DOLLAR VALUES

Recent headlines touted the benefit to U.S. retailers from the rising Canadian dollar. The strong Canadian dollar presents other important opportunities to Maine’s largest industries, such as timber and paper, fisheries and seafood. With Canadian goods now more expensive, Maine industries have an opening to increase their share of the market. That opportunity may be limited, however, if the Canadian government decides to slow its economy by lowering interest rates.

Late last month, the Canadian dollar, often called the loonie, traded at the same value as the U.S. dollar. It is the first time the loonie has reached parity with the U.S. dollar since 1976. Parity was reached largely due to the continuing drop in the value of the U.S. dollar but also because of the growing demand for commodities, such as oil and metals, which Canada has in large supply.

While many Canadian economists cheered the news, some warned that the rising price of Canadian goods has a downside, especially for the country’s manufacturing sector.

Forest products companies are expected to be especially hard hit. The Vancouver Sun notes that the British Columbia timber industry has already seen a reduction in demand from the slowdown in the U.S. housing market, a major buyer of wood. Every one-cent increase in the value of the loonie against the U.S. dollar means a loss of more than $150 million in annual revenue for the pulp, paper and forest industry, according to the paper.

The reduction in demand coupled with the rising cost of Canadian wood sold in the United States could help the Maine timber industry sell more wood domestically.

The rise of the Canadian dollar was a significant reason negotiators from both countries were able earlier this year to resolve a long-running dispute over timber imports. The United States had long charged that Canada unfairly subsidized the production of softwood lumber, giving it a competitive advantage over U.S. lumber. As the value of the Canadian dollar rose, its softwood exports became more expensive for buyers, reducing its cost advantage, making tariffs and quotas, which the United States had imposed, less relevant, and an agreement was easier to reach.

Parity could also help boost sales of Maine seafood and agricultural products as buyers on both sides of the border find that U.S. products are less expensive than Canadian. Tourism is also expected to benefit as more Canadians come to the United States to shop and visit attractions. The Canadian film industry worries that higher production costs will keep American producers on this side of the border. That’s an opportunity for Maine to market itself as a good alternative, especially after several television shows have recently filmed episodes here.

For Maine industries struggling to keep and attract customers, the rising Canadian dollar could bring small advantages.