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Quebec will soon sign an agreement with France that provides labor mobility to their citizens. This will set a tone for the upcoming Canada-EU free trade negotiation, and if succeed, will provide citizens of the two jurisdictions free labor mobility. This is both exciting and visionary. As I study the more on the topic of trade, I become an advocate of free labor mobility as a solution for changing economies.

This is an especially good news for people in the knowledge-based economy. As jobs demand more and more highly-specialized skills like science, technology, and finance, and shift in the economy will make it particularly painful for highly-skilled workers to adjust. Not all Ph.D. in biology can be retrained into a CFA. And you’ll be scared to have an i-banker retrained to work in the lab likewise. By giving labor the ability to move to other regions or countries where their skills are needed, the knowledge and experience will not be lost.

Certainly, how well this works out depends on what the two countries have to offer each other. But this certainly is a good first step towards a broader labor mobility agreement between EU and Canada.

http://www.thestar.com/FederalElection/article/498030

Today, Prime Minister Stephen Harper pledged to open up for more foreign investment if Conservatives wins the upcoming election. Certainly, both trade proponents and opponents immediately jump on to comment. Stephen Harper believes that more FDI will benefit Canada and create more jobs. Opponents, on the other hand, condemn such move is “selling off” Canada.

One fact to consider is that thanks to our previous and current governments’ fiscal discipline, Canada has been running a surplus budget for the past few years. At the same time, domestic savings outpaced the actual amount of domestic investment. Macroeconomist will tell you that domestic savings is equal to domestic investment and net capital outflow. If we have more domestic savings than investment, that means our net capital outflow, defined by outflow of direct investment subtracted by inflow of direct investment, must be positive. That means we are sending money out to invest in other countries.

From a business standpoint, as long as a project yields positive return, then it is a good investment. It does not matter where the investment is. So if there is an attractive investment opportunity overseas, firms will invest. Does that mean Canadian firms investing overseas will necessarily consolidate back-office jobs over there to Canada and create more Canadian jobs? Not really, right? Because it depends on what kind of investment a firm is undertaking. If it is an offshoring investment, then we probably will not see Canadian jobs created here. On the other hand, if it is buying up a coal mine in South America, then we can probably expect some Canadian engineers will be sent there. So if we can’t say a foreign investment by a Canadian firm is good or bad without looking at what the investment is, how can we say that FDI by foreign firms in Canada must be good or bad?

The fact that Canadian firms choose to invest abroad, as reflected by our trade data, suggests per macroeconomic theory of comparative advantage that it is more profitable for these firms to invest aborad. So if the money has gone abroad, where do we get money to finance our domestic projects? One source is the government, which we all know how well will that go. The other source is FDI. One thing to note is that it doesn’t matter who finance these projects as long as they are profitable in the long run. It is not so ideal if it is a hostile takeover, which is bound to eliminate jobs. However, that is the nature of competition and that may happen even we only have domestic competition. Overall, FDI brings in tangible capital and intangible know-hows that are good for our economy by raising productivity.

So are we selling off our national assets? Nationalism and protectionism aside, the biggest disadvantage is losing control at the firm level. The government can still exert control through regulations. Profits will have to be shared with the new owners but our governments do not lose the tax revenue. Even though some jobs will be eliminated, some will be created. FDI that makes a Canadian firms subsidiaries and hence eliminates back-office jobs will create job opportunities in the finance sectors. Some will win, some will lose. That is the nature of our changing economy.

Article: http://www.cbc.ca/canada/story/2008/09/12/gas-prices.html

Over the past few weeks, the crude oil price has dropped significantly. However, the gasoline price of shot up 13 cents per litre last Friday when hurricane Ike was hitting Texas. That is even more expensive than the summer when oil price was at record high close to $150 USD per barrel.

I don’t know what is so wrong with the pricing mechanism of gasoline, but what I find it most bewildering is how come Canada, as an oil-producing and exporting nation, have to suffer from such high gasoline price when the hurricane is not even hitting our shores!

I am a zealous believers of free market economy so I am not even going to ponder the notion of nationalizing our oil industry in Canada. Trade is based on the idea of comparative advantage and all trading partners are better off as a result of trade. Better off means that the total output (hence consumption) is higher. However, if most of our oil are sent to the United States and in turns, we have to buy the gasoline back from them, how is this better off for Canadians? Perhaps it’s time to consider investing in building more oil refineries to increase capacity?

Article from Toronto Star: http://www.thestar.com/FederalElection/article/496573

When it comes to economy, the Conservative gets it, the NDP doesn’t! Buddhist has a saying that the only constant in this univese is change. We are living in the 21st century and our economy is constantly changing. It used to be cheaper to produce cars in Canada and that is why we had an auto industry. Now the WHOLE WORLD can produce cheaper than Canada, why would companies continue to produce here? If we want an auto industry to remain here, we need to compete in low cost, as low as those workers in third world countries. Without addressing the issue of high labor cost, any money throwing into the manufacturing sector is not sustainable. A government can’t tell investors to come in and then use legislature to lock them in here. That does not encourage investment, that only scares off investment. Companies make business decisions, not patriotic decisions because government doesn’t own companies, shareholders do. NDP, get real!

Let’s take a closer look at NDP’s plan:
- $4 billion over four years to help the auto industry design and produce environmentally friendly cars and trucks.
- $3 billion would go towards retraining workers for so-called “green-collar” jobs in the environmental industry.
- Adopting a made-in-Canada procurement for the federal government and its agencies.
- $400 million on a job protection commissioner charged with investigating major layoffs and plant shutdowns to prevent jobs from leaving Canada.

If the $4 billion is mostly in designing, not producing, environmentally-friendly cars, these manufacturing workers will not benefit directly and at most reap filter-down benefits. If the spending is mostly on producing without addressing the issue of labor cost, any initial production will eventually erode away to cheap labor overseas. It is simply not sustainable.

Simply tag on “green” does not make a job sustainable. Even if we have a “green” car ready to be produced tomorrow, the jobs will still eventually go overseas without addressing the high labor cost issue. Charging a premium on putting solar panels on the roof will make these alternative energy unattractive and not a sustainable business model. The list will just go on and on. Labor cost is an issue that unfortunately cannot and should not be addressed by government, but by the market.

“Made in Canada” policy sounds good for campaign, but what happens if Bombardier decides to charge the City of Toronto more for subway cars than Siemens? You get the idea.

Government can investigate why jobs are leaving Canada, but they are likely wasting their times. At the end of the day, jobs leaving Canada because of labor cost. It is one thing for a financially stressed company to simply declare insolvent to avoid severance. It is another if the company is making a legitimate business decision.

Workers must focus on retraining. There are more options that you think. Seek help from career counsellors.

On my way home from work this afternoon, I heard a listener calling the radio station in regard to the upcoming Canadian Federal Election saying that they will cast “punishment vote”. And if the frequency of this kind of opinion is any indication of the true election outcome, that means Canadians would rather cast a vote to protest instead of a vote to support.

Then don’t complain the government is out of touch with the people, because the leading party is not representing the people, they are simply the party that disgust you least. It’s time to vote for a party that you believe in (most)!