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Division
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Madison, WI 53707-7970
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Vol.
8 #2, November 2008
Canadian Federal Election Results in More of the Same
 While
the spotlight has been on the U.S. presidential race for many months,
Canada announced and held parliamentary elections in less than two
months. On October, 14 Canadian voters went to the polls and kept
the incumbent Conservative Party in power. While the
conservatives increased their number of seats in Parliament, voters did
not give them enough seats to form a majority government.
The new Parliament will be composed of 143 Conservatives, 77 Liberals,
49 members of the separatist Bloc Quebecois party, 37 New Democrats,
and two Independents. The Liberal Party experienced a significant loss
as they shed 16 seats from the last election. The Conservatives
gained 11 of those seats and the New Democrats took five. Overall
the Conservative Party gained 16 seats more than their 2006 election
results, still 12 seats shy of the 155 needed to form a majority
government.
While the global financial crisis and the marked drop at the Toronto
stock exchange have affected Canadians, the big banks in Canada have
remained relatively strong. Of the big six banks in Canada, Canadian
Imperial Bank of Commerce (CIBC) was most exposed to the sub-prime
crisis resulting in write-downs of close to C$7 billion in the past
three quarters. Conversely CIBC’s stock price has risen
since concluding its write-downs.
Canadians have felt the pinch as unemployment has inched up and home
values and sales have declined, especially in key markets such as
British Columbia and Alberta. In some sectors, Canadian consumers
appear to be economizing, but sales in other areas are still relatively
strong. While new cars sales dropped dramatically in the United
States, car and light truck sales in Canada actually increased 1.5
percent in October 2008 over October 2007.
In one of his first post-election acts, Finance Minister Jim Flaherty
brought the Provincial Financial Ministers together to discuss the
rapidly declining federal surplus and what that means for the
provinces. At issue were equalization payments which take money from
more financially flush provinces and share it with less well-off
provinces.
For the first time in the program’s 51-year history, Ontario will
receive an equalization payment. The steep decline of revenue growth in
the province due to manufacturing job losses means the province is
facing a C$500 million deficit, which has impeded the ability of the
provincial government to keep its spending commitments. An
equalization payment of C$347 million will ease, but not eliminate, the
problem.
While the Conservatives had promised to maintain balanced federal
budgets during the campaign, this is already under scrutiny as it may
not be possible to achieve balanced budgets in the current financial
position with the decline in GDP growth, the volatile Canadian dollar,
and the rapid decline in commodity prices, which had buoyed the
Canadian currency for the last two years. The decreased value of the
Canadian dollar may provide some relief to exporters who have lost
market share due to the high dollar. However, that may not matter if
global markets are not buying. For more information on export
opportunities in Canada, contact Mr. Stanley Pfrang, Commerce’s
Canadian Specialist, stanley.pfrang@wisconsin.gov, (608) 267-0639.
--Nancy Ward, Director of the Canadian Trade Office
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