The News Rundown
- Canada along with Mexico and the EU will be subject to duties of 25% on steel and 10% on Aluminum when Americans wish to import our goods.
- You may have been alarmed with headlines such as “The US Triggers Global Trade War”
- Full of emotion Justin Trudeau called the tariffs totally unacceptable saying, “We have to believe at some point common sense will prevail… Americans remain our partners, our allies and our friends. This is not about the American people. We have to believe that at some point common sense will prevail, but we see no sign of that with this action today by the U.S. administration. These tariffs are an affront to the long-standing security partnership between Canada and the United States, and in particular, to the thousands of Canadians who have fought and died alongside American comrades-in-arms.”
- Foreign Affairs Minister Chrystia Freeland said the government is planning “retaliatory measures” that will take effect July 1. Our retaliatory measures account for $16.6b in imports of steel, aluminum or other products that are subjected to the new tariffs.
- For comparison sake the US exported $341.2b to Canada in 2017 and the US imported $332b from Canada in 2017. This means that Canada has a trade deficit of $8b with the United States.
- A trade deficit is the amount by which the value of imports exceed exports.
- This $16b amounts to roughly 5% of the total trade between the two countries.
- Foreign Affairs Minister Chrystia Freeland said, "This is the strongest trade action Canada has taken in the post-war era. It is perfectly reciprocal. This is a very strong Canadian action in response to a very bad U.S. decision."
- Canada and the US have a great relationship but our economy is small compared to the economy of the Americans.
- “retaliatory measures” are not the correct action today.
- Canada has a GDP of about $1.5T USD and the US has a GDP of about $18.5T USD.
- These measures are purely political and the true reason for these tariffs was missed by the media through the theatrics of our federal government.
- Back in March a piece on the actual economics of steel was published in the Financial Post.
- Among its findings, steel demand dropped sharply after the 2008 recession, as expected.
- But in the recovery the amount of steel producers globally sharply increased.
- As of 2016 the global steelmaking capacity was 2,369 million metric tons compared to a demand of 1,628 million metric tons. This surplus is equal to DOUBLE the steel production of North America, Japan, and the EU.
- Where’s it coming from? China.
- The report also talks about the European Commission ordering Belgium to recover 211 million euros in illegal aid that boosted revenue of steel makers.
- More, in Canada, a House of Commons trade committee report last June warned that Canada’s steel industry can compete but only on a level playing field.
- The committee went on to say, “the global excess steelmaking capacity and the resulting dumping of foreign products into the country have hurt Canadian steel producers.”
- Knowing what’s going on here, it makes more sense why President Trump is targeting steel.
- But Canada can’t import that much to the US you say?
- There’s also something called NAFTA.
- The US, Canada, and Mexico have been trying to renegotiate NAFTA but the talks are progressing slowly and roughly only 25% of the clauses have been squared away.
- Donald Trump ran on a platform of fair trade and ensuring workers in the United States get a fair shot.
- The US midterm elections happen this fall. All of congress and 1/3rd of the senate are up for re-election.
- With no NAFTA deal in sight, the Americans have to do something on trade. This is it.
- While the media may paint Donald Trump as unstable and vindictive through these tariffs, NAFTA is the entire equation and one part of it.
- Canada’s dairy sector resides under supply management and the Americans can’t sell dairy into Canada.
- Supply management sets a collective price for Canadian dairy farmers and adjusts milk production to meet consumer demand at this price.
- This in itself is a very protectionist measure and has been one of the sticking points of NAFTA though we wouldn’t know it… progressive trade policies (gender, climate, first nations, etc.)
- Canada also has a lapsed softwood lumber deal with the United States that expired in 2015 but has not been resolved despite NAFTA being on the table.
- Back in December the US put tariffs on Bombardier aircrafts of 292% but these were later overturned. Why tariffs in the first place? Bombardier has been subsidized by the government in the past.
- With these cases in Canada and the EU steel markets in particular, we can now see why these tariffs are in place and no one should be surprised if we had the full story.
- What’s more, the media based a good deal of their reporting on Donald Trump simply changing his mind.
- The US President said that free trade should be reciprocal, he said that if Canada charges more for a good, the US will as well. And this is accomplished in his view through a tariff.
- The media didn’t get this, they insist we aren’t charging the Americans higher prices! But in reality, our restricted markets for agricultural goods is effectively creating a higher price for Americans creating an unfair advantage.
- If the media wants the true story and Canada wants to know what direction to proceed in, they should follow the President’s Twitter feed, it’s all laid out there: Canada has treated our Agricultural business and Farmers very poorly for a very long period of time. Highly restrictive on Trade! They must open their markets and take down their trade barriers! They report a really high surplus on trade with us. Do Timber & Lumber in U.S.?
- A final NAFTA deal was reportedly close but now the prospect of two trade deals, one with Canada and one with Mexico is being floated.
- We’ve seen similar pullbacks recently with the North Korea summit. Extrapolating from what we have seen from the US President, it’s likely that this is an attempt to reach a better deal and resume negotiations.
- That’s precisely why “retaliatory measures” are not the correct response.
- The federal government will provide $50 million to provinces most affected by the illegal asylum seekers walking over the US border. Quebec, which has seen the majority of the asylum seekers will receive $36M, Ontario will receive $11M and Manitoba $3M to help pay for some of the costs of providing housing for these asylum seekers while they wait for their refugee claims to be processed.
- Immigration Minister Ahmed Hussen made the announcement on Parliament Hill today, saying the money is just a first instalment in a longer-term funding arrangement, meaning more millions of taxpayer money will be transferred at a later date. Hussen said in Ottawa on Friday: “The continued influx of asylum seekers entering Canada between ports of entry has increased pressure on provinces to provide shelter and social services to a growing number of asylum seekers. We appreciate the pressures Quebec, Ontario and Manitoba are facing and will continue discussions with provinces towards longer-term solutions including further financial support.” Those longer term solutions do not appear to be financial support toward either deporting these illegal asylum seekers, or enforcing our border with the United States.
- Quebec has asked for $146-million from the federal government, saying it needs to cover unanticipated asylum-seeker costs. In a tweet Friday, Quebec Immigration Minister David Heurtel said the federal government’s announcement is its first concrete recognition of the province’s efforts to deal with the border crossers. The federal government is working with Quebec and Ontario to develop a “triage system” that would move some asylum seekers to areas outside Montreal or Toronto, where many of them have already settled as they await the outcome of their refugee claims.
- Toronto Mayor John Tory issued a statement calling the $50 million "a start towards the federal government meeting its responsibilities to cities." Toronto alone expects to incur $64.5 million by the end of 2018 in direct costs related to providing motel housing to refugee claimants, and anticipates spending another $6.3 million on emergency contingency sites, he said. He said: "Our city has a long history of welcoming refugees and we continue to support that approach, but we have been clear that Toronto can no longer absorb the cost and impact of the increasing numbers of refugee claimants coming into the country at this time,"
- Colleges, universities and shelters in Toronto have been opening up their residences to asylum seekers. Most recent statistics show there are 2,779 refugee claimants in Toronto's shelter system, including hotel and motel programs specifically serving refugee claimants. They represent nearly 42 per cent of the entire shelter population.
- BC NDP immigration critic Jenny Kwan wondered why British Columbia, which has seen 153 asylum seekers cross between official border posts this year, was left out of Friday’s funding announcement.
- Hussen will soon travel to the United States for high-level talks with U.S. Homeland Security Secretary Kirstjen Nielsen to discuss ideas he has to help modernize the safe third country agreement. They include possibly introducing the use of biometrics to allow border officials to better track the movements of individuals to determine if they are eligible to make a refugee claim in Canada. One wonders how Hussen thinks the US will help with this problem, given the sudden chilly relationship between Trump and Trudeau over trade.
- Conservative immigration critic Michelle Rempel called the cash announcement a "Band-aid" solution and predicted that money requirements for housing, health care and other social costs will continue to climb as the flow of asylum seekers crossing into Canada from the U.S. continues. "What we've heard today is an abdication of responsibility to manage our border and our asylum claims system effectively," she said.
- Rempel repeated her demand that the government apply the Safe Third Country Agreement (STCA) to the entire border. She said declaring the whole border an official crossing would close the loophole that's driving irregular border-crossings. The STCA requires asylum seekers to make their claim in the first 'safe' country they arrive in, unless they qualify for an exception spelled out in the agreement. But the agreement applies only to claimants trying to enter at official land border crossings, by train or at airports — which is why some are making the trek into Canada by foot outside official crossing points. She said, “The safe third country agreement still doesn’t apply at an illegal crossing, so he can biometric all he wants, the agreement still isn’t going to apply unless he broaches the issue of renegotiating it.”
- Back in April when Kinder Morgan announced a work stoppage on the Trans Mountain pipeline, we knew there was a problem.
- Pipeline protesters chaining themselves to gates and machinery.
- MPs Kennedy Stewart and Elizabeth May being arrested.
- The BC government insisting that they are simply undertaking reviews while not standing up for the project.
- The Alberta government first banning wine and later bringing in legislation to cut the flow of gas to BC. Both on the table but only after prodding by the opposition.
- The federal government insisting the pipeline was in the national interest while providing no concrete action to make the project move forward.
- The federal government could have evoked section 92 10 (c) in the constitution declaring the project to be in the national interest, they didn’t.
- This week the announcement: $4.5b from the federal government to BUY THE EXISTING LINE.
- Kinder Morgan estimates the cost of building the expansion at $7.4b.
- Federal government will build new expansion for this amount. Bill Morneau insists the project will not have a “hit” on the books.
- When was the last time a federal project came in under budget?
- Kinder Morgan has lost confidence in the project.
- The only way this project will get built is because the federal government has more (Taxpayer) funds available and more time.
- This purchase changes nothing: protesters are still free to chain themselves to machines and interrupt the work site.
- The only difference? The losses incurred will be those of the taxpayer.
- The Alberta government is prepared to pay up to $2-billion to indemnify the project in exchange for future equity.
- Indemnity: security or protection against loss or other financial burden.
- To sum up: Federal government $11.9b and Alberta $2b if the project goes to plan.
- This is in effect a liquidation of toxic assets. A change in ownership doesn’t make the project more viable, it just increases the number of resources available.
- When dealing with toxic assets there are only two options:
- Make profitable
- As we are dealing with a federal government that can potentially borrow billions, we must hope for the second.
- According to Danielle Smith of 770 News in Calgary, “Climate change, gender equity, First Nations rights, and making sure Quebec gets a share of the procurement” could make the project balloon past $20b.
- Previously, Canada could have had this project for free, monetarily at least.
- A new crown corporation will be created to oversee the pipeline and construction, at a later date this will be sold off.
- Reportedly First Nations groups along the route and pension funds have already expressed interest.
- Of these include the BC government employee’s pension fund, which includes John Horgan.
- In effect, this pipeline could very well be funding John Horgan’s retirement!
- With all this in mind let’s remember that this government has an issue with numbers:
- - Budget deficits billions of dollars more than anticipated.
- - Huge cost overruns for a skating rink in Ottawa.
- - Millions to handle those crossing our border illegally.
- We are just at the beginning on the road witnessing the trials and tribulations of the Trans Mountain Pipeline.
- As the Party that has been in power since 2003, the Ontario Liberals are expected to have some baggage. Kathleen Wynne has been the Premier since early 2013, and has had a very negative reputation since then, despite winning an increased majority in 2014. Her own personal approval rating has been hovering in the mid to high teens.
- Just today, Wynne has announced that she will no longer be premier after the June 7 election and encouraged voters to elect Liberal candidates to prevent the NDP or PCs from securing a majority. It's very likely that she will resign after the election. Therefore, there's not much point to talking about the Liberal platform, but here are a few highlights anyway.
- The Liberal website has all their promises hidden behind 45 separate pages, which I, and probably most people do not have the patience or dedication to peruse. The pages have flowery titles such as "Promoting Equity", "Supporting Innovation in the New Economy" "The Reconciliation Journey" and "Supporting Multicultural communities".
- Therefore, here's a quick summary provided by Macleans on real issues.
- On the Provincial Debt: The Liberals have pledged a bevy of increases to social services, healthcare, and childcare—all of which will send Ontario into the red again. With more than $20.3 billion in new spending planned over the next three years, as announced in Budget 2018, the Liberals project annual deficits of between $6.5 billion and $6.7 billion until at least 2020-2021. Under Budget 2018 Ontario isn’t projected to return to balance until 2024-2025, though the province’s auditor general has dismissed these projections and said deficits are higher than stated now, and will grow rapidly.
- On Taxes: Approximately 8.6 million people would stay roughly the same, but 1.8 million would pay an average of $200 more while close to 700,000 would see an average tax cut of $130. No changes to corporate rates are included.
- On Hydro, the Liberals face an uphill battle to impress voters. The Liberals are offering a 25 per cent cut in hydro bills, with larger savings of 40-to-50 per cent for rural communities. They also include the affordability fund, launched last October, that would help Ontarians buy items that improve home energy efficiency, including LED light bulbs, greener appliances, and better insulation.
- On Health, the Liberals plan to pour money into healthcare, investing $822 million to bolster hospital care, increasing registered nurse numbers, and introducing a drug and dental plan to cover 80% of costs.
- On Energy, the Liberals plan to spend $1.7 billion over three years to support energy-saving programs under the Green Ontario Fund. They want to invest more money into progressing Ontario into a more “competitive and low‐carbon economy.”
- As we can see, the Liberals do not plan to balance the budget, want to introduce billions into social programs, and continue to focus on their version of the Green economy, while not increasing jobs and corporate competitiveness. Even Wynne knows that voters won't buy that on June 7th.
- Andrea Horwath was first elected as an MPP in a 2004 by-election. She won the leadership of the NDP in March 2009.
- Under Horwath’s leadership the NDP increased its support in the 2011 election and maintained this support through the 2014 election.
- The NDP wants to sell Ontarians on a 5 point plan of providing drug and dental coverage for all, ending “hallway medicine” and fixing seniors care, cutting hydro bills by 30% and re-nationalizing Hydro One, converting student loans to grants thereby reducing debt, and protecting the middle class by having the wealthiest people and most profitable corporations pay their fair share.
- The last bullet point means tax increases.
- The Ontario NDP will continue the Liberal’s cap and trade carbon pricing system but will divert revenues to those who are “carrying more than their fair share of the burden”.
- Following the move of British Columbia, the NDP will introduce a speculation tax on housing for all buyers, not just foreign buyers.
- During the campaign it was revealed that the NDP made a $1.4b costing error in their party’s platform. The party miscounted a $700m annual reserve fund as revenue rather than an expense.
- This means that the deficit would be a “little bit bigger” than expected according to Harwath but still called the party’s platform solid.
- The party’s fiscal platform doesn’t exist. The term deficit or surplus is mentioned only once in the platform, and that is on the costing page. It’s clear just like other NDP and Liberal governments there will be no concern given to the amount of money being spent.
- We’ve talked a lot about immigration and the flow of illegal migrants recently, the Ontario NDP has their own plan to solve this issue: declaring Ontario a sanctuary province.
- The idea behind a sanctuary province or city is that people can claim basic services without fear, regardless of their immigration status, the NDP calls this the “decent, humane thing to do.”
- What this effectively means is that if the NDP comes into power next week, the rule of law will be suspended for any illegal migrants in Canada.
- The NDP also has candidates who should raise an eyebrow for many:
- Joel Harden - A pursuer of environmental justice and “the existential threat of climate change” wants a carbon tax starting at $30/tonne and increases by $10 per year until 2030, making it $150/tonne by 2030. This places it way higher than the federal government’s $50/tonne tax.
- Laura Kaminker - She won’t wear a poppy as a symbol of remembrance as she feels it’s war glorification and is a 9/11 conspiracy theorist.
- Tasleem Riaz - Praised Adolf Hitler online and said our military slaughtered “innocent, men, women, and children in Afghanistan.”
- Guratan Singh - Jagmeet Singh’s brother, anti police protester, and participated in rallies with signs that said, “F*** the police”
- These are just a few but it’s clear that among the glaring policy holes there are significant issues with Horwath’s team, though no official response has been given.
- When asked about her team and cited with numerous examples, Horwath deflected rather than offering condemnation, pointing to her platform and how life would be made better for Ontarians if they elect her and the NDP.
- This is the same NDP story we saw in Alberta and BC last year. The NDP arrives with a vision and idea but their platforms are not thoroughly costed, their candidates not thoroughly vetted, and a year after election many end up with buyer’s remorse.
- Make no mistake, the Ontario NDP is the NDP in as bright of the colour orange as it comes.
- Much talk has been made over the past few days about the Ontario PC Party's lack of a platform. A few days ago, the party finally released its platform with a few key spending details, but without full costing. This has led many news outlets to report that Doug Ford's PCs have "no economic outlook". It's a bold strategy to get potential voters to focus of either Wynne or Horwath as bad alternatives, without providing much in the way of a better one.
- The PC's have outlined 5 major goals for their mandate should they win. They are outlined on the PC Party website under "Plan for the People", which was released just a few days ago. I say goal more than plan, because while the end game is clear on these, it's not entirely sure how the PCs plan to get there. All of the following is straight from the PC Party website, unless otherwise stated. One thing I can say, is that they've made their platform very easy to read and navigate.
- 1. PUT MORE MONEY IN YOUR POCKET: Scrap the carbon tax, reduce gas prices by 10 cents per litre, and give real tax relief to lower and middle class families.
- 2. CLEAN UP THE HYDRO MESS - Fire the $6 million man running Hydro One and lower your hydro bills by 12%.
- 3. CREATE GOOD JOBS - Send the message that Ontario is ‘Open for Business’ and bring quality jobs back to Ontario by lowering taxes, stabilizing hydro bills and cutting job-killing red tape.
- 4. RESTORE ACCOUNTABILITY AND TRUST - Order a line-by-line audit of government spending to bring an end to the culture of waste and mismanagement in government.
- 5. CUT HOSPITAL WAIT TIMES - End hallway health care by creating 15,000 new long-term care beds over the next 5 years and adding $3.8 billion in new support for mental health, addictions and housing.
- On Hydro, the PCs plan to scrap the Green Energy Act, eliminate enormous salaries at Ontario Power Generation and Hydro One, and stabilize industrial hydro rates through a package of "aggressive reforms". They also want to declare a moratorium on new energy contracts, and renegotiate others where possible.
- On Infrastructure, the PCs want to expand the GO Transit train service, and support transit projects in other cities, expand the subway system and work with the City of Toronto to do so, and explore high speed rail and expanded highway projects.
- On Fiscal Management, the PCs believe that "Ontario doesn't have a revenue problem. It has a spending problem." They want to launch an independent commission to find out about the deficit scandal and to propose solutions to remove the deficit. The party says it will "return to a balanced budget on a responsible timeframe", but not when it will happen, as well as centralize government purchasing and to conduct a value-for-money audit of every government program to ensure that programs are not costing more than the benefits they provide.
- On Tax, the PCs promise to oppose the Carbon tax, including taking the federal government to the SCC if they try to impose one, and they also plan to cut income taxes, gas taxes, and introduce a minimum-wage tax credit so those on minimum wage pay no tax. They also promise to preserve rent control on existing tenants, and to create a 75% refundable tax credit for child care costs for children aged 0 - 15 and "respect parents by leaving to them the choice of what kind of child care is best for their kids".
- On Jobs, the PCs want to make businesses more competitive, and in doing so, cut corporate tax rates, small business tax rates, and cut red tape and corporate welfare in order to save money while creating more jobs. They also want to increase access to apprenticeships and reform the foreign credential recognition process so skilled immigrants can contribute more effectively to the economy.
- On Health, the PCs plan to invest in mental health, addictions and housing supports, and add more beds to hospitals which will cut wait times.
- In other areas they also plan to support infrastructure projects in Northern Ontario, develop natural resources, and cut the aviation fuel tax for Northern flights. They also want to protect the environment by making sure revenue goes to fund conservation efforts.
- While we can see the list of priorities that the PCs will make, and while it is yet unclear how to fund all of those promises, it appears that the PCs are the one party that believes in cutting taxes and balancing the budget. We'll see who voters choose on June 7th.
Word of the Week
Election - a process in which people vote to choose a person or group of people to hold an official position of political power.
How to Find Us
Episode Title: Holding Government To Account
Teaser: We talk about US Tariffs, $50B to provinces for illegal immigrant housing, and the federal government’s purchase of the Trans Mountain Pipeline, and all these impacts on the economy. Also, we discuss party platforms in the Ontario election on June 7th.
Recorded Date: June 2, 2018
Release Date: June 3, 2018
Edit Notes: Cut out at PC Platform
Podcast Summary Notes