The Employment Effects of Increased Import Competition
from China
Press Release – Ottawa, July 13, 2017
The Centre for the Study of Living Standards today released a study done for Global
Affairs Canada entitled “The Effect of Import Competition on Employment in Canada: Evidence
from the China Shock.”
The Government of Canada has called for a “progressive trade agenda” for Canada, anagenda which responses to the concerns of those harmed by the liberalization of international
trade and ensures that trade contributes to broad-based prosperity for all Canadians. The
objective of the report is to contribute to the development of this agenda by measuring the impact
on Canadian employment of a recent shock to Canada’s import supply: the rapid rise of China asa manufacturing export superpower in the 2000s.
The key findings of the report are highlighted below.
By 2015, China had become Canada's second-largest trading partner after the UnitedStates, accounting for 12.3 percent of Canada's total imports, up from 3.2 per cent in2000.

The exposure of Canadian manufacturing to import competition increased over the 19922015 period. The import penetration ratio (i.e. the ratio of imports to total domesticabsorption) rose by 18.8 percentage points from 45.7 per cent in 1992 to 64.5 per cent in2015. Of this 18.8 percentage-point increase in import penetration, 8.1 percentage points(or 43 per cent of the total increase) were attributable to rising imports from China.

The direct effect of rising Chinese import competition in Canadian manufacturing was a
net loss of 105 thousand manufacturing jobs over the 2001-2011 period. This amounts to
21 per cent of the actual observed decline in manufacturing employment over that period(508 thousand jobs).

Accounting for labour reallocation and aggregate demand effects within local labour
markets yields somewhat larger employment effects; the total decline in employment
over the 2001-2011 period attributable to the rise of Chinese import competition is on theorder of 150 to 170 thousand jobs. The China shock led to substantial employment losses
in the industries most exposed to Chinese import competition (i.e. manufacturing), withthese losses partly offset by employment gains in non-exposed non-tradable industries.

A comprehensive assessment of the impact of increased trade with China requires that thecost in terms of employment be set against the benefits to Canadians from lower prices ofconsumer products and increased product variety, expanded export opportunities for
Canadian firms, and the productivity gains associated with enhanced foreign competition.

The report concludes that a progressive trade agenda should seek to take advantage of thegains from trade while helping those who suffer economic dislocation to adjust
The report is posted at http://www.csls.ca/reports/csls2017-03.pdf
For further information, please contact:
Andrew Sharpe
Executive Director
Centre for the Study of Living Standards
613-233-8891
andrew.sharpe@csls.ca
The Centre for the Study of Living Standards (CSLS) is a national, independent, Ottawa-based
not-for-profit research organization. Its primary objective is to contribute to a better
understanding of trends and determinants of productivity, living standards, and economic wellbeing in Canada through research.