Reacting to the Canadian dollar’s recording setting flight to over 97 cents U.S., the head of the Forest Products Association of Canada (FPAC) urged the federal government and Bank of Canada to take swift action to mitigate the damage that the rapid appreciation of the dollar is doing to Canada’s manufacturing sector.
The dollar is trading above 97 cents for the first time in 30 years. It is up over 10% from the 88 cent level it was at the start of 2007 and more than 53% from the 63 cent range it was at five years ago this month. This has placed enormous pressure on Canada’s forest products industry and Canada’s manufacturing sector more broadly. Since 2002, 110,000 jobs having been lost in Canada’s manufacturing sector, including 32,000 jobs in the forest sector
“Canada’s forest products industry employs over 340,000 Canadians in high-wage, high-tech, high productivity jobs. In fact, one study estimated that average forestry wages and benefits approached $70,000 annually – big city salaries found in rural communities,” said Avrim Lazar, President and CEO of FPAC. “The industry today is the backbone of the rural economy, accounting for 3% of Canada’s GDP—larger than oil and gas, mining and auto manufacturing. It is also by far the largest and most widely dispersed industrial activity in Canada’s rural/land-based economy with over 300 communities from Newfoundland to Vancouver Island depending on the industry for their economic well-being. More needs to be done to ensure that these jobs remain in Canada.”
The forest products industry which annually exports over $40 billion worth of products to external markets is especially vulnerable to the rapid and sustained appreciation of the dollar. The export intensity of Canada’s forest products industry combined with the fact that all of its major inputs—fibre, energy and labour—are sourced in Canada makes it among the most vulnerable to exchange rate shocks. The industry has made significant efforts to improve productivity and reduce costs in order to stay competitive. The pressures created by the surging dollar lend renewed urgency to the need for government policy reforms to improve the business climate for the forest products industry and other export-oriented manufacturers. This is of critical importance to ensure that the Canadian industry can remain cost-competitive and attract scarce investment capital.
Lazar called on Canadian monetary authorities to use what discretion they have to manage the appreciation of our currency and the impact it is having on large regions of the country. “The Bank of Canada must act in the interests of the Canadian economy more broadly and expand its focus to more consider broad economic and regional factors, including the rapid rise of the Canadian dollar, in its decision making. With the Canada-U.S. exchange rate already at a generational high, we believe that the Bank is not giving adequate consideration to the economic well-being of hundreds of communities across large regions of Canada.”
“As industry adapts and improves its efficiency and productivity to help mitigate the impact of the rising dollar, governments have an equal responsibility to adjust in the face of a shifting global economy,” concluded Lazar. “Rapid action by governments in such areas as tax reform, mergers policy and a more competitive rail transport sector can also play an important role in enabling industry renewal and in assisting the forest sector to adapt to a higher Canadian dollar. A good placed to start would be to extend the accelerated Capital Cost Allowance (CCA).”
FPAC is the voice of Canada’s wood, pulp and paper producers nationally and internationally in government, trade and environmental affairs. Canada’s forest industry is an $80 billion dollar a year industry that represents 3% of Canada’s GDP. The industry is one of Canada’s largest employers, operating in over 320 Canadian communities and providing nearly 900,000 direct and indirect jobs across the country.
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For more information:
Isabelle Des Chênes
Forest Products Association of Canada
(613) 563-1441 ext : 323