As signs grow that the worst of the global slowdown is passing, fears are being voiced that world trade could hold back the recovery.
The answer depends on whether trade is seen as a reflection of the broader economy or a transmission belt for the downturn. The links between finance and trade are still little understood.
World trade has experienced its biggest contraction since the 1930s — much sharper than the fall in economic output.
Some economists argue that damage to trade finance and global supply chains, and a series of open and furtive protectionist measures in the meantime, could hamper the recovery in trade, and with it the rebound in output.
“There is good reason to fear that trade growth will lag rather than lead any recovery, and that this will itself constrain the pace of recovery,” consultants PFC Energy said.
Globalization — the integration of the world economy — could go into reverse as national self-interest takes priority over the promotion of trade, they said in a recent note.
REBOUND
Yet behind the continuing headlines of contracting trade, the first signs of a recovery are also evident.
Of 18 countries reporting trade data for June so far, almost all show a rise in imports and exports over the previous month, said World Bank senior economist Caroline Freund faxless payday loan online.
“Although trade was still 25 percent lower than in June last year, this is the first generalized spark in trade flows since the beginning of the crisis,” she said in a blog last week.
A study by Freund on the policy portal VoxEU.org concluded that trade would contract overall by 12-20 percent this year.
But, like many economists, she forecasts a powerful bounce.
“In terms of the rebound in trade I think it will be fast — that’s what’s happened in previous episodes, so that trade falls fast but it also comes up really fast,” she told Reuters.
Why trade has contracted so sharply in the current downturn is still being debated.
It seems the financial crisis that triggered the downturn delivered a triple blow to trade, Ronald McKinnon, emeritus professor of economics at California’s Stanford University, told a recent symposium in the magazine International Economy:
The battle for business travellers flying within the so-called "eastern triangle" of Toronto, Ottawa and Montreal is about to heat up, with Air Canada threatening to respond to competitive threats posed by Toronto’s Porter Airlines.
At a time when corporations are slashing their travel budgets, three-year-old Porter is vying for an ever-bigger slice of the dwindling business travel market by continuing to expand its services from Toronto’s island airport, located a short ferry ride from the city’s downtown core.
By contrast, Air Canada operates out of Pearson International Airport in nearby Mississauga.
"Porter is a very able competitor and there’s no question that they have a very good product," Calin Rovinescu, chief executive of Air Canada, said yesterday.
"We are mindful of that and are looking at ways of responding … we are looking at providing an improved product in the triangle."
Rovinescu made the comments during a conference call to discuss Air Canada’s 27 per cent increase in second quarter earnings, due mainly to foreign exchange gains and other one-time items.
Air Canada said it recorded an operating loss during the period.
Air Canada is now looking at relaunching an enhanced version of its former Rapidair service, a high-frequency air shuttle for Toronto, Ottawa and Montreal.
Although Air Canada continues to operate a similar schedule linking those cities, the service is no longer being operated as a separate brand, with its own expedited check-in counters.
The moves are the latest in a series of efforts to prop up Air Canada. Since taking the helm in April, Rovinescu has negotiated key agreements with its unionized workforce that include pay freezes and a moratorium on payments to company pension plans for 21 months lowest fee payday loans. He also led an effort to raise more than $1 billion in new financing in a tough credit market. The loans are to keep Air Canada from tripping certain covenants with its suppliers, which could in turn force it to file for bankruptcy protection for the second time in less than six years.
Rovinescu told analysts yesterday that the national carrier, with the help of an outside consultant, has identified $400 million in costs that can be stripped out of the business over the next three years. He said a "swat team" is to work with different branches of the airline to improve the efficiency of everything from manpower planning to relationships with outside suppliers.
Meanwhile, the airline is looking to exploit new sources of revenue by broadening its distribution channels and implementing customer-focused initiatives, including last-minute upgrade programs for passengers and more opportunities for Aeroplan members to redeem their miles free flights.
Air Canada yesterday recorded earnings of $155 million, or $1.55 a share, in the second quarter, once certain items such as $48 million worth of foreign exchange gains are factored in. That compares with earnings of $122 million, or $1.22 a share, in the year-ago period.
However, Air Canada posted an operating loss of $113 million versus operating income of $7 million in the year earlier quarter. Sales fell to $2.3 billion from $2.8 billion as airlines flooded the market with cheap tickets to stimulate demand.
RICHMOND HEIGHTS — There’s a new idea for this town’s long-stalled Hadley Township redevelopment area: a big-league soccer stadium.
A local developer recently filed a proposal with Richmond Heights to build an 18,500-seat arena along Hanley Road. It would be the centerpiece of a 57-acre complex of stores, offices and housing that would cost roughly $400 million.
It’s still in the early stages, but Gateway Real Estate Partners envisions the stadium as a potential home for the Major League Soccer franchise that a St. Louis-based group has been pursuing for several years.
"I’ve thought that area of the county would be an ideal spot for a soccer stadium," said Ryan Woods, who heads Gateway, which is also redeveloping the former Schnucks site nearby at the intersection of Clayton and Hanley roads.
Woods said he has discussed the plan with Jeff Cooper, the chairman of St. Louis Soccer United, but that those talks have been very preliminary.
"I have not put a plan in front of him to consider," Woods said.
Indeed, Cooper, who’s awaiting the next round of MLS expansion, said he’s focused on two other stadium sites — one in Collinsville and another at the St my credit score. Louis Soccer Park in Fenton, which his group recently acquired from Anheuser-Busch InBev.
"The Richmond Heights proposal is not one that has our attention at this time," he said in a statement.
Gateway’s proposal was the only one Richmond Heights received for Hadley Township this spring, when the city sought new ideas for the site after three years of negotiations with another developer fell apart.
The idea for the stadium plus two hotels, office and retail space and housing was cobbled together quickly to meet the deadline in late May, Woods said. Now it is "very much in flux" as Gateway bores down on financing, traffic issues and the right mix of potential uses.
"We’re working on a more serious plan to put in front of the city," he said.
That plan is due by October, and until then, said Richmond Heights City Administrator Amy Hamilton, the city will take a wait-and-see approach.
Customer information taken in this case included names, addresses, customer account numbers and some billing information, all building blocks for anyone serious about committing identity theft. "Nobody knows if it was a rogue employee or somebody else. It’s a big question mark," says Ann Cavoukian, Ontario’s information and privacy commissioner, in an interview.
To its credit, Toronto Hydro was quick to act. But Cavoukian, who is investigating the breach, sees it as a wake-up call of sorts as utilities begin to modernize their networks and embrace communications technologies to better interact with customers.
She mentions Google and its plan to work with certain utilities – Toronto Hydro included – to demonstrate its new residential energy management tool, Google PowerMeter. Are the proper policies in place, for example, to make sure your personal information as a customer is protected when it’s handed over to Google?
"There needs to be a wall between Toronto Hydro customer information and Google being able to take that and connect it with other information Google possesses that may be linked through your Gmail account," she says. (Disclosure: I co-authored a book on data privacy with Cavoukian in 2002)
Her concern could just as easily extend to Microsoft and its new energy management tool, Hohm. Or the dozens of similar, much more advanced applications that will use two-way broadband and wireless networks to gather customer data, including energy use, for highly detailed analysis and feedback.
"The smart grid is a good idea, and I’m certainly in favour of it. But the focus is so much on controlling energy use that I think the privacy issue is a sleeper; it’s not top-of-mind," Cavoukian says.
That was the same message heard Friday at the Black Hat security conference in Las Vegas. That’s where Mike Davis, a security consultant with IOActive Inc. in Seattle, showed how someone could hack into a smart meter and install a computer worm that could spread to other smart meters used by homes and businesses connected to a local distribution hub.
The worm, apparently, could have been programmed with the ability to take over the meter and remotely disconnect someone’s power. Davis was able to demonstrate this under contract with an unnamed utility, which hired him to test smart meter security. He told his audience the general attitude among utilities is "We’ll fix this later," and privacy and security aren’t being taken as seriously as they should.
This raises many questions. Could a hacker remotely spread a virus through smart meters and then disconnect power from thousands of homes and businesses? If so, it could introduce tremendous instability to the grid unique business cards.
There are already conservation programs in Ontario that give a utility the ability to remotely shut off or control air conditioners, water heaters and other appliances when required to reduce the load during peak times. General Electric said last month it will offer in 2010 a "home energy manager" that can connect with and control appliances and a "smart" thermostat in the home. Could someone with malicious intentions gain access and wreak havoc?
On an individual household level, knowing hourly energy use can help thieves. If, over a few days, the load appears flat, it can tell a burglar you’re on vacation and nobody is home to catch you breaking in.
"We’re doomed to relive the 1980s and 1990s all over again," says Davis, referring to the hard security lessons learned by banks, retailers and others when computers became more networked and the Internet emerged onto the scene.
Stuart Brimley, manager of training and emergency preparedness at Ontario’s Independent Electricity System Operator, says utilities didn’t have to worry as much in the past because their computer systems were all closed-standard, proprietary systems and therefore less vulnerable to attack. "As an industry we’ve been lucky historically. But that’s changing," he says.
Brimley says the big fear is that the grid – from the customers that use power to the companies that generate it – is going to have more points of access that increase vulnerability. At the transmission level, this cyber security risk isn’t lost on the North American Electric Reliability Corporation, or NERC.
NERC has mandated that big utilities and system operators comply with eight standards related to infrastructure protection, including physical and cyber security. "Right now, cyber security standards in place today only apply to a dozen different companies here in Ontario," says Brimley. "The move to the smart grid expands that to many, many companies, every single distributor of power across Ontario."
Brimley says in his 10 years focusing on this area, he’s had high-level access to intelligence information and there has been little indication terrorist organizations or rogue states have tried to attack power grids in Canada. In April, however, the Wall Street Journal reported cyber spies had penetrated the U.S. grid and planted malicious software that could potentially cause disruptions. It’s conceivable that as an evolving smart grid sees more points of access and vulnerability emerging, Canada could become an attractive entry point for disrupting our neighbour.
"There is no border when it comes to electricity," says Brimley, "and it’s the same with the cyber threat."
As Congress considers extending the fiduciary standard to brokers — in essence, requiring them to put clients’ interests first — consumer and investor advocates, regulators, professional groups and prominent advisers are urging its adoption and trying to prevent attempts to water the standard down.
Good for them.
"Over the years, full-service brokers have been allowed to portray themselves to the public as ‘financial advisers’ … all without having to act in their clients’ best interests, which is the true hallmark of an advisory relationship," said Barbara Roper, director of investor protection for the Consumer Federation of America.
Roper and six others, each representing an organization, sent a letter to Barney Frank, chairman of the House Financial Services Committee, and Spencer Bachus, the committee’s ranking member, supporting but also seeking to strengthen a proposal by the Obama administration to extend the fiduciary standard to broker-dealers.
The administration’s proposal authorizes — but does not obligate — the Securities and Exchange Commission to require that all brokers, dealers and investment advisers, when providing advice about securities to retail customers, "act solely in the interest of the customer or client without regard to the financial or other interest of the broker, dealer or investment adviser providing the advice."
The legislation "represents a good starting point," the letter says. But it calls for revisions to "unambiguously provide" for the extension of the fiduciary duty to brokers without "in any way" undermining current fiduciary requirements of registered investment advisers.
These advisers, regulated by the SEC and/or individual states, are already legally bound to put clients’ interests first. Brokers or "registered representatives," who fall under the jurisdiction of the Financial Industry Regulatory Authority, face a less stringent "suitability" standard cash advances. They can recommend investments that generate higher commissions and may not be expected to perform as well as others, as long as the investment is "suitable," which means the investment fits within a client’s goals and tolerance.
"Few investors understand the stark differences" between the suitability and fiduciary standards, said Knut A. Rostad, a member of the Committee for the Fiduciary Standard, another group of 12 investment advisers urging investors to sign an online petition and letter to Congress.
"Wall Street needs real reform," reads the petition. It asks that any new laws or regulations extending the fiduciary standard to brokers "meet the requirements of the authentic fiduciary standard" consisting of five "core fiduciary principles."
They are:
— Put the client’s interests first.
— Act with prudence; that is, with the skill, care, diligence and good judgment of a professional.
— Do not mislead clients; provide conspicuous, full and fair disclosure of all important facts.
— Avoid conflicts of interest.
— Fully disclose and fairly manage, in the client’s favor, unavoidable conflicts.
Adoption and enforcement of the standard would help reverse the current "horrible" distrust by the public of the industry, said Rostad, regulatory and compliance officer at Rembert Pendleton Jackson in Falls Church, Va.
The U.S. government’s $1 billion “cash for clunkers” auto sales incentive program reached its funding limit unexpectedly after an avalanche of business exhausted its funds, an Obama administration official said late Thursday.
Auto dealers began offering government-backed rebates in early July of up to $4,500 to consumers who traded-in their gas-guzzlers for more fuel-efficient vehicles.
But the Transportation Department will need additional cash after rebates for nearly 250,000 vehicles jammed the pipeline nationwide.
The White House was working with Congress to try to extend funding as lawmakers prepared to leave town for the month of August, according to the official who was not authorized to speak for attribution.
The program was part of a congressional effort to revive slumping U.S. sales and further help domestic automakers, especially General Motors Corp and Chrysler Group that briefly went bankrupt.
Sales unexpectedly spiked this week after the government began logging transactions and approving rebates that indicated consumers were opting for vehicles that get significantly better gas mileage than the models they were trading in.
The end of the month is usually the busiest time for auto dealers and automakers that have matched the government benefit.
Initially, congressional and industry officials signaled that the program was going to be suspended late Thursday or early Friday as funding ran out.
The administration opted to keep the program in place while it sought new money first cash advance. It was not clear where the administration would find additional funding in a short period of time.
“We hope there’s a will and a way to keep the program going a bit longer,” General Motors said in a statement. “Any doubt that the program would jump-start auto sales is completely erased.”
An estimated 16,000 dealers were eligible for the program and each would have to sell more than a dozen vehicles at the maximum rebate to reach the government’s funding limit, according to the National Automobile Dealers Association.
U.S. Senators Dianne Feinstein of California and Susan Collins of Maine said any extension of the incentive must require greater fuel efficiency and higher reductions of auto emissions.
Congress wrestled with both issues when it established the current incentive to give U.S. manufacturers a better chance of qualifying for the program.
U.S. auto manufacturers are scheduled to report their July sales next week.
It was unclear how the program that was to run into the fall was impacting sales at individual companies, including Asian manufacturers like Toyota Motor Corp. (7203.T) and Honda Motor Co. (7267.T) that make the most fuel efficient cars on the road.
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