Opinion: Time to Stop Fretting Over the Canadian Dollar

(CB Online – Stephen Gordon)

The Canadian dollar has recovered from the losses it suffered during the financial crisis, and seems set to reach parity with the U.S. dollar within the next year or two. There has also been a recovery in commentaries expressing concern for the effects of this appreciation on exports, particularly in the manufacturing sector. Between 2002 and 2008, our currency rose by 50%, and the manufacturing sector shed more than 300,000 employees. Shouldn’t the Bank of Canada be trying to prevent this from happening again?

Well, no. These arguments miss a key point of international trade theory: exports are costs. The reason we participate in world markets is to obtain goods that we can’t easily produce for ourselves; exports are the price we pay to foreigners in exchange for the imports we want. In a perfect world, we would obtain an infinitely large quantity of imports in return for an infinitely tiny amount of exports. So, a rising dollar is to be welcomed. Read more here.