This is Kickstart—the daily morning management briefing on innovation, leadership, technology and the economy from the editors of Canadian Business. Sign up to get it directly to your inbox each weekday at 6 AM Eastern.
Good morning! Here’s what’s on our radar at the moment:
The U.S. Rust Belt needs NAFTA
The whole premise of renegotiating the North American Free Trade Agreement was that it was the “worst trade deal ever made,” according to U.S. President Donald Trump, who has repeatedly threatened to scrap the whole thing. But new analysis suggests that ripping up NAFTA would end up imposing the highest trade tariffs on U.S. manufacturers, harming the very constituency it’s supposed to help:
Unlike the U.S., Canada and Mexico don’t track the proportion of imports that take advantage of NAFTA preferences. But analysis by Scotiabank’s [Brett] House and [Juan Manuel] Herrera suggests U.S. exporters would face disproportionately high tariffs compared to their neighbours in a post-NAFTA world. That’s because of the nature of what Americans are actually exporting. […] “About 60 per cent of goods sent from Canada and Mexico to the U.S. would see virtually no change in the tariffs assessed on them if the U.S. were to withdraw from NAFTA,” the Scotiabank economists conclude. “In contrast, slightly more than a quarter of all goods sent from the U.S. to its current NAFTA partners would see a large increase in the tariffs imposed on them.”
Link: Canadian Business
B.C.’s auto insurance pile-up
The Insurance Corporation of B.C., the province’s publicly owned, for-profit auto insurance body, is a “financial dumpster fire,” according to B.C. Attorney General David Eby, who minced no words yesterday when summarizing its dire financial state. British Columbia is one of four Canadian provinces (along with Saskatchewan, Manitoba and Quebec) that operate public auto insurers, but B.C.’s is the only one that isn’t operated on a non-profit basis. One senses that the province’s bold experiment won’t be repeated elsewhere, given this meltdown:
ICBC is facing a financial loss of $1.3 billion by the end of the fiscal year, an astronomical increase from an amount that the previous government estimated at $11 million. Eby accused the Liberals of deliberately concealing ICBC’s problems from the public by taking out mentions of recommendations to counter losses from a 2014 review. “They knew the dumpster was on fire, but they pushed it behind the building instead of trying to put the fire out,” Eby said.
Is your FitBit a national security risk?
A strange story for our data-saturated times: a social network for joggers has become the latest geopolitical flashpoint after it intentionally dumped a huge database of popular running and cycling routes online. The app, called Strava, allows recreational runners to track their routes and share their progress, which seems innocuous; unfortunately this dataset unintentionally provides detailed maps of such things as covert military bases, which researchers have already been able to correlate to individual military personnel. Oops:
This past November, the San Francisco-based Strava announced a huge update to its global heat map of user activity that displays 1 billion activities—including running and cycling routes—undertaken by exercise enthusiasts wearing Fitbits or other wearable fitness trackers. Some Strava users appear to work for certain militaries or various intelligence agencies, given that knowledgeable security experts quickly connected the dots between user activity and the known bases or locations of US military or intelligence operations. Certain analysts have suggested the data could reveal individual Strava users by name.
Why did Keurig want Dr. Pepper?
Keurig Green Mountain Inc., the company behind the popular single-serving coffee maker, announced yesterday it would pay US$18.7 billion for Dr. Pepper Snapple Group, the soft-drink company. Strategically, the idea seems to be to marry two complementary distribution networks—Keurig with grocery and e-commerce; Dr. Pepper with convenience stores and beverage vendors—but it’s somewhat unclear how these two halves will truly work together:
The deal vaults JAB into competition with the likes of Coca-Cola Co. and PepsiCo Inc., bringing a stable of brands that includes 7Up lemon-lime soda, A&W root beer and Mott’s apple juice. Keurig Dr Pepper, as the new company will be known, will have annual revenue of about $11 billion. […] Still, it’s not clear how the new company will compete logistically. The majority of Dr Pepper’s beverages in the U.S. are distributed through Coca-Cola’s and PepsiCo’s bottling and sales networks. That could create barriers for Keurig Dr Pepper if the bigger companies refused to stock some of its beverages — say, ready-to-drink coffee brands — on shelves. The uncertainty has left some analysts puzzled by the transaction. “We have yet to be fully convinced about the strategic rationale behind the merger,” Ali Dibadj, an analyst at Sanford C. Bernstein & Co., said in a research note.
Earnings reports today
Canadian publicly traded companies of note scheduled to report quarterly earnings today:
Metro Inc. (MRU), Real Matters Inc. (REAL)
- Apple’s iPhone X is looking like a disappointment. The company has reportedly told component suppliers that it’s cutting its Q1 production targets in half owing to weak demand. “Weak” in this case still means 20 million units, but analysts got spooked. (Nikkei, Reuters)
- Companies are discriminating against people with Hotmail addresses. (Guardian)
- Scientists have built a new kind of artificial synapse, a synthetic version of the structures that connect neurons inside your brain—except they’re millions of times faster and use 1,000 times less power. (MIT)
- Inside The Jet Business, the world’s only walk-in retail store for private jets. The service is very hands-on: by the time you’re ushered inside, the sales staff have already pulled up wall-sized photos of the jet you already own (because if you don’t already own one, you’re probably not their target customer anyway). (NYT)
Thanks for reading! Have a truly excellent day.