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The StarPhoenix (Saskatoon), Thursday, June 7, 2007

Lost sovereignty predictable result of currency union

by W. H. (Bill) Loewen and David Orchard
Special to The StarPhoenix

Following is the opinion of Loewen, founder and former CEO of Comcheq, a Canadian supplier of payroll services and the Chairman of TelPay Inc., and Orchard, author of The Fight for Canada: Four Centuries of Resistance to American Expansionism.


The editorial, Time to consider benefits of move to one currency (SP, May 29), argues that a rising dollar helps make the case for a common North American currency.

The writers declared that our dollar "has been driven up by an almost insatiable demand for natural resources as a result of the Asian economic explosion," and stated that, "Over the past couple of weeks, Opposition politicians have been howling about the number of Canadian companies (especially in the resources sector) being taken over by foreign interests."

There are many negative effects on Canada of a high dollar. Farm income, income from natural resources and from any other product valued in U.S. dollars all decline as the loonie rises. The result is lower incomes for Canadian workers and farmers, lower corporate profits, more unemployment and reduced government revenues.

However, we disagree utterly with The SP's proposed solution of throwing our dollar, and our sovereignty, out with the bathwater.

A key factor that drives up the value of the loonie is the flood of foreign takeovers of Canadian companies. When foreign companies buy Alcan, Molson, Inco, Hudson's Bay, Terasen Gas, Labatt, the Montreal Canadiens and other Canadian companies, it increases the demand for and the value of our dollar because the purchases are made in Canadian currency.

We should lower our dollar's value by buying back our corporations rather than selling them.

"The rising dollar is a reflection of the underlying strength of the Canadian economy," boasts Prime Minister Stephen Harper.

In fact, the current up-tick is far more likely to be foreign private equity funds buying up Canadian dollars in anticipation of taking over companies such as Bell Canada Enterprises and Stelco, rather than a sign of their confidence in our economy.

If Opposition politicians are "howling," it is with good reason. More than 12,000 Canadian companies have been taken over since the 1989 Canada-U.S. Free Trade Agreement. Since January 2006, foreign takeovers of some $156 billion have been consummated.

There only are a handful of widely held Canadian companies now listed on the Toronto Stock Exchange -- surely an abnormal situation for a sovereign nation.

If this doesn't bother The SP, it bothers many Canadians including Dominic D'Alessandro, CEO of Manulife, who said recently: "I believe ownership matters a lot. It matters not only for economic reasons, but, more importantly, for our sense of self-esteem and pride in our country."

Canada's reaction to a rising dollar is the opposite to what Japan did through its many years of prosperity after the Second World War. It lowered the value of its currency by buying foreign bonds and other assets, enabling it to continue to export profitably. China is now doing the same.

Canada, instead, is selling more of its assets, with the resulting increase in the value of the dollar. The road to prosperity is found by selling your products, not your assets.

The SP complains that the West "already knows the regional devastation that can be caused by a central decision" and tells us that, "With the correct tools, Canada's regions might be in better shape if a decision on which Canada has a say is made in Washington, than if the decisions are made in Ottawa."

This is the old argument of both western Canadian and Quebec separatists, who will be pleased to see their demand for a common currency with the U.S. picked up by a major western Canadian newspaper.

Those tempted to buy this idea could ask North or South Dakota or Montana about their power and influence in Washington before agreeing that Canada should throw away the sovereignty and economic independence of one of the world's oldest democracies. The entire population of the West could fit into one U.S. state, and amount to less than three per cent of the American population, with all the clout in Washington that goes with such a puny figure.

Adopting a joint currency with the U.S., which is in rapid decline, would doom Canada to a similar destiny. Argentina's disastrous experience with tying its currency to that of the U.S., which led to economic breakdown, is a cautionary example.

If Canada conducts itself wisely, the future, as former prime minister Wilfrid Laurier suggested, would belong to us.

If we give up the economic tools to govern ourselves, we lose not only the flexibility to respond to changing economic conditions but the independence necessary to fulfil the dreams of those who've given their sweat, tears and, in some cases their blood, for the dream of a true north strong and free.

Instead of "having the courage" to follow The SP editors to Washington and permanent colonial status, we need the greater courage to stand on our own.


W.H. (Bill) Loewen, CM, FCA, is the founder and former CEO of Comcheq, a Canadian supplier of payroll services, and the Chairman of TelPay Inc. He lives in Winnipeg and can be reached at tel 204-957-2820, bloewen@telpay.ca

David Orchard is the author of The Fight for Canada: Four Centuries of Resistance to American Expansionism. He farms at Borden, SK and can be reached at tel 306-652-7095, davidorchard@sasktel.net

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