News & Updates

    The Morning Brief - 11.26.18

    Posted by Bruce Carson on Nov 26, 2018 7:09:42 AM


    Economy—GM Plant Closure in Oshawa—USMCA, Tariffs—Situation in Alberta as Premier Notley Heads to Ottawa and Toronto this Week

    GM Plant Closure in Oshawa

    Late yesterday news started to leak out that the GM plant in Oshawa would be closing next year as part of GM’s worldwide restructuring which will emphasize electric and autonomous vehicles. From what is known now, the plant will close in December 2019. 

    What is not known is whether other GM plants located in Ingersoll, Markham and St. Catherines will remain unaffected. There are 2500 union jobs that will be directly affected and some 300 salaried employees could potentially lose their jobs in Oshawa. 

    According to reports both Prime Minister Trudeau and Premier Ford were informed of the pending closure yesterday. This move by GM comes as the U.S., Canada and Mexico are poised to sign the new USMCA later this week on the sidelines of the G-20 meeting Buenos Aires. It also comes just days after Finance Minister Morneau’s fall economic update which featured allowing businesses to write off capital expenses in the year they occurred, following the precedent set in the United States last year. It would seem that the announcement from last week would make it attractive for GM to retool its plant in Ontario rather than shutting it down.

    No doubt this matter will be high on the agenda for question period today as when asked about debt or deficit Morneau is always quick to respond with favourable unemployment statistics. There is also a billion dollar loan outstanding to GM from EDC and while the money advanced during the recession of 2008-2009 to keep the auto industry alive has for the most part been written off, these advances could come up in question period.

    GM has an announcement scheduled for 10am today.

    USMCA, Tariffs

    We are now only a few days away from November 30 when this trade agreement is to be signed in Buenos Aires at the G-20 meeting. The plan some time ago from both Canada and Mexico was that by the time the agreement was set for signature, the U.S. would have removed the steel and aluminum tariffs. The substitution for these tariffs from the U.S. point of view is the imposition of quotas.

    It seems that Mexico is further along in its negotiations with the U.S. on quotas than is Canada. The quotas which will be substituted for the tariffs are very tight for Canada and as yet there is no agreement between Canada and the U.S. According to news reports the U.S. may be willing to remove the aluminum tariffs but the White House believes the steel tariffs are preventing a flood of cheap metals coming into the U.S. Also the U.S. Administration has for months touted the benefits of the tariffs for the U.S. Treasury.

    Regardless of whether tariffs are removed, the signing ceremony for the agreement will proceed as will the signing of a side letter dealing with a commitment from the U.S. not to impose tariffs on autos imported into the U.S. from Canada and Mexico.

    Situation in Alberta as Premier Notley Heads to Ottawa and Toronto this Week

    When we last dealt with this subject Prime Minister Trudeau was on his way to Calgary to make an announcement which many thought would provide direct relief to the beleaguered oil patch; an announcement not contained in the fall economic update. The announcement dealt with affordable housing but no new locomotives or tanker cars from Ottawa.

    Appearing at the Calgary Chamber of Commerce, Trudeau said that the situation in Alberta “is very much a crisis.” He added that his government is moving ahead “in the right way” listening to experts to sort out the best way to make policy. If one reviews speeches and comments from Trudeau, Morneau and Natural Resources Minister Sohi they all contain the phrase about moving ahead “in the right way.” That means the federal government will not take any measures to restart construction during this period of consultation nor will it bring in legislation to declare the proposed pipeline a work for the general advantage of Canada. 

    There were comments from the oil patch on the fall economic update but they mainly hit on the practical reality that nobody’s going to spend any real money while the price of a barrel of oil has tanked and while the differential between Western Canadian Select and West Texas Intermediate grows.

    Premier Notley in response to Trudeau’s empathy tour said “we’ll get it done ourselves” as Alberta is ready to pay for rail cars to move crude even if Ottawa won’t. She reiterated that “if Ottawa won’t come to the table then we’ll get it done ourselves.” 

    Calgary Herald columnist Don Braid described the Trudeau visit as “no rail cars, no locomotives, nothing to speed up pipeline construction, no specific industry targeted measures for businesses and producers in deep trouble.”

    Yesterday in an interview with Global news Alberta Finance Minister Joe Ceci fanned the flames by saying “if the oil sector was Bombardier, it would be ‘all hands on deck’ to help.” He went on to say that Liberals don’t understand the crisis facing the province’s oil industry and are doing exactly the opposite of what they would do if this was the auto industry. He then said “we need them to act quickly, not just voice platitudes.”

    Commenting on the main feature of the fall economic statement Ceci said the accelerated capital cost allowance is only a help when investing in machinery and since those in the oil patch aren’t “making any money, they don’t have money to spend and so it’s a tool which is not useful at this time.”

    He ended by saying that “the only way to get takeaway capacity in the interim is crude by rail.”

    Derek Burney in an opinion piece in the Globe entitled “Alberta’s oil problem is Canada’s problem” put the Alberta issues in a larger, national context. After setting out the alternatives he writes “there are no easy solutions to this self-made conundrum.”  Pipelines will only be operational three years from now.

    He lists the three main challenges for a government as 1) national unity, 2) prosperity and 3) security. He writes that the first two are now in jeopardy. Amid calls for western separation the Justin Trudeau “I feel your pain” empathy is not sufficient. He writes “the problem affects Canada as a whole, not just Alberta, and cries out for leadership that will break the logjam in the national interest.”

    As Premier Notley travels to Ontario this week, she must realize the position she and her government have been put in. Having bought into the Trudeau grand bargain of a pan Canadian environmental strategy in return for pipelines to tidewater she now faces the prospect of an election next year with no pipeline on the horizon but with a stringent environmental regime in place in Alberta. Trudeau’s moving ahead “in the right way” nostrum means that nothing will happen on the pipeline until next year. In the meantime Trudeau can advertise himself as someone who both supports and opposes pipelines, at least until the two consultation processes report.

    Other National Issues

    Question Period

    Today should be highlighted by questions on the government’s attempt to end the mail strike which await a vote in the Senate. The other two main issues will be the pending closure of the GM plant in Oshawa and questions to the government about what the government proposes to do to address what the prime minister has called a “crisis” in Alberta.

    Tomorrow’s Morning Brief will elaborate and add to this list.

    To come

    --this week, Premier Notley of Alberta in Ottawa and Toronto

    --November 30, GDP numbers for September and Q3 to be released—GDP is predicted to fall to 1.9% in Q3, down from 2.9% in Q2

    --November 30-December 1, G20 meets in Argentina

    --December 3-13, COP 24 meeting in Poland

    --December 5, Bank of Canada deals with interest rates --bc

    Topics: Morning Brief

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