MARCH 1993 Edition
NAFTA
The federal government has announced that it will spend
$27-million over four years to help Canadian businesses seize opportunities
opened up by NAFTA. Key elements of the program, called Access North America,
are focused on enabling Canadian companies to gain a foothold in Mexico.
Trade Minister Wilson stated that Mexico is a
fast-growing economy that will need telecommunications products, infrastructure
assistance, environmental services, new technology and other goods and services
that Canada produces. Canadian business has already shown heightened interest
in Mexico. 4,500 business people visited the Canadian embassy in Mexico City
last year compared to only 2,100 such visits in 1991.
EXPORTS
Medieval Glass
Industries, maker of cut-glass windows and doors with more than 130 different
designs, has grown each year since it opened in 1986 and employs 65 staff. Now,
with the help of a B.C. export loan guarantee, Medieval has signed a new
contract to supply a 45-store chain in the U.S. midwest which will add another
dozen jobs at their Richmond plant.
V-W Canada imports Audis, Porches and Volkswagens but has
turned into a large Canadian exporter. In 1991 the company exported
$195-million worth of components, parts and accessories from its plant in
Barrie, Ontario. The figure rose to $224-million in 1992. Besides eleven
different wheel styles which are
exported all over the world, the plant has won contracts for catalytic
converters going to Germany and Mexico.
FACTORIES
Canadian factories are making themselves more efficient
and productive. The ability to deliver goods just when the customer needs them
has become a new competitive fighting ground. Big inventories cost money and a
big backlog of unfilled orders can mean lost customers. A decade ago, factories
typically kept inventories equivalent to about two months of shipments; that
figure is now down to about six weeks. Key factory trends are:-
* Smaller inventories of finished goods and raw materials.
* "Partnering" with suppliers and customers, so
companies get their supplies and ship their products only as needed.
* Electronic data interchange systems that link partners who
have established a close relationship.
ECONOMY
Reports of an end to the recession have done little to
reassure Canadians, who cite the economy as their No. 1 concern. 48% of 1,501
Canadians surveyed in February indicated the economy was the "most
pressing issue currently facing the country," while unemployment was named
by 45% followed by the federal deficit at 18 per cent. Central Canada was most
concerned about the economy, Atlantic Canada and Quebec cited the unemployment
rate and the West was concerned about the national debt.Other issues mentioned
were the environment, free trade and political leadership--six per cent each;
and taxes, social services and national unity at five per cent.
EDUCATION
Education employs one in ten Canadians and accounts for
almost 6 per cent of gross domestic product. More British Columbians works as
university professors than as logging or forestry workers. The education
industry is larger than mining,
forestry, food, beverage, rubber, plastics and clothing industries combined.
Increasingly, communities see the presence of high-quality educational
facilities as a powerful advantage for economic development. Education creates
high knowledge-intensive, entrepreneurial spinoffs, which produce quality jobs.
ENVIRONMENT
Recent surveys have shown that consumers now put value
ahead of anything else. People are so price sensitive that many suppliers are
switching their emphasis to bulk buying, not what retailers expected two or
three years ago when it was regarded as good marketing to demonstrate social
consciousness by coming out with a line of green products.
In 1988, green promises were made for only 1.1 per cent
of new packaged goods that appeared on the Canadian market. By 1991, that
figure had soared to 33.9 per cent, only to plummet to 9.4 per cent last year.
The trend in the U.S. and Europe was similar but less dramatic.
The Loblaw chain has almost halted the introduction of
green products after having set the pace for several years. The company sells
about $100-million a year of its more than 100 green products but brought out
only three new ones last year. It is now concentrating on upgrading its
original products. Of 31 per cent of shoppers surveyed who claimed to be most
concerned about the environment, only 28 per cent said they would pay a premium
for green goods.
RETAIL
Industry experts claim that warehouse and discount
retailers will vault ahead of traditional department stores in sales of general
merchandise this year. Price slashing giants like Price Club and Zellers will continue to widen their lead over Canada's
three major department store chains.
A Toronto retailing seminar was advised that the consumer
has changed dramatically and will continue to change. Much of the trend to
low-margin retailing is being driven not just by economics, but by shifts in
demographics and social attitudes.
The baby boom generation reached its peak family-forming
years in the 1980s which caused an upturn in the demand for houses and the
things to go in them. Now, the biggest spending segment of the
population--those between 24 and 34--is shrinking while the average age of the
population is rising. Older people tend to shop at fewer stores and spend less.
TRAVEL DEFICIT
Canadians spent a record $8.3-billion more outside the country in 1992 than foreign
visitors spent here, 10 per cent more than in 1991. $11.2-billion was spent by
Canadians in the U.S. and $5.1-billion in other countries.
U.S. visitors to Canada
spent $4.6-billion in Canada and other foreign visitors spent $3.4-billion
here. On trips to the U.S. longer than one night, Canadians stay on average 7.2
nights spending $57 a night, while U.S. visitors to Canada stay an average of
only 3.7 nights but spend $74 a night.
Two factors might help to level the playing field. The
lower Canadian dollar will make overseas trips more expensive for Canadians but
cheaper for U.S. visitors to Canada. (The B.C. government has just announced
that it will close the tourism offices in Seattle and California!).
"Snowbirds" who traditionally spend the winter months down south are
finding it increasingly difficult to get health insurance and the dollar and
U.S. inflation have reduced their
purchasing power by more than 37 per cent over the last 11 years.
BRITISH COLUMBIA
The Investment Dealers Association forecasts that the
B.C. economy, as well as that of Alberta, should outperform the rest of Canada
for the sixth consecutive year but warns the that the growth might not be
sustainable if the government maintains its current spending and tax policies.
B.C.'s expansion will be spurred by the continuing flow
of migrants to the province from Canada and abroad and by exports, now rising
because of the lower Canadian dollar and economic recovery in the U.S. and
Japan.
SERVICES
We thought it would be worth reproducing extracts from a
recent article on manufacturing and services in the highly respected Economist.
" Only manufacturing industry can create real wealth
and proper jobs," is the battle cry of many businessmen and politicians in
America, Europe and Japan. They fear that the falling share of manufacturing in
countries' GDPs heralds inexorable economic decline unless governments help
with an `industrial policy.'
Manufacturing matters no more than services, but no less
than them, either, they are interdependent. Computers would be useless without
software writers and nobody would buy a car if there were no gas stations.
Indeed, the distinction between industry and services is now largely
meaningless. In rich countries today, over half the workers in a typical
manufacturing firm do service-type jobs--design, distribution, financial
planning, only a minority make things on a factory floor.
Another myth about service industries is that their
productivity lags behind that of manufacturing. Official statistics show that
productivity in services has been dismal. Partly, this is because it is
difficult to define, let alone measure, a unit of output in services. Despite
this shortcoming, there are many non-statistical signs that a productivity
revolution is sweeping through services. Cocooned for years by restrictive
practices, services are now being liberalized and exposed to competition.
Privatization and deregulation are having a much bigger impact on services than
manufacturing, forcing airlines, banks and telecommunications firms to become
more efficient.
Another misconception about services is that they offer
less scope for international trade than goods. Haircuts and hotel rooms cannot
be shipped abroad. So if manufacturing shrinks, how will a country earn the
foreign exchange needed to import video recorders or cars? Today, more and more
services are tradable. The share of services in U.S. total exports has risen
from 20 per cent to 30 per cent in the past 10 years alone. The opportunities
for expanding exports of finance, consultancy and telecommunications are vast,
through cross-border sales or foreign direct investment. Deregulation is
opening more markets to foreign suppliers of services.
Rich countries would gain handsomely if poorer countries
opened their service markets even wider to foreign firms as part of a deal
under the Uruguay round of trade talks. Instead, rich countries have foolishly
denied themselves such gains by refusing to cut subsidies and protection for
their own much smaller farming sectors. Services now account for 60 per cent or
more of the rich countries' Gross Domestic Product. Manufacturing's share will
continue to dwindle as more low-tech factories move to countries where
labour-intensive assembly or other operations can be performed more
cheaply. The comparative advantage of
industrial economies lies increasingly in services.
Writing computer programs creates more added value than
churning out computer discs. Those activities with the highest value added are
those with the highest wages. If Munich or Chicago really want to hold onto
jobs that can be done in Monterrey and Shanghai, then their citizens will need
to be happy on Mexican or Chinese wages.
Manufacturing snobs who sniff that their firms are more
valuable than pizza parlours have an out-of-date image of services. Thanks to
new technology, fewer service-industry jobs are clerical or manual and more
require cerebral skills. More than half the workers in rich countries are
employed in the production, storage, retrieval or distribution of knowledge.
The best `industrial policy' is one that provides a sound
macro-economic climate, opens the country to competition, and equips people
with the education and skills for tomorrow's knowledge-based business."
TRIVIA
* Employees of Britton Plastics Ltd. of the U.K are being
paid in cocoa beans. The scheme allows them to pay a reduced rate of National
Insurance contributions. They get a pay slip telling them how many beans they
own and can receive bonuses if cocoa does well on the commodity market.
Benefits and pensions are still received in cash.
* Despite economic hard times, the United Way of the Lower
Mainland and the Vancouver office of OXFAM say donations were up in 1992.
Statscan reports that in 1991 donations to charities increased seven per cent
to $3.1-billion over the $2.9-billion given in 1990. Giving per capita was
highest in Newfoundland ($230), followed by P.E.I. ($220), and lowest in B.C.
and Alberta ($130 each) and Quebec ($80).
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