ANALYSIS
Challenging Trends for Canada’s Chemical Sector Gary LeRoux cpca@canpaint.com
A
s noted by many in the
analysis showed that US tax reform
Other sectors would be less impacted by
business community, there
has eliminated one of Canada’s main
the US tax reform.
will be challenges on both
competitive advantages and that “this
For the chemical sector this new business
sides of the border with respect
loss will have a significant negative
environment is expected to have a
to manufacturing for a number of
impact on capital-intensive sectors
long-term impact with direct and indirect
reasons beyond the recent
GDP at risk in the order of
negotiations on NAFTA or
$10-billion, out of an overall
possibly the new agreement
negative GDP impact of
(USMCA), if and when
$85-billion in total. Also at risk
approved by Congress. The
are more than 78,000 direct
Business Council of Canada
and indirect jobs.
represents the largest group
How this will play out over time
of major companies in
will of course be tempered
Canada representing half the
by how the new USMCA
value of the Toronto Stock
trade agreement plays out
Exchange and they have indicated
in Canada. All else being equal, these
real concerns. The Council just
sectors as a whole would likely face a
released a report done for them by
significant shift in investments from
PwC confirming concerns related to
Canada to the US over the next
the potential impacts of recent US tax
10 years.” PwC notes that capital-intensive
reform on Canada’s economy.
sectors most at risk include
The US corporate tax rate is now
manufacturing related to chemicals,
two points below Canada’s and that
machinery, plastic, rubber,
is having a bullish effect on foreign
and transportation.
investment in the United States. Meanwhile Canada’s last eight quarters saw stagnation in direct foreign investment. This is largely due to the new US business tax rate, but others have argued it is also due to the nature of increasing regulations in Canada. It may also have to do with the number of large projects in Canada having been stalled for various business and political reasons over the past two years. PwC’s detailed
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N. 56 - MARCH/APRIL 2019 - international PAINT&COATING magazine
over time. This will include whether or not Carsten Reisinger © AdobeStock
Canadian Paint and Coatings Association, Ottawa – Canada