Canadian Dollar’s Rise Putting Communities, Regions at Risk, says Forest Products Industry

Ottawa, Ontario, Canada, 10 July 2007 -- Reacting to the Bank of Canada’s decision today to increase its overnight interest rate, the head of the Forest Products Association of Canada (FPAC) called on the Bank to more fully consider broad economic and regional factors, including the rapid rise of the Canadian dollar, in its decision making.

“Those that say Canada’s manufacturers are suffering because they hid behind a weak dollar are simply wrong. For example, Canada’s wood products sector has been a Canadian productivity leader, recording a rate of labour productivity growth double that of its U.S. counterpart since 1997. Add to this the fact that Canada is the most successful forest products exporting nation in the world, and we can confidently say that we have been striving to succeed in global markets,” said Avrim Lazar, president and CEO of FPAC. “But, as in other trade exposed sectors of our economy, even world-class mills in the forest products industry are struggling to remain economically viable due to the dollar rising 45% over five years.”

Canada’s forest products industry is one of the country’s leading industrial sectors, accounting for 60% of Canada’s merchandise trade surplus and a larger share of GDP than the automotive or oil and gas sectors. The industry employs more than 300,000 Canadians in high wage jobs, located disproportionately in rural and remote communities across Canada. But the unparalleled rise of the dollar has placed enormous pressure on Canada’s forest products industry and the more than 300 communities from Newfoundland to British Columbia that depend on the industry for their economic well-being. The impact goes well beyond the forest products industry. Since 2002, 110,000 jobs having been lost in Canada’s overall manufacturing sector, including the 32,000 lost jobs in the forest sector.

“The Bank of Canada must act in the interests of the Canadian economy more broadly and expand its focus to more fully consider other economic and regional factors,” continued Lazar. “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.”

Lazar also directed his remarks at the federal and provincial governments emphasizing the need for policy reform at all levels of government to make Canada more competitive in global markets. “Governments in Canada have been slow to adjust economic policies to take into account the rising dollar and increased global competition. It is industry’s job to adjust so that we can compete with low cost countries, but government must move much more quickly to create world-class competitiveness conditions. Taxes that penalize investment, out of date mergers policies, and uncompetitive transportation, fiber, and energy policies which were simply disadvantageous when the dollar was lower have become damaging to Canadian jobs with the high dollar. The result is severe and potentially irreversible damage to Canada’s economic base.”

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 CAD 80 billion dollar a year industry that represents 3% of Canada’s GDP. The industry is one of Canada’s largest employers, operating in more than 320 Canadian communities and providing nearly 900,000 direct and indirect jobs across the country.