are less likely to have advanced skills in data and software use.

* They are less innovative with almost all new formats, products and fashion trends emanating from the U.S.

The report also points to a historic lack of competition in Canada as one reason why many retailers can't adjust to new U.S. rivals such as Home Depot and Wal-Mart Stores.  

SIGNS

            A survey of 7,000 people in six countries found that the five linked rings of the Olympics were the most widely recognized logos--92 per cent of those surveyed correctly identified the symbol. The survey was carried out in Australia, Germany, India, Japan, the United Kingdom and the United States. The McDonald's and Shell logos were recognized by 88 per cent and the Christian cross by 54 per cent. Only 36 per cent identified the United Nations symbol.

MAIL ORDER

            Mail order catalogue shopping is worth $2.5 billion (U.S.) a year in Canada with purchases averaging $94 annually per capita against $240 in the U.S. Canadians are more finicky than their southern neighbours, wanting more than just low prices and superior quality when purchasing from a catalogue. They also demand simple order forms, toll-free numbers for ordering, delivery within three to four days and a variety of payment options. However, Canadians reward mail order houses that meet their demands. Response rates to catalogues and other direct mail in Canada register between three and four percent, more than double the U.S rate. Experts forecast that the Canadian business will reach the same level as the U.S by the end of the decade making the market worth $6.6 billion (U.S.) annually.

INTERNET

            The Swiss government's data protection commissioner has warned Internet users that their data are not safe from manipulation on the global computer network. The main complaint is that there are no standard international or global rules for the protection of information that are legally binding beyond national boundaries. Switzerland has the world's second highest rate of personal computer ownership after the United States, and 200,000 Internet users in a population of seven million.

SUPERFUND

            In 1996, the federal government is likely to launch a technology superfund targeted at a handful of key export-oriented industries including defence, aerospace, environment, biotechnology and parts of the computer sector. Called the National Technology Investment Program, the fund could range from $150 million to $500 million depending on how many sectors are folded into the program. The fund will consist of repayable grants and be available to help companies develop new products with export potential. Companies will pay back the government from profits they earn once their products hit the market.

HOURS

            U.S. industrial workers put in more hours than those in any other industrialized country in 1994, with Japan second and Canada third. Workers in the U.S put in 1,994 hours a year. In Japan they worked 1,964 hours and in Canada 1,898 hours. German industrial labourers worked the fewest hours, 1,527 a year. The second lowest spot was shared between Belgium and Denmark where workers put in 1,581 hours. For comparison this translates into a 38.3 hour work week in the U.S. industry and 29.3 hours a week in Germany. The Canadian work week is 36.5 hours.

NEWSPAPERS

            Daily newspaper readership in Canada has slipped by two percentage points to 65 per cent of adults on any given weekday. The decline appears to follow changes in average daily circulation which fell 3.3 per cent this year. Among other things, circulation has been hurt by increases in cover prices and labour disruptions in the professional hockey and baseball leagues. Readership of weekend newspapers also fell two per cent to 73 per cent of adults. Canadians spend 46 minutes on average reading a newspaper on a weekday.     

BANK ROBBERIES

            Canadian banks have the dubious distinction of being the most robbed in the industrialized world according to the European Banking Federation. The report found Canadian banks are targets more often because thieves don't get away with much cash and have to go back for more. One out of every six bank branches was held up last year but the average take was only $2,900, the lowest among the countries surveyed. Banks in the U.S., where one in seven branches was hit last year, were the second most frequently robbed with the average amount taken being $14,500. European banks were robbed less often--one in 21 branches--but the average take was $29,000. Luxembourg was the highest with an average take of $365,000 while Switzerland averaged $200,000 per robbery.      

MARKETS

            Experts say that Canadian business is missing a potentially lucrative market in the country's fastest growing ethnic group--1.1 million people of aboriginal origin. The federal government has estimated that the aboriginal population will grow by 50 per cent from 1991 to 2016. More than 50 per cent of the population is now under the age of 25. Indian, Inuit and Metis bands already control about 20 per cent of Canada's land and, depending on the outcome of land claims, could end up with as much as 30 per cent by 2000. In 1969 there were 800 aboriginal people with postsecondary education, by 1991 the figure had climbed to 107,000.

BRIBES

            According to a U.S. Department of Commerce report, foreign companies have used bribes to edge out U.S. competitors on about $45 billion of international business deals. The report contains hundreds of examples of bribery as well as legitimate, often government-assisted, export promotions. The stakes for U.S. companies are huge with the report predicting that over the next decade more than $1 trillion in overseas capital projects will come up for bid. Based on the past, prospects for U.S. companies aren't good. The report looked at 200 international deals over the past eight years and found that U.S. firms lost about half partly because other countries were more aggressive. The lost contracts would have meant about $25 billion in sales and have added 200,000 jobs.

AUDIENCES

            According to Statistics Canada, Canada's professional performing arts companies saw audiences shrink in 1993-94. The study included 471 companies representing theatre, music, dance and opera. About 13.3 million people attended a performance in Canada in 1993-94, down 2.2 per cent from 1992, 2.5 in 1991 and down 3 per cent from 1989-90. Only opera companies are bucking the trend with a 2 per cent increase in audiences over the past 10 years.

However, performing arts groups reported a collective income of $383.3 million with the majority coming from earned revenues.

CITIES

            In mid-1994, 2.5 billion people, 45 per cent of the world's population, lived in urban areas, a proportion the UN expects to rise to 61 per cent by 2025. A growing share of urbanites--13 per cent in 1970 but a projected 18 per cent in 2015--live in cities of more than 5 million people. In 1950 only New York and London were mega-cities, with populations of eight million or more. By 1970, five of the 11 mega-cities were in the developing world and the UN predicts that by 2015, 21 of the 33 mega-cities will be in Asia.

FRUIT

            British Columbia produces 80 per cent of Canada's cranberries which ranks as third largest producer in the world.

THE HEREAFTER

* Olay, A Turkish newspaper in Gaziantep is offering a free grave to all readers who collect

99 daily coupons.

* The Lutheran Church in Kalmar, Sweden, has applied for permission to link its on-site crematory to the church's heating system.

* Fabrizio Caselli, a Tuscan watchmaker, is offering Italians who fear premature burial a coffin that includes a beeper, a two-way speaker and a survival kit.

* A Bulgarian fortune-teller has wrecked her career. Aishe Akif of Dobrich was calling the spirits on Friday the 13th, when her tape recorder chewed the tape and the spirits went silent.