- The Washington Times - Saturday, February 2, 2002

TORONTO America's war on terrorism may end up claiming an unintended victim the lowly Canadian loonie.

As Washington and Ottawa forge closer ties to strengthen continental security, politicians here are about to ask a question few would have dared before September 11: Should Canada adopt the U.S. dollar?

The House of Commons' Foreign Affairs Committee will take up the issue when it studies North American economic integration at public hearings next week.

"I don't think we can do a report on the core of Canada-U.S. relations without looking at the issue of dollarization," Foreign Affairs Minister Bill Graham said before he was promoted to the Cabinet from his job as committee chairman two weeks ago.

"September 11 will accelerate the process," said Sherry Cooper, a former Federal Reserve economist now working in Canada as executive vice president at the Bank of Montreal and its Chicago-based subsidiary, Harris Bank.

"We're harmonizing our immigration rules, trade policies and border controls even airline security now more than ever, so why not dollarize as well?" she asked.

The debate comes as Canada's currency dubbed the "loonie" because its one-dollar coins depict a graceful loon on a lake hit a new low in trading last week. It has rebounded this week, closing yesterdayat 63 U.S. cents. Twenty-five years ago, the Canadian dollar was worth $1.03; it was 89 cents a decade ago.

"The loonie doesn't float, it sinks," Miss Cooper said. "The world is evolving three major trade markets and three major currencies," she said. "The Canadian dollar won't be one of them. The weakness in the currency is reflecting that."

With the eventual phaseout of the British pound after London joins the European currency union, the world's leading currencies will be the U.S. dollar, euro and the Japanese yen.

Although Miss Cooper predicts that the loonie will rise slightly by the end of this year, she hopes Canadians will adopt the dollar within five years "while we still have something to bargain with."

Prime Minister Jean Chretien doesn't think North America needs its own version of the euro adopted by 12 European nations on Jan. 1 and is defending the dollar.

"The fundamentals of the Canadian economy are the best in the Western world at the moment," he said. "The Canadian dollar should be stronger according to the real value." To help boost the beleaguered dollar, Canadian Finance Minister Paul Martin and Bank of Canada Gov. David Dodge met with international bankers in New York on Thursday.

Canadian business leaders are clearly worried about the state of the loonie. A recent poll found more than half believe Canada should "definitely" or "probably" consider adopting the U.S. dollar. Some are already calling openly for a public debate on the beleaguered loonie's future but are careful not to offend Canadians' sense of sovereignty.

"My own view is that, eventually, Canada and its biggest trading partner will move to a common currency," Paul Tellier, the president and chief executive of the Canadian National Railway, said in a speech last month. "The integration of the North American economy is taking place faster than any of us expected."

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