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.
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