North America Brief
Issue 08 | May 3, 2023
The North America Brief is a compilation of stories and links on the United States and Mexico’s trade relationship with Canada’s Prairie provinces focusing on stories and topics not always “on the front page” of mainstream media.
In this issue: Breaking news on potential U.S. debt default, a new train in town, is Canada’s clean energy support on par with the U.S.? and so much more.
Breaking news on potential U.S. debt default
The X date, the date when the U.S. government will be unable to meet its debt obligations, has been moved up to June 1. Politico is reporting the new date was issued in a warning from U.S. Treasury Secretary Janet Yellin on May 1. There has always been an element of uncertainty around the default date mainly due to economic factors which include how fast U.S. tax revenue is collected, which in turn is impacted by factors like natural disasters. Earlier media reports had the X date coming in July or August, but those predictions had increasingly been called into question especially as U.S. tax intake showed signs of being delayed.
Rail service will connect the continent
There is a new train in town … well, North America. Just two weeks after the inauguration of the Canadian Pacific Railway and Kansas City Southern (CPKC) merger (see last month’s brief), a new intermodal service spearheaded by Canadian National (CN), Union Pacific (UP) and Grupo Mexico (GMXT), dubbed Falcon Premium, has been announced. This is good news for western Canadian exporters because they now have two services to get products to the U.S. and Mexico without having to switch train cars. According to the CN-UP-GMXT trio, the new service will be the fastest and most dependable intermodal service in North America.
The route will connect CN’s tracks that stretch from Halifax to Vancouver, UP’s tracks in Chicago and GMXT’s terminals north of Mexico City. See the routes below.
But the race to be the best intermodal-service in North America is not over. Calgary-based CPKC has countered the recent competition of Falcon Premium with a new multi-year agreement with Knight-Swift Transportation for a Mexico-to-Chicago train, which is to launch in a few short weeks.
And for just a bit more train news, a USMCA commission is preparing an environmental investigation of the “Maya Train,” a multibillion-dollar tourist train being built on the Yucatán peninsula. According to activists, the proposed high-speed rail project will divide the coastal jungle and frequently pass over delicate limestone caves called cenotes. However, experts like archaeologist Octavio del Río say the environmental damage is already done.
Is Canada’s clean energy support on par with the U.S.?
A newly released TD report reveals that despite popular opinion that Canada cannot keep up with the U.S. when it comes to clean energy investments, Canada’s financial support for the clean energy transition is quite competitive. Since budget 2021, the Canadian government has dedicated $139 billion towards promoting clean energy development, which accounts for approximately five per cent of the country’s nominal GDP. In comparison, the TD report stated that the United States’ Inflation Reduction Act has allocated an estimated $393 billion towards this cause, which represents 1.5 per cent of the country’s nominal GDP. The full report is here.
The U.S. IRA (Inflation Reduction Act) may be the least of our worries . . .
This week, the 2023 SelectUSA Investment Summit has commenced where foreign investors, companies, economic development organizations (EDOs) and industry professionals look for U.S. investment avenues.
Aided by the passage of three huge pieces of legislation — the Bipartisan Infrastructure Act, the Inflation Reduction Act and the CHIPS and Science Act, Commerce Secretary Gina Raimondo is expected to make the case that now is the time for foreign companies to increase their investment in the United States and for new firms to think about getting in, says Politico.
Also in Politico – EU says ow! The hundreds of billions of new spending programs created by the U.S. legislation has already put pressure on the European Union to respond in kind to avoid a massive outflow of investment dollars across the Atlantic.
U.S. grain exports hit hard by Mississippi floods
American Commercial Barge Line has recently reported it had no boats on the Upper Mississippi River above St. Louis, MO due to severe flooding last week. The river has opened in certain sections, but delays should be expected for the next few weeks. Flooding could reduce exports of grain to foreign markets by 47 per cent. Follow updates here.
Unlike Canada (which pretty much lacks inland water networks), the U.S. relies significantly on inland barge transportation, especially for exporting grain. Between 2015 and 2019, barges transported an average of 13 per cent of all U.S. bulk grain and 47 per cent of grain meant for foreign markets, while rail and truck moved 37 per cent and 16 per cent of the total grain, respectively. The American Farm Bureau cautions that even minor disruptions to barge efficiency could have significant ripple effects on the revenue of U.S. farm businesses, which rely heavily on foreign markets (Canadian exporters especially).
Meanwhile Mexico adds key industries to nationalization hit list
The majority of Mexico’s electricity is state-owned following that government’s recent purchase of 13 power plants from Spanish energy company, Iberdrola. State-owned Commission Federal de Electricidad now controls 56 per cent of Mexico’s electricity production, which is two per cent above Mexican President Andrés Manual López Obrador’s initial goal. Canada and the U.S. remain against Mexico’s increased nationalization of industry claiming it limits free trade and market access within North America.
Mexico’s proposed mining reform to impact Canada
Mexico has announced new mining reforms that could have far reaching impacts, according to Canada’s Trade Minister Mary Ng. From shortened concessions to tighter water permits, the mining overhaul is expected to impact not only the Mexican economy and labour market but also Canadian investors. Canada is the largest foreign investor in Mexican mining. We will continue to follow this story as it develops.
Charging ahead with North American EV (Electric Vehicle) expansion
The Hyundai IONIQ 5 is garnering attention in the electric vehicle world as it recently completed a trip from Canada to Mexico and back in 116 days, reports Clean Technica. Patrick Nadeau, who drove from Quebec to Mexico and back in his IONIQ 5, revealed two things: (1) electric vehicles are not limited to urban commutes, and (2) charging infrastructure is improving across North America.
See the route below:
The journey cost $630 CAD in charging costs which is significantly lower than what fuel in an internal combustion engine (ICE) vehicle would have cost. So, maybe your Calgary to Regina or Brandon to Red Deer routes are EV friendly, or at least getting closer to being. But not all long-distance routes are EV friendly yet, just ask our Calgary-based Trade and Investment Centre Director, Carlo Dade who spends lots of time in Southern Utah and says “if the driver had taken the back way into Bryce on interstate 12, he’d be on the side of the road watching the vultures circle overhead.”
Consumer access to electric vehicles in Canada and across North America is set to increase as Honda just announced its fully electric vehicle which will be ready for purchase in North America by 2025. Plus, the new long-range SUV Tesla, also known as Model Y, is coming to Canada sometime between May and July this year, Reuters reports.
On the manufacturing side of things, Volkswagen is moving its manufacturing from Europe to North America, starting with a $5 billion investment in a battery-cell factory in Ontario. The Canadian federal government is on board as well and is contributing $13 billion in subsidies over the next decade, Global News reports.
California mandates move to zero emissions commercial trucking
California has announced new rules to move commercial truck fleets entirely to zero emissions and the U.S. air resources board just approved new Advanced Clean Fleets regulations that require all medium and heavy-duty commercial fleets to phase out combustion engines by 2035-42. The American Trucking Association has called the new regulations unrealistic given the lack of infrastructure, technology unknowns and costs.
- Over 1500 delegates from Indigenous nations, industry and governments across Canada and the U.S. gathered last week at a conference led by First Nations Major Projects Coalition (FNMPC). The conference highlighted the benefits of Indigenous nations’ involvement across all stages of a company’s value chain. Read more here.
- Mexican shredded pork pastor on Canadian pizza dough will be a menu staple as Canada’s largest pizza chain, Pizza Pizza, eyes expansion in Mexico.
- Following a pilot program launched in Canada, a start-up accelerator backed by Google is expanding to North America with the goal of increasing support of start-ups that build on cloud-native technology. More on that here.
- Berries have surpassed beer and tequila on Mexico’s top global exports list, Mexico Daily Post has more on this.
- Ouch … Canada has been benched as the U.S. Soccer Federation and Mexico Football Federation plan a bid to co-host the 2027 Women’s World Cup.
- Beating the record, an all-time high of five Canadians were drafted into the NFL last week, but none from Saskatchewan, which is surprising given the province’s reputation as the football powerhouse of Canada.
— Taylor Blaisdell, policy analyst
The North America Brief is a compilation of stories and links related to the U.S. and Mexico’s relationship with Canada’s West. The opinions expressed in the links don’t necessarily reflect the views of the Canada West Foundation.