FIG Topics of Interest

 

09/17/18

High-level negotiations are expected to resume this week in a bid to reach a deal for Canada to remain in the three-nation North American Free Trade Agreement, a Canadian government official said, speaking on condition of anonymity. Congress is pressing for Canada to be kept in Nafta, after the U.S. and Mexico struck their own deal last month.

“What has surprised me is looking at the conciliatory position of the U.S. on a lot of issues,” said Laura Dawson, Director of the Wilson Center’s Canada Institute in Washington. The U.S. has dropped some of its most high-profile demands, but she stopped short of making any bets. “They’re closer now than they have been; that’s all I’ve got.”

Canada is offering certain concessions, such as on dairy, in exchange for keeping parts of the current deal it deems essential. Here are the core remaining issues:

Dispute panels: Anti-dumping panels contained in Nafta’s Chapter 19. U.S. Trade Representative Robert Lighthizer has long despised them and sees them as an assault on sovereignty and wants to kill them; Canada calls this a red line issue, and sees them as an essential arbiter in a trade pact with a country 10 times its size.

Cultural exemptions: Canadian Prime Minister Justin Trudeau doesn’t want to open the door to U.S. takeovers of Canadian TV networks, or a flood of U.S. content.

Dairy: This is probably Canada’s big bargaining chip. It’s not in Nafta now but the U.S. is seeking more access to Canada’s protected market. Trudeau has said he’ll bargain here.

Cross-border shipping: The U.S. wants Canada to raise its so-called de minimis level, under which cross-border shipments are shipped duty-free.

Pharmaceuticals: The U.S. and Mexico agreed to 10-year patent protection for biologic drugs, but Canada wants a shorter period. Longer patent protection raises drug costs, and Canada is eyeing expanded public funding for pharmaceuticals.

Intellectual Property: Mexico and the U.S. agreed to tougher protections here. It’s a sticking point, but there have been scant signs that Canada sees this as a core issue.

The U.S.-Canada deal won’t substantially change any of the autos agreement already struck by the U.S. and Mexico, officials familiar with talks have said. Autos had been the biggest sticking point in earlier talks. In other words, two of the subjects Trump talks about most -- cars and dairy -- are resolved or within grasp.

The countries have been close to a deal for weeks, but remain at loggerheads. This week, Canada’s parliament returns from its summer break, squeezing Canadian bandwidth. Foreign Minister Chrystia Freeland, who is Trudeau’s Nafta minister, is scheduled to be in parliament Monday and will host a summit in Montreal beginning Friday. A Canadian cabinet meeting is also scheduled for Tuesday, one Canadian government official said.

The official confirmed that Thursday is a target for any agreement this week -- but also stressed Canada doesn’t think it’s a hard deadline. Trudeau has said as much publicly, saying so-called deadlines have come and gone in talks.

“We will do the work needed and try and get there as quick as we can, but we are going to make sure that we are doing what is necessary to get the right deal for Canadians,” Trudeau said Sept. 13.

A spokesman for Lighthizer didn’t respond to a request for comment. Without a deal this week, there’s likely little hope that text of a trilateral pact can be published by Sept. 30 -- though Nafta talks have already blown through several deadlines, and wouldn’t necessarily collapse if they miss that one. If text isn’t published by then, a deal probably can’t be signed before Andres Manuel Lopez Obrador takes office as Mexico’s president Dec. 1.

Then the next step would be up the U.S. -- it could extend the clock a bit for further talks, or ramp up fights with Canada and Congress by trying to go ahead with Mexico only, possibly begin an exit of the existing accord and proceed with auto tariffs on Canada. All that would be a dramatic escalation of trade tensions with Canada, the U.S.’s second-biggest trading partner and top export market.

https://www.bloomberg.com/news/articles/2018-09-17/it-s-crunch-week-again-for-nafta-with-u-s-and-canada-at-odds

Click here to download a pdf of this article, Missile.pdf
 
 

09/14/18

The most recent Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics (BLS) reports that from June to July, the number of unfilled jobs rose by 117,000, to 6.94 million, confirming the tightness of the current labor market.
https://www.cnbc.com/2018/09/13/workers-are-quitting-their-jobs-in-order-to-get-raises.html

At the same time, however, the number of workers voluntarily leaving their jobs rose to 3.58 million — that's 2.4 percent of the entire U.S. workforce. Bloomberg reports that the last time this many workers quit their jobs was 2001.

These 3.58 million workers are likely making a smart move, says Andrew Chamberlain, chief economist at job site Glassdoor. "We're seeing high worker confidence in their ability to strike out and find a better job opportunity elsewhere," says Chamberlain. "For many, it's a smart move, as there's a clear advantage to increasing your earning potential by switching jobs."
According to Brian Kropp, vice president at research firm Gartner, the average increase in compensation for a worker who quits their old job for a new one is about 15 percent. "You're never going to get that 15 percent [increase] by staying at your current job," he tells CNBC Make It. "That's just not going to happen."
"One of the big things that happened during the global financial crisis is that organizations pulled out all sorts of layers middle management, which actually makes it harder to get promoted," says Kropp. "Simply put, there are fewer opportunities to get promoted."

And it's not just antsy Millennials who are packing up their cubicles. Some of the biggest increases in quit rates are among older, more experienced, workers.

"Younger employees have always quit at a higher rate. That was true when Gen Xers were in their 20s. That was true when Boomers were in their 20s. That's just a fact," explains Kropp. "What's interesting, is that we are now seeing employees who are more established in their careers also quitting at higher rates."

Click here to download a pdf of this article, Missile.pdf
 
 

09/12/18

“The first place you’ll likely see it is in initial jobless claims,” Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said in reference to Florence. At the same time, major storms’ effects on the broader economy tend to be “pretty small, on aggregate.”
https://www.bloomberg.com/news/articles/2018-09-12/florence-to-batter-u-s-data-but-harm-to-economy-likely-small?srnd=premium
That will be a challenge again with Florence, forecast to be the worst storm to hit North Carolina in 64 years, and the storm season is far from over. Data on employment, consumer spending and manufacturing may also become trickier to analyze as economists gauge impacts of tax cuts and a trade war.
Based on consumer purchases that won’t be made as a result of the storm -- such as canceled events and missed dinners out -- Florence may have a $700 million net negative impact on the U.S. economy, not counting insurance losses, according to weather-analytics company Planalytics’ initial estimate.

“If you’re a mom-and-pop and you happen to be in harm’s way, this could be devastating,” said Evan Gold, executive vice president at Planalytics. Florence is “going to be big, and it’s going to be notable, but I’m not sure it’s going to be as big as others” such as Sandy.

Click here to download a pdf of this article, Missile.pdf
 
 

09/11/18

“The small business engine continues to roar with the dramatic change in economic policies since November 2016,” survey authors William Dunkelberg and Holly Wade said in the report.
https://www.bloomberg.com/news/articles/2018-09-11/u-s-small-business-optimism-at-record-high-on-hiring-spending?srnd=premium
Small businesses are increasingly optimistic as the economic expansion enters its 10th year and the Trump administration prioritizes industry deregulation and tax cuts. Companies have been boosting inventories to match robust consumer demand for goods and services.
While the gauge of intent to hire reached a record, finding qualified workers remains a problem. Of companies trying to fill a position in the month, 89 percent reported finding few or no qualified applicants. At the same time, reports of higher compensation were unchanged at a net 32 percent of firms and plans to raise pay decreased 1 point to a net 21 percent.
Other Details

  • A record 25% of owners cited “quality of labor” as the single most important problem facing their company
  • 34% said now is a good time to expand business, up two points from prior month
  • Businesses that expect higher real sales down 3 points to 26

Six of 10 index components increased from the prior month

Click here to download a pdf of this article, Missile.pdf
 
 

09/11/18

“The small business engine continues to roar with the dramatic change in economic policies since November 2016,” survey authors William Dunkelberg and Holly Wade said in the report.
https://www.bloomberg.com/news/articles/2018-09-11/u-s-small-business-optimism-at-record-high-on-hiring-spending?srnd=premium
Small businesses are increasingly optimistic as the economic expansion enters its 10th year and the Trump administration prioritizes industry deregulation and tax cuts. Companies have been boosting inventories to match robust consumer demand for goods and services.
While the gauge of intent to hire reached a record, finding qualified workers remains a problem. Of companies trying to fill a position in the month, 89 percent reported finding few or no qualified applicants. At the same time, reports of higher compensation were unchanged at a net 32 percent of firms and plans to raise pay decreased 1 point to a net 21 percent.
Other Details

  • A record 25% of owners cited “quality of labor” as the single most important problem facing their company
  • 34% said now is a good time to expand business, up two points from prior month
  • Businesses that expect higher real sales down 3 points to 26%

Six of 10 index components increased from the prior month

Click here to download a pdf of this article, Missile.pdf
 
 

09/10/18

“Tit-for-tat trade sanctions don’t benefit any country,” Abe told a gathering of lawmakers from the ruling Liberal Democratic Party on Monday, without mentioning Trump by name. “Now is the time for Japan to take the lead in creating the rules of the new era as a flag-bearer for free trade.”
https://www.bloomberg.com/news/articles/2018-09-10/japan-s-abe-pledges-to-defend-free-trade-after-trump-warning?srnd=premium
Japanese Prime Minister Shinzo Abe pledged to champion free trade in his first policy speech since U.S. President Donald Trump renewed pressure on the country to sign a bilateral trade deal.
Abe has urged Trump to reconsider his decision to quit the Trans-Pacific Partnership regional trade deal, while the U.S. leader has demanded a bilateral pact. Despite efforts to ingratiate himself with Trump, Abe has failed to secure an exemption from metals tariffs imposed earlier this year.
On domestic economic policy, Abe said he wanted to increase sales tax as planned to 10 percent in October 2019 from the current 8 percent, adding that he would introduce policies aimed at supporting sales of cars and houses in order to alleviate the economic impact. The hike has been delayed twice since Abe took office, after a previous increase to 8 percent caused a recession.

Click here to download a pdf of this article, Missile.pdf
 
 

09/07/18

With President Donald Trump expected to start implementing the next round of tariffs on $200 billion of Chinese goods within hours, it’s tempting to think the global economy is riding out the turmoil. Tempting, but mistaken. Look closely: The slowdown has begun.
https://www.bloomberg.com/view/articles/2018-09-07/the-global-trade-slowdown-is-happening-now?srnd=premium
Take trade volumes. It’s been extraordinarily unusual for the momentum of global commerce to head anywhere but up in recent decades. The only notable occasions when the world trade monitor compiled by the CPB Netherlands Bureau for Economic Policy Analysis has turned down in a sustained way since 2000 have been on the eve of the 2001 and 2008 recessions, and during the 2015 commodity slump.

Click here to download a pdf of this article, Missile.pdf
 
 

09/06/18

The United States and Canada have made progress in talks to revise the North American Free Trade Agreement, and officials from the two sides will work together into the night to flesh out areas for further discussion, Canadian Foreign Minister Chrystia Freeland said on Wednesday.
https://www.reuters.com/article/us-trade-nafta/nafta-talks-make-progress-u-s-canadian-officials-to-work-into-night-idUSKCN1LL0CM
“We sent them (the officials) a number of issues to work on and they will report back to us in the morning, and we will then continue our negotiations,” Freeland told reporters on leaving the U.S. Trade Representative’s office in Washington on Wednesday.

Freeland sounded upbeat as she emerged from a day of talks with top U.S. trade negotiator Robert Lighthizer, although she cautioned that no trade deal was done until the last issue was nailed down.
Canada wants a permanent exemption from Trump’s steel and aluminum tariffs and the threat of auto tariffs to be removed. It also wants to continue protections for its dairy industry and defend lumber exports to the United States, which have been hit with duties.

As the two sides met for talks, new economic data showed that the U.S. trade deficit with Canada grew to $3.1 billion in July. This could provide ammunition to Trump, who has accused Canada of “cheating” Americans.

Click here to download a pdf of this article, Missile.pdf
 
 

09/05/18

"There's not a farmer in America that would rather not have a good crop and a fair price than a government check," he added. "That's what they do. That's what they put their equity on the line every year for."
https://www.cnbc.com/2018/08/29/agriculture-secretary-sonny-perdue-farmers-want-trade-not-trump-aid.html?recirc=taboolainternal
The Agriculture Department has authorized up to $12 billion in relief to U.S. growers.

Soybean producers, in particular, have been hard hit by Chinese retaliatory tariffs and stand to get up to $3.6 billion in assistance under the Market Facilitation Program.

The payments to farmers will be based on "actual production ... not on any kind of average," Perdue said Wednesday. "It's going to be individual, by farmer."

The relief will not be able to make farmers "whole," but to ensure they don't have a disastrous season, he said.

Click here to download a pdf of this article, Missile.pdf
 
 

09/04/18

“There’s going to be a lot of pressure to get a deal with Canada,” Mark Sobel, a former U.S. Treasury official and now American chairman of the research group OMFIF. “Canada’s the main trading partner for many states, quite a bit of our economic fortunes are entwined with Canada.”
https://www.bloomberg.com/news/articles/2018-09-04/trump-faces-fight-with-canada-over-nafta-as-china-duties-near
In an attempt to gain leverage over the government of Justin Trudeau, the president has threatened to leave Canada out of the revised Nafta and proceed with Mexico alone. The White House on Friday gave Congress the required 90-day notification that it would be signing a revised version of the quarter-century-old Nafta with Mexico and would include Canada “if it is willing.”
Both Canadian and U.S. negotiators insist they have been making progress with talks due to resume Wednesday. But they have also bogged down over sensitive issues related to Canada’s highly protected dairy sector and the Trump administration’s zeal to eliminate a dispute-resolution mechanism that Ottawa regards as crucial.

That mechanism – known as Chapter 19 – allows Nafta members to challenge each other’s trade remedy rulings, such as special tariffs levied in anti-dumping cases, before an independent panel. It is seen as a Canadian red line, dating back to 1980s negotiations over a bilateral U.S.-Canada pact that served as a precursor to Nafta as well as the early 1990s Nafta negotiations.

Click here to download a pdf of this article, Missile.pdf