Friday News Finds – March 9, 2018

By Tegan Valentine

Hello and welcome back to Top Five Friday Finds – the weekly series in which we share five of the business news stories that dominated the papers (and our conversations) this week.

Let’s start this week’s post off with an update on the United States’ steel and aluminum tariff plan shall we? On Thursday, U.S. President Donald Trump signed proclamations slapping tariffs of 25% on steel and 10% on aluminum. These tariffs are set to come into effect two-weeks from today. When we commented on the proposed tariff scheme last week we emphasized the impact the U.S. new steel and aluminum protections could have on Canada. To recap, Canada is the number one provider of steel and aluminum to the United States, exporting over 4 million tonnes of steel alone to our southern neighbour over the last year. Trump’s proposed tariffs were immediately attacked by politicians, industry representatives and academics in both Canada and the United States – and it appears that lobbying efforts may have paid off. Canada and Mexico are the only countries to receive a provisional exemption from the United States’ new steel and aluminum tariffs program. The exemption is a relief, but Canadians are still on edge. While Canada may have avoided the tariffs for now, it is possible the U.S.A could renege on the exemptions in the future. Commentators are concerned that the steel and aluminum tariffs could be used as a substantial bargaining chip during the continent’s NAFTA negotiations, which have dragged on throughout the Trump presidency.

This week news broke that a kid centred brand is suffering through some very adult problems. Toys ‘R’ Us Inc., the toy chain that sold millions of North American children on the importance of being a “Toys ‘R’ Us” kid is making preparations to liquidate its bankrupt U.S. operations. The toy chain’s U.S. and Canadian business units filed for bankruptcy in September, espousing their hopes that an updated business model and more manageable debt level would enable the company to emerge leaner, and profitable. Instead, sales tanked during the 2017 holiday season as harried parents chose to buy gifts online, and the company continued to be crippled by debt. The company’s downfall is due to a combination of changing shopping habits (hello Amazon Prime!), and an unreasonably high level of debt (in 2005 Toys “R” Us was loaded with debt in a US$7.5 billion leveraged buyout). Current conversation has focused on the liquidation of the company’s U.S. assets, however the future for the company’s various international branches is far from certain. Currently, the Toys “R” Us’s European division is seeking takeover bids, and talks are being held about the possibility of offloading the brand’s Asian business. In Canada, Toys “R” Us’s filed for bankruptcy with the U.S. division, however there has yet to be any conversation about the potential liquidation of this particular business unit.

It appears the next chapter of the ongoing TransMountain pipeline expansion saga has begun. This week Alberta Premier Rachel Notley issued her latest threat, stating that Alberta would cease shipping oil unless the British Columbia government approved the $7.4-billion pipeline expansion project. The announcement is the latest attempt to sway the B.C. government, coming on the heels of Alberta’s short-lived ban on importing British Columbia wine. Kinder Morgan’s TransMountain expansion would triple the amount of Alberta crude oil going from Edmonton to ports and refineries in B.C. This is especially significant due to B.C.’s coastline, which provides direct access to the Pacific Ocean….and the booming Asian energy market. Alberta has been hit hard by recent declines in North American energy prices. It is relatively costly to produce oil from Alberta’s unconventional oil sands, thus making it difficult for producers to profitably produce and sell oil in North America. This, combined with Northern Alberta’s current infrastructure bottleneck (the landlocked province’s pipeline system is woefully overcapacity), has caused the prairie province to take an economic hit. Notley’s announcement is not the first time Alberta has threatened to cut off oil exports. Indeed, Alberta forced previous Prime Minister Trudeau’s hand in 1980 by cutting off oil flow. The specifics associated with Notely’s proposed ban have yet to be set out (there is no word on whether oil will continue to flow to provinces other than British Columbia), however it is clear that the battle to expand the TransMountain pipeline is far from over.

Yesterday was International Women’s Day, and it seems only fitting to talk about the latest major Canadian lawsuit involving discrimination of women in the workplace on the basis of their gender. This week, The Canadian Union of Public Employees (CUPE) announced that it had filed a human rights complaint against Canadian mainstay Air Canada, alleging “systemic discrimination and harassment” against its members.  The union stated that the airline’s policies on uniforms and makeup are discriminatory toward female flight attendants, and emphasized that women have been subjected to inappropriate behaviour by the company’s new onboard service managers, who are responsible for assuring the brand’s service standards (including uniform and makeup policies) are adhered to. Air Canada’s woes are far from unique. Last month, WestJet Airlines filed an appeal after the Supreme Court of British Columbia refused to throw out a proposed class-action lawsuit accusing the company of fostering a corporate culture that tolerates harassment against female employees. While WestJet’s action in court occurred last month, the company made headlines again on Friday with the abrupt announcement that CEO Gregg Saretsky would be retiring effective immediately. No official reason for Saretsky’s retirement was provided, but commentators were quick to point at WestJet’s brewing legal issues which include threats of unionization and the aforementioned harassment lawsuit.

And finally, Canada’s minister of international trade is looking south – way south – as he sets his sight on entering into trade negotiations with South America’s Mercosur trading bloc of nations this week. Mercosur is a trade block established by the Treaty of Asunción in 1991 that unites Argentina, Brazil, Paraguay and Uruguay to promote free trade across the continent. Canada’s interest in Mercosur is likely tied to the increasing uncertainty that surrounds NAFTA. Currently, 75% of Canadian exports are sent to the United States – a dynamic that could have disastrous consequences if North America’s free trade agreement implodes. Entering into an agreement with Mercosur would grant Canada access to Brazil and Argentina – two markets that have seen immense economic growth in recent years. Currently, total trade between Mercosur countries and Canada totals about $8 billion, however that stands to grow exponentially if an agreement is reached (for reference, trade with Colombia, Peru, Mexico and Chile totalled $48 billion despite these countries much smaller economic size due to bi-lateral agreements with Canada).