1 per cent in 2012. at best this will stop the slide in our relative productivity performance. making up lost ground will require superior performance by canadian business. a key risk to the outlook is that even this modest assumed improvement in productivity could fail to materialize. particularly if combined with persistent strength in the canadian dollar, this would jeopardize the recovery in net exports. moreover, renewed tensions in foreign exchange markets could put additional upward pressure on freely floating currencies. canada ’ s deteriorating competitiveness canada ’ s current account balance has declined substantially in recent years, reaching a deficit of 4. 3 per cent in the third quarter of last year – the largest deficit in 20 years ( chart 10 ). this sharp deterioration reflects a large decline in canada ’ s merchandise trade balance, owing to both strong imports and weak exports. part of this shift is likely cyclical, reflecting the fact that domestic demand has been much stronger in canada than in the united states in recent years. this suggests that we should see some cyclical recovery in the trade balance as growth in household spending in canada moderates while it picks up south of the border. but another more structural and more worrisome explanation also appears to be at play – increased import penetration into canada and a loss of market share among canadian exporters abroad. canadian exporters ’ have lost considerable market share in their largest market. from 2000 to 2010, china increased its share of u. s. imports from 8 per cent to 19 per cent, surpassing canada as the largest exporter to the united states ( chart 11 ). over the same period, canada ’ s share of u. s. imports fell from 20 per cent to 14 per cent, with about two - thirds of this decline occurring since 2005. moreover, while the large rise in china ’ s share is also affecting other countries, a number of countries, notably mexico, have fared relatively better than canada. over the same period, canada ’ s competitiveness has declined, with a sharp rise in the labour cost of producing a unit of output in canada compared with other countries, adjusted for exchange rate movements. the organisation for economic co - operation and development ( oecd ) calculates that the canadian real exchange rate in terms of unit labour costs has appreciated about 17 per cent since the beginning of 2005. the bilateral canada - u. s. measure shows a 31 per cent increase in relative canadian unit labour costs over the period. relative unit labour costs can be broken down into

for the ecb ’ s monetary policy, there are, in particular, two noteworthy constituent features : 1. the treaty gives a clear mandate to the ecb to maintain price stability in the euro area. article 105 of the treaty clearly states that the primary objective of the ecb shall be to maintain price stability in the euro area. this specification reflects the fundamental insight that, by eliminating a large number of inflation - related distortions, price stability is conducive to sustainable economic growth, job creation, prosperity and social stability. 2. the treaty grants the ecb full independence in pursuing its mandate. research and past experience have shown that central bank independence is a necessary precondition for monetary policy to be credibly and efficiently geared towards preserving price stability. a most important feature of the ecb ’ s institutional framework is that the mandate and the independence of the ecb are particularly well - protected since the treaty can only be amended by unanimous decision of the member states. the second cornerstone of the single monetary policy in the emu is the ecb ’ s monetary strategy. the achievements of the past 10 years have been facilitated by the adoption and consistent pursuit of a clear monetary policy strategy, consisting basically of two elements : 1. the governing council of the ecb has defined price stability in quantitative terms, as an anchor for inflation expectations and to provide a yardstick against which it can meaningfully be held accountable. the ecb defines its price stability objective as a year - on - year increase in the harmonised index of consumer prices ( hicp ) for the euro are of below but close to 2 % over the medium term. it is important to highlight that we do not attempt to fine - tune the inflation rate in the short term. our aim is to achieve price stability in the medium term. this is because monetary policy is not able to control price developments in the short - term. due to transmission lags it can only ensure price stability in the medium term. 2. the governing council has used a comprehensive and encompassing framework to assess the risks to price stability in the euro area, the two - pillar framework. this framework embodies complementary, yet distinct, economic and monetary analyses. thereby, it ensures that policy decisions are based on a broad set of relevant information, organised in a structured manner which promotes effective, prompt and consistent decision - making across different analytical perspectives. this sound institutional framework and a clear monetary policy strategy have underpinned what i think can be considered