FEBRUARY 1995 Edition
CROSS-BORDER SHOPPING
With the Canadian dollar at its lowest point in nine
years, the incentive to shop south of the border has been removed and the
reverse is now occurring. From January through November of 1994, same-day car
trips, considered an indicator of cross-border shopping, plunged 23.1 per cent
from the same period in 1993 according to Statistics Canada. And trips of one
or more nights are down 17.3 per cent. Meanwhile, same-day trips from the U.S.
rose 7.9 per cent. The trend has already taken its toll on some retailers. Some
stores in Niagara Falls, N.Y., have seen a 33 per cent drop in Canadian
customers and the percentage of B.C. cars in the parking lot of Bellis Fair
Mall, in Bellingham, Wash., has dropped to 35 per cent from 40 per cent. Many
U.S. shopping centres, built just south of the border to take advantage of the
boom in Canadian shoppers of a couple of years ago when the dollar was soaring,
are now suffering from a severe lack of traffic.
DIET
Since 1972, agricultural analysts at Statistics Canada
have been recording the import, production and supplies of basic foods and by
dividing everything by population size they arrive at "apparent per
capita" consumption patterns. Bananas are big on the list, an average of
13.4K per person annually. Lettuce, and carrots remain favourites as are pork
and beef. But patterns have changed since 1972. Certain dairy products have
declined steadily over the past 20 years. Whole milk has plummeted while 2 per
cent milk has climbed. Chicken has gained in popularity year by year while red
meat has dropped slowly. Peppers and cucumber have become especially popular.
Butter, three kilograms per capita in 1993, is now making a slight comeback
against margarine at 5.4K per person. Ale and beer consumption was 68 litres in 1993. Milk was
51 litres for 2 per cent, 10 litres for 1 per cent and six litres for
skim.
SUPPORT
People who have studied the Mexican market agree the most
effective way to explore opportunities in Mexico is through a personal visit. A
new federal government program called NewMex (New Exporters to Mexico) provides
support for Canadians who want to participate in missions to Mexico.
Participants travel to major Mexican cities to learn first-hand how to do
business there. External Affairs and International Trade have more than 30
sector-specific studies available for the Mexican market. Information on NewMex
can be obtained by calling John Wiebe in Vancouver at 666-1436. International
Trade has Centres in 11 Canadian cities and a network of trade commissioners abroad.
A guide called Trade Development Programs and Services is available by calling
1-800-267-8376. The Canadian International Development Agency (CIDA) operates
an Industrial Co-operation program (INC) that uses financial incentives to
mobilize private-sector resources for development, including direct technical
co-operation and feasibility studies. For more information call 819-997-7775.
PUBLICATIONS
The Royal Bank has introduced a newsletter entitled Trade
Talk aimed at Canadian businesses seeking international importing and
exporting opportunities. It provides an economic digest of specific regions as
well as information on the bank's products and services designed to assist
companies in their trade activities. The inaugural issue deals with Latin
America and presents information on Brazil, Mexico and Argentina. Trade Talk
will be issued quarterly and is available by calling 800-263-9191 or from the
bank's International Trade Centre in Vancouver at 665-5108.
PRINTING
Last year, Canada's printing industry was understandably
upset when the 1994 contract to print about 45 per cent of Canadian stamps was
awarded to an Australian printing company. The printing of stamps is a complex,
and high cost undertaking involving strict security systems and expensive
finishing equipment. At the root of the problem was the unwillingness of Canada
Post to award contracts other than on a year by year basis. Helped by a major
lobbying effort by the printing industry, Canada Post has now amended its
procedures and awarded a $24.1 million contract to a Toronto firm which will
guarantee that the printing of stamps stays in Canada in the future. The
company will hire up to 125 employees and invest $4 million in equipment. The
contract is for three years with two one-year options and involves the printing
of around four billion commemorative and definitive stamps during the period.
Equipment manufacturers and suppliers will also cash in on the contract. This
is welcome news for the Canadian printing industry which, after being pounded
by the recession, is now showing signs of recovery.
TRENDS
Despite four visits in three years by the Premier, trade
with the Asia-Pacific region is going downhill. At the same time, provincial
exports to the U.S. have been growing even faster than the share of Asia trade
has been dropping, due to free-trade and the declining Canadian dollar.
Diversification of the provincial economy is considered critical as a hedge
against an over-reliance on the U.S. economy.
In 1990, Pacific Rim countries took 38 per cent of the
value of B.C. exports and about 41 per cent went to the U.S. By the end of last
year, exports to the U.S had climbed to 55 per cent of total exports and the
Pacific Rim share was down to 34 per cent. Despite trade missions, the B.C.
presence in the Asia Pacific region has not substantially broadened and Japan
takes a 71 per cent share of exports and this single-market concentration has
locked B.C. into the problems of Japan's economy while other Asia markets are
booming. The share of the value of B.C. exports to Europe has dropped to 8 per
cent from 16 per cent and there have been smaller drops in exports to Latin
America. The good news is that the value of B.C.'s exports has grown 25 per
cent between 1991 and 1993.
INVESTMENT
One of the biggest worries Canada had with the advent of
free trade was that Canadian firms would head south to where wages and taxes
are lower, unions weaker and winters milder, and many have done so. However,
when it comes to long term investment, Canada still has the edge. Philips, the
Dutch electrical-products group, decided last fall to move two light-bulb
production lines from Mexico to London, Ontario. Chrysler is setting up a
research unit in Windsor, Ontario. Toyota is spending more than C$600 million
to more than double the capacity of its Corolla assembly line near Cambridge,
Ontario, to 200,000 cars a year. All the extra cars will be exported to the
U.S. Two Swedish firms, in pharmaceuticals and telephone equipment, have chosen
Montreal as the site for large research facilities with international mandates.
One will have more than 600 employees. These firms have discovered that the
lure of low wages in the southern U.S. and Mexico can be outweighed by the
productivity of a loyal, well-educated--albeit highly paid--workforce. Free
trade has helped make Canada a more attractive place in which to invest. Lower
tariffs on goods sent south from Canadian factories are one reason. Another is
that competition from Mexico and the U.S. has
spurred Canadian firms to improve productivity, mainly by investing in
plant and machinery.
RETAIL
The stronger economy has resulted in a record number of
new products making their way on to the shelves of North American supermarkets.
Grocery, drug and other stores launched a record 21,986 products in 1994, a
healthy 26.6 per cent surge from the 17,363 new products reported for 1993. New
foods, beverages and health and beauty aids topped the list. Some products were
not really new but "line extensions." Baking soda was added to a lot
of cleaning products and alpha hydroxy acid was added to creams as a
regenerating agent.
An industry study has found that the average price of
items in Canadian supermarkets is 10 per cent lower than products in the
U.S.--an average price of $1.88 in Canada and $2.09 south of the border. The
disparity exists even though some Canadian goods, such as milk and eggs, are
priced higher than they should be because of the country's supply management
system. Canadian grocers and wholesalers fared well in their sales growth in
1993 compared with those in the U.S. reporting a sales increase of 7.6 per cent
over the previous year which is double the U.S. growth. Yet, average weekly
sales for U.S. supermarkets was $332,475, 68 per cent higher that the $198,268
in Canada. Total Canadian food sales were $1.1 billion in 1993.
MARKET INTELLIGENCE
Timely, relevant, product and industry specific market
information is now available within Canada on a new service through Industry Canada's
Market Intelligence Service. Using the Harmonized Commodity (HS) and Standard
Industrial Classification (SIC), the service provides Canadian and U.S.
micro-trade information to Canadian entrepreneurs, manufacturers and investors.
A Canadian company can use the service
to increase business awareness for new product development and production;
increase domestic and foreign market share; identify new markets and buyers.
Data sources include Statistics Canada, Revenue Canada and the U.S. Department of
Commerce and the data are updated quarterly and annually. For more information
contact the Strategic Information Branch, Industry Canada, Tel: 613-954-4970,
Fax: 613-954-2340.
COMPACT DISCS
Cassette tapes are on their way out according to the
industry. CDs gained about a 65 per cent market share over the Christmas season
compared to 35 per cent for tapes. In 1992-93 CD sales totalled 45.3 million
compared with 38.5 million tapes and 300,000 vinyl albums. CDs sales will
increase even more as new cars are equipped with CD players rather than tape
decks. Three out of four Canadian households had tape players last year
compared to one out of three with a CD player. The
pirating of CDs is one of the major irritants in the copyright piracy issue
that might see the U.S. impose trade curbs on up to $800 million worth of
Chinese exports from toys to textiles and possibly shoes and electrical goods.
CDs that cost $22.00 in the U.S are sold on street corners in China for as
little as $2.00.
U.S. trade authorities have identified as many as 29
factories scattered throughout South China's special economic zones churning
out an estimated 75 million bootleg CDs every year. Only about 5 per cent are
sold in China, the rest are smuggled to Hong Kong and other parts of South-east
Asia and some have even turned up in Western Canada. So far, Chinese
authorities have been unable, or unwilling, to shut down these factories. In
fact, since the U.S. authorities first raised the issue 18 months ago, the
number of illegal CD factories has nearly doubled.
EURO-BUREAUCRACY
The New Year saw a spate of new EC regulations come into
effect to protect its citizens! Among the highlights: Abnormal curvature of
bananas is forbidden nor can they be less than 5 1\2 inches long (British tabloids
have opened up banana hot-lines so that readers can turn in stores selling bent
or short bananas); Carrots are fruit (so that Portugal's carrot jam can
continue to be sold); The land snail, favoured in French restaurants as
escargot, is a fish, this enables French snail farmers to claim fish-farm
subsidies; Young persons aged 15-18 are "adolescents" if they have
left school, but "children" if they have not; Quail are not poultry;
It will be illegal to ski on snow less than eight inches deep; Curvaceous
cucumbers are not permitted; Restaurants serving cheese and celery sandwiches
must have separate boards to carve the cheese and celery; Cattle are required
to have double eartags engraved with a 14-digit number to identify them and
have individual passports which must accompany them wherever they go, but the
number on the passport is different from the eartag number; British foresters
are up in arms over a ban on using the hearty English oak for furniture making
because it is too "bendy"; Next year should see the introduction of
standards for a Euro-Santa and Christmas trees.
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