Hope seen for exporters despite loonie's strength

The conventional wisdom is that the muscular loonie is decimating Canadian exporters.

But Stephen Poloz, Export Development Canada's new president and chief executive officer, offers a very different - and more optimistic - narrative.

Rather than withering, Canadian companies are actually becoming more sophisticated, more global and ultimately more productive, he argued. And the best time to go global is now while the dollar is strong.

Mr. Poloz suggested Canada may be on the verge of a productivity boom, aided by the outsourcing of many low-productivity activities and higher foreign investment.

"The ingredients are there," he said. "We see the globalizing of the companies. We see the stories on the impact of the dollar. Underneath all that are changes that will show up as productivity improvements."

The loonie is now up 34 per cent from two years ago - the fastest two-year ascent on record.

U.S. companies responded to the high greenback from the mid-1990s to the mid-2000s by shifting a lot of production offshore. And Canada, Mr. Poloz suggested, may be on the verge of a similar trend as companies take their low-productivity activities and move them to places where costs are lower. The result is that companies can produce more and sell more, he said.

"By doing that you improve your cost structure, improve demand for your product and then you're employing more people and doing much more stuff," said Mr. Poloz, an economist who joined EDC in 1999 after jobs at the Bank of Canada and BCA Research.

"We've seen it happen in the United States, and I believe we'll see it in Canada."

Mr. Poloz said he sees the trend in the demand for EDC products, including export financing and insurance on receivables. And he hears it anecdotally from customers.

It's also showing up in the exports from Canadian companies' foreign affiliates, which are growing twice as fast as exports from Canada.

"The benefits to Canada accumulate from those sales," he said.

Mr. Poloz also dismisses the notion that offshoring means fewer Canadian jobs. He acknowledged there will be dislocation for some workers and companies. But in the end, Canada stands to benefit as companies become more competitive on a global scale.

U.S. companies went on an outsourcing binge from the mid-1990s to the mid-2000s - a period that coincided with rapid gains and falling unemployment, he pointed out.

"Manufacturing didn't wither," Mr. Poloz explained. "It raised its level of sophistication. That's the same underlying process we're describing for Canada."