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Why Canada raced to get in on the CPTPP trade deal

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The Comprehensive and Progressive Trans-Pacific Partnership, the 11-country Asia-Pacific trade agreement revived after being abandoned by the Americans, takes effect today.

Agrifood exporters and consumers shopping for Japanese cars could benefit right away. But Canada’s greater goals for this agreement are strategic.

“Right now, things are a bit sensitive with the United States,” said Brian Innes, the president of the Canadian Agri-Food Trade Alliance, the umbrella group representing most Canadian food producers — grain and livestock farmers in particular — who rely on sales to international markets.

“Secure access, stable access to the Asia-Pacific markets is really important to farmers right now.”

The Trump administration’s decision to withdraw from the Trans-Pacific Partnership made the reworked CPTPP a far better deal for Canada.

Originally, Canada needed to be in the TPP to avoid falling behind its closest competitors. When the remaining economies — including Japan, a large, developed market where Canada couldn’t land a bilateral trade deal — stuck together, Canadians got a head start over the Americans.

Not all 11 countries have ratified yet. But six have: Australia, Canada, Japan, Mexico, New Zealand and Singapore. Vietnam ratified a few weeks later, so the CPTPP takes effect there early in the new year.

Some tariffs have now been lifted, or have started to phase out. More tariff cuts are set for early in 2019, improving price calculations for a range of businesses. But in Canada, the biggest winners are export-oriented farmers.

American farmers have noticed, and they aren’t happy about the new foothold Canadian farmers are about to get. 

A future U.S. administration may reconsider and negotiate re-entry. In the meantime, it’s time for Canadians to work on selling in markets they’ve chased for decades, Innes said.

Chief among them is Japan, a highly-protectionist agrifood market. Beef tariffs there, for example, were 39 per cent. They aren’t going away completely, but they will slowly ramp down.

Canola oil will be free of tariffs in five years.

“Right now we can ship a lot of unprocessed, raw seed into Japan, but the tariffs on canola oil prevent us from value-adding and shipping canola oil to Japan,” Innes said. “It’s really amazing that it’s finally going to happen.”

Canada is already a leading pork exporter. Canadian pork may now be more affordable than comparable U.S. imports in Japan, thanks to the tariff cuts in the CPTPP.

As processed food tariffs lift in Vietnam, French fries from Atlantic Canada also get cheaper. The list goes on.

“Right now we’re shipping eight billion dollars of exports to CPTPP countries and we think we’ll see that grow by 25 per cent once these tariff cuts are implemented,” Innes said.

Two new shipping terminals are being built in Vancouver, he said — the first new ones in decades. 

Automotive industry sticking to new NAFTA

“The Canadian government wanted (the CPTPP) on the books during the NAFTA process to demonstrate to them that we can make a deal without them,” said Flavio Volpe, the president of the Automotive Parts Manufacturer’s Association.

But the CPTPP doesn’t do much for Ontario’s automotive industry. When the U.S. was part of the TPP (along with Mexico, which remains in the deal), this agreement superseded the original North American Free Trade Agreement (NAFTA).

But when the Americans left, there was little prospect of Canada and Mexico overhauling their highly-integrated supply chains to comply with rules different from what the Americans wanted, and recently insisted on, for NAFTA 2.0

Canada’s automotive exports go south, not west.

The reworked CPTPP is more of a bullet dodged for Volpe’s industry: the original TPP didn’t require a majority of car components to be sourced and assembled in North America, which held open the door for more Asian parts. NAFTA 2.0 works to close it.

“The USMCA [Trump’s preferred name for the revised NAFTA] all but cauterizes any wounds, assuming ratification and passage, that we would have endured because of the terms of the TPP,” Volpe said.

If anything, the U.S. wants to bring the Japanese under the umbrella of the new NAFTA rules to frustrate China’s growth. The automotive chapter could be overhauled if a future White House negotiates re-entry into the CPTPP.

But there is one automotive outcome worth watching: Canadian consumers eyeing Japanese models not currently assembled in North America might be able to negotiate a better price with their dealerships soon, as the current 6.1 per cent tariff on Japanese imports begins to phase out over the next four years.

When Canada’s free trade deal with South Korea made some Korean models cheaper, dealerships offered promotional pricing in celebration.

(Cambridge Hyundai Online Advertisement)

But if you’re not currently shopping for a Mitsubishi, what’s changing for you?

“Absolutely nothing,” said Carlo Dade of the Canada West Foundation, who has studied the benefits of the TPP for Canada for months.

Service industries look for growth

The benefits from a deal like this — equivalent to another NAFTA, Dade said, in long-term potential — take years to materialize. “And they don’t often materialize directly into things like lower prices,” he said.

Instead, research suggests firms reinvest in their products, services and employees.

As CPTPP takes hold, e-commerce and expedited shipping and customs clearance get simpler, with more markets using the same rules. Cheaper intermediate suppliers become available.

Professional credentials recognition for architects and engineers boosts the service industries needed by countries like Vietnam as they develop new infrastructure. And emerging middle-class populations in Asia are starting to purchase things like insurance, a globally-competitive industry in Canada.

In global service industries, people need to be able to cross borders for work.

“Good luck trying to get a Malaysian into the U.S. for three months to actually work in an office,” Dade said. With the CPTPP, “we’ve got that advantage over the Americans for the entire Pacific Rim.”

U.S. President Donald Trump pulled out of the Trans-Pacific Partnership in the early days of his presidency. But a future president may decide to re-negotiate an American re-entry, especially if the deal succeeds in its goal of providing an alternative to China’s economic dominance in the region. (Joshua Roberts/Reuters)

“The bigger companies, yes, are ready,” said Mark Agnew, the director of international policy at the Canadian Chamber of Commerce. “The gap,” he added, “is for small and medium-sized businesses” — they often lack the time, resources and expertise to figure out how to compete in Asia.

Sometimes it’s just easier to focus on English-speaking customers in North America, where the rules are familiar.

“It takes a little while to … start to notice benefits from any trade agreement,” said Meredith Lilly, a former adviser in Stephen Harper’s office when the original TPP was negotiated by the previous Conservative government. “The government can set the table, but others need to take it up.”

“This was largely a defensive deal for Canada,” she said — a way into a large trading bloc that Canada needed to join so customers and suppliers didn’t slip away.

1.5 billion now in ‘free trade zone’

Asian imports to Canada, like textiles or electronics, already had low or no tariffs. Clothing from Vietnam won’t significantly drop in price now, for example.

These new trading relationships have “longer term, more nebulous gains,” Lilly said. But as more and more countries join — Colombia, Thailand, South Korea and even a post-Brexit United Kingdom are interested — the deal’s higher labour, environmental and intellectual property standards could become the regional norm, something which is in Canada’s interests.

There aren’t many hot economies these days. But Vietnam’s one of them. 

Brian Kingston of the Business Council of Canada sees a sound, long-term strategy in trying to get Canada in there early.

Vietnam’s “not quite on par with what China’s achieved,” he said, “but you can see them following that path” of growing and developing very quickly.

“In 10 to 15 years from now, this could become a very valuable market.”

The CPTPP also includes investor protections, making the region more accessible for businesses that saw potential but couldn’t take the risks.

“We’re way better off and way more competitive on the 30th of December than we would be on Dec. 29,” International Trade Diversification Minister Jim Carr told CBC News on Parliament Hill before leaving for the holiday break.

“This is a market of 500 million consumers that will be in addition to the 500 million through the European trade agreement and the nearly 500 million with the (revised NAFTA), so 1.5 billion consumers (are now) in Canada’s free trade zone.”

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Chris Selley: The blinding incoherence of Ottawa’s hotel-quarantine theatre is becoming obvious

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Canada’s new mandatory hotel quarantine system landed over the weekend like a wet, mildewy towel. You have to book by phone. No one answers. There are multiple reports of Canadian citizens being put on hold for three hours, then cut off seemingly automatically.

“Our trained and specialized travel counsellors are providing around-the-clock service to facilitate hotel bookings,” a spokesperson for American Express Global Business Travel told National Post.

The “regular hours of operation” listed are 8 a.m. to 11 p.m., Ottawa time.

Officials have blamed the call backlog on people calling too far in advance of travel. Would you wait until the recommended 48 hours before your flight? The online advice implies you need “proof of having reserved and pre-paid for (hotel) accommodation” even to get on the plane. In fact, help is available for those disembarking without reservations, a Public Health spokesman said.

That might be useful information to put on the internet. But then, so would a reservation system. All the participating hotels already have one of those.

For now, this all-too-predictable shambles isn’t a problem for the government. On social media, many are revelling in the misery and stress it’s causing, calling it travellers’ just deserts  — never mind if it’s an expat coming home to take a job, or a grieving family returning from a funeral, and not some fully vaccinated cartoon-villain snowbird. Former Ontario finance minister Rod Phillips and Canada’s other gallivanting politicos created a full-on moral panic overnight, and the feds, hitherto scornful of anyone who suggested international travel was worth worrying about, were happy to provide some red meat.

The populist glee will wear off, though, and the blinding incoherence of this policy will eventually dawn on people. There is evidence right here at home that may illustrate the problem.

Since November, travellers arriving at Calgary’s airport on international flights, or overland  into Alberta from Montana, could take a test upon arrival, and another a week later, and upon receipt of two negative results avoid the 14-days quarantine that has otherwise been demanded of “non-essential” humans entering the country for nearly a year. That “pilot project” was unceremoniously cancelled Sunday night.

At first, participants were allowed out and about, with a few restrictions, as soon as the test-on-arrival came back negative — usually within 48 hours. Upon receipt of the second negative result, they were subject to even fewer restrictions for the remainder of the two weeks. Later, travellers from the U.K. and South Africa were excluded; the federal rule requiring a negative test to board a flight to Canada kicked in; and on January 25, the rules changed such that pilot-project participants had to remain in quarantine until the second negative result after a week.

With the U.K. and South Africa excluded and a negative test required to board, the percentage of travellers testing positive on arrival dropped by half, from 1.47 to 0.75 per cent; the number testing positive a week later dropped by one-third, from 0.74 to 0.5 per cent.

It’s a small sample size. It doesn’t prove anything. But it’s intuitive: if you weed out high-risk travellers, and test before departure, you get fewer initial positives. This hints at one approach Canada could have taken but didn’t: focus more stringent measures on certain countries. Do we really need to treat arrivals from famously COVID-free countries like New Zealand (0.7 new daily cases per million population, on a two-week average), or Taiwan (0.03 cases), the same as those disembarking flights from Israel (384), the United Arab Emirates (296) or the United States (202)?

That one in 200 travellers were still testing positive after a week highlights the central flaw in the government’s plan, however. As I noted two weeks ago, research suggests the probability of a “false negative” PCR test only falls below 50 per cent on the fifth day after infection. If your goal is to prevent international travellers from transmitting COVID-19 to anyone in Canada, you can accomplish it vastly more effectively with a five- or seven-day quarantine, followed by another test, than with three days waiting for the result of a test conducted at the airport.

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Carleton Master’s Sociology Student to Receive Royal Ottawa Award for Mental Health Work

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Charlotte Smith, a Carleton University master’s student in Sociology, has faced overwhelming challenges throughout her life: childhood sexual abuse, homelessness, incarceration, drug dependency.

Undaunted, she has channelled these experiences into her academic, advocacy and activist work, developing research projects to address youth homelessness, creating a bursary to help homeless youth attend Carleton, and delivering food, phones and other essential items to homeless and precariously housed youth who are struggling during the pandemic.

For these actions, and for sharing her story of recovery to help eliminate the stigma surrounding mental illness, Smith will be awarded the Personal Leader for Mental Health award at the Royal Ottawa Foundation for Mental Health’s 2021 Inspiration Awards.

“It can be re-traumatizing, embarrassing and awkward talking so publicly about your mental health and substance use issues, so it’s comforting when someone tells you that you’re not just oversharing, you’re actually making a small difference in other people’s lives,” says Smith, who will be joined on the Inspiration Awards virtual podium by Carleton President Benoit-Antoine Bacon, winner of the Royal’s Transformational Leader award.

“Getting an award like this is fantastic, but there are so many people doing so much important work on mental health and substance use,” says Smith, who last year won a Community Builder Award from the United Way East Ontario for her volunteer efforts in COVID times.

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Shopify Launches Offering of Class A Subordinate Voting Shares

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OTTAWA, Ontario–(BUSINESS WIRE)–Shopify Inc. (NYSE:SHOP)(TSX:SHOP) (“Shopify”) today announced that it has filed a preliminary prospectus supplement (the “Preliminary Supplement”) to its short form base shelf prospectus dated August 6, 2020 (the “Base Shelf Prospectus”). The Preliminary Supplement was filed in connection with a public offering of Shopify’s Class A subordinate voting shares (the “Offering”). The Preliminary Supplement has been filed with the securities regulatory authorities in each of the provinces and territories of Canada, except Québec. The Preliminary Supplement has also been filed with the U.S. Securities and Exchange Commission (the “SEC”) as part of Shopify’s registration statement on Form F-10 (the “Registration Statement”) under the U.S./Canada Multijurisdictional Disclosure System.

A total of 1,180,000 Class A subordinate voting shares will be offered by Shopify for sale under the Offering, which will be led by Citigroup, Credit Suisse and Goldman Sachs & Co. LLC (the “Underwriters”).Shopify will grant the Underwriters an over-allotment option to purchase up to an additional 15% of the Class A subordinate voting shares to be sold pursuant to the Offering (the “Over-Allotment Option”). The Over-Allotment Option will be exercisable for a period of 30 days from the date of the final prospectus supplement relating to the Offering. Allen & Company LLC is acting as special advisor to the Company with respect to the Offering.

Shopify expects to use the net proceeds from the Offering to strengthen its balance sheet, providing flexibility to fund its growth strategies.

Closing of the Offering will be subject to a number of closing conditions, including the listing of the Class A subordinate voting shares to be issued under the Offering on the NYSE and the TSX.

No securities regulatory authority has either approved or disapproved the contents of this news release. This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any province, state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such province, state or jurisdiction. The Preliminary Supplement, the Base Shelf Prospectus and the Registration Statement contain important detailed information about the Offering. A copy of the Preliminary Supplement and Base Shelf Prospectus can be found on SEDAR at www.sedar.com and EDGAR at www.sec.gov, and a copy of the Registration Statement can be found on EDGAR at www.sec.gov. Copies of these documents may also be obtained from Citigroup, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, Telephone: 1-800-831-9146; Credit Suisse Securities (USA) LLC, Attention: Prospectus Department, Eleven Madison Avenue, 3rd floor, New York, NY 10010, Telephone: 1-800-221-1037 or e-mail: usa.prospectus@credit-suisse.com; Credit Suisse Securities (Canada), Inc., Attention: Olivier Demet, 1 First Canadian Place, Suite 2900, Toronto, Ontario M5X 1C9, Telephone: 416-352-4749 or e-mail: olivier.demet@credit-suisse.com; or Goldman Sachs & Co. LLC, Attn: Prospectus Department, 200 West Street, New York, NY 10282, telephone: 866-471-2526, facsimile: 212-902-9316 or email: prospectusny@ny.email.gs.com. Prospective investors should read the Preliminary Supplement, the Base Shelf Prospectus and the Registration Statement before making an investment decision.

About Shopify

Shopify is a leading global commerce company, providing trusted tools to start, grow, market, and manage a retail business of any size. Shopify makes commerce better for everyone with a platform and services that are engineered for reliability, while delivering a better shopping experience for consumers everywhere. Shopify powers over 1.7 million businesses in more than 175 countries and is trusted by brands such as Allbirds, Gymshark, Heinz, Staples Canada and many more.

We were proudly founded in Ottawa, Canada, but prefer to think of the company location as Internet, Everywhere. Shopify is a company of and by the internet, and we have physical outposts around the world. The archaic newswire system doesn’t allow us to acknowledge this fact, so we will henceforth keep this paragraph in our press releases until technology improves.

Forward-looking Statements

This press release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws (“forward-looking statements”) including statements regarding the proposed Offering, the terms of the Offering and the proposed use of proceeds. Words such as “expects”, “continue”, “will”, “plans”, “anticipates” and “intends” or similar expressions are intended to identify forward-looking statements.

These forward-looking statements are based on Shopify’s current expectations about future events and financial trends that management believes might affect its financial condition, results of operations, business strategy and financial needs, and on certain assumptions and analysis made by Shopify in light of the experience and perception of historical trends, current conditions and expected future developments and other factors management believes are appropriate. These projections, expectations, assumptions and analyses are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance, events and achievements to differ materially from those anticipated in these forward-looking statements. Although Shopify believes that the assumptions underlying these forward-looking statements are reasonable, they may prove to be incorrect, and readers cannot be assured that the Offering discussed above will be completed on the terms described above. Completion of the proposed Offering is subject to numerous factors, many of which are beyond Shopify’s control, including but not limited to, the failure of customary closing conditions and other important factors disclosed previously and from time to time in Shopify’s filings with the SEC and the securities commissions or similar securities regulatory authorities in each of the provinces or territories of Canada. The forward-looking statements contained in this news release represent Shopify’s expectations as of the date of this news release, or as of the date they are otherwise stated to be made, and subsequent events may cause these expectations to change. Shopify undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

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