TPT November 2013

Global Marketplace

question: Why would America take on that arduous task if the 27-member-nation EU, which welcomed Croatia as a new member last year, “were heading for the dustbin of history, as we were hearing as recently as 2011?” In his view, America is determined to get in on the ground floor of a New Europe before a fully recovered EU can demand tougher terms, the goal behind Canada’s own four-year-long negotiations to secure a Canada-EU trade pact. Meanwhile, a euro that was once dismissed as Monopoly money has been steadily strengthening, gaining 10 per cent against the US greenback since the spring. › That is no less a headache for European exporters than for their Canadian counterparts, coping with a “loonie” at or near par. Yet, Mr Olive pointed out, while the strong euro can be a short-term inhibitor for exporters, longer term it has the salutary effect of forcing providers of goods and services across Europe to shed obsolete practices and otherwise raise their game. Adding to signs of a strengthening recovery in Britain, the nation’s industrial production rebounded at midyear After a second-quarter expansion of 0.6 per cent, the British economy gained from a surge in manufacturing in June. On 6 August, in London, the Office for National Statistics (ONS) said that industrial output had increased 1.1 per cent from May, exceeding economists’ forecast of a 0.7 per cent increase. All 13 categories within manufacturing recorded an increase in June, for the first time since June 1992. The increase was led by transport equipment, up 5.3 per cent; other manufacturing and repair; and computer and electronic products. Also surpassing expectations was the 1.9 per cent jump in factory output indicated by the median of 33 estimates in a Bloomberg News survey. In the three months through June, total British production increased 0.6 per cent from the previous quarter, matching the estimate in the gross domestic product report of 25 July. The ONS said the data released 6 August will have no impact on the GDP estimate. Manufacturing rose 0.7 per cent in the period, the most since December 2010. Steel › As reported from Kolkata by Jayanta Mallick of The Hindu (20 August), a Tata Steel joint venture has secured a key land-use license for its iron ore project in the vast Millennium Iron Range area of northeastern Canada. According to New Millennium Iron Corp, the Indian company’s 20 per cent partner, Tata Steel Minerals Canada Ltd (TSMC) signed an agreement with the appropriate aboriginal council in south Labrador, paving the way for mining and building infrastructure related to the direct shipping ore (DSO) project.

Economic outlook A Canadian observer expects Europe to emerge stronger than ever from its most critical period since World War II “One wouldn’t wish on Europeans the economic hardship they have endured and continue to suffer. That said, the potential silver linings from the crisis are a kilometre wide, for a newly efficient European super-economy in which no member country is left behind.” David Olive, a business and current affairs columnist at the Toronto Star , sees persuasive signs of sustained recovery in the European Union – good news for a North American comeback that has been muted due to diminished exports to Europe, and for North American investors. These include Canada’s major retiree pension funds, for which European investments are once again attractively priced. Among the turnaround signs cited by Mr Olive in “Europe Rising” (2 Aug): › The anticipated result of relaxed austerity measures across the continent will be a resumption by next year of vigorous economic growth. Germany’s GDP is expected to clock in at 1.8 per cent in 2014, well ahead of this year’s 0.4 per cent. Even the much harder-hit Ireland and Spain are forecast to post healthy GDP gains of 2.2 per cent and 0.9 per cent, respectively, in 2014. › That growth will also be spurred by a return of global investor confidence in Europe. Ireland, Spain and Italy – which not long ago were paying rates of 7 per cent to 8 per cent on newly issued bonds – are able to sell new debt at yields of just 4 per cent to 4.5 per cent. › A European Central Bank (ECB) now headed by Mario Draghi, the former Italian finance minister, realises (as Ben Bernanke, head of the US Federal Reserve Board, earlier did) that central banks must not permit the control of inflation to crowd out the other half of their dual mandate, which is to promote economic growth. And so, as the Fed has done, Mr Olive wrote, “The ECB has been stepping into the market to buy government and corporate debt at reasonable rates. [Newly available] cheaper money is kick-starting business expansion while relieving some of the debt-obligation pressure for EU governments.” The Star columnist readily acknowledges the worries, centred mainly on unemployment, that still abound. But in his view it is becoming steadily more difficult to describe Europe as “struggling.” Recommending that the prefix be dropped after half a decade, he noted that the European common currency zone has welcomed Latvia as a new member; and Lithuania is not far behind, for an expansion of the eurozone to 19 member nations. Moreover, the EU has begun negotiating a free trade deal of unprecedented ambition with the US. Mr Olive posed the

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November 2013