OTTAWA - Finance Minister Jim Flaherty and Bank of Canada governor David Dodge say they have a number of important allies in their push to alleviate the global currency exchange headache, the number one issue for Canada going into this weekend's G20 economic meeting.
But whether China will respond to pleas to pull its weight in dealing with the falling U.S. greenback is still not clear.
Speaking to Canadian reporters on a conference call from Kleinmond, South Africa, site of the talks, Flaherty said South African, Australian and Brazilian currencies are also feeling the pinch of the depreciated U.S. dollar.
The loonie has risen 70 per cent since 2002, and the spike since last August, in particular, has caused a negative impact on exporters and the job market.
"My objective here at the G20 was to create a greater sense of urgency with respect to global imbalances, and governor Dodge and I believe through our bilateral meetings and various discussions we did yield some success on that point,'' Flaherty said.
Dodge added: "This is not Canada's problem, this is a global problem.''
The Canadian government estimates it has shouldered a third of the brunt of the depreciation of the U.S. dollar, the same amount as the Euro area, even though Canada is a tenth of its size.
Flaherty and Dodge offered few details on what China -- the most important piece of the current currency puzzle -- intended to do on the matter. With the value of China's yuan still set by the central government, rather than a floating currency, it is still considered undervalued, given the strength of the economy.
Canada and other countries feel it is not responding adequately to the problems caused by the weak American dollar.
"The point that I made to my colleagues was simple: those countries that are running large external surpluses need to play a bigger role in the adjustment process,'' Flaherty said. "While China has taken some useful steps towards greater exchange-rate flexibility, these steps have not kept up with current developments and, as a result, China and several other Asian countries need to do more.''
Flaherty and Dodge added that China must also look at increasing their domestic demand, to help fill the gap from the decrease in U.S. demand.
So why should China respond to the clamour for action? Dodge says they have their own economic problems that could be helped, in part, by dealing with the currency issue.
"There is an inflation problem that the Chinese government talked about, so it's very much in their interest because inflation is a huge political, as well as economic, problem for them. It's very much in their interest to have policies to deal with their own domestic issues and that, at the moment, is inflation.''
