Bank of Canada Governor Mark Carney said do not look to the loonie as the biggest problem facing Canadian exports in his first-ever public address to organized labour on Wednesday.
The country’s top central banker spoke in Toronto at a gathering of the Canadian Auto Workers union. Not only is this Carney’s maiden public address to a labour group, it is 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.
But 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 prepared remarks ahead of his address.
“While there is some truth to that, it is not the most important reason. Over the past decade, our poor export performance has been explained two-thirds by market structure and one-third by competitiveness. Of the latter 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.”
The Bank of Canada has kept interest rates at record lows for some time now, which has helped buttress the Canadian dollar.
But the strong currency only partially explains Canada’s weak exports, Carney said. Depending too much on exports to the United States was more of a factor, he added.
“In short, our underperformance prior to the crisis was more a reflection of who we traded with than how effectively we did it,” Carney said.
“We are overexposed to the United States and underexposed to faster-growing emerging markets.”
His 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.
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.