OCTOBER 1996 Economic Digest - Importing and Exporting

OCTOBER 1996 Edition

TAX BREAKS

            The New Brunswick government is offering a sales tax rebate of up to $250 to residents who buy a home computer by December 31. The government wants as many people as possible, whether in urban or rural areas, to have computers stating that access to computer networks can provide residents with improved education, business, government and entertainment services and make the province more competitive. The government estimates that about 32 per cent, or 80,000, households in the province currently have a PC and hopes the rebate program will add another 10,000. 

TRUCKING

            U.S. trucking firm J.B. Hunt Transport Service Inc. has stunned the transport industry by announcing plans for onetime pay increases averaging 33 per cent to take effect next February. The company said the move is aimed at solving severe labour shortages. However, analysts are afraid it may have more sweeping consequences for the U.S. economy such as higher shipping costs for billions of dollars of consumer goods. Truckload carriers now employ more than 300,000 drivers yet need 10 to 15 per cent more. Trucking controls about 79 per cent of the $460 billion U.S. freight bill.

DINING OUT

            The average Japanese consumer ate $2,000 (US) worth of food away from home last year, making them the world's biggest fans of restaurants and food outlets. Overall, they spent $263 billion on dining out last year. Japanese diners spent more than twice as much as their nearest rivals, the Americans, who consumed food worth $950 per capita away from home while Europeans spent from $435 to $810 per capita eating out.

FORESTRY

            An Industry Canada report states that the former Soviet Union's vast softwood forests threaten the competitiveness of Canada's forest products industry. Wood products exports from the Baltic States are already eroding Canadian market share in the European market. In 1995, exports of Canadian wood and pulp and paper totalled $41.2 billion. As many as 225,000 people work in the forests and mills across Canada and up to 675,000 other jobs are indirectly supported by the industry. The report said fast-growing forest plantations in Chile, New Zealand and Australia are also a threat.      

GAS STATIONS           

            Canada's major oil companies are cutting back on giveaways such as mugs, glassware and books and concentrating on enticing motorists with diversified gasoline stations which put neighbourhood convenience stores to shame. Gas stations have been bruised after battling retail chains which specialize in oil changes, tune-ups and other services. Industry observers say the new focus on convenience stores and fast food outlets represents a widespread retreat from automotive service and speculate that a typical gas station of the future might sell only oil and windshield fluid in addition to gasoline, with only a few providing car repairs.

LABOUR COSTS

            Unit labour costs measure the total cost of labour required to produce one unit of output. They are driven up by inflation and downward by gains in labour productivity. In most industrialized countries, labour costs have been growing slowly over the past five years. The average annual increase in labour costs in selected countries was lower during the 1990-95 period than during 1985-90. The biggest change was in Sweden where costs rose at an annual rate of 6.6 per cent while unit costs in

Canada and the U.S. rose only 0.3 per cent.

U.S. EXPORTERS

            A recent Coopers & Lybrand study of 434 fastest-growing U.S. companies showed a 31.2 per cent sales increase for 204 that were exporting, compared with 24.9 per cent for the nonexporters. A similar survey three years ago revealed a much smaller growth gap: 26.4 per cent for exporters versus 22.5 per cent for those staying domestic. The exporters said they expect their sales outside the U.S. to zoom 66 per cent this year. Not all exporters are manufacturers. Of companies surveyed that planned to start exporting this year, more than half are service providers. The median company reported 70 employees and annual sales of $7 million.

TECHNOLOGY

            Scientists in Antarctica studying the world's environment have been looking for a solution on how best to track penguins, a critical part of their research. They are now using barcodes, similar to the ones used at supermarket check-outs, glued to the beaks of the penguins. The equipment has to work in temperatures as low as -73 C and an infrared reader be able to detect the codes from great distances. While the concept works, biologists are not finding the penguins very cooperative.

INTERPROVINCIAL TRADE

            Trade among the provinces was almost as important to the national economy as exports in the early 1990s. One in every six private-sector jobs was linked to the production of goods and services sold across provincial or territorial boundaries. Interprovincial trade accounted for $141 billion of economic output, compared to $161 billion in exports abroad. B.C. had the largest interprovincial trade deficit at $8 billion but was second only to Alberta in its surplus in international trade.           

VANCOUVER

            The B.C-initiated International Maritime Centre (IMC) was set up to take advantage of federal policy which exempts international shipping companies from Canadian resident-corporation taxes. A recent benefit study shows that since 1993, 21 companies which control more than 200 ships, have established offices in Canada, 18 of them in Vancouver (10 of them from Hong Kong). These offices employ around 350 persons with an approximate annual payroll of $17 million. Business expenditures in Canada are about $30 million a year.      

SMALLTOWN U.S.A.

            Commerce Department figures are showing a surprising trend. Small, little-known towns are drawing in new factories and shattering the myth that manufacturing is dying in the hinterlands. From 1989 to 1994, rural counties gained 167,000 new manufacturing jobs, while urban counties lost 1,172,000 of them. The rural gains are all the more striking, coming as manufacturers produce more goods with fewer workers. Small communities, where land is cheaper, are luring manufacturers by offering tax breaks, low wages and taxes and a reliable work force.

OPEN SKIES

            Government is finding that economic growth and creating jobs can be spurred by changing regulations rather than just writing cheques. A case in point is the 18 month-old Open Skies air agreement between Canada and the U.S. This piece of cross-border deregulation has been a jobs bonanza in places such as Vancouver, Calgary, Ottawa and Montreal. The deal has spawned more than 100 new scheduled service routes between Canada's largest 10 cities and U.S. centres. Vancouver Airport is adding 1,000 jobs annually, paying on average 33 per cent above the provincial industrial wage. Montreal has added 1,000 new jobs to service the 33 new routes across the border. Since 1995, Calgary has doubled its number of direct connections to the U.S.

MINIATURIZATION

            Japan has developed the "micro-car", a replica, at one one-thousandth the size, of Toyota's first automobile. As tiny as a grain of rice, the minuscule vehicle has 24 parts, including tires, wheels, axles, headlights and taillights, and hubcaps that carry the company name in microscopic letters. The motor, which itself is made of five parts, is only 0.7 millimetres in diameter and can propel the car at speeds of up to five centimetres a second. Already the world's masters of miniaturization, Japanese companies, backed by the government, are hoping to make complete machines the size of insects with parts as small as specks of dust. Miniaturization is one of the most promising industries of the future with the potential to revolutionize fields like manufacturing and medicine.  

COMPETITION

            Massive change is facing drugstores where pharmacists face competition from a range of rivals, including mail order companies, supermarkets and department stores. The stakes are high as aging consumers spend more on medication and heath-care aids as well as demanding more information on available products. In a bid to counter this, Zellers Inc. of Montreal, which runs pharmacies across the country, is about to offer "good-heath clinics" covering such topics as asthma, diabetes, depression, heart conditions and arthritis. The mobile clinics will tour the country over the next year. At each site, a pharmacist and a registered nurse will run the clinic. About 15,000 people visited Zellers stores over the summer for pilot clinics on cholesterol and allergies.

FUEL EFFICIENCY

            For years, auto makers have been looking for an engine that uses little fuel, has low emissions and develops great horsepower. Now a new generation of cars with fuel sipping engines but zippy acceleration are about to hit showrooms. First out is Mitsubishi which introduced two new models in Japan this summer. They have a clever new engine which borrows ideas from diesel trucks and traditional lead burning engines. Compared with a conventional engine of comparable size, Mitsubishi claims its new GDI (gasoline direct injection) motor uses 35 per cent less fuel, produces 35 per cent less carbon dioxide and  95 per cent less nitrogen oxide and yet turns out 10 per cent more power.

ONLINE

            U.S. computer users are spending an average of 12 hours a month online, down from 16 hours last year suggesting that the rhetoric about cyberspace being the next TV is a little premature.

CANADIAN TRADE

            Canada's trade surplus retreated slightly in July but continued to reflect a booming export sector that is expanding its presence in two key markets--the United States and Japan. Statistics Canada reports that exports exceeded imports by $3.07 billion. Canada's surplus with Japan almost doubled, rising to $633 million and the balance with the U.S. edged up to $3.84 billion. However, Canada's deficit with all other countries grew to $1.4 billion. Much of the gain with the U.S. came from resurgent lumber shipments, up nearly a third because of higher prices and a stronger U.S. housing market, and robust exports of auto parts.

TRAVEL

            Higher economic growth and lower unemployment should bode well for the Canadian travel industry in 1997 according to the Conference Board of Canada. They are forecasting pleasure travel within Canada will increase 3.2 per cent compared to 2.6 per cent for the economy. Domestic business trips should increase by 3 per cent. It is expected that the number of Canadians travelling to the U.S. will pick up in 1996 and 1997 after five years of declining numbers. The outlook for U.S. and overseas travellers to Canada is optimistic with British Columbia and Alberta the main beneficiaries.        

SUPPLY AND DEMAND

            In 1995, the number of law-school applicants in the U.S. was down 16 per cent over 1991. There were about 896,000 attorneys in the country--one for each 290 people.

EMOTIONS

            Last month, at a symposium on the Riemann Hypothesis in Seattle, mathematicians gave Atle Selberg a standing ovation for his brilliant lecture on the history of prime-number theory. Such demonstrations of emotion are rare among mathematicians.

A&A WEBSITE

            This Economic Digest, as well as previous editions, may now be seen on our Homepage at http://www.aacb.com.

SEPTEMBER 1996 Economic Digest - Importing and Exporting

SEPTEMBER 1996 Edition

EXPORTERS SOFTWARE

            Advice for service companies interested in export markets is now available on computer disk from the federal government. Take A World View is a six-disk package that includes descriptions of the exporting process, help for developing an export plan, a list of common mistakes and information on networking and developing partnerships. The software, produced by the Department of Foreign Affairs and International Trade, costs $49.95 plus tax, and can be ordered by calling 1-819-956-4800.

NAFTA

            The North American Development Bank, created under the NAFTA to improve conditions along the U.S.-Mexico border, has yet to lend any of the $1.5 billion (U.S.) available. It was designed to respond to criticism that NAFTA would add new pressures on an already burdened border infrastructure. Meanwhile, according to the General Accounting Office, lack of basic water, waste water and sanitation services continue to affect the well-being of many of the 10 million Mexicans and Americans who live along the border. A new report suggests that Bank policies could be inhibiting loans to small communities along the 3,400 kilometre border.

USED CARS

            Because of the rising cost of new cars, Canadians are increasingly turning to the used car market and leasing instead of buying. About 64 per cent of cars, trucks and minivans acquired during the past year were used, versus 36 per cent new. The number of people leasing new cars soared to almost 40 per cent of buyers of 1996 models, from 25 per cent in previous years. Among buyers of used cars, 77 per cent said the most important reason for their choice was price. People are also hanging onto their vehicles much longer.

BEVERAGES

            According to the Beverage Marketing Corp., the so-called "new age" drinks industry, with products like kiwi lime and grapefruit spring water, has hit its peak and the market is declining while consumers have moved on to other things. The North American market is worth $5.5 billion annually. Competition among new entrants into the sector has taken its toll. As a result, companies are scrambling to fashion new looks for themselves and find more products and markets.

TOLL-FREE

            A new standard adopted by the International Telecommunications Union will allow businesses to use the same toll-free long-distance telephone number anywhere in the world starting next year. More than 100 million toll-free calls are made every day in the U.S. alone and the service is so popular that Canadian and U.S. phone companies ran out of numbers using the 800 prefix and had to add 888 numbers this year. Customers who want a universal number will be allocated an eight-digit number to be used after the 800 prefix instead of the current seven-digit number which will make an additional 90 million freephone numbers available to carriers, compared with the nine million now in use. The ITU will manage a single global registry and the universal numbers will be portable, meaning that businesses can keep the number even if they change carriers.

PRINT

            A survey of U.S. small businesses by the Japanese company Okidata--which makes printers and fax machines-- found that 91 per cent use print materials to market themselves. Brochures and flyers are favourite, used by 54 per cent of respondents, while 33 per cent use direct mail. Most firms, 72 per cent, said they print their own materials and 70 per cent believe printed materials are "very effective" in their marketing efforts.

RECYCLING

            People who want the convenience of disposable containers but worry about environmental pollution now have an alternative--edible tableware. A Taiwanese inventor claims to have perfected a range of palatable bowls, which look like plastic or ceramic tableware. They turn into chemical- and preservative-free porridge when soaked in water and cooked for several minutes.

ISRAEL

            Canada and Israel have now signed a free trade deal which will see tariffs eliminated on most products within two years. Trade between the two countries totalled $450 million last year, up 37 per cent from 1994. Canadian exports were $237 million, up 49 per cent. Currently, about 67 per cent of Israel's goods enter Canada duty free but far fewer Canadian goods enter Israel duty free and some face tariffs of up to 25 per cent. The agreement does not include dairy, poultry or egg products and provides limited tariffs on some other agricultural goods. Canada hopes to extend the agreement to the Palestinian territories.

WORK

            Looking at the labour market each month as it fluctuates marginally leaves the impression it is virtually static. The reality is far more complex. An analysis of the 1993 labour market           shows that for nearly every member of the 16 million-strong work force, it was a year of massive upheaval. 27 per cent, or 4.3 million, experienced a change in job status--lost a job, got a job or moved in or out of the labour force. Another 1.6 million, representing 10 per cent, worked the entire year but changed jobs at least once. Among the 8.1 million who held the same job throughout the year, one in five said they received a substantial raise of 10 per cent or more while one in ten reported a wage cut of at least 10 per cent. 3.5 million or 22 per cent were unemployed at least once.

ASIA

            According to the OECD, Asia still boasts the world's most dynamic emerging economies. China will yet again have the fastest growth in 1996 and 1997 with the GDP growing 10.5 per cent in each year. Thailand and Malaysia are next with economies likely to grow by around 8 per cent this year.

EUROPE

            An ad campaign by the Swedish government is urging fathers to take their allotted one month off work at nearly full pay to spend time with their young children.

            To deter speeding motorists, the Dutch city of Culemborg plans to introduce sheep onto its roads. Half a dozen sheep will be released this month and if the plan works, the number of sheep will be increased to over 100.

TELEVISION

            In 1995, for the first time in a decade, Canadians watched more television. On average, Canadians spent 23.2 hours in front of the small screen, 30 minutes more than in 1994. Statistics Canada say the increase is mainly a result of the six specialty channels introduced at the start of 1995. When removing the audiences for these channels, the numbers are similar to previous years. Quebec had the highest provincial viewing average, 26.2 hours a week, while British Columbians watched the least television, at 21.2 hours.

WEALTH CREATION

            A leading venture capitalist in California's Silicon Valley has calculated that the personal computer has caused the highest creation of wealth in the history of the planet. Between them, just three companies--Microsoft, Intel and Compaq--have a stock market valuation of $130 billion (U.S.), more than all the film studios in Hollywood.

OPENINGS

            Wal-Mart Stores has opened two stores  in Shenzhen, marking its official entrance into China's booming consumer market. Shenzhen is just across the border from Hong Kong and boasts China's highest per capita income. One is a Supercenter, open to the public and the other a members-only Sam's Club.

            Seattle based Starbucks Corp, has opened its first store outside North America in the heart of Tokyo's trendy Ginza shopping district. Japan is the fourth largest coffee consuming country in the world, after the U.S., Brazil and Germany.

JEWELLERY

            Canada's $2 billion jewellery industry is in revolt over an obscure, 80 year old, federal excise tax saying it is responsible for an explosion in black market sales since the recession. The 10 per cent luxury levy, applied since the First World War, is charged on items worth more than $3.00 and raised $59 million in 1994-95 alone. The taxes are collected by manufacturers on sales to wholesalers, retailers or directly to the public. A 1993 study estimates that the underground economy now constitutes 30 to 60 per cent of the jewellery sector, or between $600,000 and $1.2 billion.

MILK

            Some B.C. farmers are threatening to dump milk down the drain that they are not allowed to sell as a protest against Canada's milk marketing system. British Columbia cannot process enough milk products for its own population. Quebec holds 48 per cent of the Canadian quota for products such as cheese and butter while having only 25 per cent of the country's population. The B.C. quota is less than five per cent, yet the province consumes nearly 12 per cent of industrial dairy products. Meanwhile, producers in Quebec receive grants to build new plants to send products to B.C.

PENSIONS

            The Fraser Institute has concluded that provincial administrations across Canada owe $49 billion to their employee pension plans. In B.C., we owe about $3.5 billion to teachers, judges and other public employees, compared to $10 billion in Ontario and $21.3 billion in Quebec and $5 billion in Alberta. Saskatchewan's auditor sounded the alarm in May when he warned that the province's $3.1 billion unfunded pension liability threatens more than just retirement security for 133,000 public employees. It also could affect taxpayers if the shortfall frightens off investors, adding to ever-rising borrowing costs and deepening provincial debt.

COMPANIES

            The world's three biggest companies in 1995 (ranked by sales) were all Japanese--as were ten of the top 15. With sales of $184 billion Mitsubishi, a trading company, was top. The fourth biggest was General Motors with sales of $170 billion. The only non Japanese or U.S. firm in the top 15 was Royal Dutch Shell which had the tenth-highest sales in the world but made the largest profits of $6.9 billion.

GOLF

            A Forbes article states that while golf courses are popping up everywhere, the golf boom seems to have run its course in the U.S. The number of golfers peaked at 27.8 million in 1990 and declined to 25 million last year. Women golfers are down to 5.4 million from 6.5 million in 1990 and total rounds of golf fell to 490 million from 505 million in 1992. Spending has also levelled off: sales of equipment was unchanged at $1.37 billion last year. Among the reasons, golf clubs are being built sturdier and are not replaced as often.

COMMUNICATIONS

            In the late 1970s, the world's first mobile telephone service started in Tokyo. By 1989 fewer than 250,000 people had one and in 1994 there were still only 2.1 million subscribers. Everything changed last year and there are now more than 11 million cellular phones being carried around Japan. The difference was the introduction of a cheap and diminutive competitor, the Personal Handyphone System. The PHS is a cross between the cordless phone used around the home and the more sophisticated cellular used in cars, but much more mobile than the cordless phone and much cheaper than the cellular. The tiny radio transmitters and receivers that PHS operators fix on top of street lamps, telegraph poles and telephone kiosks cost only one-50th of a typical cellular base station. The handset also costs half as much as a cellular phone to make.

INVESTMENTS

            Karolina, a chimpanzee in Poland's Cracow zoo, picked stocks on the Warsaw exchange that earned a 10 per cent return on a three month investment, beating a stockbroker's selections.