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Economic Digest

Business Without Borders ®

Economic Digest – August 2016

BREXIT
As Britain begins the process of extricating itself from the European Union, the government has discovered it is sadly lacking in a key resource: trade negotiators. Britain hasn’t negotiated a trade deal in more than 40 years because all the negotiating has been done by the EU. Now that it proposes to leave the EU, there is a frantic search to find anyone in the civil service who knows how to put a trade deal together. There are just 20 people in the entire public service with 439,323 employees who have experience in trade talks. That compares to more than 600 in the EU. Canada has close to 200 official and lawyers working on trade deals.

WORK
Sweden has always ranked as one of the happiest nations in the world. Now, some Swedish companies are switching to a six-hour workday, the theory being that compressed hours boost both productivity and happiness. A labour agreement gives 250,000 workers in France the right to ignore work e-mails or calls after 6.00pm. Overtime in Japan has increased so much due to economic strife that karoshi, or death by overwork, is now a legally recognized cause of death.

BUDGETS
The Summer Olympics opens August 5 in Rio de Janeiro, and about the only sure bet is that they will be a financial disaster. A pair of Oxford researchers found that all of the Olympic Games held between 1960 and 2012 went over budget by an average of 179 per cent though no reliable data was available for 11 of them. That means that Rio’s US$9.7-billion could end up hitting $24-billion. The 1976 Montreal Olympics was over budget by 796 per cent and took the city 30 years to pay off its Olympic debt. The Barcelona Olympics of 1992 was over budget by 417 per cent. While the Atlanta Olympics of 1996 was over budget by 147 per cent, it ended up with a profit of $10-million.

GROWTH
The world economy grew by 2.7 per cent in the first quarter of 2016 compared with a year earlier. The growth rate grew for the first time since 2014, largely owing to a livelier performance by the BRIC economies (Brazil, Russia, India and China). Ironically, in the past five years, Britain has contributed the most to EU GDP growth. According to an OECD think-tank, GDP growth will be one per cent lower in 2018 when Britain does leave the EU.

BAGGAGE
Rimowa has partnered with Airbus and T-Systems to create the Rimowa Electronic Tag, a suitcase with a built-in smart display that will house your boarding pass and baggage tag, allowing you to truly check in from home and seamlessly glide, hands-free through security. Lufthansa is the first airline to sign on to accept the bags.

UNDERGROUND ECONOMY
According to Statistics Canada, underground economic activity for 2013 totalled C$45.6-billion in Canada, or about 2.4 per cent of gross domestic product. Since 2002, this proportion has been stable at 2.4 per cent. The highest was 2.7 per cent in 1994 while the lowest was 2.2 per cent in 2000. In 2013, three industries accounted for more than half of the total underground economy; residential construction (28.8 per cent), retail trade (12.5) and accommodation and food services (11.7).The total value of underground economic activity in 2013 was highest in the four largest economies: Ontario $16.7-billion), Quebec ($11.1-billion), British Columbia ($6.3-billion) and Alberta ($6.3-billion).

FORESTS
Animals that live in Eastern Canada’s boreal forests and the forest industry that operates there, can do just fine in the warmer drier temperatures expected with global climate change. Black spruce is found across North America from Newfoundland to Alaska and is the most common tree in the eastern boreal forest. A new study has found that in Quebec, north of the 49th parallel, black spruce seems to thrive and grow better in warmer, drier years, which are expected to become more frequent with climate change. Black spruce is commercially important for use in the pulp and paper industry, and many song birds, caribou, snowshoe hare, lynx and sable live in these forests and could spread further north.

BEER
US farmers plan to harvest their largest-ever hops crop, giving craft brewers who are struggling to match surging demand for beers with more aroma and bitterness, reason to cheer. Washington State is the largest grower of hops in the US with 32,205 acres followed by Oregon and Idaho. Farmers expect to harvest 51,115 acres of hops in 2016, up 17 per cent. The US and Germany are the world’s top hop growers. In 2015 sales volume of US craft beer rose 12.8 per cent domestically and 16.3 per cent for export. Small brewers had feared a hops shortage after adverse weather blighted last summer’s European harvest.

NEWS
More than half of Internet users now get news from social media platforms, highlighting a major shift in the way publishers find their readers. This shift is picking up speed while a confluence of forces, including a surge in smartphone use, the rise of ad-blocking software and a drastic realignment in the flow of advertising, is reshaping the media landscape. A report that surveyed 50,000 Internet users in 26 countries, including Canada, highlights the predicament that news outlets around the world have been grappling with. The highest percentages of those who have paid for online news in the past year were in Norway with 27 per cent, followed by Poland and Sweden. The figure for Canada and the US was seven per cent.

SOFTWARE
Canadian industries associated with software development and computer services earned operating revenues of C$55.4-billion in 2014, up 7.9 per cent from 2013. Software development and computer services development comprise three industries: computer systems design and related services, software publishers, and data processing, hosting and related services. The largest of the three industries, computer systems design and related services reported $42.8-billion in operating revenues.

DRONES
The drone revolution is disrupting a broad range of industries, from agriculture to film-making. According to a new study on their commercial applications, the emerging global market for business services using drones is valued at more than US$127-billion. By industry, the use of drones for infrastructure is estimated to be worth $45.2-billion; Agriculture, $32.4-billion; Transport, $13-billion; Security, $10-billion; Media and Entertainment, $8.8-billion, Insurance, $6.8-billion; Telecoms, $6.3-billion and Mining, $4.4-billion.

INFRASTRUCTURE
A study in 2013 by the American Society of Civil Engineers claimed that additional spending of US$1.6-trillion dollars, in 2010 dollars, is needed by 2020 to bring the quality of the country’s infrastructure up from “poor” to “good”. America’s roads have fallen from seventh to fourteenth in the World Economic Forum’s ranking of the quality of infrastructure. Part of the problem is that the federal tax on gasoline, which provides most of the funding for federal spending on roads, has been stuck at 18.4-cents per gallon since 1993. Over that period, the price of construction materials and the wages of construction workers have both risen by more than 75 per cent.

TELESCOPES
China has fitted the final piece on what will be the world’s largest telescope, due to begin operations in September. The 500-metre wide Aperture Spherical Telescope, or FAST, is the size of 30 football fields. The US$180-million satellite project will be used to explore space and help look for extraterrestrial life. FAST will replace the Arecibo Observatory in Puerto Rico which is about 300 metres in diameter, as the world’s largest telescope.

AVODADOS
High prices and surging demand have sparked a spate of avocado thefts in New Zealand. Hundreds have been stolen in bulk from orchards, with thieves using rakes to drag fruit straight from the trees before selling them on.

HELIUM
An approaching squeeze in US helium supplies has producers of the gas, used in everything from party balloons to magnetic resonance imaging (MRI) machines looking north to Canada’s wheat fields. Almost three quarters of US helium demand is filled by an underground reserve in Amarillo, Texas, but the US government which controls it has announced plans to get out of the commercial helium business by 2021. Helium is a US$4.7-billion industry and refiners and customers are looking north to Saskatchewan and Alberta in the expectation that they could be prolific helium producers.

PHONES
About 630,000 counterfeit mobile phones have so far been disconnected in Tanzania causing communication difficulties for those who owned them. Tanzania has joined Cameroon, South Africa and Nigeria in efforts to boost security and health measures by disconnecting the phones. The country has about 33-million phones out of an estimated 49-milion people. Counterfeit phones lack authentic International Mobile Equipment Identity (IMEI) numbers that are crucial to identifying and tracking mobile phones, making it easier for criminals and militants to escape detection. Fake phones, are not subject to safety tests and emit more radiation and contain harmful elements such as lead.

DELIVERIES
Uber, the controversial taxi ride company, has launched a food delivery service in London, England, extending the companies reach in the UK beyond its car booking service. UberEats will sell food from 150 restaurants that do not typically deliver in central London, via a network of bicycle and moped carriers. The UberEats service will use a new iPhone and Android app, but connect to the same credit card account as the Uber car service does. UberEats 11.00am to 11.00pm hours will make the service a target for lunch as well as dinner. Uber is entering a crowded market for food delivery but plans to win customers by offering guaranteed delivery within thirty minutes.

OPTICS
A flat lens made of paint whitener on a sliver of glass could revolutionize optics, according to researchers. Just 2mm across and finer than a human hair, the tiny device can magnify nanoscale objects and gives a sharper focus than top-end microscope lenses. The lens is quite unlike the curved discs of glass familiar from cameras and binoculars. Instead, it is made of a thin layer of transparent quartz coated in million of tiny pillars, each just tens of nanometres across and hundreds high. Mass production is the key to managing costs and cell-phone cameras are an obvious application.

INCOME
Swiss voters overwhelmingly rejected a proposal that would have guaranteed everyone in the Alpine nation an unconditional basic income. The plan could have seen people in this wealthy nation receive about C$3,315 per month, enough to cover their basic needs. Proponents argued that a basic income would free people from meaningless toil and allow them to pursue more productive or creative goals in life, Critics said the plan would explode the state budget and encourage idleness.

FLIGHTS
Today, two airlines share the distinction of the world’s longest non-stop flights. It is a tie between Emirates flight 449 from Dubai to Auckland, New Zealand and Air India from San Francisco to New Delhi. Both clock in at 17 hours and 15 minutes, although the Dubai-Auckland mileage is considerably longer, 14,193 kilometres compared with 12,376. Singapore Airlines will one-up its competitors when it resumes nonstop service from New York to Singapore in 2018 with an expected flying time between 18 and 19 hours, depending on wind speed and weather.

LOANS
The US government recently announced plans to regulate the controversial US$38.5-billion payday loans industry. Regulation of the high-interest, low-dollar loans has until now been left to individual states. Under the new rule, lenders would be required to verify income of those taking out loans to ensure they can afford to repay the money they borrow. Nearly 12-million Americans use payday loans every year. Because of the way the loans are set up, people on average pay $520 in fees to borrow $375.

COMPLAINTS
A woman in Newfoundland called the RCMP to complain that there was not enough cheese on a pizza. She had approached the manufacturer of the product but was not satisfied with their response.

NOTE: All details pertaining to CARM R2 processes are based on the current information available at the time of writing. As this is subject to change, it’s recommended you periodically check in with the CBSA or your customs broker.