Chronicle Herald: Loonie times may be ahead
Business leaders: Recent euphoria about dollar belies troubled times ahead
By STEVE PROCTOR Business Editor and The Canadian Press
Sat. Nov 10 - 4:47 AM
The head of the region’s largest seafood company says the flight of the loonie, skyrocketing oil prices and growing international trade deficits with China may be precursors to an unpleasant global economic upheaval.
Colin MacDonald, chief executive officer with Clearwater Seafoods Ltd. Partnership, said Friday he had just returned from a trip that included stops in England and the Far East, and everywhere he went people were talking about the economic uncertainty of the past few months.
"You can feel it all over the world: There is a feeling of helplessness," he said. "The world has gone through a long period of good times. Now we are going to have a correction. There’s going to be a little pain for the next few months or even for the next year."
It’s nice that Premier Rodney MacDonald has endorsed a call by Quebec Premier Jean Charest on Friday to set up a meeting of premiers and the prime minister on the impact of the rising dollar on Canadian companies and workers, he said, but Canada alone can have little impact on a very complicated global problem.
"Maybe if the G7 got together and developed a policy of buying U.S dollars, there might be an impact."
Mr. MacDonald has sent letters to Prime Minister Stephen Harper and Canada’s premiers asking for a meeting that could encourage Ottawa to lower interest rates to help curb the dollar.
"The high value of the dollar is a good indicator of the strength of the Canadian economy," the premier said in a release Friday. "But the speed with which the dollar has risen has caught some Canadians off guard."
The loonie reached parity with the U.S. dollar in September and this week climbed as high as $1.10. It is up 25 per cent so far this year.
How successful any meeting might be is open for debate. Finance Minister Jim Flaherty told reporters Thursday both he and Mr. Harper are well aware it’s not their place to get involved with the interest rate policy of the Bank of Canada, historically independent from Ottawa.
"Monetary policy is the responsibility of the Bank of Canada," Flaherty said.
Mr. MacDonald said the high-flying loonie is leading to job losses and uncertainties for businesses and workers. Earlier this week John Bragg, head of Oxford Frozen Foods, said the exchange difference was costing his vegetable-processing operation millions of dollars.
Jim Micali, the president of Michelin North America, said that with stock markets are struggling because of problems in the U.S. subprime mortgage industry, politicians must deal with the currency issue quickly.
"North America doesn’t need another problem to deal with," he said.
Mr. MacDonald said it wasn’t long so ago that a $5 sale of products in U.S. dollars brought $8 in Canadian funds for Clearwater.
Today, a similar sale brings the company about $4.50.
In addition to the direct decrease, he said the weakened earning power of the American dollar has customers buying less.
"The only thing we can do is to reduce our costs, improve our efficiencies and increase the quality of products so people will be willing to pay more," he said.
"We’ve had great success. We’ve had 35 per cent growth; unfortunately, the currency exchange has dropped us by 50 per cent."
He said he doesn’t expect to see any action on the problem from south of the border because American exporters are loving the new price advantage they are able to promote.
"Everyone needs to buckle up," Mr. MacDonald said. "It’s a crazy situation, but we’ve survived worse."
Ann Janega, vice-president of the Nova Scotia division of the Canadian Manufacturer and Exporters Association, said Friday that the speed of the rise has proven problematic for many members, but at least some expected the change and have adopted strategies to mitigate potential damages.
"The firms not focused on the U.S. have begun dealing in euros," she said. "Strategically, they are finding that removes some of the volatility."
Alberta Premier Ed Stelmach said Friday it’s time for the premiers to start talking about eliminating trade barriers among provinces.
He says on energy revenues alone, Alberta stands to lose $123 million for every penny the loonie climbs above US$0.93.
Mr. Stelmach said this is a prime opportunity to revisit the issue of internal trade barriers, which he says cost the Canadian economy about $14 billion per year.
He said doing away with such barriers would increase productivity and competitiveness, build a bigger economy and help Canada compete with other trading nations.