Evidence of meeting #6 for Industry, Science and Technology in the 39th Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was good.
A recording is available from Parliament.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
In a given year, but next year it could be reversed.
NDP
Peggy Nash NDP Parkdale—High Park, ON
For the foreseeable future, that's going to be the case for many manufacturers.
Conservative
The Chair Conservative James Rajotte
Your time is up. Is that it? Thank you.
We will now go to Mr. Simard.
Liberal
Raymond Simard Liberal Saint Boniface, MB
Thank you, Mr. Chair.
Thank you for being here, Mr. Orr.
We had the financial services people here a couple of days ago, and I think it's quite obvious that the manufacturing sector has been affected quite drastically by this increase in the dollar--130,000 vehicles purchased by Canadians just in the last year or so. Do you foresee the same thing happening in the service sector? It's fairly easy, for instance, for Ditech or Wells Fargo or eBay, where you can access all this in the States. Do you see that happening in the service sector? Because that is what we're studying right now.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
It could and probably will happen in the part of the Canadian service sector that is competing head-on with Americans. Tourism would be a good example, although there are a lot of people in Canada who are maybe catering to European as opposed to American. But a lot of Canadian tourist operators are taking quite a hit, as are all sorts of entertainment people in Toronto and elsewhere. So some components of the service sector are going to take a hit because they're less competitive.
The other point I should make is whenever we talk about the high dollar, people are always thinking in terms of U.S. currency. Our dollar, while it's lost about 56%--I've brought some updated numbers to that chart--to the U.S. dollar, it's only lost about 12% relative to the euro. So we're in a much better situation.
Liberal
Raymond Simard Liberal Saint Boniface, MB
That's my next question. The euro has also been losing some ground, right?
November 28th, 2007 / 4:15 p.m.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
Yes. The Canadian dollar has gained relative to every major currency, but less so with the euro than others.
Liberal
Raymond Simard Liberal Saint Boniface, MB
The Europeans are starting to get concerned. Is that something the Canadian government should be concerned about, keeping an eye on what the European nations are doing to prop up their dollar in terms of giving tax breaks? Should we be watching them? If they're doing it and we're not, then you create a disadvantage for your Canadian corporations.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
As I said, I don't think we should be changing taxes in response to where the dollar happens to be. We should be changing taxes relative to how our taxes compare. They don't compare that favourably with some of the European countries on new investment, for example. The dollar is pretty volatile.
Also, I've got to emphasize, the manufacturers are highly organized. They come here and complain, but remember, a lot of other people who aren't in manufacturing hurt just as much as those manufacturers, and a lot of manufacturers don't export. A lot of them don't export that much to the U.S. So this is the problem with just responding to the particular groups that get themselves organized and come here as manufacturers.
Liberal
Raymond Simard Liberal Saint Boniface, MB
One of the things you said was that it's one of the risks you take when you have a flexible currency, and I think you're absolutely right. You have to factor that into any decisions you make. And you probably should have been retooling and reinvesting in your firm when the dollar was at 63¢, isn't that right?
Having said that, do you have any views of the advantages or disadvantages of our dollar being tied to the U.S. dollar?
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
Yes, I definitely have. I'm glad you asked.
I guess the first thing I would say is that while you say “tied to”, I think we either go into a common North American currency or we don't do it. We don't do the peg thing, and that's a long story.
Should we have a common North American currency? It would certainly have some definite economic benefits. Frankly, I don't think the appetite is there for it in Canada, and it's not there for it in the U.S. But if the political climate changed, I think it could be something that from an economic point of view we should take pretty seriously.
A lot of the arguments against a common North American currency don't hold up very well. Obviously, the Bank of Canada cannot even whisper, hardly, that they would consider it. If I were the government, I wouldn't want to get into those discussions, and if I were a senior finance department official, I wouldn't either, because there's a real danger in saying that we want to. Among other things, you rather lose your negotiating power with the Americans.
But that's not to say that a common North American currency.... It's something that's out there as a possibility, yes. I think it has more attractive benefits.
Liberal
Raymond Simard Liberal Saint Boniface, MB
In ten seconds, if you had a crystal ball, where do you think the dollar is going to be over the next ten years?
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
Ten years? Well, I've stretched my chart into 2009, but I think even ten years out I would still see it roughly there.
But I have to say, that forecast, of course, as you appreciate, requires you to have a view on where energy prices are going. That's one of the reasons why forecasting the dollar is so difficult.
I'll leave it there.
Conservative
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Thank you, Mr. Chair.
Thank you, Mr. Orr, for coming.
This is fascinating. We're really studying the service sector, but this is great; this is okay. We'll keep on going on this.
I'm curious. You're not in favour of the GST cut. My thinking is that in my riding, for instance, one point makes about $18 million back in the hands of consumers. Isn't that a good thing?
I have a whole mess of questions, so just.....
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
When I say I'm not in favour, I'm saying “relative to other tax cuts”. If money fell from heaven, I'd be in favour of a GST cut. But there are better things that we could have done with that money. That's the point.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
But is my thesis correct? You have $18 million, so some guy has another $10 a year or $20 a year.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
No. All the federal government can do, unfortunately—I'm sad to tell you this—is redistribute the taxpayers' money. That money didn't grow within the federal government; you collected it from taxpayers. That's why I'm saying there are better things that could have been done with it.
And we always have to realize that every dollar the federal government has.... In fact, they collect the dollar, and you lose a bit putting it through the federal government, with all this administration, and 95¢ goes out the other door.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
I'm not an economist. I'm reading your background, and you certainly know your stuff. You're obviously not Keynes; you're more Hayek, I think it was, or something. Is the world going in that direction? Are countries that are lagging behind just lost to the obvious: that we need to move in that direction of free markets?
And I guess that leads to my next question. We talk an awful lot about free trade agreements. Are we going in the right direction when we do free trade agreements?
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
Generally we're going in the right direction, and it's particularly important for Canada. We have to make our living as a trading country, and it's really important that we take every opportunity to diversify ourselves from the Americans. I'm going away back to what Pierre Trudeau said.
Right now—as a matter of fact, in the last few years—the fraction of our total exports going into the U.S. has fallen from about 87% to about 77%. In times like this, when we lose our competitive advantage to the Americans, it's very important that we have trade as free as possible with a range of other countries.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
We have nothing to fear if we move in that direction.
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
Well, I mean, you have to negotiate.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
There is always the unknown, but this is the right direction to go in—
Managing Director, Canadian Macroeconomic Services, Global Insight Inc.
Yes, absolutely.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
—with free trade and lower taxes.
What about opening up the north? Like the way we put our railroads with John A. Macdonald in the 1800s, should we be exploiting the north, getting roads up there, getting ready for resources, because we are a resource-rich nation?