Government to End Preferential Tariffs for China and 71 Other coutnries
The government has proposed shrinking a list of countries eligible for tax breaks on imports by more than a third, a plan that could see companies hit with millions more dollars in taxes—costs that could be passed on to Canadians.
The government is proposing to drop 72 countries and territories, including significant trading partners like China, Brazil, and South Korea, from a list of 175 now eligible for lower duty rates through a program called the General Preferential Tariff. Other countries slated for removal include Thailand, Malaysia, and Singapore.
For example, if the planned changes take place, it could mean a company that used to pay 8.5 per cent in duty at the border on every bicycle it imported from China might then have to pay 13 per cent instead. That could amount to hundreds of thousands of dollars more per year in duty.
Some manufacturers and exporters have expressed concern about how the government is going to handle bringing about such changes without damaging relations with the emerging markets it and Canadian businesses have worked so hard to cultivate.
All of the emerging BRICS countries—Brazil, Russia, India, China, and South Africa—are slated to be cut from the list. But the government says the 39-year-old program is meant to help developing countries boost economic growth through expanding their export earnings and industrialization. It’s been almost 20 years since the last big review of the General Preferential Tariff program, and the global economy has changed.
“We want to ensure that this type of development assistance is focused on those countries most in need of tariff preferences for trade and economic growth,” Finance Minister Jim Flaherty was quoted as saying in a Dec. 21 news release.
Who will take a hit
Of the 72 beneficiaries slated to be scrapped from the list, China was the most shocking, said Joy Nott, president of IE Canada, a national advocacy group made up of importers and exporters including manufacturers, wholesalers, distributors, and retailers.
“People’s eyebrows shot up when they read it,” said Ms. Nott.
Not surprisingly, a lot of her members import goods from China, she said. Other countries of concern include Brazil, Colombia, Costa Rica, Indonesia, South Korea, Thailand, and Mexico.
The top countries to benefit from the General Preferential Tariff in 2011 were China, Thailand, India, Malaysia, Brazil, and Vietnam, according to Finance Canada.
While IE Canada has been receiving feedback about the proposed changes from members across all sectors and from medium-sized companies to large multinationals, retailers and the food import industry are signalling a particularly significant blow to their bottom lines, said Amanda Neadow, IE Canada’s committees director.
– Embassy
Canadian Mining and China
The Canadian mining industry contributes nearly $40 billion to the national economy and China is one of Canada’s biggest export markets and investors, according to the Mining Association of Canada (MAC). MAC’s annual Facts and Figures 2012 report this week said the industry accounted for nearly 30% of Canadian exports in 2011 and hosted 18% of global investment in exploration, some $3.9 billion.
Canadian mining exported a record $101.9 billion worth of metals, non-metals and coal in 2011. Since Q3 2009, China’s demand along with other emergent countries has remained fairly strong and given China’s growth projections, especially her recovery after a temporary slowdown, “demand for minerals and metals is likely to remain strong over the medium to long term”, the report forecast.
Speaking to the Vancouver Board of Trade last fall, Pierre Gratton, President and CEO of MAC declared the mining “super cycle” generated by the combination of globalization and Chinese growth is far from over as some bears have been warning. “China will continue to drive demand for metals well into the future, and is being followed by a number of emerging nations such as India and Brazil…If we keep doing the right things with our wealth of resources here in Canada, Canadians will continue to thrive not just through the development and production of new mines but the numerous spinoff economic and social benefits…”
In part due to rising mineral prices, production in Canada went up 21% in 2011 to a record $50.3 billion with four provinces leading the way – Ontario ($10.6 billion), Saskatchewan ($9.2 billion), BC ($8.5 billion), and Quebec ($7.7 billion). MAC estimates about $140 billion will be invested in Canadian mining over the next decade with the main beneficiaries being BC, Alberta, and Saskatchewan, along with Ontario, Quebec, Newfoundland and Labrador, Nunavut, and the Northwest Territories.
Chinese mining ventures in Canada have witnessed a checkered history. Back in 2005, Chinese metals giant, China MinMetals Corp., failed in its $4.7 billion bid to takeover Canada’s Noranda Inc. due in some part to the unrelated debate over China’s human rights record. Since then, MMG Minerals, a subsidiary of MinMetals is experiencing more success pursuing the multi-billion dollar development of the Izok Lake Corridor zinc and copper deposits in Nunavut that are among the world’s biggest. And even this project could face regulatory obstacles and/or social opposition.
Izok Lake, in Nunavut’s Kitikmeot region. (PHOTO COURTESY OF MMG)
Izok Lake is located about 260 km southeast of Kugluktuk, western Nunavut. The project involves 5 separate underground and open-pit mines to produce lead, zinc, and copper. There will also be three other mines at High Lake, 300 km to the northeast. MMG completed a pre-feasibility study during H2 of 2011 and started a $50 million feasibility study on the mine complex last year that will take 18-24 months to complete, reported the Nunavut news portal nunatsiaqonline.ca.
The mine would include a 2 million tonne a year concentrator that would also process ore from the High Lake mines. Izok Lake and three smaller lakes at High Lake would be drained, and the water dammed and diverted and Grays Bay would be filled in to a considerably extent. The port would be able to handle 650,000 tonnes of concentrate a year shipped east and westward through the Northwest Passage. The mines would eventually produce 180,000 tonnes of zinc and 50,000 tonnes of copper a year, employing about 1100 workers during construction and providing 710 permanent jobs.
In addition to the mines, ports and other facilities, MMG plans to build tank farms for 35 million liters of diesel, two permanent camps totaling 1000 beds, airstrips, and a 350 km all-weather road with 70 bridges stretching from Izok lake to Grays Bay on the central Arctic coast, the Canadian Press reported.
Last December, the Nunavut Impact Review Board called on Northern Development Minister John Duncan to hold public hearings on environmental and other impacts of the project. More than 400 individuals, organizations, First Nations groups and governments have issued complaints about the project.
Minister Duncan along with his colleagues in Transport, Natural Resources, and Fisheries and Oceans can either ask MMG to make changes to its current plans, let the Nunavut Board convene hearings itself, or decide whether the project’s impact is significant enough to warrant the involvement of other governments in hearings.
In a news release last fall, Michael Nossal, MMG’s executive general manager for business development stated: “With global zinc supply expected to decline by up to 1.8 million tonnes over the next five years, the Izok Corridor project represents an opportunity to met medium to long term requirements for zinc based products…(The project) is expected to provide a number of economic benefits to Nunavut, including the creation of employment, business opportunities, skills development, and the payment of taxes to the federal, territorial and Inuit government.”
China to Rationalize 9 Industrial Sectors
The government has set targets to increase the number of mergers in nine sectors to reshuffle China’s industrial structure and enhance big enterprises’ global competitiveness.
The Ministry of Industry and Information Technology (MIIT), along with 11 other authorities, said in a guideline Tuesday that the government is encouraging mergers in the automaking, steel, cement, shipbuilding, electrolytic aluminum, rare earth, electronic information, pharmacy and agricultural sector.
Zhu Hongren, MIIT chief engineer, said economies of scale play an important role in these sectors, but scattered and outdated production capacity led to redundant projects and an overcapacity problem.
The guideline says the government aims to incorporate production capacity in the coming years and upgrade industrial structures in order to increase enterprises’ international competitiveness.
Zhu said China welcomes foreign capital to hold stakes in related enterprises or engage in mergers under supervision.
China aims to foster three to five large automakers with core competitiveness, and increase the concentration ratio of top ten auto makers to 90 percent by 2015, according to the guideline.
Concentration ratio, the measurement of industrial concentration, indicates the degree of market dominance in a sector by a few large enterprises.
China will fully support the development of home car brands and encourage them to go overseas for cross-border mergers, the guideline says.
At the same time, the country will work to cut a large number of steel producing enterprises and phase out outdated capacity through mergers, in a bid to raise the concentration ratio of top ten steel producers to around 60 percent by 2015.
China will also slash the number of firms in the rare earth business through mergers and concentrate production capacity in the sector into a number of large enterprises, the guideline says.
The country aims to promote mergers in the remaining six sectors, and will try to raise the concentrate ratios of leading enterprises in those fields by 2015.
– Xinhua
3 China E-Commerce Trends in 2013
China’s e-commerce sector has grown rapidly over the course of the past five years. By the end of the third quarter of 2012, the total transaction volume of China’s online retail market reached $125 billion (781 billion Chinese yuan), which accounted for 5.2 percent of China’s total retail sales for consumer goods. Moving forward into the new year, what can we expect from China’s e-commerce sector in 2013?
1. China could overtake the US to become the world’s largest online shopping market
China’s 12th five-year economic development plan listed e-commerce as one of the priority sectors to develop. Its Ministry of Commerce announced that China is going to become the world’s largest online retail market by 2013. Regardless of whether this occurs in 2013 or 2014, given the vast netizen base in China and its constantly improving e-commerce ecosystem, China will become the largest e-commerce market sooner or later. According to a recent study that was conducted by the Multimedia Research Groupmy, in 2013, China’s online retail transactions are predicted to reach $251 billion – extremely close to $252 billion in the US. In terms of the number of online consumers, China has already surpassed all other nations, by possessing 228 million online shoppers – equivalent to approximately 73 percent of the entire US population. Whether or not China tops the world in 2013, the point is e-commerce has already significantly transformed the traditional retail landscape in China, and online shopping has become a central characteristic of Chinese consumers’ shopping habits.
2: Lower-tier cities will be more important in China’s online shopping landscape 
photo: techzb.com
According to data released from Alibaba Group, the e-commerce conglomerate had an annual turnover of $160 billion (1 trillion Chinese yuan) in 2012. Sales in China’s lower-tier cities increased over 60 percent while the growth rate in first-tier cities including Beijing, Shanghai and Guangzhou was less than 40 percent year on year.
China’s inland provinces possess the greatest number of potential online shoppers. These shoppers are migrating online for the first time, learning from their counterparts in China’s major metropolises.
More importantly, with the improving logistics capacity in remote areas and improvements in online shopping safety, online channels will become increasingly popular among Chinese consumers from rural areas. The internet enables lower-tier consumers to access more products and brands, which may not be available in their local stores. This is especially good news for Western brands that want to try to reach more Chinese consumers given that building brick-and-mortar outlets in China’s central and Western provinces is risky. E-commerce therefore is a more flexible and cost-efficient approach to reaching the majority of Chinese consumers.
3. Mobile commerce in China is set to thrive in 2013
While many declared 2012 as the beginning of the mobile commerce era in China, m-commerce is set to explode in 2013. In the first half of 2012, according to the China Internet Network Information Center (CNNIC), 37.5 million online shoppers in China purchased products via their smartphones, which increased 59.7 percent year on year. Turnover of mobile purchases accounted for roughly five percent of the total transaction volume of all online shopping, and this share is expected to reach 15 percent by 2015.
Mobile phones have replaced desktop computers to become the main devices for accessing internet in 2012. (388 million Chinese netizens access the internet via their mobile phones while the number of Chinese who access the internet via desktop computers was 380 million.)
Due to the overall increase in usage of mobile devices including smartphones and tablets, mobile commerce will keep on gaining popularity and grow in significance. In addition, barriers that hold back the development of mobile commerce in China are diminishing, and improved 3G network capabilities will considerably advance user experience for shopping via mobile devices. Moreover, mobile payment in China is evolving rapidly as well. Market research company iResearch, predicts in the following three to five years that China’s mobile payment market will increase at a rate of over 40 percent year-on-year.
China’s e-commerce sector will only grow in strategic importance for Western and Asian firms alike. As we begin 2013, these three trends will undoubtedly be key drivers for its growth over the course of the year. Companies and entrepreneurs seeking to capitalize on the potential of China’s e-commerce sector should keep these trends in mind as they execute on their business plans for 2013.
– Tech in Asia
Government to Promote Wheat industry
The Canadian Wheat Board is a dinosaur and its monopoly powers should have been stripped away long ago. Given growing demand in China and other parts of emergent Asia, much more reform is necessary.
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Stripping the Canadian Wheat Board of its monopoly on wheat and barley sales is only the start of the federal government’s “modernization” of the industry, federal Agriculture Minister Gerry Ritz said Friday.
In addition to the establishment of marketing freedom, Ottawa plans to cut farmers’ costs, invest in innovation and develop new markets, Ritz said at the Western Canadian Wheat Growers Association convention in Edmonton.
Wheat in Western Canada brings in nearly $4 billion to the farm gate and represents $5.6 billion in exports, but Ritz said the crop is in decline despite the growth of the middle classes in markets such as China and India.
“We’ve seen slippage in our production capacity of wheat over the last two decades — less and less wheat being grown, less markets demanding hard red (wheat variety) predominantly,” Ritz told reporters.
Scientists are mapping the genome of wheat and that could lead to stronger and gluten-free varieties, he said.
Ritz said the government also wants to make it easier for farmers to get their wheat to market by introducing the Fair Rail Freight Service Act, which would give shippers the right to enter into a commercial service agreement with the railways.
“The average shipment in Western Canada is 1,400 kilometres to get it to port and that takes rail in most instances to do it. There were a lot of instances where the railways would step up to the challenge and do a great job … and there were other instances where it slips a little bit.”
Amendments introduced to the Canada Grain Act as part of the budget eliminate mandatory inward weighing and inspection of grain done between elevator and port by the Canadian Grain Commission. Ritz said that will cut $20 million out of the farmers’ cost of shipping grain yearly.
“With farmers no longer owning the wheat to port as was done under the Canadian Wheat Board, there was no need for that anymore.”
Ritz also revelled in Thursday’s decision by the Supreme Court of Canada that it will not hear an appeal by eight former Wheat Board directors who argued the government should have held a plebiscite among grain producers before making radical changes.
Ritz said stripping the board’s monopoly “has gone well” for farmers. “At the end of the day, they were able to capitalize on some pretty good prices in the marketplace and deliver in a timely way. A farm’s like any other business; it relies on cash flow.”
Farmers attending the convention applauded Ritz for removing the board’s monopoly on western wheat and barley sales.
“The transition from the single desk to the open market has worked so extremely well and it’s been so seamless,” said Rolf Penner, a wheat farmer from Morris, Man. “We all expected some kind of hiccup somewhere and really there hasn’t been any.”
But Wheat Board supporters such as the National Farmers Union vowed to continue their fight.
“This is a dark day for western Canadian farmers and the marketing agency that worked solely on their behalf,” said president Terry Boehm, in a statement released Friday.
“Farmers will continue to pursue this matter in the courts, through our class action suit against the Harper government.”
– Edmonton Journal