Canada’s economy in for a rebrand
Justin Trudeau is heading to Davos with a mission to rebrand Canada in the minds of the world’s economic elite.
The Canadian dollar has plummeted in lockstep with the price of oil — from 95 cents when oil was trading at $100 a barrel in July 2014 to its current 69 cents, with the price of oil having fallen by nearly three-quarters.
But Trudeau will try to reposition Canada as more than a petro- state this week when he meets some of the planet’s top business leaders at the World Economic Forum in Switzerland.
Sources say that two Canadians — Mark Carney, the Governor of the Bank of England, and Dominic Barton, managing director of McKinsey & Co. — are hosting private dinners and breakfasts with “the heaviest hitters imaginable.”
The prime minister will also hold bilateral meetings with senior business figures ranging from Jack Ma, the founder and executive chairman of Alibaba, to Sheryl Sandberg, the chief operating officer of Facebook.
Crucially, Trudeau will also meet the chief executives of UBS, Credit Suisse, Goldman Sachs and Deutsche Bank — the global banks that have been driving down the loonie.
The message will be: “Invest in Canada — there’s no better place and there’s never been a better time.”
As one senior Liberal said, “(Stephen) Harper’s message was pitched at the resource sector exclusively. But there’s more to Canada than that.”
This may prove a hard sell, after years of Stephen Harper telling the world that Canada is an emerging “energy superpower.”
Natural resources contribute just 15 per cent to Canada’s nominal GDP, with energy comprising 10 per cent. But the oil and gas sector’s share of exports increased to 23 per cent in 2014 from six per cent a decade earlier, just as manufacturing industries slipped to 14 per cent from 22 per cent.
Finance Minster Bill Morneau has downplayed the federal government’s ability to talk up the currency, saying there is “no quick, easy fix”.
The projection is that the Canadian dollar will tumble further as tensions between Saudi Arabia and Iran put further pressure on the oil price. One forecaster sees the loonie hitting US59 cents.
In a speech in Waterloo, Ont., last week Trudeau said that he is “tremendously optimistic” about the Canadian economy and its ability to bounce back from low commodity prices by diversifying.
But selling Canada as more than a commodity-denominated economy has been tried before, with limited success.
Eugene Lang, an adjunct professor at Queen’s University, was chief of staff to John McCallum in 2002. Now immigration minister, McCallum was junior finance minister in Jean Chrétien’s government at the time, and was sent to London as part of an effort to talk up the loonie, which hit an all- time low of US61 cents in that year.
“There was a concern that it could drop below 60 cents, which was felt to be a psychological barrier. The decision was made to send out ministers and officials to the cities where the major banks were headquartered,” Lang said.
McCallum, as a former chief bank economist, was given the job of persuading the young traders in the British capital that Canada was more than a commodity currency. “The interesting thing to me was that they didn’t care what we showed them. I thought — naively — that these big global banks would be interested in evidence and we had the evidence that we were diversified. But they didn’t care — they were impervious to the facts and just said, ‘ You’re a commoditybased currency,’” said Lang.
Canada’s purchasing power recovered as the oil price rose — four years later it was back at US90 cents, and by September 2007 it had hit parity, as oil headed to US$100 a barrel.
It will be hard to decouple the dollar from the energy price. The prime minister is right to use Davos as an opportunity to bend the ears of some of the 2,500 high-profile participants, spotlighting Canada’s other sectors. It can certainly do no harm.
But for many executives and world leaders, the impression formed over decades is that Canadians are hewers of wood, drawers of water and extractors of heavy oil.
When we had a competitive advantage in those endeavours, that was not a problem. But we are now being forced to refresh the Canada brand — and it’s not clear that anyone has figured out exactly what we are selling.