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The Progressive Economics Forum

Who Wants “Closer” Ties With China?

The Prime Minister’s trip to China last week sparked a flurry of media coverage regarding prospects for “closer” economic ties between Canada and China.  Some even speculated that another free trade agreement is in the works (as soon as the Harper government inks its planned deals, of course, with the EU, India, Korea, and the TPP!).

The pandas are cute, sure.  But what are the dimensions of the current economic links betyween these two economies?  Does that relationship benefit average Canadians?  And do we want something even “closer”?

Here are a few factoids to throw into that particular discussion:

  • Canada imported almost $50 billion in merchandise from China in 2011, almost all manufactured goods.
  • We exported $17 billion, about half-and-half manufactured goods and resources.
  • Our resource exports to China have almost quadrupled in the last 5 years.  That’s clearly what they want from us.
  • We end up with two offsetting deficits:
  • We have a very large deficit in manufactured goods: $38 billion in 2011.
  • We have a significant surplus in resources (over $7 billion in 2011), but it offsets only one-fifth of the deficit in manufactures.
  • The overall result is a large trade deficit of over $30 billion.
  • Based on average labour intensity ratios, I believe the deficit in manufactured goods translates into the loss of 125,000 manufacturing jobs.
  • And the GROWTH in the manufacturing trade deficit over the last decade (from $9.6 billion in 2001 to $38 billion last year) accounts for almost 100,000 of the jobs lost in manufacturing over that decade.

Our current relationship with China does not really help most Canadians (though it certainly helps corporations which import Chinese-made products and sell them to Canadians).  We export resources, but we import increasingly higher-value manufactures.  That in itself represents a net loss of employment and income opportunities — never mind the jobs lost as a result of the quantitative imbalance in trade flows.

[Back in 2006 I co-authored with Daniel Poon a CAW report that examined the employment effects of our bilateral trade relationship with China, Japan, and Korea in more detail; it is available here.  Poon sole-authored a companion study which reviewed and analyzed the East Asian development strategy that is essential reading for anyone hoping to understand what’s happening over there.]

So “strengthening” a relationship that is not especially beneficial for us now, is not likely to improve things.  I would like to see a different model for our trade with China, premised on a more mutual flow of opportunity, both quantitatively and qualitatively.

This is not an “anti-Chinese” argument.  I actually think Canada can learn a lot from China’s state-directed development model (minus the repression, of course).  I just wish we had a government that was as aggressive in pursuing our national interests in investment, production, technology transfer, and qualitative development, as China has been in pursuing its.

Enjoy and share:

Comments

Comment from Travis fast
Time: February 13, 2012, 9:51 pm

“I just wish we had a government that was as aggressive in pursuing our national interests in investment, production, technology transfer, and qualitative development, as China has been in pursuing its.”

Ah it is Jimmy. It is just that the global labour supply curve makes it seem as though China gives a Tux penguin about their peasants’ future. From the cdn vantage point the labour supply curve gives a very different impression about its peasants’ futures.

All that is holy is profane and all that it solid melts into thin air.

Fret naught I have a turn key model which says that all is for the best in the best of possible worlds. Mind you I do not really believe it, I just teach it to my students and rehearse in when I am on the radio and television. I am afraid the nuances are too dangerous for the average man and I wish you would quit China bashing:),

Comment from T Manderly
Time: February 14, 2012, 12:07 am

We need to move up the value chain….the current policy ignores all other industries but resource extraction…

We need trade with China….but Smart Trade…not free trade….

In the vein of past Autopacts….

Comment from Roy McPhail
Time: February 14, 2012, 8:39 am

As harmonization of wage rates between formerly high wage countries and low wage countries passes some magic threshold, labour will toss nationalistic arguments and embrace global solidarity arguments. We will not disguse our global agenda the way capital did when “free” trade was sold. Repression of this solidarity will most certainly be harsh.

Comment from Former NDP-er
Time: February 14, 2012, 2:09 pm

The capacity of capitalists to appeal to nationalistic predjudice is almost without limit — global solidarity can only come through the co-operation of nation states. Internal opposition and coalition building from within a nation state is the only real hope.

Comment from Purple Library Guy
Time: February 14, 2012, 2:47 pm

I dunno, Roy. By the time we get that far, the whole system will be imploding due to demand effects. The importation of Chinese goods will collapse when nobody can afford to buy them any more.

Comment from Bill Bell
Time: February 14, 2012, 5:44 pm

Mr McPhail, I don’t want to wait for that kind of historical resolution because that harmonisation that you speak of will be used in any interim period to pay for the exorbitant lifestyles of the crooks at the ‘top.’

Comment from Glen
Time: February 15, 2012, 6:47 am

One only needs to look to Japan to see that China will go to any lengths to ensure that they run a trade surplus. Canada holds all cards if it is to negotiate a trade deal. We should insist on balanced ( labour indexed) trade with a take it or leave it stance. While we are at it we should demand a return on the Nortel IP that was stolen 🙂

Comment from Darwin O’Connor
Time: February 15, 2012, 7:18 am

The trouble is, the current government views Canada’s “cards” as things that should be given away as quickly as possible.

Comment from Roy McPhail
Time: February 16, 2012, 4:25 am

Re: “The capacity of capitalists to appeal to nationalistic predjudice is almost without limit — global solidarity can only come through the co-operation of nation states. Internal opposition and coalition building from within a nation state is the only real hope.” I have noticed that nationalistic rhetoric from the capitalists has been quite sporadic and muted, since so many of them are heavily invested in their globalization agenda.

Comment from Paul Tulloch
Time: February 17, 2012, 1:29 pm

I have made a few comments over the past days on China, and for the record, I actually do favour more contact with China. However, the relationship must be much different. In fact I would argue that we need to be closer to China, and the massive domestic market they have. My point in previous comments is, we can be a complimentary labour force for China, but until they have a dollar and production cost curves that we have, we cannot compete with them.

So it is in this complimentary fashion that we need to base an industrial strategy on. As their domestic economy grows, it will continue to demand both from its consumer, business and government demand, higher value, higher quality goods that an innovative, highly productive Canadian workforce can supply.

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