Saturday, November 24, 2007

Some Firms Like the Strong Canadian Dollar

(Reuters)

Canadian manufacturers and exporters have loudly complained about the strong Canadian dollar, but not all businesses want the currency to retreat.

The small- and medium-sized businesses that want a weaker currency only modestly outnumber those who say they benefit from a strong Canadian dollar, the Canadian Federation of Independent Business said on Wednesday.

The CFIB, which represents 105,000 businesses, said 27 percent would like a lower Canadian dollar while 21 percent would like it higher, chief economist Ted Mallett told the House of Commons Finance Committee.

The Canadian dollar has risen rapidly in recent months and reached parity with the U.S. dollar in September, for the first time in 31 years. It climbed to a modern-day high of US$1.1039 on Nov, 7, then eased to close on Wednesday at US$1.0125, valuing each U.S. dollar at 98.77 Canadian cents.

Mallett said those in the agriculture and manufacturing sectors mostly wanted a lower currency but in transport, the 50 percent that have an opinion are exactly split on the issue.

“There is real hurt in the manufacturing sector. There is real benefit in other areas of the economy,” Mallett said.

A firm that benefits from a stronger currency could be one that buys its inputs from the United States or elsewhere and sells its finished products in a stable market in Canada, he said.

In contrast, Perrin Beatty, president of the larger Canadian Chamber of Commerce, warned of “unprecedented challenges” that many of his members face.

“Fierce competition from emerging economies like China and India, weaker demand south of the border where 77 percent of Canada’s merchandise exports go, and the stunning appreciation in the Canadian dollar since 2002 have created the perfect storm for export-oriented businesses and companies facing competitors here at home,” Beatty said.

He called for lighter regulation, lower trade barriers between provinces, competitive taxes and better use of skilled immigrants.

Mallett echoed some of these calls but also said that the reduction of inflationary concerns in Canada gave room to the Bank of Canada to reduce interest rates.