Certainly it's a conundrum for manufacturers in southern Ontario and pork producers and those who have not had the run-up in commodity prices.
The Canadian dollar has been driven largely by commodity prices. The correlation between the exchange rate and the price of oil, up until fairly recently, was 0.97, so it's almost perfect. Commodity prices are driving the Canadian dollar. It's one of the important factors. Certainly the U.S. dollar's weakness during much of that period had something to do with it, but recently, the run-up in the Canadian dollar was driven by commodity prices in part.
My concern at the moment is that the run-up in the Canadian dollar was above and beyond what our models would suggest the Canadian dollar should have appreciated to, based upon where commodity prices went. That's a naked exposure, if you will, to pure exchange rate shock. That's why you're getting more and more industries being negatively affected by the run-up--because it's gone beyond what would normally be the case.
What is going to happen in the future? You have 2.5 billion people in China and India. You have 30 million people in Canada. The weight will go towards them, not us. They are rapidly industrializing. It doesn't matter to the global flows that the Canadian dollar is overvalued. It doesn't matter to the global flows that it's decimating Ontario and Quebec's manufacturing sector. It's a question of 2.5 billion versus 30 million. That's as far as you need to think about it.
The rapid industrialization is broad and material-intensive in China and India. That will cause those commodity prices to stay high relative to what they were in the recent past. It's not going to be a straight line. These things go in cycles. If the U.S. economy goes into recession, it's going to mean weakness in commodity prices for the near term. Over the long haul, it's going to mean high commodity prices with a high Canadian dollar. You need to adjust policy to reflect that reality.