FEBRUARY 1993 Edition
EUROPE
The European countries are anxious to unite their
economies while protecting their work forces. A Social Charter, still to be
ratified, is supposed to stop exploitation of different wage levels between
countries. However, the U.S. based Hoover Co. has just moved vacuum cleaner
production from Dijon in France, where they have sacked 650 workers, to
Scotland where they will take on 400 workers at much lower terms.
Meanwhile, some of the Community's more notorious
legislative proposals include an EC-wide standard size for condoms, an
eye-in-the-sky satellite to make sure the nine million farmers aren't lying
when they report land taken out of use for compensation, and a change in
classification for the carrot, from vegetable status to that of fruit.
So concerned are the faces behind the Brussels
bureaucracy, the EC policy-making body, that they have organized a PR campaign
to help revamp the EC's floundering image and get its message across.
CROSS-BORDER SHOPPING
Now that the shoe is on the other foot, retailers are
claiming that Canadian tax laws are discouraging them from trying to lure U.S.
shoppers north of the border. The Federation of Canadian Municipalities is
recommending tax changes which would allow Canadian retailers to deduct
American advertising as a business expense. Currently, tax laws do not allow
such deductions but U.S. tax laws allow American merchants to deduct
advertising costs incurred in Canada.
Businesses are concerned that at a time when they can at
last offer lower prices than Americans, they are unable to spread the word
along border communities.
EMPLOYMENT
Statistics Canada has at last declared the recession to
be over and in the U.S. they have had the seventh straight quarter of expansion
and the fastest in four years. The biggest leap in the index of leading
indicators in almost 10 years. Durable goods orders are up 9 per cent in one
month.
However, economists have been mystified by the difference
in the unemployment rates. In January, the Canadian jobless rate was 11.0%,
while the U.S. rate was only 7.1%. Canadian and U.S. jobless rates were very
similar until the 1981-82 recession. The gap opened then but there was no
single event, no change in social policy, demographic change or change in
industrial structure to account for it.
A UBC\Princeton study is now offering some clues.
Apparently, more Canadians than Americans were looking for work, which
automatically classified them as unemployed.
About a quarter of Canadian unemployed men worked exactly the period
required to qualify for UI, which raises the question of whether they would
have worked longer in the U.S. where unemployment requirements are stiffer and
is Canada's UI system a disincentive to working longer? Canadian women who are
off work spend more time seeking new jobs than their U.S. counterparts.
There is a related phenomenon among men who do not work
at all--a group that includes the retired and disabled who were not even job
seeking as well as those who were. In Canada, 13 per cent of such men said they
spent the entire year looking unsuccessfully for work, compared with only 3.6%
in the U.S.
BOEING
On January 27th, Boeing announced that it will cut
production by as much as 35% over the next 18 months. Buyers have cancelled or
delayed scores of orders because of airline losses blamed on a Gulf-related
collapse in tourism, fare wars and the economic turndown. The company has not
yet said how many jobs will be affected but observers estimate it could be
between 10,000 and 20,000. Boeing ended 1992 with about 98,000 Puget Sound
employees, down 6,000 from the year before.
The layoffs will be felt through the housing market,
retail sector and other fields. A Boeing job is usually credited with
generating two or more others. More than 200 Canadian companies have contracts
with Boeing.
RED TAPE
MPs are at last trying to come to grips with some of the
more absurd regulations which affect our competitiveness at home and abroad.
Two examples: Kimberly-Clark of Canada Ltd. can't export facial tissue to the
U.S. market because Canadian regulations dictate how many tissues go in a
package which prevents marketing one size for both countries. This is a lost
opportunity to increase production in Canada while giving the consumer a
cheaper product.
For reasons only bureaucrats can fathom, Canadian grocers
must sell food in cans that are 3 1/16 inches in diameter. Most U.S. canners
prefer using a three-inch can. So if a shipment of baked beans becomes
available [in the U.S.] at a discount price, a Canadian grocer cannot import it
and pass the savings on to consumers.
"Parliament has lost control of the regulatory
process," says a recently released report by MPs. Bureaucrats at opposite
ends of the country enforce one rule differently even though they work for the
same federal department.
FREE TRADE
With the duty rates on fabric falling, Jantzen Canada,
the sportswear manufacturer, is finding it economical to send fabrics to Canada
to be sewn into swimsuits and to export the finished suits for U.S. sales. They
have added 65 Canadian jobs and now employ an all time high of 300. 75 per cent
of their swimsuit production goes to the States which represents about 12 per
cent of Jantzen's U.S. swimwear sales.
While planning one of the recent inaugural extravaganzas,
it was discovered that there were not enough flags for a Peace Corps
presentation in the parade and they had to turn to a Canadian company for help.
They did not have enough flags to represent the 126 countries where Peace Corps
volunteers had served in the past 31 years. A search of companies in the
$300-million U.S. flag industry on a Saturday found no flags for several
countries because most firms were closed.
A call went out to Canadiana Banners and Flags of
Mississauga where the staff were on duty. The flag designs were copied from
reference books, read into a computer, screened over the weekend and shipped to
Washington on Monday.
MARKETING BOARDS
Although the GATT talks are presently stalled in Geneva,
Canadian marketing boards continue to fight the inevitable changes which will
see subsidies replaced with decreasing tariffs to the benefit of the consumer.
Now the dairy industry wants to revamp the marketing board system for the first
time in 25 years.
Among their proposals:
* Abandon provincial
boards in favour of one national board.
* Remove interprovincial
barriers to trade.
* Harmonize milk
regulations and prices across the country.
* Close unnecessary
butter and byproduct plants.
* Encourage exporters
with a guaranteed supply of lower-cost milk.
* Promote new and
innovative products.
* Revise the way
supermarkets sell milk to raise processors profits and cut costs for consumers
by getting rid of things like shelving allowances.
HYDRO
In Ontario electricity is expensive and some customers
are not willing to pay any more. At the University of Toronto, engineers have
built their own generating station which will supply one third of their needs
and waste heat from the project will be piped into classrooms and laboratories
on campus and used to heat water. The kilowatt-hour cost will be about a third
of that charged by Toronto Hydro. The power plant is a small gas turbine and
generator housed in an old coal storage shed and can be run around the clock
for months on end.
The prospects for dramatic savings are such that
organizations like Labatt Breweries, Kimberly-Clark, Fanshawe College, the
Etobicoke Olympian, H. J. Heinz and Falconbridge, the province's biggest single
power buyer, have built, or are building, their own power facilities.
SOUTH PACIFIC
Australia
has achieved the lowest inflation rate in the developed world with 0.3%, the
lowest in 30 years. The country already has a very successful free trade
agreement with New Zealand which has eliminated all tariffs several years ahead
of schedule and the Australian Prime Minister has now stated that he backs the
idea of a free trade deal with Japan.
In New Zealand, once one of the most protected economies,
things are at last turning around after 10 lean years. Exchange controls have
been removed, the dollar floated, and the financial markets deregulated.
Subsidies have been reduced and import protection reduced. Many enterprises
previously run by government are now privatized with dramatic results. For
example, New Zealand's Railway, once an inefficient government department now
moves freight more quickly, makes a profit and has a staff of 5,100 compared to
22,000 a decade ago.
UNITED STATES
A consensus seems to be emerging indicating that NAFTA
may now not be approved in the U.S. in time for a January 1st 1994
implementation despite assurances by President Clinton to the contrary.
The President is committed to side deals on labour and
the environment before sending NAFTA to Congress and the problem is how to pay
for any readjustment programs for U.S. workers who lose their jobs as a result
of the trilateral trade deal as well as to find funds for the promised deficit
reduction.
A surcharge on energy imports from Canada has been
suggested as well as a .875% import surcharge on ALL exports from Canada and
Mexico to the U.S. These ideas probably contravene the Canada-U.S. FTA as well
as the GATT, but give an indication that trade irritants between Canada and the
U.S. are likely to intensify under a highly protectionist Congress.
OTTAWA
Since 1986, cash buyouts and other payments to 13,000
civil servants have cost the taxpayer $325-million. A report by the
Auditor-General shows that many of the payments went to civil servants who
shouldn't have received them.
At least 800 of the federal civil servants who were given
cash buyouts to quit the bureaucracy ended up back on the federal payroll. In
many cases, the so-called surplus employees were replaced soon afterward by
other employees doing the same work.
In an audit of 396 buyouts payments examined by the
Auditor-General, 35 per cent were found to be unjustified and 29 per cent were
questionable. Only 29 per cent of payments were found to be well founded.
In one situation, employees who received buyout
agreements in a government unit were found to be working in a similar unit
nearby shortly after the end of the six-month period for which they received
payment.
TRIVIA
The public service in the major, western industrial,
nations has grown at a rate nearly twice that of the private sector since the
1970s. Federal governments now consume an average of 24.9% of their nations'
gross domestic product and all levels of government an average of 43.4%.
FEDERAL GOVERNMENT (% OF GDP, 1990)
Italy 40.8%
Britain 33.3%
U.S 23.5%
CANADA 22.9%
ALL LEVELS OF GOVERNMENT
Italy 53.8%
France 49.8%
CANADA 47.3%
Federally appointed judges, who earn more than $150,000 a
year, say a two-year freeze on their salaries may be unconstitutional because
they were not consulted and are considering taking the government to court.
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