Quit blaming the Dutch: Canadian economy suffering from its own disease

CALGARY, Oct. 2, 2013 /CNW/ - Economy watchers have a new disease to worry about: Canadian disease. A report published today by The School of Public Policy argues that while many politicians and pundits blame the resource boom for recent employment declines in the manufacturing sector, also known as Dutch disease, these accusations are misguided.

Serge Coulombe, the report's author, argues that most of the job losses observed during the period of 2002 to 2008 were in fact caused by the Canadian disease: the economic trouble that can be caused by Canada's extraordinarily heavy reliance on the United States as a trading partner.

"A sudden depreciation of the U.S, dollar will deteriorate the competitiveness of Canadian manufacturing exporters," Coulombe writes. "The depreciation of the U.S. dollar is a phenomenon that is independent of the resource boom and the resulting consequences on the Canadian economy cannot be endorsed to a Dutch disease."

In terms of numbers, Coulombe argues that 31 per cent of the job losses in Canada's manufacturing sector could be attributed to Dutch disease, while 55 per cent could be attributed to Canadian disease. The remaining losses were due to structural issues in the economy.

With Canada's dependency on the U.S. being the principal cause of employment losses here at home, the author recommends steps be taken to protect ourselves against economic fluctuations south of the border.

One of these steps is market diversification for manufacturing outputs, which he acknowledges is a measure already underway.

The report can be found at http://www.policyschool.ucalgary.ca/?q=content/canadian-dollar-and-dutch-and-canadian-diseases.

SOURCE: The School of Public Policy - University of Calgary

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