David Jacobson, the United States Ambassador to Canada, revealed the items that he believes are critical to a strong North American economic strategy. Trade with Asia and the importance of reducing non-tariff trade barriers are a few of the many issues the Ambassador discussed in the Institute’s private, off-record forum. Members received an insider’s view of the focal points in the current Canada-US relationship.

David Jacobson presented his credentials to the Governor General of Canada on October 2, 2009, becoming the 22nd United States Ambassador to Canada. Before coming to Ottawa, Ambassador Jacobson served in the White House as Special Assistant to the President for Presidential Personnel. Prior to his government service, he was a corporate lawyer in Chicago where he was active in civic and political affairs.

Since assuming his post, Ambassador Jacobson has traveled extensively throughout Canada to learn about the country and to meet the Canadian people. He has concentrated his efforts in four areas:

- Expanding the bilateral trading relationship – which is already the largest in the history of the world;

- Improving the security and the efficiency of the 9000 kilometer border between our countries;

- Working to strike the proper balance between utilizing the vast and secure energy resources of Canada while preserving the environment for ourselves and our children; and

- Fostering the shared values of the United States and Canada around the world.

Since coming to Canada, Ambassador Jacobson has celebrated the Stanley Cup victory of his Chicago Blackhawks. He was less excited about the results of the gold medal hockey game during the 2010 Vancouver Olympics. He has taken up cross country skiing and showshoeing. He has also become an avid curling fan.

Ambassador Jacobson received a J.D. from Georgetown University where he was the Administrative Editor of the Georgetown Law Journal. He received his B.S. from the Johns Hopkins University.

May 15, 2012 – The Competition Bureau should clarify how it will apply its powers under the Competition Act in seeking administrative monetary penalties for abuse of dominance, according to a consensus of the C.D. Howe Institute’s Competition Policy Council, which held its third meeting on May 7, 2012. The Competition Policy Council comprises top-ranked academics and practitioners active in the field of competition policy. Chaired by Finn Poschmann, Vice President, Research at the C.D. Howe Institute, the Council provides analysis of emerging competition policy issues. The Council, whose members participate in their personal capacities, convenes a neutral forum to test competing visions of competition policy and share views with practitioners, policymakers and the public.

The Council’s key recommendation is that the Competition Bureau issue guidance and explain the basis on which it will assess the AMPs it seeks.

For the report go to: http://cdhowe.org/pdf/Report_of_CPC_May_2012.pdf

The Competition Bureau should clarify how it will apply its powers under the Competition Act in seeking administrative monetary penalties for abuse of dominance, according to a consensus of the C.D. Howe Institute’s Competition Policy Council, which held its third meeting on May 7, 2012.

The Competition Policy Council comprises top-ranked academics and practitioners active in the field of competition policy. Chaired by Finn Poschmann, Vice President, Research at the C.D. Howe Institute, the Council provides analysis of emerging competition policy issues. The Council, whose members participate in their personal capacities, convenes a neutral forum to test competing visions of competition policy and share views with practitioners, policymakers and the public.

Amendments to the Competition Act in 2009 gave the Competition Bureau the power to seek administrative monetary penalties (AMPs) of up to $15 million from businesses it believes to have contravened the abuse of dominance provisions of the Act, which are non-criminal sections of that legislation. Subsequently, in March this year, the Bureau issued draft Enforcement Guidelines that were silent on the question of AMPs. At the May 7 meeting, the Council addressed the following questions: “Do Administrative Monetary Penalties make good policy? For what infractions? Are they constitutional? What are the costs, benefits, and options?”

There was a range of views among the Council members about whether AMPs for abuse of dominance are ever appropriate. Some members contended that AMPs are appropriate as a deterrence mechanism. Others expressed the view that the possibility of a firm’s being subject to AMPs would chill efficient arrangements.  There was unanimity, however, on the point that the risks of over-deterrence associated with AMPs are real, and that it would be appropriate to know how the Bureau plans to approach the issue of AMPs in particular cases. Accordingly, the Council’s key recommendation is that the Competition Bureau issue guidance and explain the basis on which it will assess the AMPs it seeks.

For the report go to: http://cdhowe.org/pdf/Report_of_CPC_May_2012.pdf

For more information contact:

Benjamin Dachis, Senior Policy Analyst, C.D. Howe Institute, 416-865-1904, email: cdhowe@cdhowe.org

Sales of contraband cigarettes in Canada constitute a sizable component of the tobacco market, note the authors. This illegal trade is associated with a loss in tax revenue and an array of illicit activities that involve gangs and organized crime. Concerned Canadians have called for action: some have urged governments to lower tobacco taxes in the belief that lower relative prices for the legal product would induce smokers to switch away from illegal to legal cigarettes, perhaps increasing tax revenues.

To assess the impact of different policy approaches to the problem, the authors model consumer choices under four policy scenarios: (i) decreasing taxes on the legal product; (ii) boosting the price of the illegal product through an intensified crackdown; (iii) a combination of (i) and (ii); and (iv) decreasing the price of discount cigarettes closer to that of the contraband product.

The authors’ modeling adds welcome rigor to research into the impact of taxes on the tobacco market. Among their main findings:

• Tax reductions on legal cigarettes would have only a modest impact on the share of the illegal product, cause a decline in tax revenues and result in a small increase in total consumption;
• For tax policy to drive out the illegal market, tax reductions would have to be substantial. But such tax reductions would reduce tax revenues dramatically and increase overall consumption;
•  However, if the price of the illegal product could be raised with extra legal or enforcement pressures on suppliers, then the market share of the illegal product would decline.

The authors  emphasize that tobacco tax policy should be based not only on its impact on the quantity of cigarettes purchased, but also on the social, legal and enforcement costs associated with the illegal supply.

For the study go to: http://www.cdhowe.org/a-taxing-dilemma-assessing-the-impact-of-tax-and-price-changes-on-the-tobacco-market/17623

For more information contact:  Ian Irvine, Professor of Economics, Concordia University; William Sims, Professor of Economics, Concordia University; Colin Busby, Senior Policy Analyst, C.D. Howe institute; 416-865-1904

Government efforts to tax cigarettes in Canada can have unintended consequences for tax revenues and the supply of contraband cigarettes, according to a report released today by the C.D. Howe Institute. In “A Taxing Dilemma: Assessing the Impact of Tax and Price Changes on the Tobacco Market,” Concordia University economists Ian Irvine and William Sims assess the effect of tax policy on tobacco use and, in particular,  on prices and consumer choice between illegal and legal cigarettes.

For the study go to:  http://cdhowe.org/pdf/Commentary_350.pdf

By Finn Poschmann

Based on the results of elections in France and Greece, the odds of a euro currency implosion have gone up.

The outcomes of loud, divisive and ostensibly important elections in Europe have rolled in.

In France, the charming and occasionally conservative Nicolas Sarkozy fought a losing rearguard action against the steady assault of his Socialist challenger for the presidency, François Hollande. Sarkozy’s loss signals the obstreperous French electorate’s rejection of post-crisis fiscal austerity measures, measures set in motion by Sarkozy and which, for the most part, they have yet to experience.

Perhaps more than that, the result signals populist resentment and the French elite’s attempt to take a stand against what they see as an overbearing German electorate’s self-righteousness, arising from the latter’s relative fiscal competence. In France, a vote for Hollande was a vote against Chancellor Angela Merkel and thrifty Swabian housewives, one which carried the bonus message of a rejection of the perhaps too charming Sarkozy. German voters in Shleswig-Holstein shared some of this populist sentiment, on Sunday rejecting Angela Merkel’s candidates in a regional election.

In Greece, riots have given way to ritual electoral comedy. Greece has run elections in the past 38 years with four different flavours of proportional representation. The 2009 episode producing a Socialist majority of seats, but not a strong one, owing to the division of votes among the Coalition of the Radical Left and the Communist Party; the Anticapitalist Left Co-operation for the Overthrow, the Communist Party (Marxist-Leninist), the Marxist-Leninist Communist Party, the Workers Revolutionary Party and the Organization for the Reconstruction of the Communist Party of Greece all won votes, but not seats.

This time, May 6, 2012, was to be different: The party gaining the biggest share of the popular vote was granted 50 seats off the top, with the remaining 250 seats in the Greek parliament divided proportionally. Yet it seems that proportional representation despises certain results, or the Greeks do prefer comedy to tragedy. The incumbent socialist party, Pasok, came in third, while the conservative New Democracy party, even with its 50 bonus seats and the support of Pasok, may not be able reliably to outvote the second-place party, the Coalition of the Radical Left, and its Marxist flankers. The anti-immigrant Golden Dawn party will vote in parliament for the first time, and the only certain result is that Greek politics will remain as fractious as ever.

Yet none of it matters, because these national elections cannot address the toxic economic bonds that make fiscal policy a burning cross-border issue within the eurozone.

The toxic bonds are created by the euro itself, which formally came into being in 1998 and represented what was then to be the key step on the road to making the European Union a true federation. Critics at the time pointed out that a political federation typically rests on common interests and a willingness at least to get along within the union – close friendship not required. Hence, for prospective members of the euro to allow themselves to be bound to a single currency, administered by the new European Central Bank, as in Europe, was to set off on that road with the cart before the horse.

Trouble was not hard to forecast. Even as the euro was born, French politicians stood ready to blame domestic economic difficulties on “unregulated global markets” and their “untrammeled greed” and free marketeers’ presumed desire to discredit the “European model of a social market economy.” Such words served notice in France, as in Greece, that fiscal probity would almost certainly founder on nationalist or populist altars.

The trouble arises because currency unions, like those among Canada’s provinces or the U.S. states, normally include some centralized fiscal arrangement, like a federal tax authority, and which may include features that support and complement subnational fiscal authorities, as does equalization in Canada.

But in Europe the federal fiscal structure is weak to the point of nonexistence. Writing in spring 1998, David Laidler and I observed that “not only is there no obligation on a central fiscal authority to bail out a member state’s government that gets into in difficulty, but there also exists no body with the fiscal capacity and political authority to do so.”

It gets worse. The ECB, because it has an inflation-targeting mandate that could easily be blown off course by tending to regional fiscal matters, is forbidden from offering credit to governments or other public agencies. But the marketable debt of member governments and their banks is involved in day-to-day monetary policy.

That means the door is open to heavy pressure on the ECB, resisted anew on Monday by the German government, to more aggressively accumulate member nation debt. The pressure can be extraordinary, because claims on dodgy sovereign debt have been taken as collateral by the ECB, making the ECB at times an accomplice in resistance to recognizing sovereign defaults and moving on to the work-out phase. This makes the ECB amenable to endless patchwork proposals to keep it all hanging together.

The ECB, and banking regulators generally, should stop treating claims on sovereign debt as equally riskless. If they were to do so, the ECB would be on better moral and financial footing for fighting pressure on it, and sticking to its inflation mandate.

Meanwhile, the fiscal pathologies are such that neither the Socialists in France nor whatever coalition temporarily rules in Greece will have a cure. There is no more a ready cure than there is any possibility that the competing demands of pensioners and state workers readily can be met within the fiscal capacities of either France or Greece. Austerity measures cannot fill the bill, and what has been achieved to date in Greece may yet be overturned.

Short term, the ECB may find itself buying more debt, under the unhappy eyes of the Germans, who ultimately will finance it. Medium term, the financing packages that politicians currently are working on internationally may evolve into a form of European Monetary Fund, fashioned loosely after the IMF. Success on either front will depend on fiscal competence winning the day among the troubled southern European nations.

The alternatives are few. One is messy individual exits from the euro, wrenching and problematic because the governing treaty does not contemplate the possibility. Option two is to implement side-by-side euro-like currencies, one for the weak countries, another for the stronger; ugly but doable. The third is a euro implosion, or currency dissolution. On the strength of the election results, the odds of the last have gone up.

Finn Poschmann is vice-president, research, at the C.D. Howe Institute.

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Please join us to hear The Hon. Brad Duguid, Ontario Minister of Economic Development and Innovation, speak on his strategy to make Ontario a global economic leader.

Brad Duguid serves as Ontario’s Minister of Economic Development and Innovation, focussed on creating jobs, promoting Ontario as a smart place to invest and growing a strong, innovative economy.

As Ontario’s Minister of Energy, Brad Duguid launched Ontario’s Long-Term Energy Plan: Building Our Clean Energy Future – an ambitious plan that builds on Ontario’s commitment to clean energy – and the cleaner air, jobs and economic growth associated with it.

As Minister of Aboriginal Affairs from 2008 to 2010, Minister Duguid worked at building relationships and launched PLAY – a program for aboriginal youth to participate in sports and activities such as hockey and learn life skills.

Minister Duguid has also served as Minister of Labour and Parliamentary Assistant to the Minister of Municipal Affairs and Housing.

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Strong economic growth, rapid industrialization and increasing wealth in emerging economies have led to record demand for metals like gold and copper. At the same time, the extractive sector is facing unprecedented scrutiny and rising expectations from stakeholders and society at large. In this environment, how can the mining industry build trust and earn support for its operations?  Toronto-based Barrick Gold is the world’s largest gold producer, and a significant producer of copper and silver. President and CEO Aaron Regent discussed how mining can contribute to responsible economic development, using a model that integrates social, environmental and economic interests to create shared value for a diverse group of stakeholders, from shareholders to local communities.

Aaron Regent was appointed President and Chief Executive Officer of Barrick Gold Corporation effective January 16, 2009. Mr. Regent is an experienced executive with a wealth of expertise in the mining and finance sectors.

Before joining Barrick, he was Senior Managing Partner of Brookfield Asset Management and Co-CEO of its Infrastructure group. Brookfield is a global asset management company with approximately US$90 billion under management.

Mr. Regent previously served as President and Chief Executive Officer of global mining company Falconbridge Ltd. from 2002-2005. Following its merger with Noranda, he was President of the combined company, which had over 14,000 employees and mining operations in 18 countries. Falconbridge was sold to Xstrata in 2006 for C$27 billion, then the largest transaction in mining history.

Early in his career, Mr. Regent progressed swiftly through increasingly senior executive roles. His leadership and strategic experience includes two years as Executive Vice President and Chief Financial Officer at Noranda, prior to joining Falconbridge.