TORONTO - Canada's dollar may be stronger than it has been in more than three decades, including Friday's biggest one-day surge since'70, but observers say the muscular loonie is dealing a heavy blow to some parts of our economy.
American tourism to Canada is down, as U.S. residents no longer enjoy a currency-related discount at hotels, casinos and restaurants; retailers are losing shoppers across the border; exporters are losing business to rivals in the U.S. market and American auto manufacturers are complaining of high labour costs at their Canadian assembly operations.
Even commodities, enjoying a boom from record-high oil and metals prices, are seeing some of their gains offset since their sales are conducted in U.S. dollars, which must often be converted back to higher valued Canadian currency when producers pay their wages and bills.
Meanwhile, Canadian consumers generally aren't even seeing many benefits at the mall, as prices for identical products remain higher in Canada than in the United States.
Patricia Mohr, an economist with Scotiabank, said the failure of Canadian and American retail prices to reach parity for the same products represents a phenomenon known as a "downward sticky" - a situation when prices should be decreasing, but they're not.
"The consumer advocate firms are going to have to put pressure on retailers to lower the prices," Mohr said.
While businesses looking to import U.S.-made capital goods are in a good position to negotiate prices with their suppliers, resulting in lower costs for machinery and other technology, the same isn't true for Canadian consumers, Mohr said.
"Individual consumers probably have less knowledge of what the price should be and very little power to influence price. Obviously, they're not negotiating for prices in the way you do for capital goods imports. It's hard to get those prices moving down."
Even the threat of cross-border shopping represents only a sliver of the business of Canadian retailers along the border, Mohr said.
"Having the dollar move up so much, so rapidly, is really a very negative development," Mohr said. "Canada is the most trade-intensive of all the G7 countries and it's actually to our benefit, and it's in our interest, to have a lower currency."
Carolyn Bones, president of the Chamber of Commerce in Niagara Falls, Ont., says the strengthening of the Canadian dollar has had an impact on her city and other border communities.
"We have had fewer U.S. visitors coming over the border for various reasons, regardless - the passport issue being one and the Canadian dollar compounding the problem. It's making things that much more difficult for everyone, from Mom and Pop businesses to major hotels."
So far, no major business failures have been seen yet in Niagara Falls, she said.
"I'm a little surprised, but it's catastophic enough. This is a tourism city, attracting U.S. visitors.
"Other sectors have had to take up the slack. We've seen a slight increase in people coming to the Falls from our own country and from Europe. But the old standby (of tourists) from the United States is not flowing in as it was."
Bones said the strong loonie is also sending Canadians across the border to the U.S.
She said the area may eventually need a "Shop Locally"' or "Buy at Home" campaign, but "we're not there yet."'
On the holiday weekend, which is Thanksgiving for Canadians and Columbus Day for Americans, "Niagara Falls will be busy. People are still coming to our city. But the U.S. numbers are worrisome.
"The U.S. dollar weakening is another concern for us. Their dollar is just not going as far."
Meanwhile, Bones' counterpart in Niagara Falls, N.Y., said it's obvious that cross-border traffic has increased, as Canadians stream into the local fashion outlet mall to visit stores such as Tommy Hilfiger, Guess, Coach and Saks Fifth Avenue.
"In the outlet mall parking lot you can definitely see that - the Canadian licence plates are outnumbering the ones from New York state," said Deanna Brennen, president of Niagara USA Chamber of Commerce.
Brennen said local restaurants have also benefited, as Canadians tend to stay for the day.
Meanwhile, American visits to Canada have also dropped, partly due to the line-ups at the border, she said.
"I do think some of that has been reduced, between the dollar and the congestion," Brennen said, adding her city also has its own gambling destination, the Seneca-Niagara casino.
On Friday, the Canadian dollar rose by as much as 1.93 cents US against its American counterpart, trading as high as 102.19 cents US in Toronto during the session. The loonie closed at 101.85, up 1.59 cents.
Buzz Hargrove, president of the Canadian Auto Workers, says the high dollar is very worrisome for the country's economy, including tourism, hospitality and the manufacturing sector.
"I'm really, really worried," Hargrove said. "It's going to have a major dampening effect on the retail sector."
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