SEPTEMBER 1993 Edition
ASSETS
Privatization is a policy that in 1980 seemed adventurous
to some and unworkable to everybody else. In 1993 it is economic orthodoxy
worldwide. Last year alone, governments sold $69 billion-worth of state-owned
enterprises. The amount raised since the mid 1980s is $300 billion. If big
privatizations being planned in France and Italy go ahead, the total will surge
again over the next few years. Many other governments--in rich countries, poor
countries, capitalist countries and ex-communist countries, even
still-communist countries--are selling off the state.
By any measure, a transfer of ownership on this scale is
a global economic revolution. The evidence so far is that privatization works.
Done well, it frees companies from the paralysing grip of public control,
stimulates competition and unleashes enterprise. Like any revolution however,
it may cause pain: and it may be followed by counter-revolution, though in the
developed countries with a socialist opposition, it seems to be accepted that
most privatizations are irreversible. In the developing and ex-communist
countries, privatization's victory is not assured unless popular opinion judges
it to be a success.
CRUISING
The Port of Seattle calculates that the Alaska cruise
ship industry generates $118 million annually in economic benefits to
Vancouver, while Seattle gets only around $3.5 million. That translates into
236 cruise ship calls and 449,299 passengers for Vancouver compared with seven
ships and 2,722 passengers for Seattle. More than half of the passengers taking
Alaska cruises fly into SeaTac airport and then take a bus to Vancouver.
Holland-America expects to transport 111,000 passengers
this summer between Vancouver and Alaska on 74 sailings with four ships which
will increase to 94 next summer with the addition of a fifth ship.
Ironically, the cause of this is the Passenger Services
Act of 1886, a protectionist law that makes it illegal for foreign-flag vessels
to transport passengers between U.S. ports. (The U.S. purchased Alaska from
Russia in 1867). Today there are only two U.S.-flag cruise ships in service
which do inter-island cruises in Hawaii.
It is expected that before long, a bill will be
introduced to change this Act to allow foreign passenger vessels to operate
between U.S. ports provided they take a serious interest in investing in the
cruise-ship building industry.
PROVINCES
Ontario, British Columbia and Quebec continued to attract
new residents in 1991-92 while Saskatchewan, Manitoba and Newfoundland saw
continued erosion of their population bases. Ontario had the highest net gain:
94,561 more people moved in than out. B.C. showed the second highest, 66,183
and Quebec was third with 30,226. Immigrants flocked to the big cities. Nearly
half of those who settled in Ontario went to Toronto. Two-thirds of those who
settled in Quebec went to Montreal and 8 out of 10 who came to B.C. settled in
Vancouver. However, Toronto and Montreal lost more people than they gained and
Vancouver showed a net increase.
GATT
The General Agreement on Tariffs and Trade (GATT) in
Geneva has turned to the public to pressure governments to wrap up a long
over-due trade liberalizing pact stating that government policies keep prices
on products such as food, clothing and cars artificially high and increase
taxes. For example, Canada's system of supply management for eggs, poultry and
dairy farming restrict imports, as do those of the European Community, Norway,
Mexico and Finland. It is estimated that resolution of the Uruguay Round would
expand the world economy by $200 million annually, but would mean sacrificing
the interests of protected domestic industries. Among the examples cited by the
GATT:
* Textiles and clothing: Import quotas and tariffs cost a
four-person household in the U.S. up to $420 a year, in Canada $220 a year and
in Britain $130 a year.
* Electronics: VCR's, TV's and CD players, often subject
to high import barriers, cost the European Community an estimated $1.3 billion
a year.
* Cars: American and European restrictions against Japanese imports cut the
choice of cars and increase the price. Japanese cars in Britain are 70 per cent more expensive than in Japan.
* Rice: Japan has banned imports to protect domestic
farmers. Rice costing $45 to $50 per 100 pounds in the U.S. sells for $175 to
$250 in Japan.
RESEARCH &
DEVELOPMENT
Statistics Canada projections indicate that despite an
uncertain economic outlook, research spending is holding steady. Industry is
expected to plow $5.6 billion into in-house R&D this year, an increase of
2.9 per cent over 1992.
The leading research industries are telecommunications
equipment (14 per cent), engineering and scientific services (nine per cent),
aircraft and parts (eight per cent), other electronic equipment (six per cent)
and business machines (six per cent). Over the last five years, these sectors
have accounted for more than half of all R&D expenditures. The highest increase in in-house R&D from
1989 to 1993 was achieved by management consulting services (124 per cent) and
pharmaceuticals and medicine (101 per cent).
Canadian controlled companies accounted for 64 per cent
of all R&D spending in 1991, the last year for which this statistic is
available. 53,730 Canadians were employed in industrial R&D and there were
3,566 firms that performed R&D of which 446 were foreign controlled.
LONG-TERM UNEMPLOYMENT
In 1990, there were 1.1 million Canadians without work,
62,000 of whom had been jobless for more than a year. By June of 1993, 1.55
million were unemployed--up 40 per cent-- but 207,000 had not worked in more
than 12 months, an increase of 234 per cent. This represents about 13.4 per cent
of all those unemployed compared to 5.6 per cent in 1990.
Bad as these figures are, they pale in comparison with
those of some countries. In 1992, France and Australia reported rates of about
35 per cent and for 1991, Belgium, Italy and Ireland, almost two-thirds of the
unemployed had been out of work for at least a year.
Ironically, the two countries that have been doing better
than Canada come from opposite ends of the economic-policy spectrum. Last year,
the rate in Sweden, the world's model "cradle to grave" country, was
8.1 per cent while the U.S., exemplifying the free market, had a rate of 11.2
per cent. The Paris based OECD feels the steady rise in long term unemployment
over the last ten years is one of the most disturbing features of the way labour
markets have been performing in the industrialized world.
In Canada, the rates were highest in Quebec (16.3 per
cent) and Ontario (15.1 per cent), the provinces hardest hit by the recession.
Rates were lowest in B.C. (6.2 per cent) and Nova Scotia (6.9 per cent).
PUBLIC SERVICE
In certain sectors of the U.K. public service, an
incentive structure has been changed into a form of internal market system
where semi-autonomous functioning groups, or "Agencies," are given
fixed budgets and told to run their own shows. At the end of the year, if they
spend less than their allotted budget, they retain half in bonuses and
performance pay and the other half goes back to the Crown. After being
implemented for one year in the British Passport Office (now Authority), the
waiting list for passports went from two months to five days.
BEER
The recent agreement ending the Canada-U.S. beer dispute
is "un-Canadian" if Ottawa does not settle a trade fight between New
Brunswick's Moosehead Brewery and Ontario, the New Brunswick government has
said. Moosehead pay an extra $3.53 a case for a variety of charges which are
not levied against Ontario brewed beers.
Meanwhile, Big Rock Brewery Ltd of Alberta, brewer of
such household names as Warthog, Buzzard Breath and Albino Rhino claims to be
doing much better in California than they ever could in Toronto. They also sell
well in Washington, Oregon and Arizona.
Not only do Big Rock's beers carry unorthodox names, but
in promoting its additive-free beers, the company eschews traditional marketing
promotions such as sponsoring baseball teams, beach volleyball tournaments or
running ads showing good times and parties. Instead they target theatre groups,
folk festivals, ballet and opera while relying heavily on word of mouth. In the
first three months of this year, sales have increased 24 per cent over last
year and the company has now gone public on NASDAQ in the U.S.
HIGH-TECH
In 1989, Hughes Aircraft of Canada Ltd was named the
prime contractor to re-vamp Canada's air-traffic control system (CAATS), a $400
million contract to be completed by 1996. Much of the development work is done
in Richmond and in return for receiving the CAATS contract, Hughes pledged to
spread activity across Canada. They now have a workforce of 750 of which 91 per
cent are Canadian. The largest subcontractor is Richmond-based MacDonald
Dettwiler which, with partners, is doing work worth $60 million.
The company has broken into the competitive European
market with a sale to Switzerland and is going after major contracts in
Australia, Brunei, Korea, Indonesia and China and hopes to crack the
British-based ATC system which handles trans-Atlantic traffic.
POLITICS
At a televised town hall meeting recently, Audrey
McLaughlin unveiled a slick, five-minute, $40,000, pre-election video which
slammed the Free Trade Agreement. Where was the video made? In the U.S. of
course! From now on the NDP insist they will buy Canadian and their director of
communications, responsible for the video, has resigned.
GREY MARKET
Grey market or "parallel importation" is the
term for importation by unauthorized middlemen who buy merchandise in foreign
countries, sometimes very cheaply, and ship them to Canada where they are sold
below the authorized price, thereby disrupting the normal retail channels,
cutting profits and sometimes jobs. This market is estimated to be worth about
$10 billion a year despite the efforts of major manufacturers to stop it.
Goods include everything from electric batteries,
toothpaste, ketchup and coffee to cameras, computers and stereo equipment. Even
a line of rice-paddy tractors has been imported from the same factory in Japan
producing John Deere tractors which are almost identical but are painted a
different colour and cost less.
Some years ago, a large number of U.S. specification
tractors came into Canada when middlemen found they could take advantage of a
high Canadian dollar and sales incentive plans in the U.S. The tractors were
shipped to Canada, duties paid and they still undercut the normal retail price.
METRIC
The U.S. Federal Trade Commission has announced that
consumer package labels will list metric measurements starting early next year
as well as inches, pounds and gallons. A 1992 law requires metric labelling on
consumer goods beginning next Feb 14th.
TRIVIA
* Giving new meaning to
the term user-pays, a hospital in Birmingham, England, has been criticized for
hiring out a sophisticated $750,000 cancer scanner so farmers could check for
fat and muscle content in pigs and sheep for breeding.
* Nissan, Japan's second
largest automaker, has announced that it will start importing about 3,000
vehicles a month from Mexico because of rising domestic production costs and
the higher yen. Last year, Honda imported 20,000 U.S.-made models of the Accord
and this year began importing the Civic.
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