By Mike Moffatt - Monday, May 13, 2013 - 0 Comments
The government’s favourite talking point on recent tariff hikes is that the existing system represents a “special tax break for Chinese companies.” I have already addressed the tax fairness issue, but there is also an underlying assumption here that Canadian tariffs on Chinese goods are wholly or mostly paid for by Chinese companies. The reality is that very little of the tariffs placed on Chinese goods are paid for by Chinese companies.
The argument made by the government is not one about laws as the tariff is not placed on the Chinese manufacturer. Rather, the tax is placed on the Canadian importer of the good, since the manufacturer is outside of Canada’s jurisdiction. However, the importer will likely share this burden with other parties including the retailer (through higher wholesale prices) and the consumer (through higher retail prices).
On our radar this month: Australia’s $5-million visa and Tim Hortons vs. Highfields Capital Management
By Econowatch - Sunday, May 12, 2013 at 12:00 PM - 0 Comments
•In the wake of Pershing Square’s shakeup at Canadian Pacific, another activist investor from the U.S. has set its sights on an iconic Canadian brand. The hedge fund Highfields Capital Management is pushing for change at Tim Hortons, including scrapping its unsuccessful U.S. expansion strategy. Highfields owns four per cent of the coffee and doughnut chain’s outstanding shares.
• Passengers on Frontier Airlines who buy basic fares can now expect to pay as much as $100 to put a carry-on bag in the overhead bin, where finding space for luggage has become “unacceptably difficult,” the U.S. company says. Meanwhile, a new British study shows several budget airlines have been dramatically hiking baggage and booking fees this year. Those extra costs can make up 65 per cent of total ticket prices.
By Econowatch - Saturday, May 11, 2013 at 3:00 PM - 0 Comments
By Econowatch - Saturday, May 11, 2013 at 12:31 PM - 0 Comments
By Econowatch - Saturday, May 11, 2013 at 9:00 AM - 0 Comments
By James Cowan, Canadian Business - Thursday, May 9, 2013 at 10:26 AM - 0 Comments
Tim Hortons appointed Marc Caira, as its new CEO on May 8, a mere 714 days after the departure of its last chief executive.
The leisurely pace of its executive search process was widely attributed to two factors. First, the company initially thrived under interim leader Paul House, a 25-year veteran of the company who previously served as CEO between 2006 and 2008. But perhaps more importantly, Tim Hortons needed a leader with experience in the U.S. market. Canada is quickly reaching its double-double saturation point. By its own estimates, there’s a market for about 4,000 Tim Hortons in the country; there are now 3,453 with 24 opening in the last quarter alone. As it outgrows its home market, the coffee chain has naturally looked south. But its American expansion has, so far, been wobbly at best. It was forced to close 36 stores in the northeastern United States in 2010 due to poor performance. Same-store sales were down 0.5% in the United States in the first quarter of 2013, compared with 0.3% in Canada.
Outgoing CEO House conceded to Canadian Business earlier this year that the U.S. remains a problem: “I won’t lie to you. I wish were making more money down there,” he said. In the 2012 annual report, the company states: “Operating income in our U.S. segment has not kept pace with our overall growth in that country, and improving it is one of our top priorities.” Continue…
By Mike Moffatt, Canadian Business - Friday, May 3, 2013 at 11:31 AM - 0 Comments
This article first appeared in Canadian Business.
The government’s latest position on Budget 2013’s tariff changes is that the modifications are necessary to ensure that China does not receive special treatment. As the prime minister put it, “we do not think it is appropriate to have special tariff reductions only for companies from countries like China.” This is problematic and not simply because these changes affect 72 countries, of which China is only one. The truth of the matter is that the existing treatment of imports from China is not particularly favourable but there is a much better way to ensure that imports from China receive Canada’s least favourable tariff treatment.
The Customs Tariff is exceedingly complex, with up to 16 different tariff treatments (rates) for each product, based on the country of origin of that product. Countries can be assigned multiple tariff treatments and, for a given product, are assessed the lowest of the multiple rates that apply.
By Kevin Milligan - Monday, April 29, 2013 at 9:00 AM - 0 Comments
Kevin Milligan is associate professor of economics at the University of British Columbia.
Manitoba stands alone in Canada, and not just for its mosquitos and late springs. It also stands alone in resisting a wave of higher provincial income tax rates on top earners—a wave that’s slowly sweeping Canada from coast to coast. Nova Scotia was first on this trend, creating a new higher tax bracket for those making above $150,000 in 2010. Ontario and Quebec announced similar brackets to take effect in 2013, and B.C. looks set to join the others in 2014.
In the chart below, I show the tax rate for high earners across provinces in 2013, along with two potential paths for B.C. in 2014 depending on the results of the upcoming provincial election. The top rates range from 50 per cent in Nova Scotia and Quebec to 39 per cent in Alberta. If the NDP proposal for B.C. is implemented, the top tax rate there will move from 43.7 per cent in 2013 to 48 percent in 2014.
By Charles Reinhardt - Tuesday, April 23, 2013 at 10:45 AM - 0 Comments
On Tuesday, April 16, Bloomberg, the financial news and data giant, filed a lawsuit against the Commodity Futures Trading Commission, one of the most important regulatory bodies overseeing U.S. financial markets. The lawsuit was about new rules governing financial instruments known as swaps—rules, which, according to Bloomberg, will push investors toward new hybrid financial products that “have less regulatory requirements, less transparency, but pose much higher investor risk” than swaps. These adverse and “presumably unintended” consequences, the legal statement goes on to say, are a good enough reason to halt the rule’s implementation.
There’s a feeling lately among long-time Wall Street observers that U.S. financial regulators seeking to tame the industry’s excesses are engaged in a cat-and-mouse chase in which the mouse is often one step ahead.
By Econowatch - Tuesday, April 23, 2013 at 10:30 AM - 0 Comments
• Tiger Woods’comeback hit a snag when he tied for fourth place at the Masters (and suffered a controversial two-shot penalty for an improper ball drop on the 15th hole). But the mere presence of a resurgent Woods at Augusta this year was good for golf, with ticket prices for the famed tournament reportedly selling for $13,820 for a four-day pass on resale websites, up from about $3,675 last year.
• The price of a luxury villa in Dubai soared 20 per cent last year, suggesting a turnaround in the city-state’s high-end real estate market four years after it crashed. Local officials, meanwhile, are intent on reinforcing Dubai’s battered image as a luxury destination. As of last week, they are paying for police to patrol the streets in a $550,000 Lamborghini Aventador, with a Ferrari model soon to follow.
By Econowatch - Tuesday, April 23, 2013 at 9:00 AM - 0 Comments
By Econowatch - Monday, April 22, 2013 at 2:53 PM - 0 Comments
By Econowatch - Monday, April 22, 2013 at 2:40 PM - 0 Comments
By Jana Juginovic - Monday, April 1, 2013 at 2:36 PM - 0 Comments
For the first time since the 2007 financial crisis, investors pushed the Standard & Poor’s 500 index into record territory before closing for the Easter weekend. U.S. stocks have rebounded despite vulnerabilities in Europe and the slow pace of the U.S. economic recovery. While investors are riding a wave, many are wondering why it is taking so long for economic output, consumer demand and employment to return to pre-recession levels.
According to Lawrence Summers, former director of President Barack Obama’s National Economic Council and former U.S. Treasury Secretary — he is also President Emeritus of Harvard University at the top of a shortlist of potential candidates to replace current chairman of the U.S. Federal Reserve Ben Bernanke — the events of the last few years have thrown into question much of what he learned and taught about coherent economic models.
Earlier this week, as Europe was in the throes of yet another crisis, this time centred in the tiny island of Cyprus, Summers told an audience at the London School of Economics that the thinking on how markets function and recover has changed. Summers was joined in the rare panel discussion by Fed Chairman Bernanke, Bank of England Governor Mervyn King and Axel Weber, former president of Germany’s central bank. Canada’s own central banker, Mark Carney was in the audience.
“The events of the last years suggest that the traditional breakdown between the structural and the cyclical that is central to economic thinking has become highly problematic. If there is anyone in this room that believes that a reasonable forecast for the U.S. or British economy at any future date would be represented by a trend line constructed through to 2007 from any previous point, I have a bridge I want to sell you,” Summers quipped.
Fourteen years ago, Summers was one in the trio of economists Time magazine anointed “The Committee to Save the World.” The other two members of the superhero league were then-Federal Chair Alan Greenspan, and U.S. Treasury Secretary Robert Rubin — Summers was deputy U.S. Treasury Secretary and became treasury secretary later that year. At the time, the troika was credited with saving the world’s financial markets from collapse and slowing the spread of the “Asian Contagion,” a wave of financial market panic that began with the rapid devaluation of Thailand’s currency and spread to other parts of Asia, Russia and Latin America, soon affecting the real economy as well. The U.S. appeared inoculated from the financial stresses afflicting other parts of the world, posting record GDP growth rates of five per cent.
Fast-forward to 2008, though, and the U.S. economy was teetering on the verge of the abyss. The committee no longer seemed so infallible — worst still, it looked guilty. As Bloomberg’s Ian Katz wrote, “their model of unfettered capitalism eventually invited disaster. The trio’s deregulatory approach encouraged banks to take risks that later threatened the U.S. financial system.”
For his part, Summers says the moniker bestowed on the three was unrealistic: “I think if anyone had the idea that somehow it was given to bankers or economists to make the world always be stable, that was a very bad idea.”
In conversation with Maclean’s, Summers spoke about lessons learned from the financial crisis, as well as Carney’s new job as Britain’s central bank governor and the Keystone XL.
By Andrew Hepburn - Friday, March 29, 2013 at 9:00 AM - 0 Comments
What killed Thelma Morrow?
At first glance, the answer seems obvious and not all that unusual. On the night of September 7, 2011, a car struck the 52-year old Miami woman as she crossed the road.
It’s tragic, but pedestrian-car accidents happen all the time.
Yet something about Morrow’s death was different, and it had nothing to do with Morrow, the driver, or weather conditions.
As a local news outlet reported at the time, “A 30-block stretch of road was unlit because copper wiring had been stolen from the street lights, rendering them inoperable.”
Emergency personnel at the scene were convinced the dimly-lit street made the unfortunate difference.
“We all feel if the street lights were on, she wouldn’t be fighting for her life,” an official with the Miami Fire Rescue was quoted as saying.
Thelma Morrow was killed by copper theft.
By Valentina Vezzani and Erica Alini - Saturday, February 23, 2013 at 7:00 AM - 0 Comments
Update: Sadly, the Italian election unfolded as our graphic novel (see below) predicted. Italians, tried by the recession and wary of more austerity, delivered a “protest vote” that produced no clear winners.
The country is simply “ungovernable,” as Italian business columnist Stefano Folli put it. According to the exit polls published by his Il Sole 24 Ore newspaper, Italy’s centre-left coalition, lead by Pierluigi Bersani, and the centre-right alliance headed by former prime minister Silvio Berlusconi are neck-and-neck, having seized about 30 per cent of the vote each. A razor-thin advantage on Berlusconi means the centre-left will be able to at least control the lower chamber, where Italy’s electoral law awards 55 per cent of seats to the party that wins a relative majority. There are utterly no winners in the senate, though, where seats are awarded strictly on a proportional basis.
Voters who shunned Italy’s two long-standing political coalitions, didn’t turn to reformist Prime Minister Mario Monti, the former European commissioner who’s been leading the country since November 2011. His newborn party — the darling of international financial elites, eurocrats and Germany’s Angela Merkel — seized only about 10 per cent of the ballots. Instead, most of those who voted against the ancient regime of Italian politics put their faith in the hands of Italian comedian-turned-politician Beppe Grillo, whose anti-establishment party conquered a startling 25 per cent of the vote in the lower house.
Uncertainty about Italy’s political outlook sent the S&P on the biggest one-day dive since November. The yield (interest rate) on Italian bonds rose to 4.48 per cent from an earlier low of 4.17 per cent, a sign that holders of Italy’s debt are once again getting nervous. The Euro fell 1.1 per cent against the greenback. Italy desperately needs political stability to enact productivity-boosting reforms that will restore to growth and ensure it can continue to pay for its massive public debt.
What happens next is anyone’s guess. Italy’s President Giorgio Napolitano will have to consult political leaders to see whether a governing coalition can be formed. If that can’t be done, Italians might have to head right back to the polls.
If all this sounds familiar, it’s because it would be exactly what happened in Greece less then ten months ago.
*Illustrations: Valentina Vezzani. Idea and texts: Erica Alini.
By Econowatch - Wednesday, February 13, 2013 at 3:17 PM - 0 Comments
By macleans.ca - Wednesday, February 13, 2013 at 2:58 PM - 0 Comments
“We rate every deal . . .It could be structured by cows and we would rate it.”
An unidentified Standard & Poor’s analyst joked in 2007 about the risky mortgage investments his company was approving, according to U.S. Justice officials. The government is now suing the firm for its part in the financial crisis.
By Econowatch - Wednesday, February 13, 2013 at 2:44 PM - 0 Comments
The average hourly wage for union workers in Canada, versus $22.25 for non- unionized employees, says a new report.
The amount gas prices have jumped in the last month in the U.S., put- ting a crimp in consumer spending.
The number of flights cancelled so far by All Nippon Airways due to the grounding of Boeing’s new 787 Dreamliner over battery troubles.
The record fine the Royal Bank of Scotland agreed to pay last week for its role in the LIBOR rate-fixing scandal.
The savings the U.S. Postal Ser- vice expects each year from stop ping Saturday delivery. Its losses last year: $16 billion.
The U.S. debt, which rose on the first day the legal debt ceiling limit was suspended.
By Econowatch - Wednesday, February 13, 2013 at 2:25 PM - 0 Comments
SIGNS OF THE TIMES:
IT’S PAYBACK TIME
• Yale: prestigious university and now, debt collector. The school, along with the University of Pennsylvania and George Washington University, has resorted to suing former grads who haven’t paid back student loans, reports Bloomberg. The money is needed to replenish loan pools for future needy students.
• Toyota recently regained its title as the world’s biggest automaker from General Motors. But it still trails in a key area: pickup truck sales. Last week it unveiled a new version of its Tundra truck, hoping to win over buyers normally loyal to Detroit brands.
• Amazon was granted a U.S. patent this month for a marketplace to sell used digital media, like movies, video games, music and ebooks. A second-hand digital market could be worth billions but will undoubtedly face fierce opposition from the entertainment industry.
• Is Facebook losing its friends?A survey by the Pew Internet and American Life Project found 61 per cent of members have, at one time, taken a break from the website for several weeks or more. Twenty per cent said they were too busy to log on.
By Econowatch - Wednesday, February 13, 2013 at 2:04 PM - 0 Comments
By Charles Reinhardt - Wednesday, February 13, 2013 at 9:00 AM - 0 Comments
In his speech at Harvard University this week, Deputy Governor of the Bank of Canada Timothy Lane took aim at the very cornerstone of Obama’s 2010 landmark financial reform bill. And then he shot: Canada, he said, does not “agree that the Volcker Rule is the only — or the most effective way to prevent excessive risk-taking in financial institutions.”
After everything that happened in the U.S. with the financial crisis — and everything that didn’t happen in Canada thanks to our prudent approach to financial regulation (no bank bailouts, no housing crisis, no massive job-destroying recession), you’d never expect Canadian officials to be so vocally opposed to efforts to tighten oversight of the financial markets south of the border. But they are.
The Volcker rule, named after former Federal Reserve chairman Paul Volcker, is a complex piece of financial regulation that aims at preventing large banks from putting customers’ money at risk.
That sounds good — except the legislation imposes a number of rules on Canadian banks too. Very costly, restrictive and unnecessary rules, according to critics on this side of the border.
By Alan Parker - Monday, February 4, 2013 at 9:00 AM - 0 Comments
The Royal Canadian Mint is finally beginning its phase-out of the penny today — and not a minute too soon.
The penny hasn’t made a lick of sense since penny candy started costing more than one cent — and that was before Lester Pearson became prime minister. It’s been costing taxpayers more than its face value to produce since the 1980s.
So good riddance to the feckless penny. Now the Mint should seriously think about getting rid of a couple of other coins that have outlived their usefulness — the nickel and the dime.
Why? Because a century of inflation has robbed them of intrinsic value.
According to the Bank of Canada’s inflation calculator, the Canadian dollar of 1914 had the purchasing power of about $20 in today’s dollars. So a penny then had the purchasing power of 20 cents today. Likewise, a nickel had roughly the same value as a dollar today and having a dime in your pocket a century ago was the same thing as having a toonie now.
The humble penny may have had even more worth back then than the Bank of Canada gives it credit for. Consider that 100 years ago most daily Canadian newspaper cost one cent. The price in competitive Toronto did not rise to two cents until 1917 and that new price held for more than 20 years. Compare that to what you pay for a newspaper today and you get some sense of the real worth of a penny a century ago.
So the penny, nickel and dime were all useful, valuable coins — 100 years ago. Today they just wear needless holes in your pocket or collect in a jar.