Canada Watch :: July-August 2010 :: Business & Finance

July-Aug 2010

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Survey of Private Sector Forecasters Results Released

The Department of Finance’s recent release of the results from the June survey of private sector economic forecasters, suggests that the near-term outlook has continued to improve since Budget 2010. Private sector forecasters have revised up their 2010 growth forecasts for both real and nominal gross domestic product (GDP) for a second time since the budget and have further revised down their forecast for the unemployment rate.

As a result of stronger expected growth in 2010, the level of nominal GDP is expected to be about $24 billion higher in 2014 than projected in the budget. This suggests that the medium-term fiscal forecast presented in Budget 2010 remains on track. An updated medium-term fiscal forecast will be provided this fall.

About the “Private Sector” Forecast

Canada’s Department of Finance regularly surveys about 15 private sector economists for their views on key economic variables. The average of these private sector forecasts has been used as the basis for fiscal planning since Budget 1994. Use of private sector forecasts introduces an element of independence into the fiscal forecast. This approach is widely endorsed by such organizations as the International Monetary Fund.

The Canadian Century? Foreign Policy Magazine Thinks So

In a glowing June 25 Foreign Policy magazine article, entitled “The Canadian Century,” its authors (Brian Lee Crowley, Jason Clemens, and Niels Veldhuis) present the piece as a record of “what the United States could learn from its northern neighbour.”

Among other accomplishments, the article cites the fact that Canada’s average rate of economic growth between the years 1997 and 2007 averaged 3.3 percent, the highest average growth in the G7. In addition, it says, during the same year period, the country’s employment growth was 2.1 percent, which is double what the United States achieved during the same period and, again, the highest growth rate in the G7. As for business investment during that same 10 years, the article says, Canada “outperformed” the G7 almost every year.

From there, the article suggests that Canada’s G7 colleagues pay attention to the country’s past economic difficulties and then review the tools by which it turned the corner to become “a top global performer” – this in order that they might learn how to address their own economic difficulties.

And justifying the article’s headline, its authors contend: “If the country continues on the path it is following today, it's not unreasonable to think that this will be the Canadian century, the era in which the country comes into its own as a world economic power…”

Minister of Finance Jim Flaherty issued a document entitled Canada's Global Economic Leadership: A Report to Canadians, at a briefing session on the upcoming G8 and G20 meetings and Canada's economic performance held at the Consulate General of Canada in New York on Monday, June 21.

Minister Flaherty Presents Economic Leadership Report in New York

Finance Minister Jim Flaherty visited New York last month, just prior to the G8 and G20 meetings in Canada, to present a report, entitled Canada’s Global Economic Leadership: A Report to Canadians, at the Consulate General of Canada.

Canada is leading the world in the global economic recovery, said Minister Flaherty, and the report reinforces that leadership role, charting as it does Canada’s strong record of growth, open trade, and financial-sector performance as compared to other industrialized nations.

“Wherever I travel – at home and abroad – Canada’s economic leadership is evident,” said Minister Flaherty. “We’re open for business, creating more and better jobs today and for the future…we have a great economic story to tell, and we can capitalize on it.”

Minister Flaherty said the document demonstrates that Canada is far advanced on the key priorities facing G20 leaders, including fiscal consolidation, trade liberalization, and financial sector reform. The report notes that:

* The decline in output in Canada during the recession was the smallest of all G7 countries;

* Canada is the only G7 country to have virtually recouped the loss in output during the recession;

* Canada is the only G7 country to record a year-over-year increase in employment in March 2010.

“Continuing to emerge from the global recession, Canada showed the strongest economic growth in 10 years in the first quarter,” said Minister Flaherty. “[Canada] has responded to the recession with the right policies to stimulate the economy and create jobs. We have lowered taxes, invested in infrastructure and training, and boosted support for workers and families.”

Minister Flaherty noted that Canada has kept its economy open for investment from all around the world, resisting protectionism, and taking down barriers to trade. At the same time, Canada has played a leadership role within the G8, G20, and other international organizations, participating in global discussions on ways to prevent future economic crises.

“One of the key lessons of the global recession and financial crisis is that sound macroeconomic and financial policies matter,” said Minister Flaherty. “Our financial system has served as a model for reforms, and our fiscal situation is the envy of countries facing crippling deficits.”

To complement Minister Flaherty’s New York presentation, Jason Kenney, Minister of Citizenship, Immigration and Multiculturalism, and Christian Paradis, Minister of Natural Resources, presented the same report in London and Beijing, respectively.

International Trade Minister Peter Van Loan with US Ambassador to Canada David Jacobson and National Chapter Chair of the American Chamber of Commerce in Canada Rick Tachuk.

Resisting Protectionism, Promoting Free Trade on Eve of the G8 and G20 Summits

In a June 22 speech, delivered to the American Chamber of Commerce in Canada, Minister of International Trade Peter Van Loan called for increased focus on free and open trade, pointing to the Canada-United States relationship as an example of a free trade success story.

“Canada believes that lasting economic recovery – not just in North America, but around the world – depends on free trade, not protectionism,” said Minister Van Loan during the speech, which took place in advance of the G8 and G20 summits in Muskoka and Toronto.

In his remarks, Minister Van Loan highlighted Canada’s leadership in driving the free trade agenda and opening markets to Canadian businesses and Canadian workers, pointing to the continuing economic recovery as proof that the plan is working.

“Our government’s aggressive free trade agenda, coupled with decisive implementation of the Economic Action Plan, has generated results for Canada’s economic recovery,” said Minister Van Loan. “Our commitment to free trade, to fighting protectionism, and to opening doors to new opportunities continues to fuel our economy and create jobs for Canadians at home and abroad. The Canada-United States trade relationship is an example of how partners can benefit from opening their borders to trade.”

Indeed, the North American Free Trade Agreement has contributed to significant growth in trade and foreign direct investment in North America. Merchandise trade among Canada, Mexico, and the United States has doubled since the agreement came into force, reaching $798.5 billion in 2009. It is now one of the largest free trade areas in the world, with some 448 million consumers.

While the Canada-United States trade relationship remains by far Canada’s most significant, Canada is moving to secure access to key markets around the world. In less than four years, Canada has built on the success of NAFTA by concluding new free trade agreements with Colombia, Peru, Jordan, Panama, and the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland).

Peter Van Loan, Minister of International Trade, meets with Toichi Sakata, Vice-Minister of Japan’s Ministry of Education, Culture, Sports, Science and Technology, to discuss strengthening the Canada-Japan science and technology relationship.

Canada Builds Closer Trade and Investment Ties with Asia-Pacific Partners

Also in June, while on a trade visit to Japan, Minister of International Trade Peter Van Loan reaffirmed Canada’s commitment to strengthen trade and economic cooperation with the Asia-Pacific region and attended the Asia-Pacific Economic Cooperation (APEC) Meeting of Ministers Responsible for Trade, where he held a number of bilateral meetings with counterparts from APEC member economies.

“The Asia-Pacific region is a priority for Canada,” said Minister Van Loan. “We are committed to APEC and will continue to work with our partners to promote economic growth, cooperation, trade and investment across the region.”

The Minister stressed Canada’s support for economic integration in the Asia-Pacific region, including working toward a free trade area of the Asia-Pacific as a long-term objective. “Free trade and investment are vital to recovery from the global economic downturn,” said the Minister.

Minister Van Loan also met with Japan’s Minister for Foreign Affairs, Minister of Economy, Trade and Industry, and Vice-Minister of Education, Culture, Sports, Science and Technology, as well as a number of business leaders. He noted Canada’s commitment to strengthening its science-and-technology relationship with one of the world's most innovative and science-rich economies, and conveyed Canada’s commitment to progress on a range of Canada-Japan commercial issues, including the possibility of negotiating an economic partnership agreement with Japan.

“A Canada-Japan economic partnership agreement would help address today’s economic challenges by creating jobs and opening more doors for business on both sides of the Pacific,” said the Minister. “Our government is committed to promoting free trade, fighting protectionism, and creating opportunities for Canadian businesses and Canadian workers in global markets.”

Japan is Canada’s second-largest trading partner in Asia and its largest source of foreign direct investment from Asia. Together, APEC members account for 55 percent of world GDP, 40 percent of the world population, and 45 percent of global merchandise trade.

Minister Van Loan, at right, and Open Text Corporation Executive Chairman Tom Jenkins navigate Open Text software in action.

Minister Van Loan Promotes Canadian Economy and Technologies at G20 Summit

Canada showcased its innovations and leading-edge technologies at Experience Canada pavilions during the G8 and G20 summits earlier this summer. The pavilions, which were located in the International Media Centers for both summit events, provided “great opportunities to promote leading Canadian businesses and Canada’s competitive advantages to the world,” according International Trade Minister Peter Van Loan. “With one of the most successful and innovative economies in the world, Canada is the premier destination for business and investment. Our competitiveness, excellence, depth of talent, creativity, and innovative spirit offer key competitive advantages to investors.”

The Minister provided a tour of the G20’s Experience Canada pavilion just prior to the summit, highlighting interactive displays of Canadian innovations from across the country, including:

* Advanced digital gaming technology, such as the virtual 2010 FIFA World Cup soccer game, which was developed by Electronic Arts Inc. at its Burnaby, British Columbia, campus. Electronic Arts is one of the most successful developers and publishers in the video game industry;

* The “connected car,” which offers online multimedia networks to the driver and passengers by applying Canadian research in the areas of Internet provider technologies, optical network equipment, application software and wireless infrastructure from Alcatel-Lucent. Alcatel-Lucent has offices in British Columbia, Alberta, Ontario, Quebec, and New Brunswick;

* New imaging technology that enhances 3D viewing capacity for laptops and handheld devices. The technology was created by Spatial View Inc., of Toronto, a global company that provides 3D content of all types for applications in retail, digital signage, professional design, gaming, entertainment, and animation.

These new Canadian products represent a mere fraction of the innovations that keep Canada at the forefront of new technology development in key sectors ranging from biotechnology to aerospace and digital media to renewable energy.

“Canada is a modern and innovative business destination,” said Minister Van Loan. “With the lowest debt, soundest banking system, and fastest predicted economic growth in the G7 over the next few years, the highest proportion of post-secondary graduates among countries of the Organisation for Economic Co-operation and Development, and an outstanding quality of life, Canada offers an environment in which innovators can create, businesses thrive, and investors succeed.”

Minister Flaherty at the G20

Minister of Finance Jim Flaherty met with his South African counterpart Pravin Gordhan at the G20 Summit in Toronto.

Minister Van Loan announces Invest in Canada week to an audience of business leaders while visiting Shanghai on June 1. Invest in Canada week will take place in October during the World Expo 2010 in Shanghai.

Canada’s Economic Success Story Recognized by China

Canada’s leadership in weathering the global economic downturn is being recognized around the world, according to International Trade Minister Peter Van Loan, who, immediately prior to a successful trade visit to Japan, paid a four-day visit to China. During the visit, the Minister promoted Canada’s economic success story to government and business leaders, highlighting Canada as a world-class destination for investment.

“With one of the most successful and innovative economies in the world, Canada offers many advantages as an investment destination and business partner,” said Minister Van Loan. “Chinese investors are enthusiastic about Canada’s success story and see our country as a hub of opportunity and as a dynamic business partner.”

During his visit to China, Minister Van Loan met with Gang Wan, China’s Minister of Science and Technology, and with Xiuhong Ma, the Vice Minister of Commerce. The ministers discussed how Canada and China can work closer together to create more opportunities and new sources of prosperity for both countries. The Minister also met with Han Zheng, Mayor of Shanghai, and with Shao Qiwei, Chairman of the China National Tourism Administration.

While in Shanghai, Minister Van Loan announced Invest in Canada Week, desiged to attract foreign investment to Canada, which will take place at the Canada Pavilion in October, during the Expo 2010 Shanghai China world’s fair. He also spoke to Chinese investors, highlighting the growing economic and trade partnership between the two countries. (The Canada Pavilion is a popular fixture at Expo 2010: on June 2, Minister Van Loan and the Finance Minister Jim Flaherty welcomed the one-millionth visitor to the Pavilion.)

Also at the Pavilion, Minister Van Loan witnessed the signing of contracts between Canadian and Chinese companies, contracts in areas such as fibre optics, green technology, architecture, and state-of-the-art entertainment.

“Chinese and Canadian companies have a great deal to offer each other,” said the Minister. “With the most generous research and development tax credits in the G7, Canada is one of the best locations in the world [in which] to pursue sophisticated, cost-effective science-and-technology partnerships.”

Minister Van Loan concluded the Shanghai portion of his visit by delivering a keynote address to the Asia-Pacific Canadian Chambers of Commerce Forum, one of the largest Canadian business events in the Asia-Pacific region.

“Canada’s competitive advantages, excellence, depth of talent, innovation, and creativity offer a great environment to potential investors from around the globe,” said Minister Van Loan. He added that Canada’s investment climate offers everything from low taxes and solid economic growth to the world’s soundest banking system and a high quality of life.

First-Quarter Profits Soar for New York Favorite lululemon

Canadian athletic clothing company lululemon, a favorite retailer in New York’s yoga-mad environs, tripled its first-quarter profit on strong revenue and same-store sales growth.

“This was our company's best-ever first quarter as we were able to generate very strong same-store sales growth in both the US and Canada,” Christine Day, the company’s Chief Executive Officer, said in a recent release.

For the quarter ended May 2, Lululemon earned $19.6 million (28¢ a share), compared with $6.5-million (9¢) in the same period last year. Revenue in the quarter increased 69.3 percent to $138.3 million, compared with $81.7 million in the first quarter of 2009. Significantly, same-store sales were up 51 percent in the quarter, compared with a 21-percent decline in the first quarter of 2009.

Based out of Vancouver, lululemon focuses on yoga apparel and other accessories. The company has four New York City locations and 125 stores across the United States, Canada, and Australia.

Governor Carney appointed Chairman of the Committee on the Global Financial System

In the days immediately following the G20 Summit in Toronto, it was announced that Governor Mark Carney has been named Chairman of the Committee on the Global Financial System (CGFS), a forum for central banks to discuss policy issues related to financial markets and systems.

The appointment, which took effect July 1 (not incidentally, Canada’s 143rd birthday) for a term of three years, was made in Basel by the central bank governors of the Global Economy Meeting (GEM), which includes 30 central bank governors within the membership of the Bank for International Settlements (BIS).

Governor Carney succeeds American Donald L. Kohn, who had been CGFS Chairman since July 2006, (Mr. Kohn is retiring as Vice Chairman of the Board of Governors of the Federal Reserve System).

Bank of Canada Governor Mark Carney.

A Bold Response Is Required to Secure the Economic Recovery, Says Bank of Canada Governor Mark Carney

The recent recession was not an ordinary downturn, and a bold response from the public and private sectors in Canada and globally is required to secure the economic recovery, Bank of Canada Governor Mark Carney said in a recent speech.

“Do not be misled. This was the Great Recession. To claim otherwise with simplistic comparisons to prior downturns is to ignore both the rapidity and the scale of the policy response, as well as the likelihood that the aftershocks from the crisis will persist for years,” the Governor told the Greater Charlottetown Area Chamber of Commerce in a speech that reviewed the recent economic past, its present outlook, and its challenges for the future.

Describing the global economic recovery as “a policy-led, multi-speed recovery,” the Governor said the Bank expects that: the pace, composition, and variability of global growth will be substantially different across economies; the level and volatility of commodity prices will be higher; and the nature of the global financial system will be radically altered.

Changes in behavior and policy adjustments are required to make concrete the G20’s framework for strong, sustainable, and balanced global growth, the Governor said during the speech, which occurred just 10 days prior to the G20 meetings in Toronto. The core of the G20 financial reform includes two approaches – to protect the banks from the business cycle and to protect the cycle from the banks. The first is about making individual banks stronger and more resilient, while the second is focused on strengthening the system as a whole so that it can withstand the failure of any single financial institution. Finally, policy-makers must ensure that business can operate in an open and stable trade and regulatory environment, free from trade and financial protectionism.

“The G20’s agenda is comprehensive and radical, but we need to implement, as well as propose,” Governor Carney said, underscoring in advance the Prime Minister’s call for accountability at the G8 and G20 Summits.

In Canada, all businesses, large and small, must step up productivity for the recovery to be balanced and the economy more competitive. “The imperatives for Canadian businesses appear clear,” the Governor said. “New suppliers need to be sourced; new markets opened; a new approach to managing for a more volatile environment developed.”

The role for Canada is significant. The Governor noted: “Canada is not a bystander in this global upheaval. We can influence policies and focus reforms. Our businesses can anticipate and take advantage of emerging trends.”