Michael Knell Canadian correspondent

That’s the most important insight I’ve gleaned from researching this week’s report on Canada’s leading furniture and bedding resources.

Starting in the early 1990s, Canadian furniture makers underwent a shakeout as they adjusted to the free-trade agreement with the United States and Mexico. Now it’s happening again, this time because of a shift in currency exchange rates and the emergence of the Pacific Rim as the most important furniture-producing region in the world.

But the one point that most people have forgotten is that, while change has been almost incomprehensively rapid here in North America, it has been even faster in Asia.

Frankly, I’m beginning to agree with those who believe the Chinese juggernaut will sooner or later run out of steam for a variety of reasons. For example, because there is no environmental protection in China, pollution is rampant. As Jean Deveault, executive vice president of Canadel, said to me recently, “You can’t kill the environment and expect nothing will happen.” Within the not-too-distant future, the need for clean water and breathable air is going to force China to change its industrial practices to protect the health of its citizens.

Art DeFehr, president and CEO of Palliser, also points out that there are political risks in doing business with China. With economic prosperity comes demands for political and religious freedom, and that could mean a cry for change within China.

“People want to be free. They are going to want to live by the kinds of rules we have,” Deveault adds. “If they have another Tiananmen Square incident, there will be a revolution and nothing could stop it.”

DeFehr notes that while the value of the Canadian dollar vs. the U.S. greenback has been the cause of much pain recently for Canadian producers, the pressure on China to allow its currency to float could mean more change is in the air. “The Chinese currency is not stable. If it breaks, we don’t know what will happen,” he says. “There are a lot of potential areas of instability.”

The last time China broke out of its shell to become a power in world trade, it traveled the Silk Road. “The Silk Road was closed because of the plague, which wiped out whole cities,” DeFehr says. “They followed the Silk Road to the Black Sea and found the plague, and that stopped trade for the next seven centuries.”

The United Nations and other international organizations have warned that China faces many potential health crises, such as SARS outbreaks and rising HIV/AIDS rates, unless something is done.

“It doesn’t take much to make the supply chain less reliable,” DeFehr said.

While China will remain a force in this industry, it’s important to remember that change is happening there too. By not putting all its eggs in one basket, the Canadian industry has guaranteed its survival. Still, it will be a totally different industry five years from now, just as it’s totally different from what it was before free trade.

This isn’t something to be feared. It is something to be embraced.

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