Who wants 'closer' economic ties with China?

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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 between 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 interests.

Jim Stanford is an economist with CAW. This article was first posted on the Progressive Economics Forum.

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