APRIL 1996 Economic Digest - Importing and Exporting

APRIL 1996 Edition

EXPORTS

            In 1995, Canada's exports to the U.S, our major trading partner, increased 13 per cent to $202 billion. Recent figures show that sales to the rest of the world increased 29 per cent to $52 billion. Exports to Europe rose 42 per cent and sales to countries that are not part of the 25-member club of big industrialized nations increased 31 per cent. This indicates that Canadian companies have become competitive enough to finally begin penetrating the tougher foreign markets that lie beyond the U.S. and that the painful restructuring that preoccupied Canadian companies in the early 1990s is paying off. In the final three months of the year, Canada ran its first quarterly trade surplus with countries other than the U.S. since 1985. The trade deficit with those countries in 1994 was over $11 billion.

INFORMATION

            United States travel information offices in Toronto, Montreal and Vancouver are in the process of closing down as the U.S. Travel and Tourism Administration prepares to go out of business. The U.S. Congress refused to allocate $12 million to keep the agency operating until an industry-sponsored group could be formed to take over the tasks. The move makes the U.S. the only industrialized country in the world without a government-run office to promote tourism.

FORESTRY

            The B.C. Premier wants the forest industry to create 21,000 more jobs in the province over the next five years. If they don't, the government will move unilaterally to tie the companies' access to trees to the employment they create. The B.C. industry has generated 15,000 additional jobs over the past five years bringing the total to 107,000. However, it still employs fewer people--1.4 jobs for each 1,000 cubic metres of wood harvested--than its competitors in other areas. Employment rates range from about 1.5 jobs for each 1,000 cubic metres in Sweden to more than six in California where more manufacturing is done.

CULTURE

            Hundreds of thousands of Canadians could become "electronic Americans" because of a ruling by the Canadian Radio-Television  and Telecommunications Commission making it expensive to set up Canadian satellite TV services. An estimated 200,000 Canadian households already supply fake addresses in order to receive signals from such U.S. satellite services as DirectTV. They receive up to 150 channels on tiny RCA satellite dishes. The illicit trade draws about $100 million a year out of the Canadian broadcasting system.

TV TUBES

            Japan's Mitsubishi Corp. is closing Canada's only television tube factory--throwing 575 people out of work. The Ontario plant has been battered recently by increased competition, mainly from South Korea. Mitsubishi bought the plant in 1983 for $20 million after RCA Inc. abandoned it. They spent more than $100 million modernizing the operation, and was also given $15 million in federal and provincial loans. For a few years, the plant turned regular profits and generated about $160 million in annual sales from the production of about one million cathode ray tubes a year, most of which were sold to U.S. based television makers.

FASHION

            In the 1980s, Chinese citizens gained access to "status goods" such as television sets, stereos and washing machines, now they are stepping into French fashions. China is anxious to project a new, positive image of itself so the government has asked Pierre Cardin to design uniforms for its public servants, including soldiers, and railway, airline and post office workers.

SPORTS

            When the world figure-skating championships were awarded to Edmonton, Alberta, tickets for the 16,000 seat Edmonton Coliseum sold out in 42 hours a year ago. During the nine days of the championships, an estimated $50 million was infused into the coffers of Edmonton businesses and the organizers realized a profit of over $5 million of which $750,000 will be funnelled into figure-skating clubs in Alberta.

CUBA

            According to a study by Colby College in Maine, the last time U.S. politicians tried to curtail Canadian trade with Cuba with anti-Castro legislation, they were not very successful. Canadian exports to Cuba have doubled to about $274 million a year in the four years since the U.S. Congress extended its economic embargo to include Canadian subsidiaries of U.S.-parent companies. The consequence of the law was to clear the field of competition from subsidiaries so that wholly owned Canadian companies could step in and do a booming business.

EUROCRACY

            European bureaucrats have ruled that shellfish being taken to market must be given regular rest periods and be immersed in water or sprayed, to avoid injury, stress or suffering.

TRUCKING

            Trucks carry close to 70 per cent of goods moving between Canada and the U.S., despite the fact that no cabotage agreement exists regulating the operation of trucking companies in cross-border operations. Without a cabotage agreement, truckers can't cross the border and make door-to-door pickups and deliveries, or move goods either inter- or intra-state or province. Current practice calls for trucks moving to a border relay point where the rig is turned over to a driver licensed in the other country. The delays not only add to the transit time for shipments, but boost a shippers transportation costs as well.

WORLD TOURISM

            In 1995, international tourism receipts rose by seven per cent to $372 billion, according to the World Tourism Organization. The Middle East was the fastest growing region, thanks to a strong recovery of tourism in Egypt. At the other extreme, tourist receipts in the Americas stagnated, largely due to a decline in the number of Canadians and Mexicans travelling to the United States. In the developing world, the biggest tourist earners are China and Hong Kong. China's receipts have increased by an annual average of 30 per cent over the past five years. In 1995 however, South Korea's grew 50 per cent.

LAUGHTER

            It costs three per cent more to laugh this year than it did in 1995 according to the Cost of Laughing Index. Rubber chickens, thrown at hockey games, one of the components of the Index, rose to $66 a dozen from $60 a dozen last year. Other items include the newsstand price of Mad Magazine, up 28 per cent, and comedy club tickets at 10 clubs across the country which rose 1.7 per cent. The minimum price for writing a half-hour TV situation comedy rose three per cent to $11,209 from $10,883. The price of Groucho glasses, at $15 a dozen and arrows through the head, at $6 a dozen, remained the same because they don't get thrown at hockey games. The index has been compiled for 10 years.

GROWTH

            These are the benchmarks of the fastest-growing small U.S. companies according to Inc. magazine:

* Average time spent on market research before launching a company: 8.5 months.

* Percentage of founders who started with a marketing plan: 45 per cent.

* Average time to make a sale in 1990: 3.79 months.

* Average time to make a sale in 1994: 3.78 months.

* Percentage of companies that have their own sales forces: 58 per cent.

* Percentage of companies that use independent reps: 8 per cent.

THE WORKPLACE

             Employees at Maplins, a British electronics company, start every Monday with a bingo game in the cafeteria. Workers can win up to $100 depending on how many orders the company won the week before.

OWNERSHIP

            Women now own a third of U.S. businesses and have become a major force in the economy. From 1987 up to 1992, sales and receipts of women-owned companies increased 131 per cent to $643 billion (U.S.). Women-owned companies totalled 6.4 million in 1992, employed 13.2 million workers and had sales and receipts of $1.6 trillion, more than the gross domestic product of all but a few countries.

JAPANESE LAW

            Tough new consumer legislation in Japan is already having an impact on B.C.'s tourism industry. Some Vancouver hoteliers fear they will get involved in lawsuits filed in Japan--or have local payments withheld--if tours don't go exactly as planned. Claims from disgruntled travellers can be as high as 15 per cent of the cost of a package tour for complaints such as a change of itinerary, or being bumped from one hotel to another, even if the substitute hotel is of equal quality and just across the street. Even trivial complaints, such as being assigned a room with a queen or king bed instead of twins, which Japanese prefer, could result in a claim.

WINE

            The European Wine Databank in Italy has used a technique known as nuclear magnetic resonance to compile the characteristics of the continent's thousands of wines. The technology allows them to verify an individual wine right down to a particular hillside. Experts contend that 5 per cent to ten per cent of wines have been tampered with and misrepresented.

EXERCISE

            A British study of health and economic benefits of vigorous exercise shows that, below the age of 45, people who partake are costing the country's health service five times more in injuries than they save in improved health. The leader of the study, from the University of Sheffield who is under 45 and plays hockey and cricket, has had five strains, two broken fingers, a dislocated shoulder and is on his fourth set of teeth.

WATER

            Ninety-seven per cent of all water on earth is found in the oceans. Nearly 58 per cent of U.S. imports come by sea. Nearly 180 million people visited America's beaches last year. Saltwater fishing contributes nearly $15 billion a year to the U.S. Gross Domestic Product. U.S. ship construction, commercial fishing, offshore oil and natural gas production generate about $242 billion in annual revenues worldwide. And nearly 3.1 million pounds of garbage was collected from America's oceanfronts last year.   

RESERVATIONS

            U.S. restaurant owners are watching with interest an experiment launched last summer by American Express. In 35 restaurants in 20 cities, patrons who make reservations and then fail to show up are charged $10 to $25. Of 10,000 reservations made so far, there have been only seven no-shows. In a 1993 survey, many restaurants reported no-show rates of 10 to 40 per cent.

TRENDS

            Dried pig ears, America's hippest canine snack, are making dogs across the country sit up and beg. The supplier, Oink-Oink Inc. of Detroit, has introduced spinoff products such as Fresh Vanilla and Cool Mint pig ears for dogs with problem breath.

ONLY IN SWEDEN

            Research in igloos will remain part of Swedish military spending, despite plans to trim the defence budget. A military igloo can be as large as a hanger and take a direct hit from artillery without collapsing.

            On 40 occasions in 1992-94, the Swedish government heard rotational movements at up to 200 rpm in coastal waters and assumed they were submarine propellers. Researchers have since found that the noise is identical to that made by mink furiously paddling their little feet.

FEBRUARY 1996 Economic Digest - Importing and Exporting

FEBRUARY 1996 Edition

ISRAEL

            Negotiators have reached a tentative agreement on a free-trade deal between Canada and Israel. The deal, which must be reviewed by both governments, would eliminate tariffs on all manufactured goods and  many agricultural and fish products. The agreement will enable Canadian companies pursuing business opportunities in Israel to compete on an equal footing with international competitors. Israel has such agreements already with the U.S. and the European Union.

COFFEE

            Americans are drinking half as much coffee as in the early 1960s. It has been estimated that U.S. per capita consumption fell 10 per cent last year after an 8 per cent decline in 1994. Americans drank an average of 1.7 cups of coffee a day last winter against an average of more than three cups in the early 1960s. Industry watchers link the downturn to dramatic fluctuations in retail prices after two bad frosts in Brazil over an 18 month period. Others cite changes in taste preferences towards colder and sweeter drinks. One sector that has bucked the trend is the specialty coffee bar. There were about 200 coffee bars in 1989 and more than 10,000 in 1995.

CROSS-BORDER SHOPPING

            According to Statistics Canada, Canadians making shopping trips to the U.S. fell 2.8 per cent in November from October continuing a three year trend as the Canadian dollar lost value against its U.S. counterpart. About 2.926 million Canadians made same-day trips in November, down from 3.01 in October.

TECHNOLOGY VISITS PROGRAM

            This innovative program is run by the Canadian Manufacturers' Association and the National Research Council. Manufacturing executives can take advantage of this government-industry program which allows them to visit other plants and exchange information. The aim of the Technology Visits is to demonstrate new technology and production methods at work in a real plant and allow executives to gain insight on how they can improve and enhance their own operations. In the last 18 months, more than 1800 executives have toured plants across Canada. About 50 visits a year are conducted. More information may be obtained in B.C. from: Geoff Grover at 685-8131 or nationally from: John Fenwick at 1-800-798-0201, Ext 294.

WORTH

            If employees were aware of the day-to-day worth of doing their jobs, they would feel more motivated to help their companies succeed, according to a U.S. study by Ernst & Young. Almost 60 per cent of workers and 77 per cent of managers in a poll of 1,000 large companies said they would work harder if they knew how their jobs help the company make money. Only 15 per cent of workers surveyed knew how much it cost either to make a product or to provide a service for their company. A growing number of companies are practising "open book management" in which they give financial information to employees.

SHUTDOWN

            According to the Financial Post, the three week U.S. government shutdown has cost American taxpayers US$400 million in penalties and lost revenues. This was made up of penalties the government was forced to pay to hundreds of independent contractors and revenues lost from park fees and other services which were shut down. The total $1.4 billion tab was accumulated during a six day period in November that idled about 800,000 workers--and cost $700 million--and a second two-week hiatus for 260,000 that ran up another $700 million. Ironically, the shutdown delayed plans to lay off several thousand workers as part of a 10 per cent reduction in the federal payroll which have now been delayed until February.

AUTOMATION

            It stocks shelves, fills prescriptions and even bills patients automatically. The "Pharmacy Robot"--a new, high-tech computer system that can stock and retrieve drugs flawlessly in record time is finding its way into U.S. hospitals. Twenty-five facilities have already installed it and others are jumping at the chance. The system was developed around 1990 to ensure accuracy and reduce the possibility of human error. Out of 30 million prescriptions the robots have filled so far, there have been zero errors.

AUTOS

            Despite a slowdown in the North American automobile market, the Canadian auto industry built a record 2.38 million vehicles in 1995, a 4.2 per cent increase over the 2.28 million built in 1994. General Motors led the pack, up 25 per cent to 907,833 thanks largely to strong production of the Lumina and Monte Carlo. Chrysler was No 2, down 23 per cent to 538,097, due to an eight-week shutdown. Ford was third, up 8 per cent producing 533,433 cars and light trucks. Honda produced 106,133 Civics and Toyota, 90,492 Corollas. CAMI Automotive, a joint venture between GM Canada and Suzuki, saw production up 15 per cent to 196,630 vehicles.

TECHNOLOGY

            In 1991 a farmer cut a fibre-optic cable when burying a dead cow. He closed four of the Federal Aviation Administration's 30 main air-traffic control centres for over five hours. A year earlier, a bug in some AT&T software brought the company's long distance network to a halt for nine hours. When the Defence Department's cyber-security team attacked 3,000 of the Pentagon's own computers, only 5 per cent of the people operating the target systems detected the intrusion.

COLDS

            The cold remedy-market was worth $724 million in Canada in 1995. (Headache remedies $210 million, cold and sinus remedies $257 million, antihistamines $135 million, non-prescription cough syrups $80 million, nasal decongestants $16 million and throat lozenges $26 million). This market has remained stagnant over the past few years as recession-weary consumers reach more for cheaper private label products such as the Life label at Shoppers Drug Mart which have swallowed at least 35 per cent of the market. A U.S. Food and Drug Administration study of over-the-counter cold medications reported that chicken soup was "as good as anything else in relieving the symptoms of colds."

CHILE

            Chile's entry into the NAFTA is frozen because the U.S. President lacks "fast-track' approval from Congress to negotiate an agreement. However, Canada and Chile have agreed to pursue an interim bilateral free-trade agreement without waiting for participation from Washington. This could give Canadian companies the jump over U.S. competitors in the fast-growing Chilean market. Canadian exports to Chile in the first nine months of 1995 were $265 million and imports were worth $233 million. Planned and current Canadian investment in Chile totals $7 billion in mining, telecommunications and other sectors.

JOBS

            Human Resources Canada says the place to look for work in B.C. in 1996 is in community, business and personal services which are forecast to add 21,000 jobs this year, for a total of 716,000. Another job-growth area is vaguely called "other-manufacturing' which involves primarily the high-tech sector which is projected to gain 3,000 jobs for a total of 125,000. Forestry, wood products and paper, and allied industries will remain relatively constant with about 105,000 jobs. Public administration which took a big drop in 1995 will shrink again to about 102,000 jobs. The retail and wholesale trade will remain flat at about 325,000 jobs.

WHEAT

            Despite a temporary transportation shutdown last year, Canadian wheat exports to China soared to 5.3 million tonnes, the highest level in three years. This represents an increase of 1.4 million tonnes, or more than 35 per cent, over 1994 levels. Canadian shipments now account for 40 per cent of all wheat imported by China, making the Chinese the largest single foreign buyer of Canadian wheat.

Severe drought and widespread flooding in different parts of China affected 38 per cent of the country's farmland last year. Despite this, Chinese authorities reported a 1995 grain harvest of 455 million tonnes, up 10 million from the previous year

LUMBER

            The bad news is that due to a large unsold inventory, residential construction had its worst year in three decades with approximately 111,000 housing starts. This is causing everybody from lumber suppliers to kitchen cabinet makers to review what to do with their excess capacity. The good news is that some new export markets such as Florida and Texas are being developed by some suppliers. Also, the Japanese lumber market has made a sharp turnaround--prices are up 5 to 10 per cent from late 1995 having dropped 20 to 30 per cent earlier in the year which means that B.C. coastal mills can refocus their attention on that market.

CHARITY

            Fewer Canadians gave to charity in 1994 but those that did gave more. A total of 5.3 million tax filers reported donations to charity, a figure that has been declining since the mid-eighties. But the total amount of money given increased to $3.39 billion, $40.4 million more than in 1993 and up 9 per cent  over 1991. Newfoundlanders, who have the lowest median income at $27,000, had the highest median donation at $250. Nationally, the median donation was $150 on a median income of $34,100. British Columbians and Albertans were the second lowest givers to charity after Quebec. Donors over age 65 gave an average $890, 40 per cent higher than the Canadian average.

McGROWTH    

            McDonald's Corp. ended 1995 with record international growth having opened 1,300 restaurants outside the U.S. with 60,000 new jobs. 751 non-US outlets were opened in 1994. 20 per cent of the openings were in countries McDonald's were not even in five years ago. 10 more countries were added in 1995 including Qatar, Honduras and St. Maarten. The others are Estonia, Romania, Malta, Colombia, Jamaica, Slovakia and South Africa. McDonald's now has more than 17,400 restaurants in 89 countries worldwide.

MOVIES

            Last month we reported that Disney is opening two studios in Canada. A Toronto production company has now announced that it will build a $200 million state-of-the-art feature film studio in Charlotte, N.C. largely because the federal government dithered over the site it really wanted, on an armed forces base in Toronto which will close this summer. Image Factory Entertainment is planning to build a 162,000 square-metre studio with 22 sound stages, four of them the world's biggest and the studio will employ 3,000 people. It is estimated that the annual value of production at the studio will be $1.5 billion which exceeds the total film and television production revenue in Canada. The Charlotte facility will surpass Toronto as the third-largest film and TV production centre in North America.

BABY WATCHERS

            Two mothers in San Francisco have created what's believed to be the world's first video for infants, reports The Examiner. "What do babies most like to watch on TV? Other babies, of course." Babymugs features a background of upbeat music and 85 infants doing such varied things as drooling, lying inert, staring at the screen and falling out of the picture. Local stores are reportedly selling out of copies.

CORDON BLEU?

* Titles of three new cookbooks: Butterflies in My Stomach, Unmentionable Cuisine and Entertaining with Insects.

TRIVIA

*   In 1995, the most popular colour in Canada and the U.S. for most new cars and trucks was white. Dark green ranked No.1 among sport and compact cars.

*   In 6,000 BC, at the end of the New Stone Age, the population of the world was roughly equal to the present-day population of Canada.