WCA May 2017

From the Americas

Myth 1: Government must ramp up infrastructure spending to make up for past neglect. The net stock of government infrastructure per person (total value net of depreciation) has been growing steadily over the past 15 years and is now at the highest level since 1971. After adjustment for inflation, it has grown 27.3 per cent from $16,394 per person in 2000 to $20,876 per person in 2015. Since 2008, annual spending to acquire new public infrastructure has been particularly high, with Canada ranking relatively high on international comparisons of government capital spending. Myth 2: Infrastructure is largely the domain of governments. Those who argue that Canada would benefit from increased infrastructure spending usually overlook the major contribution made by the private sector. For over 40 years, the net stock of infrastructure per person from non-government organisations has exceeded that of the government sector. In 2015, the net stock of non-government infrastructure represented 72.6 per cent of Canada’s total infrastructure stock, up from 63.4 per cent in 1971. Myth 3: Increased infrastructure spending will spur economic growth. In practice, not very much of public infrastructure spending goes toward the high-in-demand roads, railways or ports that can increase long-term economic growth by improving the economy’s productive capacity. Just 10.6 per cent of what the federal government plans to spend on new infrastructure will go for trade and transportation projects. Most will favour so-called green and social infrastructure, such as public housing, community centres and hockey arenas. While these initiatives may be appreciated by the local community, they are unlikely to provide productivity gains. Moreover, infrastructure spending generally fails to stimulate the economy in the short term because of delays in fulfilment and errors in targeting the sectors of the economy in greatest need. Myth 4: With interest rates low, now is the time to ramp up government infrastructure spending. Failure to account for other relevant fiscal and economic costs exaggerates the opportunity provided by low interest rates. Other fiscal considerations include the future operation and maintenance costs of a new infrastructure asset, which can be up to 80 per cent of the total lifetime cost and are not influenced by current interest rates. In addition, the economic costs of the taxes that fund infrastructure spending add considerably to overall costs and should be properly accounted for. A more fundamental problem is that the interest-rate argument wrongly assumes infrastructure spending should always be largely or completely financed by debt. Myth 5: The federal government should take the lead on infrastructure. Government grants give Ottawa influence over which projects are undertaken and how they are managed, imposing federal priorities that may not reflect the particular needs of a given region. Conditional grants can distort local

decision-making by encouraging recipient governments to undertake projects likely to receive funding over others that may be of higher local priority. Federal infrastructure grants can also lead to a deterioration in the recipient government’s accountability to taxpayers. Automotive To commend their product to the Japanese, USA carmakers may have to learn to blow their horns louder Writing from Tokyo, Jonathan Soble of the New York Times observed that, even as Japanese cars command a wide swathe of the United States market, American brands are barely visible in Japan, where Toyota, Honda and other domestic brands rule the roads. Of the nearly five million cars and light trucks sold in Japan last year, Mr Soble reported that just 15,000 were American, or a mere 0.3 per cent of the total. He wrote: “Toyota sells more vehicles at a single mega-dealership in California.” This has long frustrated American auto executives and trade negotiators and is a source of resentment in the new administration in Washington. President Donald Trump has accused Japan of shutting out American producers by throwing up regulatory barriers and rigging the currency market in favour of Japanese brands. In a meeting with American executives in January he said, “They do things to us that make it impossible to sell cars in Japan.” Mr Soble noted that such talk is alarming to the Japanese, whose auto industry is “a pillar of the economy.” From the standpoint of Yoshihiro Masui, a car collector unusually well positioned to offer an opinion, the problem lies elsewhere. (“Trump Wants More American Cars in Japan. Japan’s Drivers Don’t,” 9 th February) “Of course American cars don’t sell in Japan,” the Times was told by Mr Masui who owns, in addition to a replica Model T with a race car’s engine, a gleaming white Ford Thunderbird – the latest of nearly 70 Detroit-made vehicles he has bought and sold over the years. “Dealers don’t make an effort to convince people. I’ve never seen a TV commercial. You go to a car show, they’re not there.”  “German cars are popular in Japan, but American cars hardly sell at all,” Akio Mimura, chairman of the Japan Chamber of Commerce and Industry, said at a news conference in February. “If they’re going to sell cars in Japan, it’s obvious that [the American carmakers] need to make an effort to appeal to Japanese customers.”  “Japanese cars are boring,” one of Mr Soble’s local respondents told him. But this is apparently not well known in Japan. It would seem that a first step in the effort recommended to the carmakers of Detroit by Mr Mimura might be a visit to Madison Avenue for a persuasive ad campaign.

Dorothy Fabian Features Editor

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Wire & Cable ASIA – May/June 2017

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