BCBC In The News
MetroNews: Pipelandia: B.C. holds ‘last obstacle’ between Kinder Morgan and its pipeline dream
[Excerpt] The Business Council of B.C.’s executive vice-president and chief policy officer, Jock Finlayson, said he believes the province will both directly and indirectly benefit if Trans Mountain’s expansion proceeds — not just through thousands of construction jobs and company contracts to build it, but also thanks to boosting Alberta and Canada’s prosperity.
A “big chunk” of the $6.8 billion cost of the project, he explained, will flow into B.C. where the bulk of the pipeline work will happen.
“To the extent this pipeline project will lead to a more vibrant energy marketplace in western Canada, B.C.’s going to get some benefit from that,” he told Metro in a phone interview. “Recognizing it’s highly controversial, we are supportive of building our energy infrastructure to access global markets. Energy is the biggest export in the country.
“We think it’s very important in the national interest to get our products into global markets.”
However, there's disagreement over how much benefit B.C. will actually receive in the long term.
On one hand, the Conference Board of Canada estimates the project could create the equivalent of 15,000 construction jobs and 37,000 direct and indirect operations jobs after it's built. The province would see $5.7 billion flow into its economy, the Board said.
However, another report from Conversations for Responsible Economic Development (CRED) BC concluded, once it's built, "the proposal would create 50 permanent jobs" but that an "oil spill would put at risk industries that together employ over 200,000 people."
Finlayson said, “there’s real validity” to Clark’s fifth condition, particularly because of the risks borne by B.C. for an Albertan product.
“She’s saying we have legitimate concern about the environmental consequences or risks attached to it, both of terrestrial and maritime spills,” he said. “The premier said she wants some economic upside to this.”But if Clark is hoping for a share of Alberta’s oil royalties, “we don’t have a history of upstream royalties associated with hydrocarbon development in Canada,” he warned. “Resource development typically accrues to the province where the resource is domiciled … The principle of that is challenging to get one’s head around.”
BIV: U.S. tax reform could imperil Canadian advantage
To date, most of the hand-wringing in Canada’s business community over the prospect of a Donald Trump White House has been over trade with the U.S.
But an expert in cross-border taxation and accounting says Canadian businesses and governments should also pay attention to Trump’s tax reform policies, which could make Canada less attractive to companies like Microsoft (NASDAQ:MSFT), which has built up a substantial presence in Vancouver.
It could also trigger an outflow of talent from Canada to the U.S., which would have a much more competitive personal and corporate tax environment.
Jock Finlayson, chief policy officer at Business Council of BC, agrees American tax reform could be bad for Canada. He fears new business investment will flow to the U.S. instead of Canada in a range of sectors, including energy, manufacturing and software. And lower personal taxes could result in a drain of professionals.
“It is not hard to imagine that tax-rate differences of this magnitude would trigger an outflow of well-paid managerial and professional talent from Canada, and also encourage more ambitious entrepreneurs to immigrate to the U.S.,” Finlayson said.
News 1130: Tax changes recommended to make BC more competitive
Whether you hated the HST or embraced it, we might one day see a compromise.
The group tasked with finding ways to make BC more competitive for business is recommending we replace the PST with what it calls a ‘made-in-BC value-added tax.’ That’s one of four recommendations being made to the BC government by the Commission on Tax Competitiveness.
The panel was formed in July to review the BC corporate tax structure by holding consultations. Twenty-seven submissions were received, about 60 responses came through online and 12 stakeholder meetings were held.
The commission found the PST to be the major barrier to tax competitiveness. Three of the four recommendations deal with the sales tax.
The BC Business Council says the PST is an antiquated tax, which has become a big deterrent to business. Chief Economist and VP of the council Ken Peacock says the sales tax isn’t equal province to province, which hurts BC’s chances. “Alberta has no PST so, cost advantages are higher in Alberta. It’s different across the states, but ultimately, it ends up driving up the cost of doing business by having a PST rather than a value added tax system.”
Peacock adds the switch may actually bring prices down for consumers.
Vancouver Sun: Kinder Morgan pipeline risks exaggerated by critics
[Excerpt] Which brings me to the issue of oil pipelines. New pipelines are essential to get Alberta’s oil to global markets. Without them, one of the biggest drivers of the Canadian economy will hit a plateau over the next few years. Billions of dollars worth of future potential investment will go elsewhere, along with thousands of jobs. Not just in Alberta, but in B.C.
Alberta will lose and Canada as a whole will lose. In fact, Canada is already losing. While we twiddle our thumbs and our politicians engage in endless consultation and debate, U.S. energy production, exports and related infrastructure spending have gone straight up.
The U.S. added 8,600 kilometres of new pipeline capacity between 2014 and 2015 alone, notes Jock Finlayson, executive vice-president and chief policy officer at the Business Council of British Columbia. That’s equivalent to 7.5 new Trans Mountain pipelines.
“A lot of Canadians, including people in this part of the country, look at the U.S. through the lens of President Obama’s advocacy around things like climate policy, the Clean Power Plan and the Paris Agreement” on climate change, he notes. “All that is very important. But just as important has been the steady expansion of the U.S. oil and gas sector.”
Vancouver Sun, Peter O'Neil: Federal policy paper on housing gives short shrift to young people, expert says
Young Canadians squeezed out of housing markets in cities like Vancouver didn’t get the attention they deserved in a federal paper released Tuesday on plans for a National Housing Strategy, says one expert.
The report, which summarizes the results of an intensive four-month public consultation, noted the high concern — especially on the West Coast — with affordability.
Economist Jock Finlayson, executive vice-president of the Business Council of B.C., said the federal government is limited in what it can do given that affordability is a major issue only in Metro Vancouver and Toronto.
But he said Ottawa must still play a role, perhaps through tax policy, in finding innovative ways to boost private sector interest in affordable housing.
And Finlayson added that Ottawa has a responsibility to take its role seriously, given that the government has increased annual immigration to 300,000 — the highest level since just before the First World War.
“If Canadian policy-makers plan to ramp up immigration inflows in the next decade, as the Trudeau government has signalled, then they would be wise to recognize that this will exacerbate housing affordability concerns in the metropolitan regions where the vast majority of newcomers settle,” he said.
“This underscores the need to step up efforts to expand the housing stock — that is, to make housing supply ‘more elastic’ — in the large metro areas that immigrants are drawn to.”
BIV: ‘This might be our moment’ to attract top talent to Vancouver in Trump's wake
[Excerpt] Trump’s election comes a week after federal Finance Minister Bill Morneau announced a new “global skills strategy” targeting skilled foreign workers.
The program, set to go into effect in the spring, aims to offer short-term labour relief to international businesses or tech startups that need to recruit top talent from overseas.
Jock Finlayson, chief policy officer at Business Council of BC, said it’s up to Canada to take advantage of what a Trump presidency could mean for immigration.
“Mr. Trump’s success in this campaign signals a hardening of American attitudes toward immigration generally,” Finlayson said.
“One could imagine that talented immigrants, who might otherwise be drawn to the United States because it is the biggest economy in the world, might be prepared to look at a place like Canada through a more favourable lens.”
BIV Radio: Jock Finlayson chats US election results and what Trump means for BC & Canada [36:25]
BCBC Chief Policy Officer, Jock Finlayson lays out the impacts President-elect Donald Trump could have on the Canadian economy on Roundhouse Radio - Business in Vancouver.
CBC Radio, Early Edition: Will Trump's unconventional views help the Canadian economy?
Listen to Jock Finlayson, Executive Vice President and Chief Policy Officer's interview on the Early Edition.
CBC: Canadian economists watch Trump closely
[Excerpt] The big question, however, is where Trump stands on trade. He has pledged to renegotiate the North American Free Trade Agreement and back out of the Trans Pacific Partnership.
"If he does do what he promised to do, that will be a negative drag on growth if he starts ripping up trade agreements ... we know this from 300 years of theory and practice."
But Lee said Trump won't target Canada specifically, and it's a belief shared by Jock Finlayson, an executive vice president and chief policy officer at the Business Council of B.C.
"I couldn't see a single mention of Canada in anything that he talked about when he talked about the unfairness of trade agreements and the practices of unfair trade practices ... Canada never figured in the discussion," Finlayson said.
Lee said it is more likely Trump will force Mexico — the other member of NAFTA — into accepting new measures.
"I think he's going to intimidate Mexico because they have no leverage with the U.S. ... We may duck the bullet," he said.
But Finlayson said nothing is certain.
"He's not really aligned with his party completely with some of the big policy files ... How he will implement and move in the direction of the campaign with his Republican colleagues who have both control of the Chamber and Congress, that is the biggest unknown at this point."
Vancouver Sun, Peter O'Neil: Don't panic, Premier, business leaders tell B.C. after Trump's win
[Excerpt] Economist Jock Finlayson, executive vice-president of the Business Council of B.C., reserved judgment on the economic impact of a Trump presidency.
“It is too early to say with any precision what the next administration, buttressed by the Republicans being in control of both chambers of Congress, will mean from a Canadian economic and business perspective,” he told Postmedia in an email.
“Obviously there is some risk that our existing trade arrangements may be in jeopardy, which is worrisome. But until the new president has taken office and appointed his cabinet and key economic, trade and foreign policy advisers, we really won’t know.”
Finlayson described NAFTA as an agreement of “vital importance” to both the country and province, given that three quarters of Canada’s exports and more than half of B.C.’s flow south.
“There are also extensive cross-border business linkages through supply chains that have expanded and deepened in the past 25 odd years.
“Plus, the U.S. remains the No. 1 source of international tourists coming to Canada and of inward foreign direct investment. In short, our economic fortunes are inextricably tied to America and American policy in multiple ways.”
He cautioned against a negative over-reaction, noting that “millions” of American jobs are dependent on Canada-U.S. trade.
“I am hopeful that the many economic benefits America garners from its wide-ranging trade and investment connections with Canada will influence the decisions of the incoming Trump administration on NAFTA and other commercial policy matters that touch Canada.”
Business in Vancouver: Canada must take long road on growth, Poloz says
On the same day that Bank of Canada governor Stephen Poloz was in Vancouver speaking about monetary policy, federal Finance Minister Bill Morneau last week was updating his 2016 budget with a commitment of an additional $81 billion in capital works spending over the next decade.
What the two presentations had in common is that, to a great extent, both take long-term views for managing Canada’s economy as it enters a new era of slow global economic growth.
The Chinese supercycle that drove unprecedented demand for commodities has cooled, the baby boomer generation is entering its sunset years, the energy sector is in transition, and developed economies are simply going to have to get used to slower growth and do whatever they can to boost productivity and workforce numbers.
The slower growth in developed economies may seem surprising, given the explosion in innovation and technology that has given rise to companies like Google, Apple, Amazon and Tesla.
“Even though there might be good productivity, we are in for a slower growth scenario than what we got used to, and that’s primarily a demographic thing,” Poloz said at the November 1 BC Business Summit.
Although global economic growth is expected to pick up, improving from 2.8% in 2016 to an estimated 3.5% in 2018, the longer-term trend is for slower growth.
For the last two years, Canada’s gross domestic product grew about 1%, thanks in no small part to the oil price shock and wildfires that have ravaged Alberta’s economy. Even when Canada’s economy gets back to firing on all cylinders, its real GDP growth “speed limit” is projected to be 1.5%, says Jock Finlayson, chief policy officer for the Business Council of BC, which hosted last week’s summit.
Concerns over the long-term decline in population and productivity in developed economies explains why the federal government wants to boost immigration, has been aggressively pursuing international trade agreements and plans to spend an additional $81 billion over the next 12 years on infrastructure.
“It’s basically taking a really long-run view,” Allan Maslove, research professor at the School of Public Policy and Administration at Carleton University, said of last week’s federal budget update. “It’s not really promising anything that’s going to change very much in the next two to three years.”
Finlayson agrees: “The vast majority of this infrastructure plan over 12 years, and the increase of $81 billion, the bulk of that is actually back-loaded into the 2021 to 2028 period. So it will make very little difference to growth and employment in the short term.”
Wall Street Journal: Bank of Canada Believes Raising Inflation Target Would Be Costly
The Bank of Canada seriously considered raising its inflation target during a recent policy review before concluding that higher consumer price increases would be too costly for the economy, Gov. Stephen Poloz said.
In a speech to the Business Council of British Columbia on Tuesday, Mr. Poloz said a higher inflation target would generally result in higher interest rates, giving the central bank more room to act in the future. Ultralow and negative interest rates in many developed countries have limited central bankers’ options for stimulating their economies through rate cuts.
“However, we have learned from recent experience that there are unconventional monetary policies that give us more room to maneuver than previously believed,” Mr. Poloz said in the speech. “These include pushing interest rates below zero or buying longer-term bonds to compress long-term yields.”
The Bank of Canada announced last week that it would maintain its inflation target at 2% for the next five years, but change the way it measures core inflation. The decision was part of a regular renewal of the central bank’s inflation-control agreement with the Canadian government.
Business in Vancouver: Bank of Canada holds course on inflation policy
Bank of Canada Governor Stephen Poloz is banking on the “low probability” that Canada will suffer a major economic shock and is holding the central bank’s inflation targets for another five years.
And that means continued low nominal interest rates – possibly even negative interest rates, if that unexpected shock ever does come.
The Bank of Canada recently renewed its inflation targets for another five years, which aim to stick with an average inflation rate of 2%.
At a keynote speech at the BC Business Council’s BC Business Summit on November 1, Poloz explained to a sold-out crowd of business people why the Bank of Canada thinks its inflation targets are an effective tool that does not need recalibration.
“Canadian businesses and households have reaped the rewards of reduced uncertainty, helping them make spending and investment decisions with more confidence,” Poloz said.
Poloz said the Bank of Canada has flirted with the idea of raising its inflation target, which would mean higher nominal interest rates. That would give the central bank more room to manoeuvre in economic crises, because it could lower rates to stimulate spending.
But Poloz said higher interest rates would amount to “a higher inflation tax on the economy.”
“I think of this as paying dearly, every day, for insurance against the low probability risk that another very large macroeconomic shock could occur in the future,” he said.
He said new unconventional monetary policy tools – negative interest rates, for example – “give us more room to manoeuvre than previously believed” should they be needed.
Jock Finlayson, chief policy officer for the BCBC, said the central bank’s five-year renewal of its inflation targets is the right thing for the Canadian economy.
“What he’s saying is we’ve got a framework that’s worked in Canada,” Finlayson told Business in Vancouver. “We’ve got inflation expectations anchored around 2%. We want to keep it there.
“I think staying the course is the right move.”
Montreal Gazette: Trudeau government wants to bump up number of immigrants to B.C.
B.C. will receive between 39,000 and 42,000 immigrants and refugees annually under the Trudeau government’s ambitious plan unveiled Monday to bring in a minimum 300,000 newcomers to Canada annually.
The federal Liberal government had already declared its intention to reach the 300,000 threshold this year, which if achieved would mark the first time since just before the First World War that the total number of immigrants and refugees hit that mark.
Immigration Minister John McCallum said Monday it will be the target again for 2017 — and become a “baseline” for subsequent years.
“The 2017 levels plan will put Canada in a strong position for the future and support our overall economic and social development as a country,” McCallum said in a statement.
The 2017 total is made up of an estimated 172,500 economic immigrants, primarily skilled workers and professionals.
Another 84,000 will be “family” reunification applicants such as spouses, children, parents, and grandparents. The remainder will comprise 40,000 refugees and 3,500 people admitted on “humanitarian and compassionate” grounds.
In 2016 the target was 160,600 from the economic class, 80,000 from family class, 55,800 refugees, and 3,500 under the “humanitarian and compassionate” category.
While McCallum noted that he’s increasing the number of economic class immigrants in 2017 compared to 2016, in fact the Liberals intend to essentially match the former government’s total number of economic immigrants accepted in 2015, which came to 170,384.
B.C.’s business community had a lukewarm reaction to the figures, noting that the government hasn’t responded adequately to the need for more skilled foreign workers.
The target for economic class immigrants “falls a little bit short of what we’d like to see,” said Ken Peacock, chief economist for the Business Council of B.C.
“Our member companies continue to report a large level of difficulty hiring people, and an increasing need to look to overseas markets for top talent.”
Vancouver Sun: New Trudeau Senate appointee Yuen Pau Woo has both his fans … and panned in B.C.
[Excerpt] But a business community spokesman said Woo’s appointment is in fact a positive contribution to Canada’s economic interests.
Woo, who was en route to Canada from India Thursday and unavailable for comment, will help B.C. and the rest of the country take advantage of the “huge shift” in the global economy towards Asian markets, said Greg D’Avignon, president of the Business Council of B.C.
“It was an inspired choice.”
He pointed out that Woo, as head of the government- and private sector-supported HQ Vancouver, was instrumental in bringing eight head offices to Vancouver over the past 18 months.
Vancouver Sun: Help us or we may leave Vancouver, Lululemon tells Ottawa
[Excerpt] But economist Jock Finlayson, the business council’s executive vice-president, said Lululemon — operating in a country with a relatively small apparel industry — is the kind of company that needs to headhunt overseas.
“Canada needs well-educated and highly skilled foreign workers to help grow our companies and drive innovation, but the ‘regular’ immigration program tends to be very difficult to use to get this kind of talent, especially in a world where employers can’t wait 18-24 months to bring on the right person,” he told Postmedia in an email.
Ken Peacock on Roundhouse Radio
[14:30] BCBC Chief Economist Ken Peacock discusses the latest BCBC column in Business in Vancouver which delves into the province's need to cultivate more large companies in BC.
Vancouver Sun, Vaughn Palmer: B.C. businesses lobby for value-added tax, minus HST furor
The B.C. Liberals face growing pressure from the business community to reform the provincial sales tax to stimulate investment and improve productivity, particularly in the manufacturing sector.
But as business leaders themselves acknowledge, the politicians need to avoid reviving the backlash over the ill-advised move to harmonize the provincial sales tax with its federal goods and services counterpart.
The chamber’s concerns about the erosion of B.C.’s competitive position were echoed in a submission from the Business Council of B.C. While acknowledging that the province currently leads the country in jobs and growth, the council cited some longer term obstacles to investment in the resource industries and manufacturing.
“This is especially true of industries operating on the land base where First Nations claims, permitting and environmental rules, high and still rising energy costs, and social licence, poses challenges for existing operations and make it hard for companies to sanction new investment,” said the brief.
“Manufacturing for the most part is also at a competitive disadvantage. Among all developed country jurisdictions, B.C. now has one of the highest aggregate business tax burdens as measured by the average “marginal effective tax rate” for the business sector as a whole.
Such are the business council’s concerns, that it recommends the government postpone a promised one-point reduction in the corporate income tax.
Instead the estimated $275 million in tax room should be used to “finance new measures designed to spur business capital spending, innovation and growth and offset some of the damage that the restored PST regime has done to the province’s overall investment climate.”
For starters, the council would eliminate the sales tax on the electricity purchased by industrial and commercial firms, particularly those trading internationally. Then, in keeping with the value added model, begin lifting the PST on machinery, equipment and other business inputs.
“The PST will raise more than $6 billion in the current financial year,” says the council. “Some 40 per cent of this comes from tax levied on business inputs, everything from machinery and fixtures to construction materials, vehicles and legal services.”
Hence the call for the government to “reduce and over time eliminate the PST on business purchases of all types of machinery and equipment, software, vehicles and telecommunications and data services.”
The goal being to “stimulate investment in up-to-date capital equipment and the digital and other communications-related technologies that are fundamental to driving productivity gains and improved operational performance.”
The business council’s recommendations to the legislature committee were a short-form version of a longer brief to a second panel, the government-appointed commission on tax competitiveness.
Like the legislature committee, the commission will report out later this fall with recommendations that could be incorporated into the next provincial budget, due in February.
The Province: B.C. lumber towns braced for U.S. trade assault
B.C. is bracing for pain as the U.S. lumber industry stands poised to launch a punitive softwood lumber trade battle as early as Thursday.
That’s when a one-year “standstill” agreement tacked onto the 2006 Canada-U.S. Softwood Lumber Agreement expires, opening the door to years of costly litigation and likely mill closures and job losses.
Economists say Metro Vancouver is largely insulated from the economic impact, thanks to growth in sectors like housing construction and high tech.
“Much of the growth we are seeing in B.C. is urban-based, and urban areas of the province will not feel much impact from reduced logging and lumber production,” said economist Jock Finlayson, executive vice-president of the Business Council of B.C.
“The interior and the north will feel most of the pain.”
While B.C.’s economy overall will be hurt, the trade dispute won’t drive the province into recession because of other sectors like tourism, the film and TV industry, and the partially-recovering mining sector, he said.
Vancouver Sun: Tsawwassen Mills mall is a sign of 'reconciliation in action,' says local First Nation chief
[Excerpt] The mall’s opening comes a few weeks after the Business Council of B.C. and the B.C. Assembly of First Nations signed a new formal agreement designed to help lift indigenous communities out of poverty and build the province’s economy.
Council chair Marcia Smith, a senior vice-president with Teck Resources Limited, described the memorandum of understanding as the first of its kind in Canada and said it would give investors more confidence in B.C.-based projects.
“We are going to work together to build shared understanding of aboriginal rights and title issues, economic opportunities and the priorities of First Nations communities,” she said.
Reconciliation is a key theme of the memorandum. Gottfriedson pledged his commitment to the 94 recommendations of the Truth and Reconciliation Commission, and promised he would not support economic development that conflicted with the needs of indigenous people or threatened the environment.
The memorandum also contains a commitment to erasing some of the disadvantages First Nations face in terms of education, health care and social supports. After the signing, Gottfriendson said he hoped the agreement would bring opportunities for training and employment.