DECEMBER 1996 Economic Digest - Importing and Exporting

DECEMBER 1996 Edition

CHILE-CANADA

            A free trade agreement has now been signed between the two countries which gives Canada momentum in developing closer political and economic ties with Latin America. The agreement is modelled on the NAFTA and will give duty-free access to 75 per cent of Canadian exports and elimination of Chile's 11 per cent import duty on almost all remaining industrial and resource based goods over five years. Canada will have better access for agricultural goods, protection for Canadian investments and there will be mutual elimination of anti-dumping duties within a six year period. There are side agreements on labour and the environment.

STATISTICS

            The range of high‑tech equipment on the market is rapidly changing the face of communications and entertainment for the average Canadian. Every third household

now has a home computer, while new data show that one in seven has a cellular phone. In 1996, 3.6 million households, or 31.6%, have a home computer, up 365,000 from last year and triple the proportion of a decade ago. Data collected for the first time this year show that 1.6 million households, or 14.1%, have cellular phones. In terms of home entertainment, 53.4% of households have a compact disc (CD) player, more than double the proportion of just five years ago.

MICROBREWERS

            The changing tastes and loyalties of thousands of B.C. beer drinkers have shifted away from the major brewers. Microbrewers are now increasing their market share at the expense of the industry's giants and now account for between six and 10 per cent of B.C.'s annual 2.95 hectolitre market. This is the highest penetration rate of any Canadian province, about double the national average and rivals the 10 per cent market share that microbrewers now command in Washington and Oregon. In the U.S as a whole, upwards of 1000 microbrewers account for 2.5 per cent of total beer consumption. This industry is worth about $52 billion (U.S.) annually.

DAEWOO

            This giant South Korean auto maker has postponed indefinitely its planned 1997 entry into Canada but still expects a spring 1998 launch in the U.S. market. This is the second South Korean auto maker to reassess its plans for Canada. Earlier this year, Kia Motors Corp. closed a research and sales office in Toronto. Consultants have been assessing if the unique method Daewoo uses to sell cars in Britain would work in Canada. That system involves 18 big show rooms of at least 20,000 square feet where the company sells only new cars and does no service. The show rooms are complemented by another 30 or so dealerships which offer new and used cars and service. The major problem in duplicating the British strategy is Canada's vast size and thinly spread population. It is estimated that a serious effort to sell cars would require initial costs of $10 to $20 million.

DOING BUSINESS

            When it comes to business competition with the U.S., Canada wins, hands down. A business cost analysis prepared by the Royal Bank and KPMG Canada for the federal government, states that for every industry examined, all costs are lower in Canada and this will remain while the Canadian dollar stays under 87 cents against the U.S. dollar. Costs related to locations are on average 15.7 per cent lower in Canada. The advantage varies from industry to industry and ranges from 5.5 per cent for telecommunications to 10.5 per cent for software production. The survey show that even expensive cities, such as Vancouver, are less costly than their U.S. counterparts.

FAX ADVERTISING

            Rules governing facsimile advertising have been toughened in B.C., Ontario and Quebec following consumer complaints. Unsolicited advertising by fax will be allowed from 9.00am to 9.30pm Monday to Friday and 1.00am to 6.00pm Saturday and Sunday. Advertisers will also have to comply within seven days with a consumer's request not to be faxed again, down from the present 30 days. Exceptions to the new rules are emergency and public service information, account information, market or survey research and calls to businesses responding to messages or requests by subscribers.

OPPORTUNITIES

            Invitations to tender from GATT\WTO countries around the globe are now available on-line. Tenders Electronic Daily (TED), is a database developed by the European Commission. It is said to be the best available source of information on current worldwide purchasing and includes all areas subject to government spending, including supply, service and public works contracts above a certain monetary value. With an average of 30,000 documents in TED each day, there is a good chance that most companies will find one in their particular field. For a free document search and sample invitation to tender or contract award registration and subscription fees, contact Advanced Information Databases Inc, the official gateway in North America for the European Union at 1-800-890-1692.

SERVICE

            His wife thought he was mad when Mr. Simpson of Florida sent in a Jones Dairy Farm coupon for a pancake breakfast that he found in a 1935 issue of Fortune in an antique store. Four days later, a delivery truck pulled up to their home and dropped off a package containing breakfast sausage, pancake mix and a jug of pure maple syrup. The value of the breakfast package: $29.95, plus shipping.

CREDIT

            Credit cards are far more popular in America than anywhere else, with each person carrying an average of 1.4 cards. Canadians average one card each. By contrast, there is only one card for every two people in Britain and one card for every ten Germans. Only seven per cent of the French have credit cards, but those who do make the most of it, spending an average of $6,192 per card. That is more than four times the amount spent per card in America.

DEBT

            The biggest group of people behind B.C.'s personal bankruptcy numbers are between 23 and 26 and the rate is increasing faster than anywhere else in the country. The young have gone to a community college, university or technical school, though many didn't complete their programs. They ran up student loans from $3,000 to $20,000 and when they left school, the few who found jobs didn't find well-paying ones. With low or no earnings and student loan payments, many abused credit cards, further swelling their debt.

SOUTH AFRICA

            The Canadian High Commission in South Africa has launched an Internet homepage which may be found at http://www.canada.co.za. It enables visitors to access information on a wide range of topics relating to Canada and South Africa. These include political-economic and trade and tourist information. It also has links to a variety of other African sites and should be useful to any company considering trade in Africa.

REAL ESTATE

            According to a survey by AFIRE, a U.S. real estate organization,  American real estate remains the investment choice of foreign property investors. 81 per cent of AFIRE respondents said U.S. real estate was a better investment than in Europe, while 77 per cent picked the U.S. over South East Asia. 83 per cent of the 155-member group said they would increase their level of investment in the U.S. next year. AFIRE members have about $15 billion (U.S.) in capital invested in the U.S., about half of all foreign investment.

TRENDS

            A majority of people living within Vancouver's city limits speak a language other than English at home according to the city's social planning department. In the past five years, many Asian immigrants have moved into Vancouver and English speaking residents have sold their high-priced city homes and moved to the suburbs. Now, only 43.96 per cent of the children in Vancouver schools report English as the language they speak at home.

POLAND

            Canada wants Poland to become its foothold for trade expansion in Central and Eastern Europe and will likely double investment there next year. Poland is already Canada's No 1 market in the region. Six years after the fall of the Berlin Wall, there were 3-4 million non-agricultural businesses in the region, most of which were set up from scratch after communism's collapse. In some countries, such as Poland and Hungary, around 20 per cent of them existed before 1990 and Poland had over a million registered businesses in 1995.

SATELLITES

            Industry Canada is warning that hundreds of thousands of Canadians using satellite-receiving equipment to obtain U.S. services may be breaking the law and could face criminal charges. In a recent brochure on direct-to-home TV, the government made it clear for the first time that it regards the so called grey-market to be illegal. Industry watchers estimate as many as 200,000 Canadians are receiving grey market TV services. A black market also exists in the form of cards with embedded microprocessors that enable people to pull in satellite programming without paying anyone. However, the legality of DTH remains uncertain and police agencies are confused and frustrated as they try to enforce laws that are under attack in the courts. A New Brunswick court ruled recently that a search and seizure of satellite equipment by the RCMP was a violation of the Charter of Rights and Freedoms and ordered the equipment returned.

THE FUTURE

            A laboratory experiment In Wisconsin has shown that a gene in bacteria can be inserted into the cotton plant creating a polyester-like substance which may allow farmers to grow a fibre that is wrinkle-free and as warm as wool. The concept may allow the industry to come up with new and novel fibres for the textile industry. Different genes may be used to make cotton resistant to wrinkles and shrinkage and others could cause cotton fibres to lock in dyes, allowing production of more brightly coloured, fade resistant fabrics.

GAS

            Almost half of all Canadian natural gas production is exported to the United States via an extensive network of pipeline systems. Over the past decade, natural gas exports have been growing rapidly to meet the demand from U.S. utilities and residential users. In recent years, pipelines transporting gas to Canadian and U.S. customers have been operating near full capacity, especially during the peak winter months.

FILMS AND VIDEOS

            In 1994/95 there were 706 film, video and audio‑visual production companies and 154 motion picture laboratories and post‑production companies in the Canadian film and video industry. Almost 16,000 people were employed, including 3,600 full‑time, 2,300 part‑time and 10,000 freelancers. Canadian films showed increased popularity on the international market with another record performance by the film and video industry. Production revenues reached $797 million, up 8.7% from the previous year and up 37.2% from 1990/91. A factor in the expansion was growth in foreign sales, which reached $163 million, a 9.6% increase from the previous year. Exports, which accounted for a fifth of total revenues, have more than doubled over the past five years. Made‑for‑television productions accounted for most foreign sales.

CHRISTMAS

            Three is the maximum number of courses of a Christmas dinner that may be eaten in Britain without violating a 1646 law still on the books from Oliver Cromwell's Long Parliament.

            Thousands of Christmas cards depicting stolen artwork will go on sale in Britain this year. Police hope that some card recipients will recognize the masterpieces and tip them off.

NOVEMBER 1996 Economic Digest - Importing and Exporting

NOVEMBER 1996 Edition

TRADE SURPLUS

            Canada's exports grew by 2.7% in August, reaching a record $23.2 billion. The gain reflected healthy vehicle exports and a rebound in sales of grain and other agricultural products. Shipments to all trading partners except Japan gained ground, but U.S.‑bound exports were strongest, due mainly to automotive exports. Imports slackened after two months of steady growth, dipping 2.7% to $19.1 billion. Weakness was widespread, but machinery, industrial goods and auto parts played major roles. Imports from the United States and European trading partners fell the most. Export strength and import slippage resulted in the largest trade surplus on record ($4.0 billion).

FOOD PROCESSORS

            Canadian food processing companies are mired in tough competition at home and must buy out their rivals and look to foreign markets to improve flagging profits.   A survey by Deloitte & Touche found that the pretax return on equity for Canadian food processors fell to 12 per cent last year from 16 per cent in 1994. U.S. processors, meanwhile, managed to increase their return to a record 36.2 per cent from 34.2 per cent for the same period. U.S companies produced better returns in part because of greater population density, which reduced transportation costs, and less competition from grocers' private-label brands than in Canada.     

RRSP'S

            Home buyers have cashed in nearly $4 billion in RRSP's to take advantage of a federal tax incentive to boost the housing market. A study from Canada Mortgage and Housing shows that more than 402,000 individuals and families purchased homes because of the program set up in 1992 which allows people to take up to $20,000 out of RRSP's tax free, to buy a home, as long as it is repaid within 15 years. Over $3.8 billion have been removed from RRSP accounts over the past four years. An estimated 65,000 are expected to use the program this year. Almost two thirds of the activity occurred in the first two years until Ottawa decided it would apply only to first-time buyers.

POPULATION

            Canada's population reached 30 million late this summer and should be 35 million by 2010. The population was 10 million in 1929, 20 million in 1966 and 25 million in 1982. Half the country's growth now comes from immigration. Last year 215,000 immigrants came to Canada. The vast majority settled in Ontario (55 per cent) or B.C. (21 per cent).

WOMEN

            A study involving 6,403 questionnaires by the Foundation for Future Leadership, found that women do a better job than men in 28 of 31 key management categories, including keeping productivity high and generating ideas, but do poorly at handling frustration. It found that women have better intuitive skills than men, and also outperform men in logic-based skills such as meeting deadlines and problem solving.

MEN

            A survey by the Food and Consumer Products Manufacturers of Canada shows that men are doing far less grocery shopping than six years ago, despite hints that the women's movement was turning out more male shoppers. Men make up only 15 per cent of all grocery shoppers now, down from a high of 21 per cent in 1991 and a little above the 13 per cent level of 1987. This means that advertisers have not been far off the mark in stereotyping women as the prime shopper who worries about which products to buy. The study also found that men spend more on a per person basis when shopping, spending an average of $45 a week while women spend $37 a week.

AFRICA

            Companies need to know what the future high-growth markets are. United Nations demographers say Africa is the only major region that will gain a larger share of world population over the next 30 years. Its portion should explode to nearly 20 per cent by 2025, from the current 13.5 per cent. The continent is expected to rocket to a staggering 1.6 billion people from 750 million. Some countries and even regions, most of Europe for instance, are expected to shrink as a result of declining family size and of rising death rates in an aging population. And as Africa moves towards industrialization, it will become an enormous market for the right goods and services.

COMPLAINTS

            Companies can do more harm than good by soliciting customer complaints when they have a poor system to handle them. Hepworth & Co, a consulting firm, surveyed more than 38,000 customers of 25 large Canadian companies between 1994 and 1996 and found that it can be a dangerous approach if it isn't accompanied by a good response system. Companies lose more business by handling complaints badly than by never hearing them at all. The survey also found that only one in four people who complained were satisfied with the response they received.

PHONES

   Once marketed mainly as a business tool, cellular phones are now making their way into the average home. While 14.1% of Canadian households have a cellular phone, the proportion jumps to 20.8% in Alberta. Canadians love their telephones, whether regular and cellular. Nationally, almost 4 in 10 households have three or more regular telephones. In Alberta, 45.5% of households have three or more phones, the highest proportion in the nation. This drops to 28.4% in New Brunswick, where the proportion is the lowest.

OPPORTUNITY

            The phone is ringing at the town office in Swan Hills, Alberta, including a call from Sweden. Officials are so desperate for business they have started to give away land. They plan to disburse 28 fully serviced lots. The community of 2,300 is 170 kilometres north of Edmonton and is best known as the home of a hazardous waste treatment centre. The town wishes to attract more business to diversify its economy.

COSTS

            Toronto, Vancouver and Montreal are the most expensive Canadian cities in which to live. According to Runzheimer Canada, a relocation company, a family of four in Toronto would have to spend $87,400 annually to sustain a lifestyle that would cost only $74,000 in Edmonton and Saint John. It would cost $86,800 in Vancouver and $83,400 in Montreal. (The median cost in all Canadian cities is $75,000.) The hypothetical lifestyle includes a 2,000-square-foot, eight-room house in a suburban area and two cars, one a 1996 model.

ROBOTICS

            Artificial workers are making a comeback. After peaking at almost 81,000 units in 1990, worldwide sales of industrial robots fell to just over 56,000 in 1993. Last year however, sales surged by 26 per cent to 75,500 units and are expected to grow by 15 per cent for the rest of the 1990s. Japan is still the biggest user of industrial robots buying 36,500 last year, almost half of the world's total. The U.S., Britain, France, Germany and Italy invested in another 23,000 robots between them.

TAIWAN

            An affluent country about the size of Vancouver Island, but with a population of over 21 million potential consumers with a per capita income of US$13,500, Taiwan has experienced an 8 per cent economic growth rate for the past 30 years and is Canada's eighth‑largest export market. It is also one that offers increasing opportunities, particularly for those committed to the long term. Two‑way trade in 1995 totalled almost $5 billion. Canadian exports to Taiwan that year were valued at $2.2 billion, an increase of 40 per cent over 1994. While some of this trade consisted of traditional Canadian exports, there has been diversification. In little more than a year, some 20 to 25 new Canadian products have been introduced into Taiwan.

TECHNOLOGY

            It used to be that an auction for 13,200 cattle was a noisy affair. But at the Highwood Auction Company in Alberta where $10 million worth of cattle recently changed hands, the only sound that could be heard above the auctioneer's patter was the ring of cell phones. This event was part of an emerging trend called a satellite cattle auction. The heifers, steers and calves had been videotaped earlier on their home ranches. The videotape was then broadcast over the Anik E1 satellite on Channel 20 starting at 6.00pm sharp and the catalogue sent over the Internet. It is expected that 150,000 cattle will be sold in Canada via satellite this year

FREER TRADE

            Leaders of the 12 member states of the Southern Africa Development Community have agreed to a trade protocol which commits them to establishing a free-trade area within eight years. This marks the first time that South Africa has signed a multilateral trade agreement with a number of countries that were opposed to its former apartheid regime.

           

BANANAS

            For fifteen years the Canadian International Development Research Centre (IDRC), has been funding research in Honduras into a better banana. They are hoping to create a variety without the disease problems of the familiar Cavendish banana sold everywhere which suffers from a black fungus when growing. Called the Mona Lisa, the IDRC first presented the stubby little banana to the public in 1994. Trouble was, it was in the developmental stage and no one was actually marketing it. Test batches have recently been sold in Ottawa and it is hoped they will be available across Canada next year.

POST-INDUSTRIALIZATION

            According to John Kettle, a consulting futurist, it has been half a century since Canada was an industrialized nation--that is, one whose economy is driven and dominated by manufacturing, construction and non-renewable resources. The peak was in 1953 when 40 per cent of our GDP was derived from industry. The figure is now down to about 28 per cent and dropping, likely to follow agriculture which now accounts for just 4 per cent of GDP. We are now in a post-industrial, service-oriented phase, Kettle suggests, which implies that, at some point, we will import almost all our goods as other countries are able to manufacture everything better and cheaper.

PARODY

            Two Liberal MP's have introduced a private member's bill in the House of Commons parodying the U.S. Helms-Burton act which allows foreign businesses to be sued if they are using land confiscated after the 1969 Cuban revolution. The bill would allow Canadians who lost property in the American Revolution to do the same. The sponsors insist the bill is no joke citing the descendants of James Osborne, a captain in the British army. Under the Canadian bill, they would have claim to 500 acres in Washington, including the land underneath the White House. Private bills rarely pass!

PROFITS

            The world's biggest companies fattened their profits by nearly 15 per cent in 1995, and did it with roughly the same number of workers as they had in 1994, Fortune magazine reports. The U.S. was home to the largest number of the 500 biggest companies with 153, followed by Japan with 141, France with 42, Germany with 40 and Britain with 32. The most profitable industries included airlines, brokerages enriched by booming markets and paper companies that commanded premium prices. The collective profits of the 500 totalled $323.3 billion (U.S.), an increase of 14.7 per cent. But the number of workers the companies employed rose only 1.8 per cent to 35.12 million, with some companies slashing jobs.

DUMB

            The FBI estimates that 45 bank robbers are caught each year in the U.S. after writing their holdup notes on the back of their personalized deposit slips.