Trump's first big test

Donald Trump heads for Texas on Tuesday for a first-hand look at the damage caused by Hurricane Harvey.  Reasonably enough, he will stay clear of the Houston area, probably spending most of his time at Corpus Christi, which is close to where the storm made landfall but which escaped most of the rain and damage.

The media are describing this as Trump's first big challenge since the election.  Will he rise to the occasion and actually manage to look "presidential" without an autocue on front of him?  Early signs are not good: as the storm hit, he pardoned the egregiously awful Sheriff Joe Arpaio and tweeted about his electoral victory in Missouri and a book written by one of his shrinking army of buddies.  In the meantime, there are all kinds of stories about how Trumpian policies are making the risks of Harvey-type events that much greater.

• No word on whether Trump thinks Hurricane Harvey is a Chinese hoax, but that's how he sees global warming. Drawing a direct line of causation between global warming and individual weather events is dangerous, and climatologists are resisting the temptation.  Still, the fact that we are seeing a weather event with no known precedent is surely instructive.

• Trump has cut the budget of the NOAA, which operates the National Hurricane Centre.  The NOAA has bemoaned the fact that its modeling of tropical weather systems is falling seriously behind that done in other countries, despite the regular arrival of deadly storms on US coasts. 

• The unwelcoming attitude of the Trump regime to immigrants may well make the reconstruction effort in Houston far more expensive and protracted than it would otherwise have been.  US unemployment is at a multi-year low and skilled trades such as construction and roofing are in particularly short supply. It appears that as many as 100,000 workers made their way across the border from Mexico to work on the rebuilding of New Orleans after Hurricane Katrina back in 2005.  How many will want to take the chance under today's circumstances?

The emergency management agency FEMA is already warning that it expects to be on the job in Houston and elsewhere in Texas for several years. Unfortunately for the people of that city, the same can also be said for Donald Trump.

This says it all

Hillary Clinton blames everyone but herself for the fact that Donald Trump became President.  Ever since election night I've been nurturing the feeling that she bore a lot of the responsibility for the disastrous outcome, but I haven't quite been able to find the right words.  No problem! Garrison Keillor has done it for me, in a column in the Washington Post.

We Democrats bear some responsibility. Hillary Clinton was a symbolic candidate with a nice résumé who lacked the ability to connect with voters. This is a fatal flaw. She was almost beaten in the primaries by an elderly Vermont socialist. The party, bitterly divided, stuck to symbolism and tried to elect the First Woman President, though most women were not enthused about her. The party apparatus assumed she had to win. Who could possibly lose to an invincibly ignorant blowhard New York developer with a peroxide ducktail? As it turned out, she could.

You can read the entire column -- most of which is not actually about Trump and Clinton -- here.

NAFTA talks: the race is on

Talks aimed at renegotiating the North American Free Trade Agreement (NAFTA) began in Washington DC last week.  Two further multi-day rounds are planned for September (in Mexico City and then Ottawa), with a similar pace set to continue for the rest of the year.  Both the US and Mexico face elections in 2018 (Congressional mid-terms and Presidential, respectively), and so would like to wrap up the process by the end of this year, if at all possible.

The US negotiators set the tone with a toughly-worded opening statement, making it clear that President Trump wants major changes to the existing deal, not just minor tweaks here and there.   The US position was laid out in some detail in a consultative document several weeks ago.  Canada has declined to follow suit -- "we don't negotiate in public" -- but Foreign Minister Chrystia Freeland did issue a statement of general principles a few days before the talks began.

And a very odd thing it was.  Inter alia, Canada wants to insert new chapters into NAFTA guaranteeing the rights of women and indigenous people.  These are perfectly worthy objectives, but surely matters for national governments and not subjects to be shoehorned into a trade deal.  Some media commentators interpreted Freeland's statement as an indication that the Canadian government does not believe a deal can be achieved.  This seems improbable, but this type of grandstanding on the part of the Trudeau government is becoming distressingly frequent.

After these first few days of talks, some of the potential sticking points can already be identified:

Buy America rules.  All three countries favour domestic businesses when it comes to public procurement, often with catastrophic results (see: Bombardier transit deals with various Ontario municipalities).  Tougher Buy America rules were part of Trump's election platform, and US negotiators have made it clear that the subject is not even up for discussion at the NAFTA talks.  Yet the US wants its companies to have greater access to Canadian and Mexican public projects.  This prompted one Canadian observer, union leader Jerry Dias, to remark that "we are a polite country, but we're not stupid".

Autos.  Current rules require 62.5 percent of a vehicle to be manufactured within the NAFTA countries in order for it to be considered domestic.  The US would like to increase this percentage, which both Canada and Mexico could support.  However, the US also wants a separate percentage purely for US manufacture, in order to stem the continued seepage of auto assembly work to Mexico.  This cannot be palatable to either Mexico or Canada.

Dispute resolution.  There are various dispute resolution provisions in the current deal, including Chapter 11, which allows companies to sue governments if public policy measure affect their profitability, and Chapter 19, which covers government-to-government disputes.  The US wants to abolish Chapter 19 altogether, but as this would leave Canada and Mexico at the mercy of the regular US court system in any future dispute, this is unacceptable to either country.  As for Chapter 11, Canada has come out on the short end of a number of disputes with US corporations, at considerable cost to taxpayers. Canadian nationalists would love to see it removed, but the US would never agree.

Plenty to be going on with there, and we haven't even mentioned Canada's supply management regime, duty-free shopping limits, bank ownership restrictions and a whole host of other niggles.  Getting all of this sorted out by the end of the year seems a tall order indeed, even under ideal circumstances -- which these are not.  After the chaos of the past few months, Donald Trump needs a win.  Assuming that he has now been persuaded that a war with North Korea is not the kind of win he needs, he may well feel that sticking it to his northern and southern neighbours is an ideal way to rally support.  A successful end to the NAFTA talks is far from being a sure thing.

    

Isn't it Raonic?

For a country of its size, Canada produces an embarrassingly small number of sports stars capable of making an impact on the international stage.  Hockey no longer dominates public and media attention in the way it used to, thanks to the arrival in Toronto of NBA basketball (the Raptors) and American League baseball (the Blue Jays).  In other sports, however, especially those focused on individual achievement such as golf, tennis, swimming or track and field, the media pay next to no attention unless a Canadian pops up and notches a victory.  Then it's blanket coverage, for at least a day or two.

Look back to 2016 and there were two Canadians making their mark in a big way.  At the Rio Olympics, 17-year-old swimmer Penny Oleksiak turned in a performance for the ages, including a gold medal and a couple of bronzes.  The press went wild, interviewing everyone from her parents to the guy who cleans the pool where she trains.  Years of achievement and glory beckoned.  This year? Not so much.  At the recent world championships, Oleksiak swam creditably but didn't win anything of note.  As a result, she and her sport barely rated a wire service column on the inside pages of the sports section.

The year 2016 was also a breakthrough year for tennis star Milos Raonic, who broke into the world top ten rankings and got to the finals at Wimbledon, where he was handily beaten by Andy Murray.  This year? Again, not so much. Raonic has been plagued by injuries, has played little and won even less, with the result that the media coverage has largely dried up.

But what's this??  In the past week a "new" Canadian star has appeared in the tennis firmament: 18-year-old Denis Shapovalov.  In a tournament in Montreal, Shapovalov made it all the way to the semi-finals, disposing of both Juan Martin del Potro and Rafael Nadal along the way.  Cue, once again, the media frenzy, with reporters who had never heard of him until this week rushing to laud him.  This article from the Toronto Star will give you the tone.  Not content with asserting that "Shapovalov clearly has our undivided attention", the columnist can't resist taking multiple swipes at poor Raonic, last year's man:

"Raonic just can’t stay healthy for more than a few months at a time, and bombed out of this Rogers Cup early with a wrist problem. His health has been a significant part of the reason he’s so far not been able to win one of the big tournaments in his sport, either a Grand Slam event or a Masters-level tournament."

Yeah, what a loser, eh?  And talking of which, let's take a look at Eugenie Bouchard, the media cynosure of 2015, when she too reached a Wimbledon final.  It's all gone wrong since then: multiple coaches, a lawsuit against the US tennis association, demoralizing first-round losses week after week and, at times, an evident loss of interest in her chosen sport.

This past week, as Shapovalov was burning up the courts in Montreal, Bouchard yet again lost badly in the first round of a tournament in Toronto.  Evidently disheartened, she was unwise enough at her post-match press conference to suggest that it would be a relief to let someone else carry the pressure of being "Canada's tennis sweetheart".  Needless to say this did not go down well with the media, who are even quicker to pile in on a loser than they are to latch onto a winner.  Bouchard's road back to the top has been growing narrower for a while; with the media panting for her to fail, it may now be next to impossible.

So, good luck Denis Shapovalov.  I don't mean on the court -- you've already shown you can handle the world's best.  It's the local media you have to beware of.

The mineshaft gap

US rhetoric towards North Korea has certainly ramped up in the last 24 hours, with President Trump fulminating from the boardroom of his New Jersey golf course about America's ability to rain down "fire and fury" unless Pyonyang gets out of the nuclear arms business.  The trigger for the harsher language seems to be a report that US military intelligence believes that North Korea has already managed to miniaturize a warhead that can be fitted atop one of its new ICBMs.

That's quite a change from the confident posturing just a month or two ago, when the same intelligence sources were still expressing the view that a meaningful nuclear threat to the US mainland was still at least five years away.  Those of us with long memories of the Cold War might be just a touch sceptical about all this.

The sainted John F. Kennedy fought the 1960 election in part on the charge that President Eisenhower was weak on national defence. He claimed that the USSR had a huge advantage over the US in nuclear missile capacity -- the so-called "missile gap".  There never was any such gap, and there's plenty of evidence that JFK knew this perfectly well, but it served its purpose during the campaign, in which he narrowly defeated Richard Nixon.  

The whole issue was mordantly satirized by Stanley Kubrick in Dr Strangelove.  The good doctor's plan for surviving a post-nuclear future is to assemble a group of the best and the brightest, naturally including Strangelove himself, in mineshafts.  The deranged General Buck Turgidson worries that the USSR is ahead on that front too: "Mr President, we must not allow a mineshaft gap!"

Despite the bloodcurdling rhetoric out of Pyongyang, there is no doubt that any gap in armaments (or mineshafts) between North Korea and the United States massively favours the latter.  There is little likelihood that Kim Jong-Un would seriously contemplate using any of his arsenal for a first strike -- even an attack against Guam, which the North Korean military has specifically threatened, would prompt a devastating response. Kim may be bad and dangerous to know, but he is probably not mad.

What about the US, which is still the only country ever to have used a nuclear weapon in combat? Plans for a pre-emptive strike are no doubt at an advanced stage, but it remains a remote possibility, given the amount of conventional weaponry that North Korea has in place, aimed directly at Seoul.  The tough rhetoric, from the President itself as well as Defense Secretary Mattis, is more likely intended to bring the North Koreans to the negotiating table -- and, equally, to convince China that the time has come to put serious pressure on its neighbour to do so.

President Trump, for whom nothing on the domestic front has gone right lately, may also feel that tough talk will stand him in good stead with his domestic voters.  He's probably right about that, as long as he doesn't inadvertently spark an actual war.  Presidents Johnson and Nixon, over Vietnam, and George W Bush, over Iraq, soon found that actual combat was not a sure-fire way to win voter popularity.  

Canada jobs market remains strong

StatsCan reported this morning that the Canadian economy added 11,000 jobs in July, the eight consecutive monthly gain. Although the headline was merely in line with the consensus expectation, rather than blowing past it as has been the case for most of this year, the details of the report confirm that the jobs market remained strong at the start of the third quarter of the year.

• Full-time employment rose by 35,000 in the month, offset by a 24,000 decline in part-time employment.  Taking these two numbers together, there was a healthy 0.6 percent rise in hours worked in the month, for a year-over-year increase of 1.9 percent.

• A total of 387,000 jobs has been created in the past twelve months, the highest figure in a decade.  The overwhelming majority of these jobs -- 354,000 -- have been full-time positions.

• The unemployment rate fell by 0.2 percentage points to a nine-year low of 6.3 percent.  This partly reflected a small decline in labour force participation, although the participation rate for the core age group (i.e. excluding the youngest and oldest) was unchanged. 

• Average hourly wages remain tame, with 1.3 percent year-on-year growth recorded in each of the past three months, barely keeping up with inflation.

The persistent strength in the labour force data over the past year or so has taken some of the focus away from the volatility in the numbers, which used to make it difficult to perceive the underlying state of the jobs market.  For what it's worth, the data on self-employment still seem somewhat erratic, albeit less so than in the past, but for the moment there can be no dispute that the employment situation in Canada is the strongest it has been since the onset of the financial crisis.  

There can be little doubt that Q2 GDP data, due for release on August 31, will be strong, and today's data indicate that the strength has persisted into the current quarter.  This means that the economy is likely to reach effective full capacity by the end of this year, in line with the Bank of Canada's forecast.  Although the persistently low growth in wages will give Governor Poloz and his colleagues something to think about, it is very likely that the Bank will implement another 25 basis point rate increase at its October Governing Council meeting, when it will also release its updated economic outlook.  

This is getting serious

Another month, another decline in Toronto-area house prices.  The Toronto Real Estate Board (TREB) reported today that home prices in the region fell 6 percent in July.  That's the third straight monthly decline since the Ontario Government introduced a package of measures aimed at reining in the market.  It's all but impossible these days to find anything attempted by the provincial government that goes according to plan, but this surely has.

TREB is trying to put on a brave face.  It notes three factors that, at least in its view, mitigate the pain.  First, prices are still higher year on year, by about 5 percent.  This is true, but it won't stay true for long if the month-on-month declines continue.  Second, it argues that the summer season is usually quiet, with activity often picking up after Labour Day.  That's not much of a mitigation, given that a year-on-year price comparison is by definition measuring the change between comparable periods (i.e., presumably the market was quiet last July also).  Third, it notes that a similar sharp pullback was seen in Vancouver last year, when the provincial government there also imposed market cooling measures.  That market has now begun to see prices rises again, albeit at a modest pace.

Is that Vancouver experience likely to be repeated in Toronto?  The very sharp decline in sales (down a remarkable 40 percent from July 2016) and the rise in listings (up 5 percent) seems to suggest that the entire direction of the Toronto market has changed.  There must be very few potential buyers out there right now who don't think they can afford to wait a little longer in hopes of getting an even better deal.  Moreover, the fact that the Bank of Canada has started to raise interest rates, together with the prospect of tighter regulation of the mortgage market in the coming months, also argues against a sharp rebound.

Recent reports estimate that there are close to 50,000 registered realtors in the Toronto area, although many of them seem to pursue it as a side gig, doing few if any deals.  Despite the number of chancers who have jumped into the "profession" in recent years, real estate fees remain at sky-high levels, close to 5 percent.  Realtors directly contributed to the price spiral seen in recent years, encouraging bidding wars at every turn in order to boost their own incomes*.  Despite their stoical public posture, TREB and its members must be starting to feel very queasy indeed.  It's hard to feel sorry for them.

* As this article reports, fees associated with home sales now account for almost 2 percent of Canada's GDP.