A lot of talk has arisen over the past three months regarding 2014
being a year of global elections. There are, in fact, 44 elections taking place
this year, which is significant not only in terms of global politics, but also how
these changes in politics will impact global economy.
As the last blog post focused on Canadian exports and the projected
boom by the EDC, this one wants to take into account the effect that global
political change will have on Canada’s export markets.
QT of QE and Global Implications
This year specifically holds a lot of political change for emerging
markets (EM) such as Brazil, India, Indonesia, Turkey and South Africa (EDC).
Aside from political debate and changes looming on the horizon, there are also other
implications for these emerging markets with the economic developments here in
North America.
With the US economy picking back up, the Quantitative Easing (QE) that
has been in place throughout the recession, meant to stabilize the banking
system, will be tapering off, what is aptly being termed Quantitative Tapering
(QT). For the past 5 years, the global financial system “has been awash in
liquidity, flooded with a torrent of dollars” (EDC). This fluidity of currency,
however, is predicted to come to an end by the end of this year, and as the US
economy “accelerates in 2015, the central bank will have little choice but to
raise interest rates. This will have global implications” (EDC). The same is
expected to occur with the European Central Bank and the Bank of England, who
had “increased their asset holdings massively, but are now pulling back or
holding steady” (EDC). The removal of trillions of dollars from the global
economy, however, will obviously cause ripples of effect. The withdrawal of this
liquidity is essential to guard against inflation; however, as the stronger G7
nations recover and the withdrawal of QE supports a “return to growth” (EDC),
for many “asset classes and markets that benefited from the cheap US dollar,” this
tapering means facing “major consequences” (EDC).
A lot of growth in EM over the past few years “has been built on
readily accessible and affordable credit” (EDC). Because of this, many of the
EM economies are “closely integrated into global debt markets and actions taken
in Developed Markets (DM)” (EDC). As capital becomes more expensive and
difficult to access, EM are expected to see a cumulative GDP growth loss of
approximately 3% between 2013 and 2016 (EDC). Predominantly, the withdrawal of
QE means that “interest costs will increase, credit growth will slow, the
currency will depreciate making imports more expensive, and all of this
together will cause a slowing domestic economy” (EDC).
These economic pressures, coupled with existing political tensions, can
“exacerbate social discontent while the government has limited resources to
spend,” put more clearly, “with slower growth and tighter budgets, competition
for fewer resources may lead to more conflict within society” (EDC). Why this year’s
elections seem to be so important is because many EM will begin to see “economic
slowdown or political instability” at the same time as experiencing a “tighter
global credit environment” (EDC). Political tension coupled with greater
economic stress is sure to create greater friction in EM.
What do the Changes in Global Politics Mean for Canada?
Political unrest is obviously “bad for business,” because it affects
global trade. Several of the countries participating in elections this year are
vital to Canada’s economic prosperity because of the trade relationship that
Canada shares with these countries, and vice versa.
Country Stats on Trade with Canada for
2013
|
|||
Country
|
Total Trade/GDP
|
Canadian Exports
|
Top Sectors
|
Brazil
|
26%
|
CAD 2.3 bn
|
Machinery and Equipment, Other industrial goods, and Energy
|
China
|
54%
|
CAD 20.2 bn
|
Pulses, Coal, Wood pulp, Lumber, Iron ore, Mineral fuels
|
Euro Area
|
86%
|
CAD 38.7 bn
|
Metals, Aerospace products, Automotive products
|
India
|
56%
|
CAD 2,800 mn
|
Pulses, Aircraft, Newsprint, Coal
|
Japan
|
54%
|
CAD 10.7 bn
|
Mineral fuels, Non-ferrous metals, Plant oils, Lumber
|
Mexico
|
62%
|
CAD 4.9 bn
|
Oilseeds, Automotive Products, Iron and Steel Products
|
Russia
|
51%
|
CAD 1.6 bn
|
Animal products, Agricultural machinery and equipment, Oil and gas
machinery and equipment
|
South Africa
|
71%
|
CAD 634 mn
|
Machinery and mechanical appliances, Chemical products, Vehicles,
aircraft and transport equipment
|
USA
|
32%
|
CAD 317.2 bn
|
Energy, Automotive, Ores
|
Global Elections and Country Overviews
There are specifically 9 elections that Canada should pay special
attention to over the next year: Brazil, China, Euro Area, India, Japan,
Mexico, Russia, South Africa, and the United States.
Brazil
In Brazil, there is “increasing public discontent over the cost of
living and doing business, corruption, poor infrastructure and services such as
health and education” are all points of contention in this upcoming election
(EDC). The economy continued to operate at a slow pace in 2013, but EDC expects
the economy to “moderately pick up speed on the back of an uptick in industrial
production and manufacturing.” Consumer business confidence is low, impacting
domestic consumption investment. The government needs to address rising
household indebtedness and debt servicing costs relative to income, as well as
ensuring sustainable growth and improved fiscal flexibility (EDC).
China
In China, the world’s second-largest economy, the “new administration
is unlikely to spur growth beyond 7.5%” and the CCP “plans to shift growth
inland toward the Western provinces, which includes infrastructure, industry
and linking these new urban centres to the East. The Shanghai Free Trade Zone
will serve as an incubator for economic reform as China opens up further”
(EDC). Ultimately, China’s growth model is being transformed to be “more
consumption driven,” which the EDC predicts will “result in a more moderate
growth profile. At the same time, China will continue to move up the value
chain with greater emphasis on home-grown R&D and higher value-added
sectors” (EDC). A major concern for Canada is the Canada and China Foreign
Investment Protection Agreement which was announced in February 2012 that “must
still be ratified in both countries” (EDC).
Euro Area
In the Euro Area, European leaders are “exploring options for greater
political union, such as mutualized debt (European bonds), fiscal transfers and
EU-wide bank supervision. These types of solutions will take years to negotiate
and implement” (EDC). Emerging from the recession in 2013, even though growth
“remains tepid” and unemployment is “still quite high at over 11%), investors
are re-entering European capital markets (EDC). The Eurozone, accounting for
approximately 20% of the global GDP, is “forecast to grow by 1% in 2014 and
1.7% in 2015,” and although market conditions have improved, they will continue
to be stressed by a weak financial system (EDC).
India
In India, the economy “appears to have bottomed out,” but the EDC
predicts that “momentum will gradually return on the back of stronger
agricultural output and a gentle global rebound” (EDC). Regardless of current
economic weakness, “the mid - to
long-term growth trajectory remains fairly robust at over 6%. India’s workforce
is projected to grow by about 2% annually over the coming decade” (EDC).
Another area of specific interest for Canada is India’s current state of free
trade agreements. India has “pushed ahead with free trade agreements with
Japan, ASEAN (Association of Southeast Asian Nations) and more recently the
EU,” while a free trade agreement is “currently under negotiation with
Canada”(EDC).
Japan
In Japan, the world’s third-largest economy, “wage growth and
investment in plant and machinery have not taken hold in a sustainable manner.
The trade balance remains in deficit due to both a weak yen and the reliance on
fuel imports to generate power, but is cushioned by one of the world’s largest
FX reserve bases” (EDC). Nevertheless, Japan remains a” heavy industrial
manufacturing and technology powerhouse in spite of two decades of economic
weakness and persistent deflation” (EDC). Moreover, there are “various
investment and trade treaties currently being negotiated, including the
Trans-Pacific Partnership (TPP),” which, along with an increasing consumer
confidence, have the potential to “revitalize the economy” (EDC).
Mexico
In Mexico, they are in the middle of “Secondary legislation on energy
reform,” expected to go forward this year, which will “open up the sector to
much-needed private investment that will help increase PEMEX’s production and
refining capacity, which should in turn “increase business opportunities for
foreign investors” (EDC). With a low deficit, modest debt service ratios, high
reserves and flexible credit, Mexico remains “in good shape” and with its
“large network of free trade agreements” remains “an important part of the
global supply chain” (EDC).
Russia
In Russia, although unemployment is at a “historical low of below 6%”
and wages are increasing, improving the investment environment “will require
billions of dollars in investment over the coming years” (EDC). Economic growth
has averaged to be 1.3% and the first quarter of 2013 showed that “imports
[were] down sharply” and that “export growth has been weak and investment
spending has plunged” (EDC). In its current state of political turmoil, Russia
is not an attractive investment and trade partner, sure to impact its economy
in the long-run.
South Africa
In South Africa, the economy remains “well diversified” and it has a
“sizable private sector and a highly developed and well-supervised financial
sector” (EDC). The country is facing some “significant structural challenges,”
however, “particularly in relation to the very high rate of unemployment
(around 25%), an ineffective and inadequate education system and growing income
inequality” (EDC). Throughout 2013 growth was “dragged lower (2%) due to ongoing
strike action in key industries and weaker-than-expected demand from key export
markets (in Asia and Europe)” (EDC). As predicted by the EDC, consumer demand
will “continue to support the economy,” but there remains a “need for foreign
funds to cover the sizable current account deficit,” which places a significant
importance on trade and investment, it is therefore crucial for South Africa to
maintain its “business-friendly environment” (EDC).
United States
In the United States, the world’s largest economy “accounting for 20%
of the global GDP” (EDC), the economy is in healthy recovery. In 2014 they will
be voting in the congressional midterms, wherein it seems that the Republicans
are most likely to achieve a majority. Ultimately, though, the US is doing well
and is projected to “grow by 3.0% this year and 3.9% in 2015” (EDC). The EDC
also expects the deficit to “fall to just over 3% of GDP in 2014, as tax
revenues are rising because of the strengthening economy” (EDC). The strength
of the US economy is essential for the prosperity of the Canadian economy, as
the US is Canada’s strongest trade partner, accounting for “over 70%” of Canadian
merchandise exports, “40% of the stock of Canadian direct investment abroad,
and 50% of all sales made by Canadian foreign affiliates” (EDC). Canadian
exports to the US are projected to “grow by approximately 6% in both 2014 and
2015” (EDC).
Here is a list of the upcoming Global Elections:
2014 Global Elections Calendar
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Date of Election
|
Country
|
Type of Election
|
1/5/2014
|
Bangladesh
|
General
|
1/14/2014 - 1/15/2014
|
Egypt
|
Constitutional Referendum
|
January
|
Somalia (Puntland)
|
Presidential
|
2/2/2014
|
Costa Rica
|
General
|
2/2/2014
|
El Salvador
|
Presidential
|
2/2/2014
|
Thailand
|
General
|
2/20/2014
|
Libya
|
Constituent Assembly
|
3/9/2014
|
Colombia
|
Legislative
|
3/9/2014
|
El Salvador
|
Presidential Runoff
|
3/15/2014
|
Slovakia
|
Presidential
|
3/16/2014
|
Guinea-Bissau
|
General
|
3/16/2014
|
Serbia
|
Parliamentary
|
3/22/2014
|
Maldives
|
Legislative
|
4/5/2014
|
Afghanistan
|
Presidential
|
4/6/2014
|
Hungary
|
Parliamentary
|
April 7 - May 12
|
India
|
General
|
4/9/2014
|
Indonesia
|
Parliamentary
|
4/13/2014
|
Macedonia
|
Presidential
|
4/17/2014
|
Algeria
|
Presidential
|
4/27/2014
|
Macedonia
|
Presidential Runoff
|
4/27/2014
|
Macedonia
|
Parliamentary
|
4/30/2014
|
Iraq
|
Parliamentary
|
5/4/2014
|
Panama
|
Presidential
|
5/7/2014
|
South Africa
|
General
|
5/16/2014
|
Dominican Republic
|
Legislative
|
5/18/2014
|
Guinea-Bissau
|
Presidential
|
5/20/2014
|
Malawi
|
General
|
5/25/2014
|
Colombia
|
Presidential (1st Round)
|
5/25/2014
|
Ukraine
|
Presidential
|
5/26/2014 - 5/27/2014
|
Egypt
|
Presidential
|
6/3/2014
|
Syria
|
Presidential
|
6/8/2014
|
Kosovo
|
Parliamentary
|
6/15/2014
|
Colombia
|
Presidential (2nd Round)
|
6/15/2014
|
Georgia
|
Municipal
|
6/15/2014
|
Ukraine
|
Presidential Runoff
|
6/21/2014
|
Nigeria
|
Gubernatorial (Ekiti)
|
7/9/2014
|
Indonesia
|
Presidential
|
7/20/2014
|
Thailand
|
General
|
8/10/2014
|
Turkey
|
Presidential
|
8/24/2014
|
Turkey
|
Presidential (2nd Round)
|
9/17/2014
|
Fiji
|
Parliamentary
|
10/5/2014
|
Bosnia-Herzegovina
|
General
|
10/5/2014
|
Brazil
|
Presidential
|
10/12/2014
|
Bolivia
|
General
|
10/15/2014
|
Mozambique
|
General
|
10/26/2014
|
Brazil
|
Presidential runoff
|
10/26/2014
|
Uruguay
|
General
|
October
|
Botswana
|
Presidential
|
11/30/2014
|
Uruguay
|
Presidential (2nd Round)
|
November
|
Lebanon
|
Parliamentary
|
November
|
Namibia
|
Parliamentary
|
2014
|
Botswana
|
Parliamentary
|
2014
|
Egypt
|
Parliamentary
|
2014
|
Moldova
|
Parliamentary
|
2014
|
Niger
|
Parliamentary
|
2014
|
Tanzania
|
Constitutional Referendum
|
2014
|
Tunisia
|
Presidential and Legislative
|
2015 Global Elections Calendar
|
||
Date of Election
|
Country
|
Type of Election
|
2/14/2015
|
Nigeria
|
General
|
February
|
Chad
|
Parliamentary
|
February
|
Tajikistan
|
Parliamentary
|
March
|
Uzbekistan
|
Presidential
|
May
|
Ethiopia
|
General
|
May
|
Mauritius
|
Parliamentary
|
June
|
Burundi
|
General
|
July
|
Mexico
|
Parliamentary
|
July
|
Togo
|
Presidential
|
9/13/2015
|
Guatemala
|
General
|
September
|
Afghanistan
|
Legislative
|
September
|
Venezuela
|
Parliamentary
|
10/18/2015
|
Argentina
|
Presidential
|
October
|
Cote d'Ivoire
|
Presidential
|
October
|
Kyrgyzstan
|
Parliamentary
|
October
|
Oman
|
Parliamentary
|
October
|
Tanzania
|
Presidential and Parliamentary
|
11/20/2015
|
Belarus
|
Presidential
|
November
|
Azerbaijan
|
Parliamentary
|
November
|
Burkina Faso
|
Presidential
|
November
|
Burma
|
General
|
2015
|
Iran
|
Parliamentary
|
2015
|
Saudi Arabia
|
Municipal
|
2015
|
Sri Lanka
|
Presidential
|
2015
|
Turkey
|
Parliamentary
|
2015
|
Yemen
|
Referendum
|
2015
|
Yemen
|
Parliamentary
|
Amanda Labelle
Sources:
“2014: A year of electoral fireworks,” Global Post, January 3rd, 2014. Web.
http://www.globalpost.com/dispatches/globalpost-blogs/the-unraveler/2014-world-vote-elections, accessed May 12th, 2014.
“2014-2015 Elections Calendar,” The National Democratic Institute, Web.
https://www.ndi.org/electionscalendar, accessed May 12th, 2014.
“Global Export Forecast, Spring 2014: Ready for White Water?,” Export Development Canada (EDC), April
2014.
Lindsay, James M. “The 10 Elections to Watch in 2014,” Dec 10th, 2013. Web.
http://www.theatlantic.com/international/archive/2013/12/the-10-elections-to-watch-in-2014/282223, accessed May 12th, 2014.
Ralph, Elizabeth. “10 Global Elections to Watch in 2014,” Politico Magazine. Dec 31st, 2013. Web.
http://www.politico.com/magazine/story/2013/12/global-elections-to-watch-in-2014-101647.html#.U3Dp4fldXbA, accessed May 12th, 2014.
