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Economic Digest

Business Without Borders ®

Economic Digest – October 2016


The cement industry is one of the world’s most polluting: it accounts for 5 per cent of man-made carbon-dioxide emissions. About 4.3-billion tonnes of cement were consumed in 2014; China alone needed more than half of that. China also produces 60 per cent of the stuff, followed by India and the US.  The industry brings in about US$250-billion a year. Cement firms have not yet attracted the ire of the environmental campaigners in the way that oil firms have, but that could change if they shirk efforts to cut emissions in a manner consistent with keeping the world less than two degrees centigrade warmer than it was in pre-industrial times. About a third of cement’s production costs come from energy bills.


In the decade to 2014 the acreage of vineyards in England and Wales rose from 1,879 to 4,500. Wine exports are expected to increase from US$4.9-million in 2015 to over $35-million in 2020. Two major French firms have recently invested in southern England and in August the first full container of English wine departed for the US. The Chardonnay grapes on the UK vines are due to hit the shelves as sparkling wine in 2019 or 2020. So far, wine has been a borderless business, with UK vineyards buying bottles, barrels and machinery from France. However, the Brexit vote is now causing uncertainty for the industry.


A group of mayors from Canada and the US is trying to challenge a recent decision allowing an American city to draw water from the Great Lakes, arguing that it sets a dangerous precedent. In June, The Great Lakes River Basin Water Council gave the green light to divert water from Lake Michigan, making it the first exception to an agreement banning diversions of water away from the Great Lakes River basin. The Great Lakes and St. Lawrence Cities Initiative, which represents more than 100 local governments on both sides of the border, is looking to fight that decision. Waukesha, a city of about 70,000 people asked for permission to take water from the Great Lakes because its own aquifer is running low and the water is contaminated with high levels of naturally occurring cancer-causing radium.


August is not the holiday season for everyone.  Last year, 38 per cent of Europeans felt that they could not pay for a week away. In Greece, the share of people who believed they couldn’t afford a holiday rose by four percentage points between 2008 and 2015 during which time real wages fell by 14 per cent and unemployment climbed by 17 points. In Sweden however, household disposable income per person rose by 9 per cent over the same period and the proportion of people who felt they couldn’t afford a holiday decreased.


Many places are now banning or restricting tourists. From October, visitors will be turned away from Koh Tachai Island, a snorkelling paradise in Thailand, to save the coral from tourists. Sun umbrellas will go from three nearby islands as they curb tourism too. At the height of the summer, 10,000 holidaymakers get off cruise ships into the alleyways of Santorini, a Greek island. The authorities now have a cap of 8,000 a day. In the Seychelles, the government has banned large hotel developments indefinitely. Both Barcelona and Amsterdam have banned construction of new complexes in the city centre to appease locals. Tourism now accounts for nearly a tenth of global GDP and is a reliable source of growth for many places that would otherwise struggle. In Barcelona it provides 120,000 jobs and in the Seychelles tourism was almost two-thirds of GDP last year.


Swedes rarely handle cash, the volume of card payments has increased tenfold since 2000 and only one in five payments—5-7 per cent if measured by value are made in cash today. In much of northern Europe the situation is similar with “no cash” signs increasingly appearing in shop windows. But travel south or east and a different picture arises. In Italy, 83 per cent of payments are still in cash. Whereas Norwegians made 456 electronic transaction per person last year, Italians made only 67 and Romanians just 17. As countries become richer, they tend to move away from cash on grounds of security, convenience and cost. Consumers may think of cash as free but for banks and retailers it is not, it needs to be counted, bundled, transported, cleaned, replaced and checked for forgery, stored and guarded.


Environmentalists are cheering as San Francisco has voted to ban Styrofoam type coffee cups. In fact, people in San Francisco won’t be able to buy polystyrene foam coolers, paddling pool toys or packing peanuts after the city approved a measure that goes far beyond the prohibition on foam food carry-out containers in effect in dozens of cities and counties. The ban is the most comprehensive by a large US jurisdiction on the cheap insulating foam that cushions goods and keeps drinks hot or cold. The lightweight plastic is extremely slow to decompose and pollutes waterways, harming marine life and birds. Detractors, however, say the legislation does nothing to stop foam-wrapped goods being shipped into the city.


A scheme to collect millions of tonnes of greenhouse gases and bury them under the North Sea off the coast of Rotterdam is Europe’s best hope of showing it can make carbon capture and storage (CCS) technology work. Rotterdam, Europe’s largest port, is the home to the sole survivor of a dozen European Union pilot plans to test CCS technology that has been thwarted by years of false starts. Fossil-fuel and mining firms need to make CCDS work if they are to avoid being left with energy resources whose value has to be written off because they fail to meet regulatory rules. Scientists say the technology is essential if the world is to meet targets to curb global warming. The Rotterdam pilot project would capture around one-million tonnes of carbon emissions a year from a local coal-fired power station over a three year period then compress them and pump them into a depleted gas field.


The Canadian government has stated that it is committed to finding a long-term solution to surging imports of US milk protein that farmers blame for sapping their incomes. Ottawa has promised to consult with farmers and processors to deal with the problem of so-called diafiltered milk, which will trigger a potential trade showdown with the US.  The Dairy Farmers of Canada claim the issue cost farmers more than C$230-million in lost revenue last year. The product, used to make cheese and other dairy products, is legally imported duty-free from the US under NAFTA rules. Milk protein imports reached nearly C$200-million last year, up from virtually nothing in the mid-2000s.


Lawmakers in Massachusetts are drafting a bill that would jump-start the offshore wind industry in the US, helping trigger a US$10-billion building spree off the Atlantic coast. The energy bill is expected to require utilities to purchase power from offshore wind farms. Developers want the legislation to mandate the sale of 2,000 megawatts over a decade, enough to power roughly 1.6-milion households. It would also give developers their first chance to build the farms on a mass scale outside Europe and Asia, in a region where powerful ocean winds and high energy prices will provide a key proving ground. Three companies have leases from the US government to build in the waters south of Martha’s Vineyard.


The Canadian specialized design services industry group, which includes interior, industrial, graphic and other specialized design services, generated C$3-billion in total operating revenue in 2014, up 2.8 per cent from 2013. Total operating expenses grew 1.2 per cent to $2.3-billion. As the revenue growth outpaced that of expenses, the operating profit margin increased to 21.3 per cent in 2014 from 19.7 per cent in 2013. Firms operating in Ontario (50.6%) generated the largest share of revenue in this industry followed by Quebec (20.3%) and BC (13.6%). Sales of interior and graphic design services accounted for almost three-quarters (71.8%) of the industry group’s total sales.


Prices of salmon and squid have soared   as disease and weather have hurt global supplies. Now, British fish sellers say that Brexit-related currency changes may be the next scourge. This would affect import prices, including cod and haddock used by roughly 10,500 fish and chip shops which serve about 380-million meals each year. The majority of fish Britons eat is imported, mostly from Norway and Iceland while much of the domestic catch is exported. Norway, the world’s top salmon exporter is benefitting from salmon prices that are 60 per cent higher than a year ago due to disease and a prevalence of sea lice in South America.


The Boeing Co. is to test whether new non-stick aircraft coatings may provide a simple solution to an age-old aviation hazard: icing. The paints are designed to cause ice to slide harmlessly off a plane’s wings and flight-control surfaces where dangerous build-ups can cause stalls or make aircraft difficult to control. They may help with another issue as well: bug splats that disrupt the flow of air over a jetliner’s wings. Studies have shown that keeping the airflow smooth over a wing can reduce fuel consumption as much as six per cent.


Soaring sales of instant noodles have for years been a reliable indicator of the insatiable appetites of China’s rising consumer class. China is the world’s biggest market for these flash-fried snacks, slurping down 40-billion packets each year. However, the volume of instant noodles consumed last year fell by 12.5 per cent and profits for China’s biggest instant-noodle firm fell by 36 per cent in 2015 to US$256-million. The economic slow-down is affecting sales of many basic consumer goods, from toothpaste to packaged foods.


The Dutch have bicycles with crates in front of the handlebars, child seats behind the saddle, and even wheelbarrow-sized boxes for assorted bags, deliveries or infants. But the many ways of getting the best out of the humble bicycle are causing more and more problems. Almost 40 per cent of Dutch bikes have outgrown the standard size and many are too big for standard cycling racks. A new study recommends installing ”plus” and “double plus” sized bicycle parking spaces at railway stations. In a country with more bicycles than people, the Dutch are already angered by cyclists who take up too much space.


Out of 80 countries, Canada ranks third when measuring how many litres of coffee per capita is gulped inside and outside the home with an average of 152 litres per person per year. Two countries ranked higher, Netherlands with 260 litres and Finland with 185 litres per capita. In fact Canada rated number one when measuring how many litres of coffee per capita are swallowed at food service outlets and cafes. The US was ninth on the list consuming 115 litres per person. There is one Tim Horton’s for every 9,000 Canadians, one McDonald’s for 25,000 Canadians and one Starbucks for every 26,000 Canadians.


According to a recent report, smartphone sales may soon be in decline. Worldwide smartphone sales are poised to reach US$1.46-billion in 2016 facilitating a year over year growth of 1.6 per cent. While this number represents positive growth, it is down significantly from 2015 annual growth levels of 10.4 per cent. Much of this year’s decline is expected to come from developed regions while developing countries will still maintain positive growth rates. On average, wealthy markets such as the US, Canada, Japan and Australia are expected to report a compound growth rate of just 0.2 per cent. Growth in the smartphone market is quickly becoming reliant on replacing existing handsets rather than seeking new users.


After years of decline, youth unemployment is on the rise again according to the International Labour Organization. Worldwide, the unemployment rate for 15-to 24-year-olds will rise to 13 per cent this year. Arab states will see the highest rates of unemployment on average. And globally, 38 per cent of working youths are living in extreme or moderate poverty.


A college in China is trying to stop excessive toilet flushing by giving students electronic passes to access the facilities on campus. Each student is assigned 3,000 litres (650 gallons) of water per month on a preloaded card which must be swiped to use the toilets. If they go over the quota, students have to pay extra.

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