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International trade in 2018: making sense of a ‘tarrifying’ year

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CBC News surveyed a dozen Canadian and American researchers, lecturers, lawyers and business advocates to sum up this complicated and often frustrating year in international trade.

Here are a few highlights from what they shared with us.

What was the biggest surprise?

“The fact that Donald Trump carried through with steel and aluminum tariffs,” said Mark Agnew, director of international policy for the Canadian Chamber of Commerce.  “People thought, ‘Surely he’s not going to do this against Canada.'”

They thought wrong.

“That really shocked me,” agreed Debra Steger, a former Canadian trade official now on the University of Ottawa’s law faculty, adding that Trump’s escalating tariff strategy over the last year caused a “ripple effect” of consequences — including retaliatory tariffs from other countries, Canada among them.

“Everything has been driven by the initial tarrifying actions that were deliberately taken by the United States as a cudgel over everyone’s heads to negotiate,” she said.

(Her use of the word ‘tarrifying’ serves double-duty as a pun. Trump’s indiscriminate use of tarrifs is terrifying for those who believe in international trade law.)

The new level of bullying was a surprise, she said. “We had never seen U.S. administrations behave that way before.”

“I thought this government was too pro-business to allow (the tariffs) to stay in place,” said Todd Tucker, a fellow at Washington D.C.’s Roosevelt Institute. “I underestimated the way Republicans rallied around Trump.”

Inu Manak, a Canadian trade researcher who now works at the Cato Institute, said she was caught off-guard by the level of Trump’s hostility toward Canada.

“At first I thought maybe he’s just joking around, and it’s a negotiating tactic,” she said.

But the tariffs persist, even after the revised North American trade agreement was signed.

“It was genuinely shocking, and genuinely negative for the bilateral relationship,” said Meredith Lilly, the Simon Reisman chair at Carleton University’s Norman Paterson School of International Affairs.

What don’t people get?

“I don’t think the average person understood how completely integrated we are with the U.S. economy, and how foolish the idea that we would tell the Americans to bugger off would be,” said Flavio Volpe, president of the Automotive Parts Manufacturer’s Association.

Trump’s presidential powers became a topic of fierce legal debate in 2018. Can he just terminate NAFTA if Congress won’t ratify the revisions he wants?

The U.S. presidency has been given a lot of authority over trade matters over the years, Manak said, but “the fact that this Congress has not pushed back a lot on a lot of stuff he’s done, doesn’t mean they can’t.”

U.S. House Speaker designate Nancy Pelosi and Senate Minority Leader Chuck Schumer met President Trump at the White House earlier this month. The Democratic leaders didn’t shy away from confrontation, and it’s not clear they’ll be willing to work with the administration to ratify the revised NAFTA. (Jonathan Ernst/Reuters)

That’s why the election of a Democratic majority in the House of Representatives in November could be “a little destabilizing,” but good for the democratic process, she said.

“There’s the strong impression that he can just just unilaterally go back to pre-NAFTA tariffs on Canada and Mexico,” Tucker said. “I don’t know any constitutional law professor that thinks that.”

The public and partisan debate over Trump’s powers has generated more “heat than light,” he said, by not properly acknowledging that Congressional authority over tariffs.

Brian Kingston, vice-president for international and fiscal policy with the Business Council of Canada, said he thinks the Canadian public hasn’t properly grasped the role of Congress in trade deals, either.

But the Canadian government gets it, he said, “hence their very comprehensive lobbying and advocacy campaign” — especially important as long as Congressional ratification remains uncertain.

Trade lawyer Mark Warner doesn’t buy the argument that Trump can’t unilaterally terminate a trade treaty and throw everything into chaos.

The Canadian negotiators, Warner said, should have agreed to a deal earlier in the year, before the tariffs landed — even if that meant conceding more.

He said he thinks Ottawa misjudged the dynamics of the NAFTA negotiations from the start.

“The idea that Mexico was joined at the hip with Canada and wouldn’t go out on its own … it just didn’t make a lot of sense,” he said. “Our interests are not completely aligned and it’s something that we have now learned.”

What stories were overblown?

Lilly said she found the NAFTA negotiations were generally overhyped, with a lot of “false drama” coming from the Canadian side before the talks ended with a deal that turned out to be quite predictable.

“Much ado about very little change,” agreed Monica de Bolle, senior fellow at the Peterson Institute for International Economics. “Very anticlimactic.”

Her office did a lot of work trying to anticipate the disruption Trump’s threatened auto tariffs might trigger. But despite the hype, those tariffs haven’t materialized.

At least, not yet. (The U.S. Commerce Department report on whether automotive imports are a “national security” threat is due by February.)

“We were all concerned about ‘carmageddon,'” Volpe said, “but I wonder if the Americans would have pulled that trigger, because the bullet would have gone through both of us.”

The room was a bit tense as the revised North American trade agreement was signed Nov. 30. Outgoing Mexican president Enrique Pena Nieto’s decision to announce a deal with the U.S. before Canada had concluded its negotiations made the final weeks difficult for Prime Minister Justin Trudeau’s government. (Kevin Lamarque/Reuters)

Agnew said the debate over Canada insisting on a cultural exemption also offered more drama than substance.

“In the end it was the dog that didn’t bark, with the retention of the exemption.”

Another new feature in NAFTA 2.0 — article 32.10 on negotiating a trade deal with a “non-market economy” (read: China) — will have “very little impact,” said Carlo Dade, director of the trade and investment centre at the Canada West Foundation.

“I don’t think it’s a total nothing, but it’s certainly not going to take away Canadian sovereignty and Canada’s ability to negotiate with China in the future,” Steger said.

What warranted more discussion?

“If there is a Russian strategy to undermine multilateralism and U.S. leadership of the global economy, it’s really more about economics than it is about defence,” said George Washington University’s Susan Aaronson.

The most competitive Canadian and American exports in the future will be agricultural commodities and services. But for both export sectors to succeed, they need trusted partners in world markets and a strong global consensus on what constitutes appropriate behaviour, Aaronson said.

Trump undermined all this, she said, which hurt Canada’s integrated economy — and left the Trudeau government little choice but to diversify its trade through other deals.

“It’s a good thing Canada’s doing that,” Aaronson said, “but in the long run, it’s a bad thing.” North America, she said, is more competitive when it works together. Plus, the world will miss U.S. leadership on trade — and it might not like what replaces it.

“We haven’t talked enough about what happens to Latin American relations in the middle of the confusion over the China-U.S. relationship,” said de Bolle, an expert on the region. “The region is very complicated right now.”

The new left-leaning, nationalist Mexican administration, for example, has closer ties to China, de Bolle said. The foreign policy of Brazil’s new government, a major economic player, is “crazy to me,” she added. And the Chinese are also securing key oil resources in Venezuela, as that country’s economy continues to implode.

Trade lawyer Cyndee Todgham Cherniak said she thinks businesses are only just beginning to wake up to the consequences of politicians escalating economic sanctions against countries like Iran and Saudi Arabia. The arrest of a Huawei executive in Vancouver, she said, may be only the beginning.

Canada’s new Magnitsky Act — a law allowing Canada to go after the assets of foreign officials implicated in human rights violations — should get more attention, she added, particularly if it’s applied to Saudi Arabia. “It will have a significant effect on companies carrying on business worldwide.”

Long-term consequences?

The effects of what unfolded over the last year may be felt for years to come.

“The hardening American consensus around Chinese trade practices is something that is here to stay,” Warner said, “even if Trump is defeated in 2020.”

“You would have seen Hillary Clinton do some of the same things” on China, said Tucker.

But what the history books will emphasize is Trump’s use of “national security” as an excuse for protecting domestic steel and aluminum industries, Tucker argues. Other countries already have started to follow suit, bringing unprecedented instability to the global trade system Americans once fought to establish.

Chinese President Xi Jinping and U.S. President Donald Trump had a “working dinner” after the G20 leaders summit in Buenos Aires, Argentina earlier this month. They announced a 90-day “truce” in their tariff war while officials attempt to work out a deal to de-escalate the conflict. (Kevin Lamarque/Reuters)

Dade calls Trump’s ongoing tariff war “the nuclear option.”

“The unthinkable has become normalized,” he said.

That puts a lot of pressure on countries like Canada, which are now being forced to pick a side.

“It’s going to affect every trade discussion that we have from now on,” Volpe said. “You’re going to have to know what the American position is before you even attempt a discussion with us.”

The American insistence on a sunset clause for NAFTA (even if it was watered down in the final text) reflects an increasing climate of protectionism in the U.S. that “isn’t a cyclical trend. That’s here to stay,” said Kingston.

“The very negative rhetoric and some of the missteps along the way have created the conditions that we may look back in 20 years and say this fundamentally changed the Canada–U.S. relationship,” Lilly said.

“Down the road we’re going to look back and say, ‘I wish this never happened,'” Manak said. “I’m a little nervous.”

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Majority of Canadian workers willing to take less pay for a workplace pension plan: survey

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A majority (70 per cent) of Canadians say they’re willing to forgo a higher salary in exchange for a workplace pension plan, according to a new survey for the Healthcare of Ontario Pension Plan by Abacus Data.

The survey, which polled more than 2,000 Canadian adults in April, signals an opportunity for employers to build back the post-coronavirus pandemic working landscape better by expanding access to good retirement plans — whether they’re defined benefit, defined contribution or group registered retirement savings plans, says Steven McCormick, senior vice-president of plan operations at the HOOPP.

According to the survey, a secure retirement remains of greater concern for Canadians than concerns about their health, debt load and job security. McCormick says this has been a consistent worry the HOOPP has seen in survey results over the past couple of years. Nearly half (48 per cent) of respondents said they’re very concerned about having enough money in retirement, while 31 per cent were highly concerned about their personal debt load and 26 per cent cited their job security. Close to half of respondents expressed high concerns for their physical (43 per cent) and mental (40 per cent) health.

In addition, the pandemic has harmed the finances of more than half (52 per cent) of Canadians’ surveyed and it’s had a particularly disproportionate affect on the finances of younger adults. Adults aged 44 and younger said they’re twice as likely (25 per cent) to have had their finances greatly harmed, compared to those over the age of 60 (12 per cent).

Generally, younger adults tend to work in roles that may have been impacted most by the pandemic, says McCormick, whether in service industries that were shut down or frontline health care that have been busy but don’t always come with access to a pension plan. “Affordability is an issue, so I think their worries increased during this time.”

And while almost half (46 per cent) of Canadians surveyed said they’ve saved more money than they would have since the onset of the pandemic, among these respondents, over half (52 per cent) didn’t put any of their savings toward their retirement. Overall, most (63 per cent) Canadians surveyed haven’t set aside or saved anything for retirement in the past year, a five-point increase since 2019.

McCormick says this may be due to uncertainty or hesitancy about whether people’s immediate needs outweigh longer-term needs. And with 55 per cent of respondents noting they were very concerned about the cost of day-to-day living, he adds that rising prices have fuelled insecurity and worries so people are creating their own emergency funds right now.

While there’s a segment of the population who’ve saved more and, for them, the pandemic has created wealth, he doesn’t see this as a common narrative in the survey data. “If you don’t have access to a workplace pension or the opportunity to have things like automatic enrolment, the uncertainty of the time may have you holding onto money,” says McCormick. “In Ontario, we’re more optimistic about the pandemic than we were maybe a month ago, but there are still people worrying about whether there’ll be a fourth wave.”

In addition, more than two-thirds (67 per cent) of respondents said a retirement crisis is looming and 65 per cent said saving for retirement is prohibitively expensive. It’s a common and shared dream for many people in looking forward to a secure retirement, says McCormick, noting for many, making that dream a reality remains elusive.

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What Canadians need to know about moving to the U.S. for more affordable real estate

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Like many real estate markets around the world, U.S. home prices have run up during the pandemic to the point of some saying it’s in bubble territory.

But the whole time and for years before, Canada has said “hold my beer” as prices rocket through the stratosphere in a number of major markets.

The discrepancy really jumps off the page in comparisons of the most recent benchmark prices and household income. As the chart below from Karl Schamotta, chief market strategist at Cambridge Global Payments, comparing Canada to the U.S. shows, a picture paints a thousand words, especially when it’s presented as an exploding gif.

Jessy BainsThu., June 24, 2021, 6:43 p.m.·9 min read

A U.S. flag decorates a for-sale sign at a home in the Capitol Hill neighborhood of Washington, August 21, 2012. President Barack Obama said on Monday the U.S. housing market was
Home prices have run up in the U.S. but are mostly more affordable than major Canadian markets.(REUTERS)

Like many real estate markets around the world, U.S. home prices have run up during the pandemic to the point of some saying it’s in bubble territory.

But the whole time and for years before, Canada has said “hold my beer” as prices rocket through the stratosphere in a number of major markets.

The discrepancy really jumps off the page in comparisons of the most recent benchmark prices and household income. As the chart below from Karl Schamotta, chief market strategist at Cambridge Global Payments, comparing Canada to the U.S. shows, a picture paints a thousand words, especially when it’s presented as an exploding gif.https://platform.twitter.com/embed/Tweet.html?creatorScreenName=JessySBains&dnt=true&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X3R3ZWV0X2VtYmVkX2NsaWNrYWJpbGl0eV8xMjEwMiI6eyJidWNrZXQiOiJjb250cm9sIiwidmVyc2lvbiI6bnVsbH19&frame=false&hideCard=false&hideThread=false&id=1388165660598063104&lang=en&origin=https%3A%2F%2Fca.finance.yahoo.com%2Fnews%2Fwhat-canadians-need-to-know-about-moving-to-the-us-for-more-affordable-real-estate-131344769.html&sessionId=06d9c3e7619ac1c3744b64cd9cc60845665a4a57&siteScreenName=Yahoo&theme=light&widgetsVersion=82e1070%3A1619632193066&width=550px

The situation has gotten so bad for first-time buyers that many may have given up. Ontario is home to markets with the biggest recent run-ups. A survey by Right at Home Realty found 74 per cent of younger Ontarians aged 18 to 34 say they may never be able to afford a home where they currently live.

Michelle Makos, broker-owner at Royal Heritage Realty, sells real estate for a living but doesn’t like what she’s seeing, especially after a conversation with her recently engaged daughter who wants to buy a first home.

“She made a comment that they may have to move to the United States to find something they can afford and truly I would hate to lose my children simply because they feel like the housing situation here is out of their reach,” Makos told Yahoo Finance Canada.

“Being in real estate, it just made me realize, the one thing I love doing is the one thing that could cost me my daughter, if she were to leave.”

So she took to Twitter to see if other Canadians were feeling the same way as her daughter. She conducted a Twitter poll that showed many were in the same boat.

She was flooded with messages from frustrated Canadians who were seriously considering leaving the country because of high home prices and shared many of them on Twitter. She eventually put a selection of the messages she received in a handy document for everyone to see.

Jessy BainsThu., June 24, 2021, 6:43 p.m.·9 min read

A U.S. flag decorates a for-sale sign at a home in the Capitol Hill neighborhood of Washington, August 21, 2012. President Barack Obama said on Monday the U.S. housing market was
Home prices have run up in the U.S. but are mostly more affordable than major Canadian markets.(REUTERS)

Like many real estate markets around the world, U.S. home prices have run up during the pandemic to the point of some saying it’s in bubble territory.

But the whole time and for years before, Canada has said “hold my beer” as prices rocket through the stratosphere in a number of major markets.

The discrepancy really jumps off the page in comparisons of the most recent benchmark prices and household income. As the chart below from Karl Schamotta, chief market strategist at Cambridge Global Payments, comparing Canada to the U.S. shows, a picture paints a thousand words, especially when it’s presented as an exploding gif.https://platform.twitter.com/embed/Tweet.html?creatorScreenName=JessySBains&dnt=true&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X3R3ZWV0X2VtYmVkX2NsaWNrYWJpbGl0eV8xMjEwMiI6eyJidWNrZXQiOiJjb250cm9sIiwidmVyc2lvbiI6bnVsbH19&frame=false&hideCard=false&hideThread=false&id=1388165660598063104&lang=en&origin=https%3A%2F%2Fca.finance.yahoo.com%2Fnews%2Fwhat-canadians-need-to-know-about-moving-to-the-us-for-more-affordable-real-estate-131344769.html&sessionId=06d9c3e7619ac1c3744b64cd9cc60845665a4a57&siteScreenName=Yahoo&theme=light&widgetsVersion=82e1070%3A1619632193066&width=550px

The situation has gotten so bad for first-time buyers that many may have given up. Ontario is home to markets with the biggest recent run-ups. A survey by Right at Home Realty found 74 per cent of younger Ontarians aged 18 to 34 say they may never be able to afford a home where they currently live.

Michelle Makos, broker-owner at Royal Heritage Realty, sells real estate for a living but doesn’t like what she’s seeing, especially after a conversation with her recently engaged daughter who wants to buy a first home.

“She made a comment that they may have to move to the United States to find something they can afford and truly I would hate to lose my children simply because they feel like the housing situation here is out of their reach,” Makos told Yahoo Finance Canada.

“Being in real estate, it just made me realize, the one thing I love doing is the one thing that could cost me my daughter, if she were to leave.”

So she took to Twitter to see if other Canadians were feeling the same way as her daughter. She conducted a Twitter poll that showed many were in the same boat.https://platform.twitter.com/embed/Tweet.html?creatorScreenName=JessySBains&dnt=true&embedId=twitter-widget-1&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X3R3ZWV0X2VtYmVkX2NsaWNrYWJpbGl0eV8xMjEwMiI6eyJidWNrZXQiOiJjb250cm9sIiwidmVyc2lvbiI6bnVsbH19&frame=false&hideCard=false&hideThread=false&id=1395756831100882947&lang=en&origin=https%3A%2F%2Fca.finance.yahoo.com%2Fnews%2Fwhat-canadians-need-to-know-about-moving-to-the-us-for-more-affordable-real-estate-131344769.html&sessionId=06d9c3e7619ac1c3744b64cd9cc60845665a4a57&siteScreenName=Yahoo&theme=light&widgetsVersion=82e1070%3A1619632193066&width=550px

She was flooded with messages from frustrated Canadians who were seriously considering leaving the country because of high home prices and shared many of them on Twitter. She eventually put a selection of the messages she received in a handy document for everyone to see.https://platform.twitter.com/embed/Tweet.html?creatorScreenName=JessySBains&dnt=true&embedId=twitter-widget-2&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X3R3ZWV0X2VtYmVkX2NsaWNrYWJpbGl0eV8xMjEwMiI6eyJidWNrZXQiOiJjb250cm9sIiwidmVyc2lvbiI6bnVsbH19&frame=false&hideCard=false&hideThread=false&id=1397895446048169985&lang=en&origin=https%3A%2F%2Fca.finance.yahoo.com%2Fnews%2Fwhat-canadians-need-to-know-about-moving-to-the-us-for-more-affordable-real-estate-131344769.html&sessionId=06d9c3e7619ac1c3744b64cd9cc60845665a4a57&siteScreenName=Yahoo&theme=light&widgetsVersion=82e1070%3A1619632193066&width=550px

“We as a country can do better,” said Makos.

But not so fast if you’re like any of these people and thinking of moving across the border. There are a number of things to consider.

Immigration rules for moving from Canada to the U.S.

The first thing to consider is immigration laws. If you work from home, you can’t just grab your laptop and start working from the U.S.

Sara Herbek, managing partner at Global Immigration Associates, says you need a U.S. employer to sponsor you and be qualified for a TN or L-1 visa.

“If a Canadian employer has a U.S. entity, this could potentially be another option, however, it depends on the visa category,” Herbek told Yahoo Finance Canada.

It’s the same deal if you plan to work for a U.S. employer.

“Canadians are able to present TN and L-1 visa petitions at the border (now by air is recommended versus by land),” said Herbek.

“In other visa categories, the employer would need to file the visa petition with United States Citizenship and Immigration Services (USCIS) and obtain approval first.”

Herbek says it’s important to have all of the correct paperwork when entering the U.S. to avoid being turned away.

“They should ensure they have original documents when appearing at the border: approval notice, as applicable, educational documents, birth or marriage certificates,” said Herbek.

Mortgage rules for buying a home in the U.S.

Unless you’re lucky enough to be able to buy a home outright, you’ll need a mortgage and things are mostly similar to obtaining a mortgage in Canada if you’re moving to the U.S. permanently, but with some key differences.

Rob Mclister, mortgage editor at RATESDOTCA says one of them is proof of income.

“It may be harder to prove income to the U.S. lender’s satisfaction if you have already moved to the U.S. before applying for a mortgage,” Mclister told Yahoo Finance Canada.

“That’s because most mainstream U.S. lenders generally want to see at least two years of U.S. tax returns. If this is the case, find a good broker in the U.S. to advise you.”

If you plan to buy before your immigration and job situation are sorted out, Mclister says most lenders will want 20-25 per cent down instead of the 5 per cent minimum in Canada.

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Canadian Mortgage Debt Hits $1.69 Trillion, Fastest Rate of Growth Since 2010

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Canada is experiencing a real estate boom, and it’s fueled by a flood of cheap mortgage debt. Bank of Canada (BoC) data shows mortgage credit reached a record high in April. That’s no longer a surprise since it’s a regular occurrence, but the rate of growth is noteworthy. Canadians added the equivalent of 6% of GDP to mortgage debt over the past year. It’s now growing at the fastest rate in a decade, as people scramble to buy as much house as possible. 

Canadian Mortgage Debt Hits $1.69 Trillion, After Growing 6% of GDP

Canadian mortgage debt reached a record high, adding a massive amount in just a short period. The balance reached $1.69 trillion in April, up 1.06% ($17.74 billion) from the month before. The annual increase works out to 7.80% ($122.25 billion), which is just a mind-blowing number. For context, $122.25 billion is the size of ~6% of the country’s GDP. With this kind of scale, it shouldn’t be a surprise how dependent the economy is on real estate. 

Canadian Residential Mortgage Debt

The outstanding dollar amount of residential mortgage credit held by Canada’s instituional lenders.

Canadian Mortgage Debt Is Growing At The Fastest Rate Since 2010

The rate of mortgage growth isn’t just high for this period — it’s high by historical standards. The annual rate of growth is the largest seen since 2010. For the month of April, you need to go a little further back — to 2009. Usually, during a recession, it’s difficult to get households to borrow. In Canada, households ramped up the borrowing and purchases of expensive goods.

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