TORONTO — Don’t look to the loonie as the biggest problem facing Canadian exports, Bank of Canada governor Mark Carney said Wednesday in his first-ever public address to organized labour.
The central banker’s speech to a gathering of the Canadian Auto Workers’ union was not only Carney’s maiden public address to a labour group, but also the first time any Bank of Canada governor has made such an overture.
Carney addressed a persistent complaint of those who put the blame for weak exports squarely on the shoulders of the strong Canadian dollar. The manufacturing sector and auto industry have been particularly hard hit in recent years.
He noted Canada’s export performance was the second-worst in the G20 over the last decade, with only nine per cent of exports going to fast-growing emerging markets such as China and India.
And he sought to dispel the notion that the high loonie bears the bulk of the blame.
“Some blame this on the persistent strength of the Canadian dollar,” Carney said in his speech. “While there is some truth to that, it is not the most important reason.”
The loonie has been trading near parity with the U.S. dollar since late July, and was trading at 100.59 cents US at midday Wednesday. The last time the dollar was bellow 99 cents US was on July 26.
Carney told union members that over the past decade, Canada’s poor export performance is two-thirds explained by market structure and one-third by competitiveness. Of the latter, he said, about two-thirds is the currency while the rest is labour costs and productivity.
“So, net, our strong currency explains only about 20 per cent of our poor export performance,” he said.
The structure of the Canadian economy, “unfortunately, is too north-south, not enough east-west in a global sense,” Carney said during a media conference after his speech.
“That’s going to take a while to change and there’s no sense that’s not that case.”
While CAW president Ken Lewenza conceded that the dollar isn’t the only factor affecting auto manufacturing, he maintained that the loonie is more significant than Carney suggested.
“I’m in bargaining with most automotive manufacturers today, and what they’re saying is… the Canadian dollar hurts the competitive advantage in Canada, and they’re even threatening to leave because of the Canadian dollar,” said Lewenza, who added Carney speaks with a bigger picture view of the economy.
“What I talk about is touching workers on the ground and seeing workers lose their jobs as a result of the high Canadian dollar. I touch the emotions of a high Canadian dollar. He doesn’t.”
Carney’s remarks also touched on a familiar CAW theme: namely, that companies must keep investing in their workforces if they want to succeed.
Carney urged companies and their workers to upgrade their skills so they can compete in the global marketplace.
“We all need to recognize that the durable, high-paying manufacturing jobs of the future will be located in companies that invest to equip and train their workers and that are fully engaged in the global economy,” he said.
The demand for unskilled workers in advanced economies such as Canada is waning, he said, adding the need for skilled workers is growing.
The bank governor, after his speech, said the auto sector needs to put more focus on research and development in the production chain. Last month, GM said it would invest $850 million in research and development in Oshawa, Ont.
Carney noted the number of manufacturing jobs has steadily dropped over the last 30 years. He said the use of robotics on assembly lines played a part in that decline, but he added many manufacturing jobs are migrating to low-paying, emerging markets.