CALGARY, March 5, 2013 /CNW/ - Two reports published today by The School
of Public Policy offer empirical evidence that Canada is not suffering
from a case of Dutch Disease.
Jack Mintz and Matt Krzepkowski reveal that Canadian manufacturing has
been in decline for the past 50 years and therefore should not be
attributed to the recent run-up in the Canadian dollar. The authors
also show that employment in manufacturing has been falling over the
last 35 years throughout most OECD countries. This includes countries
that don't have substantial natural resources.
"Casting blame for lost manufacturing jobs on commodity prices ignores
the inevitable fact that, even if the dollar begins to fall, it is
unlikely that those lost jobs will return," the authors write.
The second report by Trevor Tombe and Wardah Naim shows that an
appreciating Canadian dollar may actually be helping manufacturing
because of increased purchasing power on inputs. Canada has one of the
highest fractions of imported intermediate goods among OECD countries.
Meanwhile, among Canada's various industries, manufacturing has the
highest imported input ratio at 40 per cent.
"A higher dollar may make it more expensive for foreign buyers to
purchase Canadian manufactured goods, but that effect appears to be
more than offset by the savings that Canadian producers enjoy with a
higher dollar that makes possible cheaper imported-inputs and lower
cost of production, which have a lowering effect on prices," the
Ontario and Quebec are the provinces that benefit the most from these
cheaper inputs, Tombe and Naim argue.
"Policy-makers looking to aid the Canadian economy as a whole, and the
manufacturing sector in particular, should stop worrying about Dutch
Disease and, rather, welcome a higher Canadian dollar," they write.
"But more than that, they should design policies that are better
tailored for an economy that relies so heavily on imported intermediate
The reports can be found at www.policyschool.ucalgary.ca/publications
SOURCE: The School of Public Policy - University of Calgary
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