Trump’s green rollbacks may help Canada

A ‘Canadian Emissions Standard’ would appeal to automakers

Canada has a chance to become North America’s new regulatory pacesetter in vehicle emissions and fuel-economy standards if the Trump administration succeeds in its effort to roll back the strict new standards set by the Obama administration, which the Canadian government readily adopted.

In coming months, Ottawa will have to decide whether to stand fast with the Obama-era regulations, or degrade them to align with Trump regulations.

That would seem to put Ottawa in a quandary. Relaxing Canadian standards would further impair a Canadian reputation for fighting climate change undermined by federal approval of the Trans Mountain Pipeline.

But holding to the stricter current standards risks defection of Canadian automaking operations to a more laissez-faire U.S. and Mexico.

There is another option, though, suggested by Christopher Sands, veteran scholar of Canada-U.S. relations at Johns Hopkins University in Baltimore, in a recent Sands essay for the C.D. Howe Institute.

Donald Trump, the U.S. president, is trying to strip California of its 48-yearold waiver to set its own, higher standards, as well as rolling back the federal standards. “If the Trump administra- tion is successful in stripping California of its role as a regulatory pacesetter on automotive emissions standards,” Sands writes, “Canada could attempt to take California’s place.”

The middle course Sands suggests is for Canada to keep the current higher standards, but make them voluntary rather than mandatory.

Automakers who remain in compliance with the higher standards could brand their products as meeting a new “Canadian Emissions Standard,” an attractive selling point.

It would be akin to the developers who seek Leadership in Energy and Environmental Design certification.

Both they and appliance makers who comply with the U.S. Environmental Protection Agency’s voluntary EnergyStar ratings program do so in order to command premium selling prices. Canadian Tire pays the price to stay in fighting trim

The price of shares in Canadian Tire Corp. Ltd. (CTC), one of Canada’s most reliable income stocks, dipped as much as 7.5 per cent last Thursday as the company reported second-quarter profits and revenues well below analysts’ expectations.

But last week’s share-price slip was probably an overreaction.

The firm’s all-important same-store revenues growth remained strong at CTC’s retail banners, including Canadian Tire, Mark’s and Sport Chek. Total revenue was up 3.2 per cent in the quarter, to $3.48 billion.

The sore spot was a 12.6 per cent drop in year-over-year quarterly profit, to $170.6 million.

The CTC profit decline in the first two quarters of 2018 results from CTC’s heavy investment to remain competitive with powerhouse retailers Walmart Inc. and Amazon.com Inc.

CTC has revamped its loyalty program to cover all its banners, including its Gas+ filling stations. The upfront costs of that will pay off in higher revenues as customers are more easily able to use their loyalty points and old-fashioned but beloved Canadian Tire money across all of CTC’s businesses.

This year, CTC also made one of the biggest acquisitions in its history, the $985-million purchase of apparel marketer Helly Hansen. That firm, transformed into a global brand during its ownership by the Ontario Teachers’ Pension Plan (Teachers’), has racked up three consecutive years of increased profit.

Given its success at integrating its acquisitions of Mark’s and Forzani Group (Sport Chek, et al.), Hansen should help those two CTC units.

There’s no evidence here that CTC has lost its touch in both organic growth and growth by acquisition. Nor, with its major investments in the business, does it suffer the complacency of the ill-fated Target Canada and Sears Canada. Saudi Arabia is not your friend

Given the tiny amount of economic activity between Canada and Saudi Arabia, the Saudi all-fronts attack on Canada that began last week is akin to a Saudi assault on the fall-fashion pages of Vogue.

But the Saudi attack on Canada, over an anodyne Canadian criticism of Saudi human-rights practices, is a powerful warning to Western economies that have been eager to host Saudi investments. That was billed as a win-win proposition. Saudi Crown Prince Mohammed bin Salman (“MBS”) wants to diversify his economy away from oil and gas. And the West is eager that the Saudi kingdom be more heavily invested in mainstream Western economies. There’s a snag, though. MBS, 32, presents well as a Saudi modernizer, entertaining tycoons worldwide with PowerPoint presentations of his Vision 2025 campaign to achieve Saudi world leadership in selected technologies.

Meanwhile, though, the Crown Prince has spearheaded his kingdom’s pointless war in Yemen, asserting Saudi authority over Lebanon and led an economic blockade of Qatar, whose trifling sin is to host the broadcast centre of Al-Jazeera. Qatar has been forced to sell its stakes in Tiffany & Co. and Credit Suisse Group AG to keep the country running.

Not only is Saudi Arabia an unreliable foreign investor, it strips its satellites of that status.

Compounding the Qatar debacle, the Saudi-Canada dispute signals that MBS means to use the estimated $2 trillion (U.S.) in Saudi’s sovereign wealth fund as a geopolitical weapon, favouring certain jurisdictions with investment and withdrawing it from, or denying it to, others.

The only reason Saudi Arabia hasn’t abruptly withdrawn investments from Canada is that it effectively has none. Which is fortunate, obviously.