Business Notes

May 22 2000

Business Notes

May 22 2000

Business Notes

Caught in an air war

A trade war is in the air between Canada and Brazil. Ottawa has asked the World Trade Organization to approve levying almost $5 billion in punitive tariffs against Brazil. Ottawa says the tariffs will compensate Canada for losses caused by Brazil’s illegal subsidization of its aerospace producer Embraer SA, which makes regional jets. Embraer competes directly with Montreal-based aerospace producer Bombardier Inc.

Last month, the WTO ruled, for the third time, that Brazil’s financing of Embraer violated WTO regulations. After negotiations between Ottawa and Brasilia broke down, the Brazilian government said Canadian sanctions would create an “irrational escalation of the dispute.” Later, Brazilian offi-

cials said they would appeal the WTO rulings, which they believe will buy about a month of time for further talks before the WTO can deal with the sanctions issue. If such measures are approved, Brazil has threatened to retaliate, although this could break WTO rules. Canadian companies— including Alcan Aluminium Ltd. and Nortel Networks Corp.—had $2.8 billion invested in Brazil in 1998.

London comes calling for Trimark

Trimark Financial Corp., Canada’s sixth-largest mutual fund company, agreed to a takeover by international money-management giant Amvescap PLC. The London-based company is offering $2.7 billion for Trimark, which has $25 billion under management. Amvescap, which has $585 billion in assets, will merge Trimark with its Toronto-based unit AIM Funds Management Inc., though it will maintain both brand names. The combined entity will become Canadas second-largest fund manager, after Winnipeg-based Investors Group Inc.

Financial Outlook

Canadians are finally getting richer again. The average Canadian household last year gained 1.5 per cent in net income and three per cent in net


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worth, largely concentrated in the wealthiest homes. But in the wake of the 1990s recession, it is only this year that net income will surpass the 1989 level. Over the decade, Canadians did see a 20-per-cent rise in their net worth after inflation—but American households posted a 50-per-cent jump.

Royal Bank of Canada economist Derek Holt forecasts that income will continue to grow this year and next. But he worries that record-high debt-to-income ratios and stock ownership have made Canadian household finances vulnerable to sudden, sustained shocks.

Microsoft fights back

Breaking up is hard to do, especially for Microsoft Corp. The company that Bill Gates built asked a U.S. federal judge to throw out the justice department’s proposal to split Microsoft into two separate units. Justice, along with 19 states, wants one company to sell the Windows computer operating system and the other to handle the rest of Microsoft’s business. Microsoft said it would agree to change its behaviour, including allowing a competing Web browser to have pride of place on a computer running Windows.

A break for grain farmers

Ottawa is cutting grain freight costs by $178 million for western farmers by capping the amount railways can charge to ship grain. It will also put $175 million into improving Prairie rural roads and will restructure the Canadian Wheat Board. Transport Minister David Collenette called the cuts a “pro-producer package.” But Canadian Pacific Railway, which has put $3 billion into improving its service over the last three years, said it would reconsider future investments.

Bay Street looks south

Call it a match made on Wall Street. The Toronto Stock Exchange is discussing the viability of an alliance with the New York Stock Exchange. The TSE is also talking to other potential partners, including Nasdaq. Canada’s leading exchange has been spooked by the Quebec government’s deal with New York City-based Nasdaq to open a branch in Montreal.

Driving onto the Web

Ford Motor Co. of Canada Ltd. said two Canadian communities will pioneer its global foray into selling cars on the Internet. Consumers in the Hamilton and Ottawa regions will be the first in the world to be able to go online and custom order a vehicle from the manufacturer { They will obtain a fixed “ePrice” for the car and, if the precise model is not available, can track its status through manufacturing. Buyers will confirm the order with a $250 credit-card deposit and take delivery from a local dealer.