When Global Sticks, the company that holds your corndog together, keeps your popsicles intact and helps doctors get a good look at the back of your throat, was looking to locate a state-of-the-art manufacturing facility, it actually moved from China to Thunder Bay, Ontario. The words “made in China” are practically a synonym for “globalization.” How did costly Canada pull this off?
The rising cost of energy was a key factor. Being closer to the customer, naturally, brings down transportation costs; and after a certain point, power outages that idle factories in China begin to trump cheap labor costs. In Canada, Global Sticks also has the advantage of proximity to the raw forest products from which it fashions our ice cream handles.
Global Sticks is but one company, but economic statistics may suggest a trend. First quarter growth came in at a robust 1%, for an annualized rate of 3.9%. That compares with a measly 1.8%, annualized, for the U.S. in the first quarter. And at a time when the U.S. regional Fed branches are producing a string of negative reports, business conditions in all four of Canada’s economic regions are only slightly down (and strongest in Alberta and British Columbia). While Canadian manufacturing decelerated in the May report, it is growing at a notably better clip than in the U.S. and without the sharp downswing we’re seeing here.
The Canadian economy is heavily dependent on exports and the U.S. is by far its biggest market, for which reason the two neighboring economies should be expected to closely track each other. And while they indeed do, their current differences seem more flattering to Canada. From the start of the credit crisis until March 2009, when global fears were greatest, the U.S. dollar rallied. But when the U.S. embarked on a historic spending and money-printing campaign, the two currencies parted. The U.S. dollar, which then bought C$1.28, is now worth just C$0.98.
What Your Peers Are Reading