I haven't really prepared for this because I didn't know what we were going to talk about, but it's a subject on which I'm reasonably versed, so I won't have any great problem.
About three years ago I got together with Mr. Dodge and indicated to him that the dollar had already risen quite a bit. In a country where one-third of the gross product is dependent on the United States and 85% of our exports go to the United States, we cannot go through periods every 20 years when commodities do well and our manufacturing industry goes broke. That's exactly what's happening and will happen to practically all of our manufacturing industries in Canada—or they will move out of this country—if we continue at the current level of exchange.
I indicated to him at the time that inflation was one item, but for a country tied as closely as we are to another country, the exchange rate makes an enormous amount of difference.
Even your members of the more socialist parties will recognize that if you raised wages in one year by 29%—as we did this year as the result of the dollar differential between us and the States—and 74% in a four-year period, the unions would have done something about it. I don't believe there are any industries that have any amount of labour capable of overcoming that kind of disincentive...except to go bankrupt.
Until recently I was a director of Canfor, which is the largest sawmill operation in Canada. I can tell you that at this point, even though I'm no longer on the board, we don't have a single mill in Canada that isn't losing cash at the current exchange rate, despite the fact that we invested hundreds of millions of dollars in new equipment when we had the money.
Very often we are told that this is a wonderful time to invest, but if you're going to go bankrupt anyhow and the dollar keeps shooting further up, I would say it would be throwing good money after bad. You might as well go bankrupt and try to save as much of your money by pulling it out of there before you go bankrupt, rather than putting additional capital into the company.
When you have as close a relationship as we have with the United States—and I'm thinking long term—it's going to be very difficult to attract people to invest in manufacturing here, because for 60 years, ever since World War II, we have been trying to build a manufacturing base in this country. The result of what we have seen in the last few years is that the manufacturing base is being totally destroyed.
I believe that if we stay at the present level, practically the entire forest products industry will be in bankruptcy, with an enormous loss of employment. I believe that about a million people out of the 30 million depend on the forests, and it's going to create absolute havoc in the mill towns, especially in areas like British Columbia, where you have to compete with wages in Alberta.
If you look across Canada, especially in the heartland, where we don't have oil production, we are really living in a country where the hair on the tail of the dog, namely the 70,000 people who live in Fort McMurray, are really the engine of this petrodollar.
When you look at Alberta at the present time, conventional drilling for oil is practically non-existent, and very large reserves aren't going to be found there any more. Because of the differential in the gas-to-oil price internationally, most of the gas drilling—and that's really what the province is all about, other than in Fort McMurray and the tar sands—there's hardly any activity there, and it's very much reduced this year compared to last year. So it's really the hair on the tail of the dog that's wagging this dollar.
The other thing that has had enormous influence in the last few months is the fact that we have allowed some of our largest corporations to be taken over by foreign interests. I believe the recent upsurge in the dollar to $1.10 was largely the result of people who received the Alcan money translating it back into Canadian dollars. Our firm estimated that some $20 billion was involved in that alone.
If BCE goes ahead, the foreign investors from the United States who work together with the teachers' union will also bring probably another $20 billion in.
The way we have organized it—and this is an Alberta problem—the development of the tar sands, whereby everybody is building at exactly the same time, reminds me of what happened during the uranium boom some 40 years ago in Ontario. All these companies are going to have enormously high costs, far higher than if there had been scheduled building whereby only so many tar sands would have been allowed to be built.
My personal feeling is that in a country like Canada we cannot permit ourselves to have a dollar that goes through these kinds of gyrations, and I think we have to really seriously start thinking of a model of a continental currency, just like Europe has a continental currency. We have to work towards that, not at a price where we are today, but at an average price.
Even then, we have to keep in mind another thing, and that is that in a country as cold and as distant as Canada, we have a problem of productivity. Our productivity increases will continue to be slower than in the U.S.