TPT May 2014

Global Marketplace

› TransCanada’s $10.8bn, 1.1 million bpd Energy East pipeline, which would carry oil fromAlberta east to Quebec and New Brunswick.

Mexico’s lower wages constitute its most compelling advantage over Canada – the third signatory to NAFTA. According to the Center for Automotive Research (Ann Arbor, Michigan), the average Mexican worker assembling vehicles or making parts earns $7.79 per hour including benefits. That is substantially less than $37.38 in the US and $39.04 in Canada. One executive who has done the arithmetic is the CEO of Fiat Chrysler Automobiles, Sergio Marchionne. He has said Chrysler is earmarking as much as $2bn for its next generation minivan, but will re-commit to production in Windsor, Ontario, only if the provincial government and the Canadian Auto Workers union help reduce the company’s costs by way of lower wages and tax abatements. Canada is “a guppy in shark-infested waters,” Mr Marchionne said in February, noting pointedly that “other states” are interested in the Fiat minivan if it should be taken out of Canada. He would not have needed to mention that Detroit, in the economically depressed American state of Michigan, lies just across the Detroit River from Windsor. › The Center for Automotive Research reports that, so far, the newest surge of growth in Mexico has not hurt Michigan’s prospects. Between 2010 and 2012 automakers announced an estimated $19.2bn in investments in seven states of the Great Lakes region. “You have two regions that are big losers: Canada and the southern US,” senior economist Sean McAlinden of the non-profit research organisation said. “I just don’t see it affecting Michigan.” What he does see is the future for “the largest non-indigenous auto industry in the world.” Mexico, Mr McAlinden told the Free Press , “will be twice the size of Canada in vehicle production by 2016.” Elsewhere in automotive . . . › Ford Motor Co is still a relatively small player in the Chinese market, the world’s largest, but is growing rapidly. Its sales in China rose 67 per cent in February from the year before and surged 73 per cent for the first two months. The US automaker expects to sell more than a million vehicles this year in China, where industry sales are expected to top 21 million. To support its strategy for building and selling more of its global lineup in China, Ford plans to invest $100mn to expand its research and development facility in Nanjing. Energy In an abrupt U-turn, Spain – an early leader in the solar energy movement – imposes a “sun tax” Spain is seen as already having come close to the European Union’s goal of 20 per cent reliance on renewable energy by 2020. But last year the Spanish government approved measures to limit and tax solar power generation, which had attracted thousands of investors big and small to the business. Now, instead of the current per-kilowatt-hour fee, it is proposed

Elsewhere in oil and gas . . . › As reported by Zheng Yangpeng in China Daily , in a document issued 24 February by the National Energy Administration the regulator asserted that China intends to open up the construction and operation of oil and gas pipelines to private investors. Currently this area is dominated by a few state-owned petroleum corporations. › China also has removed import duties on a range of oil and gas exploration and high-end manufacturing apparatus, including drilling equipment, semi-submersible drilling rigs, and liquefied natural gas (LNG) carriers. The official news agency Xinhua reported that the exemptions from tariffs and import value-added taxes took effect 1 March. The list of exempt items – gear needed in China but not manufactured there – was compiled in 2009 and has already been modified several times. The latest adjustments are in line with the recommendation of Wang Zhonghong, a researcher with the Development Research Center of the State Council, that China strive to stimulate domestic technological innovation. Beijing expects the changes to help improve Chinese competitiveness in resource exploration, air pollution control, new energy development and railway safety. Automotive Another challenge to Canada by Mexico: in vehicle production it will be twice the size of its northern NATO partner by 2016 “Mexico is winning thousands of new auto jobs by offering a compelling combination of lower labour costs, a mature supply base and access to transportation that makes it easy to export vehicles to the US, South America and Europe.” For Detroit Free Press business writer Brent Snavely, the facts speak for themselves. Recently Honda and Mazda opened two assembly plants in Mexico in less than a week. The factories, in the central Mexican cities of Celaya and Salamanca, represent an investment of more than $2bn. Between 2013 and 2015, automakers Honda, Mazda, Nissan, Chrysler and Volkswagen will invest $6.8bn in Mexico. Twenty years after US President Bill Clinton signed the North American Free Trade Agreement (NAFTA), the pact has had its intended effect in Mexico – at least on its automotive industry. For Rick Schostek, senior vice president of Honda North America, Mexico’s lower labour rates, together with its rail and seaports access, were key factors in Honda’s decision to invest in Celaya. (“Free Trade, Lower Wages Drive Mexico’s Automaking Boom,” 2 March)

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M ay 2014