July 2017710-151 Slater Street
Ottawa, Ontario
K1P 5H3
613-233-8891
csls@csls.ca

CENTRE FOR
THE STUDY
OF LIVING
STANDARDSThe Effect of Import Competition on
Employment in Canada: Evidence from the'China Shock'Alexander Murray

CSLS Research Report 2017-03
July 2017

The Effect of Import Competition on Employment in
Canada: Evidence from the 'China Shock'
Abstract
A common view holds that increasing trade with emerging economies in recent decades has
harmed the economic prospects of middle-class workers in Western countries like Canada. In
this paper, we provide a quantitative assessment of the impact on Canadian employment of a
recent shock to Canada’s import supply: the rapid rise of China as a manufacturing export
superpower in the late 1990s and early 2000s. Using an instrumental variables strategy, we
estimate that total job losses from rising Chinese import competition were on the order of 150 to
170 thousand over the 2001-2011 period. Manufacturing industries account for at least 105
thousand of these job losses. This amounts to 21 per cent of the total decline in manufacturing
employment over the 2001-2011 period.

iThe Effect of Import Competition on Employment in
Canada: Evidence from the 'China Shock'
Table of Contents
Abstract ............................................................................................................................................ i
Executive Summary ....................................................................................................................... iii
List of Tables ................................................................................................................................. vi
List of Charts................................................................................................................................. vii
I. Introduction ................................................................................................................................. 1
II. Trade and Employment in Canada: Recent Trends .................................................................... 4
A. Aggregate Trends ................................................................................................................... 6
i. Trade .................................................................................................................................... 6
ii. Employment ...................................................................................................................... 11
B. Industry-level Trends ........................................................................................................... 13
i. Chinese import exposure ................................................................................................... 13
ii. Employment ...................................................................................................................... 14
C. Trends within Local Labour Markets ................................................................................... 17
i. Chinese import exposure ................................................................................................... 18
ii. Employment ...................................................................................................................... 18
D. Comparison with the United States ...................................................................................... 21
III. Effect of Chinese Import Competition on Canadian Employment ......................................... 23
A. Data ...................................................................................................................................... 24
B. Step 1: Industry-level Direct Effect ..................................................................................... 25
i. Empirical strategy .............................................................................................................. 25
ii. Results............................................................................................................................... 28
C. Step 2: Industry-level Indirect Effect via Input-Output Linkages........................................ 36
i. Empirical strategy .............................................................................................................. 36
ii. Results............................................................................................................................... 38
D. Step 3: Reallocation and Aggregate Demand Effects within Local Labour Markets .......... 42
i. Empirical strategy .............................................................................................................. 42
ii. Results............................................................................................................................... 45
IV. Conclusion .............................................................................................................................. 50
References ..................................................................................................................................... 52ii

The Effect of Import Competition on Employment in
Canada: Evidence from the 'China Shock'Executive Summary
The Government of Canada has called for a “progressive trade agenda” for Canada. A
common view holds that the liberalization of international trade in recent decades has harmed theeconomic prospects of middle-class workers in Western countries like Canada. The
Government’s progressive trade agenda is meant to respond to these concerns – to ensure that
trade contributes to broad-based prosperity and that public sentiment does not turn against free
and open trade. The objective of this report is to contribute to the development of this agenda bymeasuring the impact on Canadian employment of a recent shock to Canada’s import supply: therapid rise of China as a manufacturing export superpower in the late 1990s and early 2000s.
The report is structured as follows. Following an introduction in Section I, Section II
summarizes recent trends in Canadian trade and employment data. In Section III, three empiricalapproaches are successively described and their results presented. Section IV concludes.
Trade and Employment in Canada: Recent Trends•

China accounted for 1.7 percent of Canada's imports in 1992, and by 2000 China's share
had grown only to 3.2 percent. But by 2015 China had become Canada's second-largest
trading partner after the United States, accounting for 12.3 percent of Canada's total
imports and 13.8 percent of Canada's manufacturing imports.

•

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 domestic
absorption) 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.

•

Canada's imports from China grew faster than Canada's exports to China both before andafter 2000. Canada's bilateral trade deficit with China increased $188 million (or 0.03 percent of GDP) in 1992 to $45.5 billion (or 2.3 per cent of GDP) in 2015.

•

Total employment in Canada increased by 1.5 per cent per year over the 1992-2015
period. The employment rate increased by 3.0 percentage points over the same period.
Employment growth has been markedly slower since 2008 relative to before, however,and the employment rate in 2015 was down 1.9 percentage points from 2008.

iii

•

Manufacturing employment grew at a robust 2.7 per cent per year over the 1992-2000
period, but then fell at annual rates of 1.9 and 1.7 per cent over the periods 2000-2008
and 2008-2015, respectively. Altogether, Canadian manufacturing shed 533,000 jobs
over the 2000-2015 period.

Empirical Approach
The employment impact of rising Chinese import competition is investigated using threesets of estimates: 1) the direct effect of increased import competition on industry-level
employment; 2) the indirect effects on industry-level employment arising through input-output
linkages; and 3) the combined impact of direct effects, labour reallocation and aggregate demand
effects operating within local labour markets. To isolate the impact of rising Chinese exporting
capacity (as opposed to increased Canadian import demand), an instrumental variable strategy isapplied whereby Chinese import penetration in a set of other advanced economies is used as an
instrument for Chinese import penetration in Canada.
Results
The key results of the report are as follows:•

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).

•

By comparison, past research for the United States found that rising Chinese importcompetition accounted for 10 per cent of U.S. manufacturing employment losses over asimilar time period. The difference is due to the fact that Canadian industries experienced
a larger increase in Chinese import exposure than American industries did over the 20012011 period.

•

Data constraints imposed limits on the quality of evidence we could generate in thesecond step of the analysis. In our view, the results suggest that the employment effect ofindirect import exposure through input-output linkages is modest. Relative to the direct
effect, accounting for input-output linkages adds about 13 thousand additional job losses
over the 2001-2011 period.

•

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.

This is by no means a comprehensive assessment of the welfare impact of international
trade, or of trade with China in particular, on Canadians. Rising Chinese import competition led
to a non-negligible reduction in employment in Canada. That cost must be set against theiv

benefits to Canadian consumers in terms of lower prices and increased product variety, expanded
export opportunities for Canadian firms, and the productivity gains associated with enhanced
foreign competition. (Not to mention the incredible increase in the living standards of workers in
China who not long ago were quite poor.) A progressive trade agenda should seek to takeadvantage of the gains from trade while helping those who suffer economic dislocation to adjust.

v

The Effect of Import Competition on Employment in
Canada: Evidence from the 'China Shock'
List of Tables
Table 1: Canada's Imports from China and from All Trade Partners, All Industries andManufacturing, Millions of Current Canadian Dollars, 1992-2015 ............................................... 5
Table 2: Canada's Exports to China and to All Trade Partners, All Industries andManufacturing, Millions of Current Canadian Dollars, 1992-2015 ............................................... 7
Table 3: Total Shipments, Total Domestic Absorption, and Import Penetration,
Manufacturing, Canada, 1992-2015 ............................................................................................. 10
Table 4: Employment Levels and Rates, All Industries and Manufacturing, Canada, 19922015............................................................................................................................................... 12
Table 5: Employment Levels and Rates in Manufacturing and in All Industries, Labour
Force Survey and Census, 1991, 2001 and 2011 .......................................................................... 13
Table 6: Changes in the Chinese Import Penetration Ratio for Selected NAICS
Manufacturing Industries, 2001-2011 ........................................................................................... 14
Table 7: Employment Growth for Selected NAICS Manufacturing Industries, 2001-2011 ........ 15
Table 8: Employment Growth for Selected IOIC Industries, 2001-2011 ..................................... 17
Table 9: Changes in Chinese Import Exposure for Selected Local Labour Markets, 20012011............................................................................................................................................... 19
Table 10: Changes in Employment Rates for Selected Local Labour Markets, 2001-2011......... 20
Table 11: Summary Statistics on Changes in Employment and in Chinese Import Exposureby 4-Digit NAICS Manufacturing Industry .................................................................................. 29
Table 12: Effect of Import Exposure on Employment in Canadian Manufacturing
Industries: OLS and 2SLS Estimates ............................................................................................ 31
Table 13: Implied Employment Changes Induced by Changes in Exposure to Chinese
Import Competition ....................................................................................................................... 33
Table 14: Actual and Counterfactual Employment Changes, Thousands of Jobs, 1991-2011..... 34
Table 15: Summary Statistics on Changes in Employment, in Direct Chinese Import
Competition, and in Indirect Upstream and Downstream Chinese Import Competition by 4Digit IOIC Industry ....................................................................................................................... 39
Table 16: Effect of Import Exposure on Employment in Canada Incorporating InputOutput Linkages, 1991-2011 ........................................................................................................ 40
Table 17: Summary Statistics on Changes in Employment Rates and in Chinese Import
Exposure across Local Labour Markets, for All Industries and by Sector, 1991-2011 ................ 46
Table 18: Effect of Import Exposure on Employment in Canadian Local Labour Markets,
1991-2011 ..................................................................................................................................... 47vi

List of Charts
Chart 1: China's Share of Canadian Imports, All Industries and Manufacturing, Per Cent,
1992-2015 ....................................................................................................................................... 8
Chart 2: Canada's Trade Balance with China (Exports less Imports), All Industries andManufacturing, Billions of Current Canadian Dollars, 1992-2015 ................................................ 8
Chart 3: Employment Growth and the Change in Chinese Import Exposure, 4-Digit NAICS
Manufacturing Industries, 2001-2011 ........................................................................................... 16
Chart 4: Changes in the Employment Rate and in Chinese Import Penetration, CMAs/CAs,
2001-2011 ..................................................................................................................................... 21
Chart 5: Employment and Chinese Import Penetration, United States and Canada ..................... 22
Chart 6: Change in Chinese Import Exposure in Canada and in Comparison Countries,
Percentage Points per Year, 1991-2001 and 2001-2011 ............................................................... 28
Chart 7: Exports less Imports of Goods and Services, Canada, Billions of Dollars, 19912016............................................................................................................................................... 49

vii

The Effect of Import Competition on Employment in
Canada: Evidence from the 'China Shock' 1"[What] is going on is the middle class in western industrial societies … has begun tofear very profoundly that the two great economic transformations of our time—
globalization and the technology revolution—may have been good for a narrow elite… but that they haven’t been good for most people. …
And you know what? The people who feel that, who have this sort of inchoate anger,
who say, 'You know, it’s not working for me,' they’re not wrong."
Chrystia Freeland, former Minister of International Trade
Montreal, Quebec, June 15, 2016

I. Introduction
The Government of Canada has called for a “progressive trade agenda” for Canada. A
common view holds that the liberalization of international trade in recent decades has harmed theeconomic prospects of middle-class workers in Western countries like Canada. This view was
expressed by Chrystia Freeland, then Canada's Minister of International Trade and now Ministerof Foreign Affairs, in the quotation that begins this report. The Government’s progressive tradeagenda is meant to respond to these concerns – to ensure that trade contributes to broad-based
prosperity and that public sentiment does not turn against free and open trade. The implicationsof these principles for trade policy have yet to be made precise.
The development of the progressive trade agenda requires an empirical, quantitative
assessment of the impact international trade has had on Canadian labour market outcomes inrecent decades. The objective of this report is to contribute to this assessment by measuring theimpact on Canadian labour markets of a recent shock to Canada’s import supply: the rapid rise of
China as a manufacturing export superpower in the late 1990s and early 2000s. China accounted
for 1.7 percent of Canada's imports in 1992, and by 2000 China's share had grown only to 3.2
percent. But China's exporting capacity exploded after 2001. By 2015 China had become
Canada's second-largest trading partner after the United States, accounting for 12.3 percent of
Canada's total imports and 13.8 percent of Canada's manufacturing imports. Over the same
period 2000-2015, Canadian manufacturing employment declined by 23.7 percent, amounting to533,000 lost jobs.
1This report was written by CSLS economist Alexander Murray under the supervision of CSLS Executive Director
Andrew Sharpe. The Centre for the Study of Living Standards would like to thank Global Affairs Canada forfinancial support for this research. Earlier versions of the report were presented at the annual meeting of theCanadian Economics Association held at Saint Francis Xavier University Antigonish, Nova Scotia May 31-June 2,2017 and at the Second OECD Global Forum on Productivity held in Budapest, Hungary June 26-27, 2017. The
author would like to thank Phil Leonard and officials at Global Affairs Canada, especially Aaron Sydor forcomments. Email: alexander.murray@canada.ca.

1Correlation does not imply causation, so more careful analysis is required to assess theimpact of Chinese import competition on Canadian employment. Following Acemoglu et al.
(2016), we use an instrumental variables approach to estimate the causal impact of China's
export rise on Canadian employment. Our main finding is that the direct effect of rising Chinese
import penetration in Canadian manufacturing was a net loss of 105 thousand manufacturingjobs 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). Data limitations constrain ourability to precisely measure the indirect effects that work via input-output linkages acrossindustries, but our analysis suggests that these indirect import exposure effects add modestly tothe total Canadian job losses arising from increased Chinese import competition. Labour
reallocation and aggregate demand effects operating within local labour markets prove more
important. After accounting for those effects, our main estimates suggest net job losses on theorder of 150 to 170 thousand over 2001-2011.
This report’s focus on imports from China is not motivated by any special interest in
China as such. Rather, the rapidity of China’s rise as a global export supplier and the fact that its
rise was plausibly driven by factors internal to China mean that China provides a clean ‘naturalexperiment’ with which to study the impact of import competition on employment.
This analysis does not constitute a comprehensive assessment of the impact ofinternational trade, or of trade with China in particular, on welfare in Canada. The employment
impact of import competition represents one of many implications for Canada of rising tradewith China. Other effects include lower prices for Canadian consumers (Francis, 2007; Morel,2007), higher prices for oil and other primary commodities exported by Canada (Roache, 2012),
and hence an improvement in Canada's terms of trade since 2001 (Wilkins, 2016). The openingof the Chinese market also provides new opportunities for Canadian exporters. More broadly,international competition is known to enhance productivity both by reallocating market sharefrom less productive firms to more productive ones and by leading exporters to invest in withinfirm productivity improvement (Lileeva, 2008; Baldwin and Yan, 2017a and 2017b). We do notaddress any of these dimensions of the impact of trade with China in this report.
The narrow scope of our analysis does not diminish the importance of our results fromthe perspective of economic inclusiveness. Economic inclusiveness requires that all people beable to participate in and benefit from a society's economic activity.2 Employment is the keymeans by which most people participate in the economy and partake in the gains from economic
growth, so labour market outcomes are a fundamental determinant of the inclusiveness of growth(Sawhill, 2017). Even if rising trade with China has on balance been beneficial for Canada, theloss of employment opportunities in certain sectors may represent a net loss for a segment ofworkers tied to those sectors. A progressive trade agenda should take those losses into accountand seek ways to ameliorate them. The first step in that process is to quantify the losses.

2

In a recent and influential line of research, the OECD (2014) defines inclusive growth as "economic growth thatcreates opportunity for all segments of the population and distributes the dividends of increased prosperity, both inmonetary and non-monetary terms, fairly across society." See Murray (2016) for an application of this notion ofinclusiveness in the context of innovation in Canada.

2The remainder of the report is structured as follows. In the remainder of this introductory
section, we briefly review existing evidence on trade and labour markets. In Section II, wesummarize recent trends in Canadian trade and employment data. In Section III, three empiricalapproaches are successively described and their results presented. Section IV concludes.
Related Literature
There is a large empirical literature on the effects of international trade on labour market
outcomes such as employment or the wage distribution. In general, empirical research in the
1980s and 1990s found little evidence that international trade openness was a significant driverof employment outcomes or the wage distribution in advanced economies.3 More recent research
has focused on the effects of increased trade with developing countries, especially China. This
research suggests that trade has become a more important factor than past evidence hadsuggested, and that labour markets are slower to adjust to the dislocations associated with trade
shocks than had previously been thought.
Our work fits into a recent line of research by David Autor and coauthors on the labour
market impact of the 'China shock,' the rapid increase in China's exports in the 2000s. 4 In thesestudies, variation in Chinese import exposure across local labour markets in the United States isused to assess the impact of the 'China shock' on employment, wages, and other outcomes. A
local labour market's import exposure is an employment-weighted average of industry-level
Chinese import penetration measures for industries located in that local labour market. To
establish causality, the authors develop an instrumental variable strategy whereby the rise ofChinese imports by other advanced economies is used as an instrument for the rise of Chinese
imports by the United States.
The key findings from this set of studies are that the rise of Chinese import competition
had large disemployment effects in U.S. regions concentrated in manufacturing industries, andthat offsetting employment gains in other industries in these regions have not materialized. On
the contrary, the manufacturing employment declines caused by Chinese import competition
have been associated with increases in unemployment and labour force nonparticipation within
the same local labour markets. The local labour markets more exposed to Chinese importcompetition also exhibit larger reductions in average wages, concentrated mainly among workers
in the bottom 40 per cent of the initial wage distribution (Chetverikov et al., 2015). Using
longitudinal data on individual workers, Autor et al. (2014) find that workers who worked inindustries more exposed to Chinese import competition accumulated significantly lower earnings
over the 1991-2007 period than otherwise comparable workers who worked in non-exposedindustries. The studies find little evidence of migration across local labour markets in response tojob loss (Autor et al., 2013).
In the study most directly related to ours, Acemoglu et al. (2016) estimate that the rise ofChinese import competition led to U.S. job losses of between 2.0 and 2.4 million over the 19992011 period. Their method exploits both industry variation and geographic variation in import3
4

See Autor et al. (2016) and Harrison et al. (2011) for overviews of this research.
See Autor et al. (2013a; 2013b; 2014; 2015; and 2016).

3

exposure, and they use the instrumental variable strategy described above. For our analysis in
this report, we adopt the empirical strategy developed by Acemoglu et al. The approach is
described in detail in Section III below, so we say no more about it here.
This literature has shed new light on the U.S. labour market's ability to adjust to large
trade shocks. On the basis of the older empirical evidence, most economists had believed that thelabour markets of advanced economies were sufficiently flexible that workers displaced inimport-competing industries could easily reallocate to other industries or regions. The recent
research by Autor and his coauthors suggests that, at least in the United States, the labour market
adjustment to the rise of China has not been so easy.
Of course, the literature on the impact of trade on labour market outcomes extends wellbeyond the work of Autor and his coauthors. Hakobyan and McLaren (2016) study the effect of
NAFTA on U.S. wages using a local labour market approach similar to that of Autor, and theyfind that NAFTA substantially reduced wages for blue collar workers in localities more exposed
to Mexican import competition. Pierce and Schott (2016) find that the accession of China to theWorld Trade Organization (WTO) in late 2001 led to employment losses in the United States at
the industry level, and induced U.S. production plants to adopt less labour-intensive productionplans. Helpman (2016) provides a review of research on globalization and wage inequality.
The rise of Chinese manufacturing imports has been accompanied by a corresponding
increase in Chinese demand for energy and raw materials. This point is of particular importanceto Canada, but it has received little attention in the empirical literature on the labour market
impact of China's rise. Once exception is Costa et al. (2016), who study the effect of China's
growth on outcomes in local labour markets in Brazil. They find that, over the 2000-2010 period,
Brazilian localities more exposed to Chinese manufacturing import competition exhibited slower
growth of manufacturing wages. Over the same period, however, localities exposed to rising
Chinese commodity demand exhibited faster wage growth. Analysis along these lines for Canada
should be a priority for future research.
Most of the literature cited above pertains to the United States. On Canada, the recent
research literature is thin. An older literature focused on Canada-U.S. trade liberalization.5 It
found that liberalization was followed by employment losses in industries that lost tariff
protection, and that these losses were concentrated among production workers (i.e. unskilled
labour). Evidence on the impact on wages is mixed. Only a few studies have focused on thelabour market implications of the recent increase in Canada’s trade with developing economies. 6
To our knowledge, this report represents the first attempt to measure the causal impact of the‘China shock’ on Canadian employment using an instrumental variables strategy.

5

See Gaston and Trefler (1997), Baldwin and Rafiquzzaman (1999), Beaulieu (2000), Lemieux (2005), Trefler(2004), and Townsend (2007).
6
See Breau and Rigby (2010), Annabi et al. (2013), and Acharya (2015).

4

Table 1: Canada's Imports from China and from All Trade Partners, All Industries andManufacturing, Millions of Current Canadian Dollars, 1992-2015
All Industries

Manufacturing

1992

2,453

Total AllCountries
148,018

1993

3,098

169,953

1.8

3,003

151,345

2.0

96.9

89.1

1994

3,856

202,736

1.9

3,732

182,392

2.0

96.8

90.0

1995

4,639

225,553

2.1

4,527

202,379

2.2

97.6

89.7

1996

4,931

232,566

2.1

4,781

206,421

2.3

97.0

88.8

1997

6,341

272,946

2.3

6,211

243,801

2.5

97.9

89.3

1998

7,651

298,386

2.6

7,498

270,876

2.8

98.0

90.8

1999

8,951

320,409

2.8

8,798

292,732

3.0

98.3

91.4

2000

11,294356,992

3.2

11,130321,144

3.5

98.5

90.0

2001

12,724

343,111

3.7

12,523306,308

4.1

98.4

89.3

2002

16,004

348,957

4.6

15,773

313,571

5.0

98.6

89.9

2003

18,583

336,141

5.5

18,314

298,519

6.1

98.6

88.8

2004

24,104355,886

6.8

23,788314,050

7.6

98.7

88.2

2005

29,516

380,858

7.7

29,169330,624

8.8

98.8

86.8

2006

34,508397,044

8.7

34,178343,982

9.9

99.0

86.6

2007

38,331

407,301

9.4

37,963350,185

10.8

99.0

86.0

2008

42,628433,999

9.8

42,252360,983

11.7

99.1

83.2

2009

39,661

365,359

10.9

39,287

310,980

12.6

99.1

85.1

2010

44,524

403,701

11.0

44,113340,931

12.9

99.1

84.5

2011

48,188446,666

10.8

47,713372,759

12.8

99.0

83.5

2012

50,723462,072

11.0

50,250389,058

12.9

99.1

84.2

2013

52,737475,661

11.1

52,239404,078

12.9

99.1

85.0

2014

58,660512,084

11.5

58,129439,978

13.2

99.1

85.9

2015

65,650535,604

12.3

65,077471,212

13.8

99.1

88.0

China

GrowthRates:
1992-2015

Percent per year

China Share(per cent)
1.7

Percentagepoint change

2,381

Total AllCountries
131,142

China Share(per cent)
1.8

Manufacturing Share ofImports
Total All
China
Countries
97.1
88.6

China

Percent per year

Percentagepoint change

Percentage-point change

15.4

5.8

10.6

15.5

5.7

12.0

2.1

-0.6

1992-2000

21.0

11.6

1.5

21.3

11.8

1.7

1.5

1.4

2000-2008

18.1

2.5

6.7

18.1

1.5

8.2

0.6

-6.8

2008-2015

6.4

3.1

2.4

6.4

3.9

2.1

0.0

4.8

2001-2011
14.2
2.7
7.1
14.3
2.0
8.7
Source: Innovation, Science and Economic Development Canada, Trade Data Online.

0.6

-5.8

5

II. Trade and Employment in Canada: Recent Trends
In this section, we review recent trends in Canadian trade and employment data. We first
discuss trends over the 1992-2015 period at the aggregate level and for the overall manufacturingsector. We then discuss trends at two lower levels of aggregation – the four-digit industry level
and the local labour market level – because our econometric analysis will exploit variation atthese levels of aggregation. When we discuss trends at the industry level and in local labour
markets across Canada, we narrow our focus to the 2001-2011 period. That is the period during
which most of the increase in Canada's imports from China occurred, and it is the focus of ourmain econometric findings later in this report.

A. Aggregate Trends
i. Trade
Table 1 summarizes Canada's imports from China and from all trade partners over the
1992-2015 period.7 Canada imported goods and services valued at $535.6 billion in 2015 (incurrent dollars), up 5.8 per cent per year from $148.0 billion in 1992. Canada's imports from
China amounted to $65.7 billion, an increase of 15.4 per cent per year from $2.5 billion in 1992.
Over the 1992-2015 period, China's share of Canada's total imports increased from 1.7 per centto 12.3 per cent.
Most of the increase in China's share of Canadian imports occurred after 2000 (Chart 1).
Growth of Chinese imports slowed somewhat after 2000; the growth rate declined from 21.0 per
cent per year over the 1992-2000 period to 18.1 per cent per year over the 2000-2008 period. But
growth of Canada's total imports slowed by much more, so that China's share increased faster
after 2000 than before.8

7

The year 1992 is the first year for which detailed industry-level trade data are available for Canada.
China entered the World Trade Organization (WTO) at the end of 2001. See Ostry (2001) for a discussion of thatprocess and some of the legal and administrative challenges it posed. Pierce and Schott (2016) find that the change
in the treatment of China under U.S. trade policy following China's WTO accession reduced U.S. manufacturing
employment over the 2000s.
86

Table 2: Canada's Exports to China and to All Trade Partners, All Industries andManufacturing, Millions of Current Canadian Dollars, 1992-2015
All Industries

Manufacturing Shareof Exports

Manufacturing

1992

2,265

Total AllCountries
162,828

853

Total AllCountries
124,948

37.6

Total AllCountries
76.7

1993

1,681

187,515

0.9

1,052

148,475

0.7

62.6

79.2

1994

2,303

225,679

1.0

1,384

178,973

0.8

60.1

79.3

1995

3,465

262,267

1.3

1,748

210,976

0.8

50.4

80.4

1996

3,015

275,819

1.1

1,575

218,845

0.7

52.3

79.3

1997

2,407

298,072

0.8

1,510

236,454

0.6

62.7

79.3

1998

2,497

318,444

0.8

1,306

256,352

0.5

52.3

80.5

1999

2,664

355,420

0.7

1,664

286,798

0.6

62.5

80.7

2000

3,698

413,215

0.9

2,421

319,267

0.8

65.5

77.3

2001

4,264

404,085

1.1

2,906

306,168

0.9

68.2

75.8

2002

4,132

396,381

1.0

3,257

305,371

1.1

78.8

77.0

2003

4,809

381,071

1.3

3,808

286,213

1.3

79.2

75.1

2004

6,770

412,290

1.6

4,821

309,561

1.6

71.2

75.1

2005

7,214

436,351

1.7

4,959

314,751

1.6

68.7

72.1

2006

7,802

440,365

1.8

5,639

316,091

1.8

72.3

71.8

2007

9,512

450,321

2.1

6,774

317,592

2.1

71.2

70.5

2008

10,468483,488

2.2

6,614

301,994

2.2

63.2

62.5

2009

11,151

359,754

3.1

6,052

234,969

2.6

54.3

65.3

2010

13,232398,838

3.3

7,980

259,542

3.1

60.3

65.1

2011

16,810446,688

3.8

9,475

279,319

3.4

56.4

62.5

2012

19,366455,150

4.3

9,734

288,867

3.4

50.3

63.5

2013

20,492471,940

4.3

10,587

293,377

3.6

51.7

62.2

2014

19,339525,019

3.7

10,636318,179

3.3

55.0

60.6

2015

20,172523,972

3.8

11,621

349,148

3.3

57.6

66.6

China

GrowthRates:
1992-2015

Percent per year

China Share(per cent)
1.4

China

Percentagepoint change

Percent per year

China Share(per cent)
0.7

Percentagepoint change

China

Percentage-pointchange

10.0

5.2

2.5

12.0

4.6

2.6

20.0

-10.1

1992-2000

6.3

12.3

-0.5

13.9

12.4

0.1

27.8

0.5

2000-2008

13.9

2.0

1.3

13.4

-0.7

1.4

-2.3

-14.8

2008-2015

9.8

1.2

1.7

8.4

2.1

1.1

-5.6

4.2

2.4

-11.8

-13.2

2001-2011
14.7
1.0
2.7
12.5
-0.9
Source: Innovation, Science and Economic Development Canada, Trade Data Online.

7

Chart 1: China's Share of Canadian Imports, All Industries and Manufacturing, Per Cent,
1992-2015
16.0
14.0

Per cent

12.0
10.0
8.0
6.0
4.0
2.0

All Industries

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

0.0

Manufacturing

Source: Table 1.

Focusing on trade in manufactured goods does not substantially alter these trends. This is
no surprise since manufactured goods accounted for 88.0 per cent of Canada's total imports in2015 and for 87.6 per cent of total imports on average over the 1992-2015 period. Canada's
imports from China are dominated by manufactured products to an even greater extent.
Manufactured goods accounted for 99.1 per cent of Canada's Chinese imports in 2015 and for98.4 per cent of Chinese imports on average over the 1992-2015 period.
Chart 2: Canada's Trade Balance with China (Exports less Imports), All Industries
and Manufacturing, Billions of Current Canadian Dollars, 1992-2015
0.0

Billions of Dollars

-10.0
-20.0
-30.0
-40.0
-50.0

1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

-60.0

All Industries

Manufacturing

Source: Tables 1 and 2.

8

Table 2 summarizes Canada's exports to China and to all trade partners over the 1992-2015
period. Canada's total exports in 2015 amounted to $524.0 billion, up by 5.2 per cent per year
from $162.8 billion in 1992. Canada's exports to China were valued at $20.2 billion in 2015, anincrease of 10.0 per cent per year from $2.3 billion in 1992. Over the 1992-2015 period, China's
share of Canadian exports increased from 1.4 per cent to 3.8 per cent. This 2.5 percentage-point
increase was far smaller than the 10.6 percentage-point increase in China's share of Canadian
imports (Table 1).
The entire increase in China's share of Canadian exports occurred after 2000. Indeed,
between 1992 and 2000, China's share declined from 1.4 per cent to 0.9 per cent. Growth in
Canadian exports to China accelerated after 2000 even as Canada's overall export growth slowed.
It is noteworthy that, following China's entry into the World Trade Organization (WTO)
in 2001, growth of Canada's Chinese imports slowed slightly while growth of Canada's exports
to China increased. This provides suggestive evidence that the policy changes associated with
China's entry into the WTO may have, on the margin, expanded business opportunities for
Canadian exporters to China more than for Chinese exporters to Canada. This question warrants
further research.
In any case, Canada's imports from China grew faster than Canada's exports to China
both before and after 2000. Canada's bilateral trade deficit with China (i.e. imports less exports)
increased from $188 million (or 0.03 per cent of GDP) in 1992 to $45.5 billion (or 2.3 per cent ofGDP) in 2015 (Chart 2).
The industry composition of Canada's exports, both to China and to all trade partners, isless concentrated in manufacturing than was the case for imports. In 2015, manufactured goods
accounted for 66.6 per cent of Canada's total exports and for 57.6 per cent of Canada's exports to
China.
One common measure of the exposure of an industry to import competition is the importpenetration ratio, the ratio of imports to total domestic absorption in that industry. 9 Table 3
presents measures of domestic absorption and import penetration for Canada's manufacturingsector. The exposure of Canadian manufacturing to import competition increased over the 19922015 period. The import penetration ratio rose by 18.8 percentage points from 45.7 per cent in1992 to 64.5 per cent in 2015. 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. Much of the increase in import competition from China relative to other import sources
occurred during the 2000-2008 period, which covers the period from the entry of China into the
WTO in late 2001 to the slowdown in global trade associated with the global recession of 2008
and 2009. Over that period, import penetration from China increased by 4.5 percentage points
while overall import penetration fell by 1.6 percentage points.

9

Total domestic absorption is equal to total shipments plus imports less exports. The import penetration ratio is ameasure of competition for the domestic market in an industry.

9

Table 3: Total Shipments, Total Domestic Absorption, and Import Penetration,
Manufacturing, Canada, 1992-2015
Domestic Absorption(Millions of Current Dollars)

Import Penetration(Per cent)

Total
Shipments

Net Exports

1992

280,518-6,194

Total
Domestic
Absorption
286,712

1993

303,943-2,8701994

346,941

1995

389,779

1996

All Countries

China

45.7

0.8

306,81349.3

1.0-3,419350,360

52.1

1.1

8,597

381,18253.1

1.2

400,085

12,424

387,661

53.2

1.2

1997

426,519-7,347433,866

56.2

1.4

1998

441,153-14,524455,677

59.4

1.6

1999

510,550-5,934516,483

56.7

1.7

2000

561,301-1,877563,178

57.0

2.0

2001

543,272-140

543,412

56.4

2.3

2002

559,903-8,200568,103

55.2

2.8

2003

563,634-12,306

575,940

51.8

3.2

2004

582,563-4,489587,052

53.5

4.1

2005

599,206-15,873615,079

53.8

4.7

2006

605,527-27,891

633,418

54.3

5.4

2007

597,673-32,593630,266

55.6

6.0

2008

591,970-58,989

650,959

55.5

6.5

2009

488,731-76,011564,741

55.1

7.0

2010

529,275-81,389

610,664

55.8

7.2

2011

568,282-93,440

661,722

56.3

7.2

2012

585,336-100,191

685,526

56.8

7.3

2013

587,645-110,701

698,347

57.9

7.5

2014

618,593-121,799

740,393

59.4

7.9

2015

608,323-122,064

730,38764.5

8.9

GrowthRates:
1992-2015

Per cent per year

Percentage-point change

3.4

-13.8

4.1

18.8

8.1

1992-2000

9.1

13.9

8.8

11.3

1.1

2000-2008

0.7

-53.9

1.8

-1.6

4.5

2008-2015

0.4

-10.9

1.7

9.1

2.4

2001-2011
0.5
-91.7
2.0
0.0
4.9
Source: CANSIM Table 304-0014 and Innovation, Science and Economic Development Canada,
Trade Data Online.
Notes: Total shipments, net exports and total domestic absorption are in millions of current
dollars and cover Canada's manufacturing sector (NAICS industries 31-33).
Total domestic absorption = Total shipments - net exports.
Import penetration ratio = 100 x Imports/Absorption.

10

ii. Employment
Table 4 summarizes trends in Canadian employment, in all industries and in
manufacturing, over the 1992-2015 period. Total employment increased by 1.5 per cent per year
over the 1992-2015 period. This was slightly faster than the 1.3 per cent annual growth of theworking-age population, so that the employment rate increased by 2.9 percentage points over theperiod. Employment growth has been markedly slower since 2008 relative to before, however,and the employment rate in 2015 was down 2.1 percentage points from 2008.
Within the manufacturing sector, employment declined by 0.3 per cent per year over the
1992-2015 period. There was substantial variation in the trend between sub-periods.
Manufacturing employment grew at a robust 2.7 per cent per year over the 1992-2000 period, butthen fell at annual rates of 1.9 and 1.7 per cent over the periods 2000-2008 and 2008-2015,
respectively. As shown earlier, the 2000-2008 period was a time of rapid growth in Chinese
import penetration in Canadian manufacturing.
It is well known that manufacturing employment has been declining as a share of total
employment.10 Over the 1992-2015 period, manufacturing's employment share fell from 14.2 percent to 9.5 per cent. Of this 4.7 percentage-point decline, 3.9 points (or 82 per cent of the total
decline) occurred between 2000 and 2008.
The figures in Table 4 are from the Labour Force Survey, but in our econometric analysis
we will use employment estimates derived from census data. Table 5 summarizes the levels andgrowth rates of employment in the census years 1991, 2001 and 2011 as derived from both theLabour Force Survey (Panel A) and the censuses (Panel B). The two sets of data reveal broadly
similar patterns. Total employment growth was similar in the 1991-2001 and 2001-2011 periods,
while manufacturing employment growth was positive in the earlier period and turned strongly
negative in the latter. The census estimates of employment are consistently somewhat lower thanthe LFS estimates, especially in manufacturing.

10

For recent analysis of this trend, see Capeluck (2015a; 2015b) and Calver and Capeluck (2016).

11

Table 4: Employment Levels and Rates, All Industries and Manufacturing, Canada, 19922015
Employment

Employment Rates

Population
Aged 15+All Industries

Manufacturing

All Industries

Manufacturing

Manufacturing
Share of
Employment

1992

21,82012,731

1,815

58.3

8.3

14.3

1993

22,093

12,793

1,779

57.9

8.1

13.9

1994

22,36813,059

1,823

58.4

8.2

14.0

1995

22,66013,295

1,904

58.7

8.4

14.3

1996

22,96013,420

1,925

58.5

8.4

14.3

1997

23,247

13,708

2,021

59.0

8.7

14.7

1998

23,516

14,047

2,103

59.7

8.9

15.0

1999

23,782

14,402

2,188

60.6

9.2

15.2

2000

24,09014,760

2,242

61.3

9.3

15.2

2001

24,41914,932

2,222

61.1

9.1

14.9

2002

24,76915,291

2,289

61.7

9.2

15.0

2003

25,08015,661

2,277

62.4

9.1

14.5

2004

25,40815,915

2,297

62.6

9.0

14.4

2005

25,755

16,124

2,203

62.6

8.6

13.7

2006

26,116

16,396

2,102

62.8

8.0

12.8

2007

26,462

16,769

2,026

63.4

7.7

12.1

2008

26,82417,010

1,927

63.4

7.2

11.3

2009

27,203

16,728

1,745

61.5

6.4

10.4

2010

27,574

16,964

1,711

61.5

6.2

10.1

2011

27,913

17,221

1,722

61.7

6.2

10.0

2012

28,283

17,438

1,747

61.7

6.2

10.0

2013

28,647

17,691

1,723

61.8

6.0

9.7

2014

28,981

17,802

1,711

61.4

5.9

9.6

2015

29,28017,947

1,713

61.3

5.8

9.5

GrowthRates:
1992-2015

Percent per year

Percentage-point change

1.3

1.5

-0.3

2.9

-2.5

-4.7

1992-2000

1.2

1.9

2.7

2.9

1.0

0.9

2000-2008

1.4

1.8

-1.9

2.1

-2.1

-3.9

2008-2015

1.3

0.8

-1.7

-2.1

-1.3

-1.8

2001-2011
1.3
1.4
-2.5
0.5
-2.9
Notes: Population and employment levels are in thousands of persons. Rates are in per cent.
Source: Statistics Canada, Labour Force Survey (CANSIM Table 282-0001).

-4.9

12

Table 5: Employment Levels and Rates in Manufacturing and in All Industries, Labour
Force Survey and Census, 1991, 2001 and 2011
Panel A: Labour Force Survey
Population
Aged 15+

Employment
All
Industries

Employment Rates

Manufacturing

All
Industries

Manufacturing

Manufacturing
Share of
Employment

1991

21,533

12,857

1,890

59.7

8.8

14.7

2001

24,41914,932

2,222

61.1

9.1

14.9

2011

27,913

17,221

1,722

61.7

6.2

10.0

Compound Annual Growth (Per Cent)

Annual Percentage-Point Change

1991-2001

1.27

1.51

1.63

0.14

0.03

0.02

2001-2011

1.35

1.44

-2.52

0.05

-0.29

-0.49

Panel B: Census
Population
Aged 15+

Employment

Employment Rates

All
Industries

Manufacturing

All
Industries

Manufacturing

Manufacturing
Share of
Employment

1991

21,60413,006

1,860

60.2

8.6

14.3

2001

24,282

14,695

2,033

60.5

8.4

12.1

2011

27,86916,595

1,525

59.5

5.5

11.3

Compound Annual Growth (Per Cent)
1991-2001

1.18

1.23

0.90

Annual Percentage-Point Change
0.03

-0.02

-0.22

2001-2011
1.39
1.22
-2.83
-0.10
-0.29
-0.08
Notes: Data in Panel A are from Statistics Canada, CANSIM Table 282-0001. Data in Panel B are calculated fromthe 1991 and 2001 Censuses and the 2011 National Household Survey. Employment estimates from the Labour
Force Survey are annual averages of monthly estimates, while estimates from the Census pertain to a reference
week in May or June of the year indicated. Employment and population levels are in thousands of persons. Rates
are in per cent.

B. Industry-level Trends
i. Chinese import exposure
At the industry level, we summarize changes in exposure to Chinese import competition
using a modified version of the import penetration ratio discussed earlier. For industry 𝑗, wemeasure ∆𝐼𝐸𝑗,𝑡 , the change in Chinese import exposure over time period 𝑡, as𝐶𝐶∆𝑀𝑗,𝑡∆𝐼𝐸𝑗,𝑡 =𝑌𝑗,92 + 𝑀𝑗,92 − 𝑋𝑗,92(1)

𝐶𝐶
The numerator, ∆𝑀𝑗,𝑡, is the change in Canadian imports from China in industry 𝑗 over time
period 𝑡. The denominator is domestic absorption in industry 𝑗 in 1992, the base year of ouranalysis. Normalizing by initial domestic absorption means that time variation in import13

exposure comes only from changes in Chinese imports and is not affected by other factors that
may have influenced domestic market size during the period of China’s rise. Both the numerator
and denominator of (1) are measured in chained 2007 Canadian dollars, deflated by thehousehold consumption expenditure deflator.
We compute this import exposure measure for 85 four-digit NAICS manufacturingindustries. Table 6 displays the industries with the five largest and five smallest changes inTable 6: Changes in the Chinese Import Penetration Ratio for Selected NAICS
Manufacturing Industries, 2001-2011
Annual percentage-point change, 2001-2011:
Five largest:
NAICS 3341 - Computer and Peripheral Equipment Manufacturing

7.0

NAICS 3169 - Other Leather and Allied Product Manufacturing

6.6

NAICS 3343 - Audio and Video Equipment Manufacturing

5.4

NAICS 3151 - Clothing Knitting Mills

5.2

NAICS 3342 - Communications Equipment Manufacturing

4.9

Five smallest:
NAICS 3274 - Lime and Gypsum Product Manufacturing

0.0

NAICS 3311 - Iron and Steel Mills and Ferro-Alloy Manufacturing

0.0

NAICS 3131 - Fibre, Yarn and Thread Mills-0.1

NAICS 3333 - Commercial and Service Industry Machinery Manufacturing-0.1

NAICS 3132 - Fabric Mills-0.1

Notes:
Figures are the author's calculations based on data in Appendix Tables 1-4. Nominal values weredeflated to chained 2007 dollars using the implicit deflator for household consumption expenditurefrom CANSIM Table 380-0064. The total number of manufacturing industries in the dataset is 85.

Chinese import exposure over the 2001-2011 period. The top five include three information andcommunications technology (ICT) manufacturing industries: computer and peripheral
equipment; audio and video equipment; and communications equipment. Also included in the
top five are two textile manufacturing industries: other leather and allied products; and clothingknitting mills.
No industries exhibited large declines in Chinese import exposure over the period; thefive smallest changes were close to zero.
ii. Employment
Table 7 shows the manufacturing industries with the five largest and five smallest annual
rates of employment growth over the 2001-2011 period, based on census data.The petroleum andcoal products manufacturing industry exhibited the fastest employment growth over the period,at 2.6 per cent per year, followed by dairy product manufacturing (2.2 per cent per year).
14

As the bottom panel of the table reveals, some industries exhibited very large negative
employment growth rates over the 2001-2011 period. All five of the manufacturing industries
with the largest declines in employment were textile industries. The largest decline was inclothing knitting mills; in that industry, employment growth was -16.2 per cent per year.

Table 7: Employment Growth for Selected NAICS Manufacturing Industries, 2001-2011
Annual per cent change, 2001-2011:
Five largest:
NAICS 3241 - Petroleum and Coal Products Manufacturing

2.6

NAICS 3115 - Dairy Product Manufacturing

2.2

NAICS 3273 - Cement and Concrete Product Manufacturing

1.5

NAICS 3331 - Agricultural, Construction and Mining Machinery Manufacturing

1.4

NAICS 3254 - Pharmaceutical and Medicine Manufacturing

0.8

Five smallest:
NAICS 3132 - Fabric Mills-11.0

NAICS 3169 - Other Leather and Allied Product Manufacturing-11.3

NAICS 3152 - Cut and Sew Clothing Manufacturing-12.1

NAICS 3161 - Leather and Hide Tanning and Finishing-12.5

NAICS 3151 - Clothing Knitting Mills-16.2

Notes:
Figures are the author's calculations based on data from the 2001 Census and the 2011 National
Household Survey. Growth rates are calculated using log differences. The total number ofmanufacturing industries in the dataset is 85.

15

Chart 3: Employment Growth and the Change in Chinese Import Exposure, 4-Digit
NAICS Manufacturing Industries, 2001-2011
50

Employment Growth

-1

0

1

2

3

4

5

6

7

8

-5

-10

-15

-20
Change in Chinese Import Exposure

Comparing Table 7 with Table 6 reveals some overlap between the industries with thelargest increases in Chinese import exposure and those with the smallest increases (i.e. thelargest declines) in employment. Two industries appear on both lists: other leather and allied
product manufacturing and clothing knitting mills.
To provide a more complete picture of the bivariate relationship between employment
growth and the change in Chinese import exposure across manufacturing industries, we plot thetwo variables against one another in Chart 3. A negative correlation is evident. Industries withpositive (or only slightly negative) employment growth over the period tended to experience
little increase in Chinese import exposure, while industries with large increases in Chinese
import exposure tended to exhibit large declines in employment.
While only manufacturing industries are directly exposed to a non-negligible degree ofChinese import competition, our econometric analysis will explore spillover effects of Chinese
import competition on employment in non-manufacturing industries. Table 8 displays theindustries with the largest and smallest employment growth rates over the 2001-2011 periodamong all industries, not just manufacturing industries.11

11This table is based on the input-output industry classification (IOIC). The IOIC is based on NAICS but differs in
its treatment of some forms of economic activity, particularly in construction and in the non-profit sector. Our
econometric analysis of spillovers to non-manufacturing industries uses input-output data, and that is why we use
IOIC industries rather than NAICS industries when we look beyond manufacturing.

16

Table 8: Employment Growth for Selected IOIC Industries, 2001-2011
Annual per cent change, 2001-2011:
Five largest:
IOIC 2111 - Oil and Gas Extraction

5.8

IOIC 2131 - Support Activities for Mining and Oil and Gas Extraction

5.6

IOIC GS21 - Universities

4.3

IOIC 4930 - Warehousing and Storage

4.0

IOIC 611A - Educational Services (Except Universities)

3.7

Five smallest:
IOIC 3252 - Resin, Synthetic Rubber, and Artificial and Synthetic Fibres and Filaments-6.6

IOIC 3122 - Tobacco Manufacturing-7.1

IOIC 31A0 - Textile and Textile Product Mills-8.4

IOIC 3160 - Leather and Allied Product Manufacturing-9.2

IOIC 3150 - Clothing Manufacturing-12.2

Notes:
Figures are the author's calculations based on data from the 2001 Census and the 2011 National
Household Survey. Employment estimates by four-digit NAICS industry were transformed into estimatesby four-digit IOIC industry using a mapping described in Trau (2005). Growth rates are calculated using
log differences. The total number of industries in the dataset is 86.

The bottom panel is consistent with Table 7; the industries that exhibited the largest
declines in employment over the 2001-2011 period were manufacturing industries, mostly in theclothing and textiles sectors.
The top panel of Table 8 is quite different from that of Table 7, which reflects the factthat none of the industries that exhibited fast employment growth over the 2001-2011 period are
manufacturing industries. The two fastest-growing industries are in the oil and gas extraction
sector; employment grew by 5.8 per cent per year in oil and gas extraction and by 5.6 per centper year in support activities for mining and oil and gas extraction. Two of the next three highest
employment growth rates were in the education sector: 4.3 per cent per year in universities and3.7 per cent per year in education services (except universities).

C. Trends within Local Labour Markets
Part of our econometric analysis will exploit variation in Chinese import exposure andemployment growth across local labour markets. In related research for the United States, Autoret al. (2013a) measure local labour markets as commuting zones, regions defined by strong
commuting ties within regions and weak commuting ties across regions. For our purposes, we
identify the local labour market concept with the census metropolitan area (CMA) and census
agglomeration (CA) as defined by Statistics Canada. This is a suitable choice since Statistics
Canada defines the boundaries of CMAs and CAs in part on the basis of commuting flows(Statistics Canada, 2011). Our dataset includes the 129 localities present in all three census years(1991, 2001 and 2011). In 2011, CMAs and CAs contained 82 per cent of Canada's population
aged 15 and over.
17

i. Chinese import exposure
We measure the change in a locality’s Chinese import exposure as an employment𝐿
weighted average of industry-level exposure changes. Formally, we measure ∆𝐼𝐸𝑙,𝑡, the change
in the Chinese import exposure of locality 𝑙 over time period 𝑡, as
𝐿∆𝐼𝐸𝑙,𝑡=∑𝑗

𝐿𝑙,𝑗,𝑡∆𝐼𝐸𝑗,𝑡𝐿𝑙,𝑡(2)

where ∆𝐼𝐸𝑗,𝑡 is the change in Chinese import exposure of industry 𝑗 as defined in equation (1),𝐿

and 𝐿𝑙,𝑗,𝑡 is the share of industry 𝑗 in total employment in locality 𝑙 at the beginning of time period𝑙,𝑡𝑡.
There has been substantial regional variation in changes in Chinese import exposure overthe 2001-2011 period (Table 9). The localities that exhibited the largest increases in Chinese
import exposure over the period were all located in Quebec or Ontario. Of the ten localities thatexhibited the smallest increases in Chinese import exposure, six are located in Western Canada
and two in the Atlantic region. This pattern reflects the relative concentration of economic
activity in Quebec and Ontario in manufacturing industries, while other regions specialize incommodities industries less exposed to Chinese import competition. No locality experienced adecrease in import exposure over the 2001-2011 period.
ii. Employment
Following Acemoglu et al. (2016), we measure employment change within local labour
markets using annual percentage-point changes in employment rates rather than per cent annual
employment growth rates as in the earlier industry-level analysis. This is to account for local
population changes over time as a result of migration between local labour markets (possibly inresponse to trade shocks).
Regional variation in employment rate changes over the 2001-2011 period is a mirror
image of the regional variation in Chinese import exposure changes (Table 10). Among the ten
localities with the smallest changes (i.e. the largest declines) in the employment rate, seven are in
Quebec or Ontario. Among the ten localities with the largest employment rate increases over theperiod, there are four Quebec localities but zero from Ontario (the province that contains themost localities by far). Four of the top ten are in Western Canada and two in the Atlantic
region.12

12

Readers may be surprised that Cape Breton exhibited the largest employment rate increase of any CMA or CA
over the 2001-2011 period. This was driven in part by a large decline in the working-age population of that locality.
Between 2001 and 2011, Cape Breton's population aged 15 and over declined by 0.31 per cent per year, from 89,640
to 86,895.

18

Table 9: Changes in Chinese Import Exposure for Selected Local Labour Markets, 20012011
Annual percentage-point change, 2001-2011:
Ten largest:
CMA/CA 450 - Granby, Quebec

0.32

CMA/CA 440 - Victoriaville, Quebec

0.32

CMA/CA 454 - Sorel-Tracy, Quebec

0.29

CMA/CA 428 - Saint-Georges, Quebec

0.28

CMA/CA 541 - Kitchener - Cambridge - Waterloo, Ontario

0.27

CMA/CA 553 - Stratford, Ontario

0.27

CMA/CA 512 - Brockville, Ontario

0.26

CMA/CA 550 - Guelph, Ontario

0.25

CMA/CA 465 - Salaberry-de-Valleyfield, Quebec

0.25

CMA/CA 452 - Saint-Hyacinthe, Quebec

0.24

Ten smallest:
CMA/CA 320 - Fredericton, New Brunswick

0.02

CMA/CA 010 - Grand Falls-Windsor, Newfoundland and Labrador

0.02

CMA/CA 850 - Grande Prairie, Alberta

0.02

CMA/CA 598 - Kenora, Ontario

0.02

CMA/CA 977 - Fort St. John, British Columbia

0.02

CMA/CA 745 - Prince Albert, Saskatchewan

0.02

CMA/CA 411 - Dolbeau-Mistassini, Quebec

0.02

CMA/CA 965 - Terrace, British Columbia

0.01

CMA/CA 845 - Cold Lake, Alberta

0.01

CMA/CA 860 - Wood Buffalo, Alberta

0.01

Notes:
The change in Chinese import exposure by CMA/CA is the employment-weighted average of (national)
industry-level changes. At the industry level, the change in Chinese import exposure is equal to 100
times the change in real imports from China between 2001 and 2011, divided by real domestic
absorption in that industry in our base year (1992). The employment weights at the CMA/CA level are
obtained from the 2001 Census and the 2011 National Household Survey. The total number of
CMAs/CAs in the dataset is 129.

19

Table 10: Changes in Employment Rates for Selected Local Labour Markets, 2001-2011
Annual percentage-point change, 2001-2011:
Ten largest:
CMA/CA 225 - Cape Breton, Nova Scotia

0.42

CMA/CA 001 - Saint John's, Newfoundland and Labrador

0.42

CMA/CA 408 - Saguenay, Quebec

0.41

CMA/CA 480 - Val-d'Or, Quebec

0.38

CMA/CA 725 - Saskatoon, Saskatchewan

0.29

CMA/CA 485 - Rouyn-Noranda, Quebec

0.29

CMA/CA 705 - Regina, Saskatchewan

0.25

CMA/CA 421 - Quebec, Quebec

0.25

CMA/CA 915 - Kelowna, British Columbia

0.19

CMA/CA 715 - Moose Jaw, Saskatchewan

0.18

Ten smallest:
CMA/CA 437 - Cowansville, Quebec-1.07

CMA/CA 584 - Temiskaming Shores, Ontario-1.07

CMA/CA 468 - Lachute, Quebec-1.07

CMA/CA 955 - Prince Rupert, British Columbia-1.09

CMA/CA 865 - Wetaskiwin, Alberta-1.11

CMA/CA 546 - Tillsonburg, Ontario-1.17

CMA/CA 110 - Summerside, Prince Edward Island-1.17

CMA/CA 528 - Port Hope, Ontario-1.18

CMA/CA 502 - Hawkesbury, Quebec/Ontario-1.32

CMA/CA 557 - Leamington, Ontario-1.32

Notes:
Figures are the author's calculations based on data from the 2001 Census and the 2011 National
Household Survey. The total number of CMAs/CAs in the dataset is 129.

20

Chart 4: Changes in the Employment Rate and in Chinese Import Penetration, CMAs/CAs,
2001-2011
0.6
0.4
0.2

Change in Employment Rate

0.0
-0.2

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

-0.4
-0.6
-0.8
-1.0
-1.2
-1.4
-1.6
Change in Chinese Import Exposure

Chart 4 plots the annual change in the employment rate against the annual change in
Chinese import exposure for all 129 localities in our dataset. While there is substantial noise in
the data, a negative relationship is discernable.13

D. Comparison with the United States
The econometric strategy in this report is adapted from the work of Acemoglu et al.
(2016) on labour market outcomes in the United States. The prima facie evidence that motivatesthe analysis in that paper is the coincident timing of the rise of U.S. imports from China, thedecline of U.S. manufacturing employment, and the stagnation of U.S. total employment after
the year 2000. Panel A of Chart 5 presents this U.S. evidence. Panel B presents analogous
statistics for Canada.

13

The raw correlation between the two variables is -0.28. A regression of the change in the employment rate against
the change in Chinese import exposure and a constant yields a coefficient estimate of -1.38, significant at the one percent significance level.

21Chart 5: Employment and Chinese Import Penetration, United States and Canada

Manufacturing Employment (Left axis)

Chinese import penetration (per cent)

2011

2010

2009

2008

2007

0

2006

0

2005

1

2004

0.2

2003

2

2002

0.4

2001

3

2000

0.6

1999

4

1998

0.8

1997

5

1996

1

1995

6

1994

1.2

1993

7

1992

1.4

1991

Employment (1991 = 1)

A. United States

Total Employment (Left axis)

Chinese Import Penetration (Right axis)

10

1.4

9
8

1.2

7

1

6

0.8

5

0.6

4
3

0.4

2

0.2

1

0

0

Manufacturing Employment (Left axis)

Total Employment (Left axis)

Chinese Import Penetration (Right axis)
Notes: U.S. data are from Acemoglu et al. (2016). Canadian data are from Table 3 and Table 4.

22

Chinese import penetration (per cent)

1.6

1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

Employment (1991 = 1)

B. Canada

Chart 5 reveals both important similarities and important differences between the twocountries. In both countries, the Chinese import penetration ratio was below one per cent in theearly 1990s and increased slowly until around 2000, after which year its growth accelerated.
Both countries exhibit a downturn in manufacturing employment at about the same time; peakmanufacturing employment was in 1998 in the United States and in 2004 in Canada. During thepeak-to-peak period 2000-2008, manufacturing employment declined by a cumulative 20.0 per
cent in the United States and by 14.1 per cent in Canada. Since 2009, manufacturing employment
has stabilized in Canada but has continued to decline in the United States.
One key difference is that manufacturing employment was stagnant over the 1990s in the
United States, whereas it grew by a robust 2.7 per cent per year over the 1992-2000 period in
Canada. The other difference is the behaviour of total employment. After exhibiting positive
growth throughout the 1990s, total employment in the United States stagnated over the 2000s.
Acemoglu et al. (2016) refer to this as "the great U.S. employment sag of the 2000s."14 In stark
contrast, Canadian total employment continued to grow throughout the 2000s, showing a slight
downturn only around the 2008 recession. Evidently, there was no "great Canadian employment
sag of the 2000s."
Based on this descriptive evidence, we might expect to find that increased Chinese importcompetition has reduced Canadian manufacturing employment to some extent, consistent with
the Acemoglu et al. (2016) results for the United States. On the other hand, we might expect thespillover impact of Chinese manufacturing imports on employment in non-competing Canadianindustries (either through input-output linkages or through aggregate demand effects) to bemuted relative to the analogous effect in the U.S. context. Acemoglu et al. found that theinclusion of input-output spillover effects more than tripled their estimate of job losses relative tothe direct effect, and this acted as a major drag on U.S. total employment growth over the 2000s.
Our descriptive analysis provides no prima facie evidence for such a strong effect of importcompetition on total employment in Canada (though of course it is possible that such an effect
was present over the 2000s and was simply offset by other factors that drove Canada's strong
overall employment growth).
Simple descriptive analysis can neither corroborate nor disprove these conjectures. In thenext section, we therefore turn to an econometric strategy aimed at identifying the causal impactof rising Chinese import competition on Canadian employment.

III. Effect of Chinese Import Competition on Canadian Employment
Acemoglu et al. (2016) develop an econometric method to quantify the impact of Chinese
import competition on U.S. employment. The method exploits both industry variation andgeographic variation in employment growth and import exposure. An instrumental variables
14

Acemoglu et al. (2016) end their analysis in 2011. U.S. employment grew by a mediocre 0.75 per cent per year
over the 2000-2008 period, then fell by 1.27 per cent per year between 2008 and 2011. After 2011, however, U.S.
employment growth has improved; it averaged 1.56 per cent per year over the 2011-2015 period. The "employmentsag" label applies best to the period 2000-2008, when the U.S. economy was not in recession but employment
growth was weak.

23

approach is used to identify the causal impact of the rapid increase in China's exporting prowessin the 1990s and, especially, the 2000s. The authors' preferred estimates imply that this “China
shock” caused net job losses in the range of 2.0 to 2.4 million jobs over the 1999-2011 period in
the United States.
We adapt the method of Acemoglu et al. (2016) to estimate the impact of the "China
shock" on Canadian employment. Three successive sets of estimates are developed: 1) the direct
effect of increased import competition on industry-level employment in manufacturingindustries; 2) the spillover effects on industry-level employment in manufacturing and nonmanufacturing industries arising through input-output linkages; and 3) the combined impact of
direct effects, labour reallocation and aggregate demand effects within local labour markets.
This section contains four parts. The first part describes the data sources. The remaining
three parts successively present the three sets of estimates described above. In each of theseparts, we first lay out the empirical strategy and then present the estimation results.

A. DataInternational trade data for Canada are drawn from the Trade Data Online databasemaintained by Innovation, Science and Economic Development Canada. Trade Data Online
provides import and export statistics by detailed NAICS industry. We extracted the nominal
values of total imports, total exports, and imports from China for 85 four-digit NAICS
manufacturing industries for the 1992-2015 period, the full period for which the data are
available.
Construction of the instrumental variable requires data on the Chinese imports of eight
other advanced economies by four-digit NAICS industry. To build this dataset, we obtained dataon each country's Chinese imports by six-digit HS product code from the UN Comtrade
database. We mapped these data into 85 four-digit NAICS manufacturing industries using aprocedure based on the crosswalk developed in Pierce and Schott (2012).15
The import penetration measures are normalized by the industry's total domestic
absorption. Data on total shipments by four-digit NAICS manufacturing industry are drawn fromCANSIM Table 304-0014.
We draw measures of employment by four-digit NAICS industry and by industry-byCMA/CA cell from the 1991 and 2001 censuses and the 2011 National Household Survey. 16 The
15

There are actually 86 four-digit NAICS manufacturing industries. Our mapping from HS products to NAICS
industries mapped no products into NAICS code 3328 (Coating, engraving, cold and heat treating and allied
activities). We therefore dropped that industry from the analysis, leaving us with a sample of 85 manufacturingindustries. We suspect that our results would not be sensitive to the exclusion of industry 3328; in the Canadian datafrom Trade Data Online, measured imports in this industry are close to zero (and, for Chinese imports, are missing
in several years).
16
Industry of employment was coded according to the 1980 SIC in the 1991 census. In the 2001 census, both SIC
and NAICS codes are available. We used the 2001 census to construct national and locality-specific NAICS-to-SIC
crosswalks based on employment shares. We applied these to the 1991 census data to transform SIC-based24census is the only data source sufficiently detailed to allow for our local labour markets
analysis.17
Information on the input-output structure of the Canadian economy is taken from
Statistics Canada's CANSIM Table 381-0009. We use the 1992 input-output table, which
provides industries' current-dollar inputs and outputs of 472 commodities. We transform therectangular industry-by-commodity table into the square industry-by-industry table using the'industry technology' procedure described in Capeluck (2015b) and Horowitz and Planting(2009).
The input-output accounts use the Input-Output Industry Classification (IOIC), which isbased upon but not identical to NAICS. For the part of our analysis that uses input-output
information to compute upstream and downstream trade exposure, we collapse our NAICS-based
trade and employment growth measures into IOIC-based measures in order to make themcommensurable with the input-output data.
In the end, our sample for Step 1 (the estimation of the direct industry-level effect)contains observations for 85 four-digit NAICS manufacturing industries. Our sample for Step 2(the estimation of the indirect effects that propagate via input-output linkages) contains
observations for 86 IOIC industries (42 manufacturing industries and 44 non-manufacturingindustries). Our sample for Step 3 (the estimation of direct effects, reallocation effects andaggregate demand effects operating within local labour markets) contains observations for 129
CMAs/CAs; that is, all the CMAs/CAs present in all three census years.

B. Step 1: Industry-level Direct Effecti. Empirical strategy
The first-step estimate is obtained by running the following regression on industry-leveldata:∆𝐿𝑗,𝑡 = 𝛼𝑡 + 𝛽∆𝐼𝐸𝑗,𝑡 + 𝑒𝑗,𝑡(3)

where ∆𝐿𝑗,𝑡 is annual employment growth in manufacturing industry 𝑗 over time period 𝑡 and∆𝐼𝐸𝑗,𝑡 is the change in Chinese import exposure in industry 𝑗 over time period 𝑡, 𝛼𝑡 is a period-

employment estimates into NAICS-based employment estimates. This potentially introduces some information fromthe Canadian economy’s 2001 employment structure into our 1991 estimates, but only to the extent that changes inthe economy between 1991 and 2001 altered the empirical relationship between SIC categories and NAICS
categories. We do not think this is a major concern, and in any event most of our main results are driven by the
2001-2011 period.
17
The main alternative source of employment statistics would be the Labour Force Survey, but the sample size ofthat survey does not permit the detailed analysis of employment by CMA/CA and industry that we carry out in thisreport. Even at the national level, Statistics Canada suppresses estimates of employment for many four-digit NAICS
industries. We have nevertheless performed the estimation exercises for steps 1 and 2 of our analysis using LFSbased employment estimates, and the results are broadly consistent with the census-based estimates we report.

25

specific constant, and 𝑒𝑗,𝑡 is an error term.18 The coefficient of interest is 𝛽, the marginal impactof import penetration on employment.
Our measure of the change in import exposure∆𝐼𝐸𝑗,𝑡 was defined earlier in equation (1).
As a reminder, we repeat it here; it is𝐶𝐶∆𝑀𝑗,𝑡∆𝐼𝐸𝑗,𝑡 =𝑌𝑗,92 + 𝑀𝑗,92 − 𝑋𝑗,92(4)𝐶𝐶
Here, ∆𝑀𝑗,𝑡denotes the change in Canada's imports from China in industry 𝑗 over time period 𝑡
while 𝑌𝑗,92 + 𝑀𝑗,92 − 𝑋𝑗,92 denotes domestic market absorption in the initial period (in our case,1992). All nominal values are deflated to chained 2007 Canadian dollars using the PCE deflator,
so that the numerator reflects the change in the real value of imports. In equation (4), variation
over time within an industry reflects only the change in the real value of imports from China (thenumerator), while the domestic market size (the denominator) remains constant at its initialvalue.19

To isolate the impact of rising Chinese exporting capacity (as opposed to other sources ofrising imports from China, such as increased Canadian demand), an instrumental variables
strategy is applied whereby Chinese import exposure in a set of other advanced economies isused as an instrument for ∆𝐼𝐸𝑗,𝑡 . To be precise, we instrument for ∆𝐼𝐸𝑗,𝑡 using∆𝐼𝐸𝑂𝑗,𝑡 =

𝑂𝐶
∆𝑀𝑗,𝑡

𝑌𝑗,92 + 𝑀𝑗,92 − 𝑋𝑗,92(5)

𝑂𝐶
where ∆𝑀𝑗,𝑡is the change in the Chinese imports of eight other advanced economies in industry
𝑗 over time period 𝑡.20 The total nominal imports of the eight comparison countries are converted
18

Acemoglu et al. (2016) include a vector of industry-level controls in the regression (average wages, pre-1992
employment growth, measures of industry-level technological sophistication and capital intensity, etc.). We include
no controls. Due to data constraints, we have substantially fewer observations than Acemoglu et al. had for theUnited States and we want to preserve degrees of freedom. In the U.S. case, Acemoglu et al. found that theircontrols did not affect the main results.
19
We follow Acemoglu et al. (2016) in measuring an industry's exposure to Chinese import competition using animport penetration ratio. This approach captures competition for sales in the domestic Canadian market but ignores
the effect of Chinese competition for Canadian sales in third markets. One might question the appropriateness of thisapproach for a country like Canada, a small open economy that exports a large share of its manufacturing output.
How accounting for Chinese competition in Canada's export markets would affect our results is a question we leave
for future research. To the extent that our import penetration measure fails as a proxy for total Chinese competition(i.e. inclusive of competition over foreign markets markets), we might expect that our results will understate theimpact of China's rise on Canadian employment.
20
The eight countries are Australia, Denmark, Finland, Germany, Japan, New Zealand, Spain and Switzerland. Thisis the same set of countries used by Acemoglu et al. (2016). They were selected on the basis of data availability in
the UN COMTRADE database. We chose not to add the United States to this list. Given the physical proximity andthe depth of economic integration between Canada and the United States, as well as the size disparity, we think an
instrument based on U.S. data would be unlikely to satisfy the exclusion restriction required for instrumental
variables (IV) estimation. For example, import demand shocks in Canada and the United States are probably
correlated. See Angrist and Pischke (2009) for an explanation of the technical conditions that justify IV estimation.

26

from U.S. dollars to Canadian dollars using annual PPPs for personal consumption expendituresfrom the OECD, then deflated to chained 2007 Canadian dollars using the Canadian PCE
deflator.
The key identifying assumption underlying this strategy is that, within industries, thecommon component of Chinese import growth across advanced economies primarily reflects
China's rising exporting capacity (e.g. productivity growth in China's exporting firms). Potential
threats to identification include the possibility that import demand shocks are correlated acrossCanada and the other eight countries or the possibility that adverse Canadian productivity shocks
have led buyers both in Canada and in other advanced countries to substitute Chinese goods for
Canadian goods. The former would lead us to underestimate the impact of the China shock on
Canadian employment. We think the latter is unlikely to be a major concern because of Canada's
small size relative to the global economy and because China's massive export growth since 2000
appears to be related to technological and policy factors specific to China. Autor et al. (2013a)
provide further discussion of this point.
We estimate equation (3) by two-stage least squares on a pooled sample of industry-levelchanges in employment and import exposure over the periods 1991-2001 and 2001-2011.21
There are 170 observations (85 manufacturing industries for two periods). We measure thechanges in employment and import penetration in annualized terms. Observations are weighted
by industry employment levels in 1991, so that industries that were initially larger receive greater
weight. Standard errors are clustered within 21 three-digit NAICS categories.
Once we have obtained an estimate of the regression coefficient 𝛽 in equation (3), we cancompute an estimate of the direct employment impact of the change in Chinese import̃competition in Canadian manufacturing industries. Let ∆𝐼𝐸𝑗,𝑡 denote the portion of the change in
Canada's Chinese import exposure in industry 𝑗 attributable to the Chinese export supply shock.
𝑐𝑓
Let 𝐿𝑗,𝑡 be actual employment in industry 𝑗 at time 𝑡 and let 𝐿𝑗,𝑡 be the counterfactual̃
employment level that would have obtained if ∆𝐼𝐸𝑗,𝑡 had been equal to zero. Then using equation(3), the total direct employment effect of rising Chinese import competition in Canadianmanufacturing industries is
𝑐𝑓

𝑐𝑓∆𝐿𝑡 = ∑(𝐿𝑗,𝑡 − 𝐿𝑗,𝑡 )
𝑗

(6)
̃

= ∑ 𝐿𝑗,𝑡 (1 − 𝑒 −𝛽∆𝐼𝐸𝑗,𝑡 )𝑗̃
We measure ∆𝐼𝐸
𝑗,𝑡 as the observed change in Chinese import exposure, ∆𝐼𝐸𝑗,𝑡 , multiplied by thepartial R-squared from the first-stage regression of ∆𝐼𝐸𝑗,𝑡 on the instrument ∆𝐼𝐸𝑂𝑗,𝑡 . In our
regression results, that partial R-squared is equal to 0.57.
21

Data on Chinese imports by industry are available from 1992 onward, so the measure of the change in importcompetition is defined for the periods 1992-2001 and 2001-2011. We do not view this as problematic since allchanges are measured in annualized terms and Chinese imports were small in the early 1990s.

27

ii. Results
Data summary
Table 11 presents summary statistics for the three key variables used in the estimation ofequation (1). The distributions of the Chinese import penetration ratio in Canada and in thecomparison countries are quite similar, both over the 1991-2011 period and within the two subperiods 1991-2001 and 2001-2011. The distribution of import penetration ratio changes isskewed to the right; most industries exhibited small annual increases in import penetration (i.e.
below one percentage point per year), while a small subset of the industries showed very large
increases. In both Canada and the comparison countries, Chinese import penetration increased
faster in the average manufacturing industry after 2001 relative to before.
Chart 6 plots ∆𝐼𝐸𝑗,𝑡 against ∆𝐼𝐸𝑂𝑗,𝑡 by four-digit NAICS manufacturing industry, where
the changes are measured over the periods 1991-2001 and 2001-2011. The strong positive
relationship between the key variable of interest ∆𝐼𝐸𝑗,𝑡 and its instrument ∆𝐼𝐸𝑂𝑗,𝑡 is evident in
the scatter plot. The employment-weighted correlation between the two variables is 0.77.
The dependent variable in equation (3) is annual employment growth by industry. Acrossfour-digit NAICS manufacturing industries, employment growth averaged -1.27 per cent per

Change in Chinese Import Penetration,
Comparison Countries (percentage points)

Chart 6: Change in Chinese Import Exposure in Canada and in Comparison
Countries, Percentage Points per Year, 1991-2001 and 2001-2011
9
8
7
6
5
4
3
2
1
0
-1
-1

0

1
2
3
4
5
6
Change in Chinese Import Penetration, Canada(percentage points)

7

Note: There are 170 points on this chart: 85 changes over the 1991-2001 period and 85 changes over the
2001-2011 period.

28

8Table 11: Summary Statistics on Changes in Employment and in Chinese Import Exposure by 4-Digit NAICS
Manufacturing Industry
1991-2011

1991-2001

2001-2011
Mean

SD

No. of
Obs.
85

Mean

SD

Median

Min

Max

Mean

SD

0.67

0.96

0.22

-0.006

5.20

0.38

0.70

0.9

1.31

Instrument for annual Δ in Chinese import exposure

85

0.63

0.90

0.24

0.001

6.59

0.33

0.56

0.87

1.26

Annual growth rate of employment

85

-1.27

2.21

-0.75

-7.69

2.50

0.91

2.38

-3.44

3.45

Annual Δ in Chinese import exposure

Notes:
The annual change in Chinese import exposure is 100 x the average annual absolute change in Canadian imports from China over the period
indicated, divided by the total Canadian market volume (i.e. total shipments plus imports less exports) in that industry in 1992.
The instrument is 100 x the average annual absolute change in imports from China in a set of eight comparator countries over the period
indicated, divided by 9.8 x the total Canadian market volume (i.e. total shipments plus imports less exports) in that industry in 1992. (9.8 is theratio of the eight countries' combined GDP to that of Canada in 1992 at PPP.) The comparator countries are Australia, Denmark, Finland, Germany,
Japan, New Zealand, Spain and Switzerland.
The trade values for the instrument were converted from US dollars to Canadian dollars using OECD annual PCE-based PPPs. Then all trade values(for Canada and the comparator countries) and market absorption measures were deflated to 2007 chained Canadian dollars using the PCE
deflator.
Employment changes are average annual per cent changes based on data from the 1991 and 2011 census and the 2011 National Household
Survey.
Observations are weighted by industry-level employment in 1991.

29

year over the 1991-2011 period. The reversal of manufacturing employment growth in the 2000s
is evident here; average employment growth was 0.91 per cent per year over the 1991-2001
period, then fell to -3.44 per cent per year over 2001-2011 period.22
Estimation results
We estimate several regressions based on equation (3). The results are presented in Table
12. Columns (1) and (2) provide a baseline for the analysis. Column (1) excludes the Chinese
import exposure variable; the coefficients on the time indicators reflect the mean growth rates of
employment over the two periods, as displayed in Table 11. In column (2), the Chinese import
exposure variable is added but the instrumental variable is not used. The coefficient estimate on
Chinese import exposure is negative; a larger increase in Chinese import penetration isassociated with lower employment growth in an industry. The estimate is statistically significant,though only at the ten per cent significance level.
The negative and significant OLS estimate in column (2) is consistent with the view thatrising Chinese import competition has reduced employment growth in Canadian manufacturingindustries, but correlation does not establish causation. As noted earlier, we need to isolate theimpact of rising Chinese exporting capacity (as opposed to increased Canadian import demand).
Thus, we estimate the regression by two-stage least squares (2SLS), using the change in Chinese
import exposure in the eight comparison countries as an instrument for the change in Chinese
import exposure in Canada.
Column (3) presents the 2SLS estimates. The coefficient estimate on the importpenetration variable is -1.36, substantially larger in absolute value than the OLS estimate, and it
is statistically significant at the five per cent level. This estimate implies that if the annual change
in an industry’s exposure to Chinese import competition rises by one percentage point, annual
employment growth in that industry is reduced by 1.36 percentage points.
The remaining columns of Table 12 present estimates of the relationship between
employment growth and Chinese import exposure for the 1991-2001 and 2001-2011 sub-periods
separately. We detect a significant impact of rising import competition on employment growth
only in the latter period. These results should be interpreted with caution, since they are based on
only 85 observations. Nevertheless, it is reassuring that the 2SLS estimate for 2001-2011 (incolumn 7) is -1.48, not so different from the main estimate from column (3). These results
suggest that our main estimate in column (3) is driven mainly by the 2001-2011 data. We
showed earlier that most of the increase in Chinese import penetration in Canadian industries
occurred after 2001.

22

The difference between the manufacturing employment growth rate for 2001-2011 given here and the one
reported in Table 5 is attributable to the fact that the observations underlying the summary statistics in Table 11 areweighted by employment levels in 1991.

30

Table 12: Effect of Import Exposure on Employment in Canadian Manufacturing Industries: OLS and 2SLS Estimates
Stacked Differences

Separated by Sub-period

1991-2001 and 2001-2011(1)

𝟙{1991-2001}

0.91**(0.43)(2)-0.82*(0.48)
1.23***(0.42)

𝟙{2001-2011}-3.44***(0.71)-2.70***(0.57)----

Annual Δ in Chinese import exposure--(3)-1.36**(0.68)
1.43***(0.47)
2.22***(0.61)

1991-2001

1991-2001

2001-2011

2001-2011

(4)
-0.01
(0.41)(5)-0.74(0.54)(6)-1.05*(0.58)(7)-1.48**(0.75)

--

--

--

--

--

--

--

--

1.20**(0.48)
85-2.49***(0.61)
85-2.10***(0.64)
85

2SLS

OLS

2SLS

Number of Observations

170

170

170

0.92*
(0.46)
85

Estimation Method

OLS

OLS

2SLS

OLS

Constant--

First-stage F Statistic--48.0-12.8-46.9
Notes:In all specifications, the dependent variable is the average annual growth rate of employment by industry over the specified period.
Standard errors are in parentheses. Standard errors are clustered on 21 three-digit industry groups. Observations are weighted by industry
employment in 1991.
*** p < .01** p < .05* p < .1031

Analysis of results
Using the coefficient estimate in column (3) of Table 12 together with equation (6), we
estimate the total number of manufacturing jobs in Canada that did not exist in 2011 as a resultof the increase in Chinese import competition over the 1991-2011 period. That estimate ispresented in the first row of Table 13. According to our estimates, direct Chinese importcompetition led to a net loss of 169.5 thousand manufacturing jobs in Canada over the 19912011 period. This total includes 64.3 thousand lost jobs over 1991-2001 and 105.2 thousand over
2001-2011.
One way to contextualize these estimates is to compare them with the actual employmentchanges that occurred over the 1991-2011 period and within the two sub-periods. The first row
of Table 14 provides this information. Between 1991 and 2011, manufacturing employment in
Canada declined by 334.3 thousand jobs. Over the same period, our estimates imply that rising
import competition led to a loss of 169.5 thousand jobs. This means that rising importcompetition from China accounts for 50.7 per cent of the overall decline in manufacturing
employment between 1991 and 2011; if the increase in Chinese import competition had notoccurred (and all other factors in the economy somehow remained unchanged), the decline in
manufacturing employment over the period would have been 164.8 thousand instead of 334.3
thousand.
The direct effect of rising import exposure reduced manufacturing employment in bothsub-periods. Total manufacturing employment nevertheless increased by 173.5 thousand over the
1991-2001 period; absent the employment losses associated with rising Chinese importcompetition, the gain in manufacturing jobs over the period would have been 237.8 thousand, or
37.1 per cent larger.
Over the 2001-2011 period, by contrast, manufacturing employment declined by 507.8
thousand jobs. Our estimates imply that the direct effect of rising import competition accounted
for 105.2 thousand of these job losses, or 20.7 per cent of the total decline.
Further context is provided by comparing our results with the results obtained by
Acemoglu et al. (2016) for the United States. Those authors found that U.S. manufacturing
employment declined by 5.8 million over the 1999-2011 period and that rising Chinese importcompetition reduced manufacturing employment by 560 thousand over the same period. Thus,
the increase in Chinese import competition accounted for 9.7 per cent of the total decline.
At 20.7 per cent, our estimate of the proportional impact of rising Chinese importcompetition on Canadian manufacturing employment over the 2001-2011 period is twice as large
as the Acemoglu et al. estimate of 9.7 per cent for the United States over the 1999-2011 period.
The main explanation for this difference is that the increase in Chinese import exposure over theperiod was larger in Canada than in the United States; the mean annual percentage-point increasein Chinese import penetration was 0.90 percentage points in Canadian manufacturing industries(Table 11), compared to 0.50 percentage points in the United States (Table 1 in Acemoglu et al.,2016). A secondary part of the explanation is that our estimate of the marginal impact of Chinese
import exposure on employment growth in Canada (-1.36, from Table 12) is slightly larger in
32

Table 13: Implied Employment Changes Induced by Changes in Exposure to Chinese Import Competition
Implied Employment Effect (x1,000)
Regression
Specification
Table 12, column 3

Unit of Analysis

Description

Affected Sector(s)1991-2001

2001-2011

1991-2011

Industry (NAICS)

Direct effect of import exposure

Manufacturing-64.3-105.2-169.5

Table 16, column 2

Industry (IOIC)

Direct effect of import exposure

Manufacturing-72.5-118.6-191.1

Table 16, column 5

Industry (IOIC)

Direct and first-order upstream effects
of import exposure

Total

-71.5

-131.3-202.8--Industry (IOIC)

Direct and first-order upstream effects
of import exposure

Manufacturing-60.2-100.9-161.1

Table 18, column 2

Locality(CMA/CA)

Direct, labour reallocation and local
demand effects of import exposure

Total

-59.4

-169.1-228.6

Total

-55.7

-153.6-209.3

Exposed-92.6-255.4-347.9Non-exposed tradable

-18.3

-50.7

-69.0

Non-exposed non-tradable

55.3

152.4

207.7

Table 18, column 4

Locality(CMA/CA)

Direct, labour reallocation and local
demand effects of import exposure

33

Table 14: Actual and Counterfactual Employment Changes, Thousands of Jobs, 1991-2011
1991-2001

Description

Affected Sector(s)2001-2011

1991-2011

ActualEmployment
ChangeCounterfactual
Employment
ChangeActualEmployment
ChangeCounterfactual
Employment
ChangeActualEmployment
ChangeCounterfactual
Employment
ChangeDirect effect of import exposure

Manufacturing (NAICS)

173.5

237.8

-507.8-402.6-334.3-164.8

Direct effect of import exposure
Direct and first-order upstream
effects of import exposure
Direct and first-order upstream
effects of import exposure
Direct, labour reallocation and local
demand effects of import exposure by
CMA/CA and sector

Manufacturing (IOIC)

173.5

246.0

-507.8-389.2-334.3-143.2

Total

1,689.6

1,761.2

1,899.9

2,031.2

3,589.5

3,792.4

Manufacturing

173.5

233.7

-507.8-406.9-334.3-173.2

Total

1,678.6

1,738.0

1,764.2

1,933.3

3,442.8

3,671.3

Total
Direct, labour reallocation and local
demand effects of import exposure by
CMA/CA and sector

1,678.6

1,734.3

1,764.2

1,917.8

3,442.8

3,652.1

Exposed

216.7

309.3

-344.3-88.9-127.6220.3

Non-exposed traded

-12.2

6.1

21.6

72.3

9.4

78.4

Non-exposed non-traded

1,474.1

1,418.9

2,086.8

1,934.4

3,561.0

3,353.334

magnitude than their estimate for the United States (-1.30, from their Table 2). Via equation (6),these factors contribute to the result that rising Chinese import competition accounts for a larger
share of the total manufacturing employment decline in Canada than in the United States.23
The key message of our results is that rising import competition from China has had asubstantial negative impact on manufacturing employment in Canada. This is especially true
after 2001, when China’s expansion into global markets for manufactured goods accelerated.
Other factors that had buttressed Canadian manufacturing employment in the 1990s ceased to do
so in the 2000s; by our estimates, Canada would have lost 402.6 thousand manufacturing jobs
after 2001 even without the rise of import competition from China. Moreover, Canada
experienced robust employment growth over the 2000s outside of manufacturing. Nevertheless,import competition appears to be a substantial part of the explanation of the decline of Canadianmanufacturing employment.
Two caveats are worth noting with respect to the analysis above. First, we assumed thatthe marginal impact of import competition on employment growth was the same in the 19912001 period as in the 2001-2011 period (based on column 3 of Table 12). Columns 5 and 7 ofTable 12 suggest that rising import competition negatively affected employment growth only inthe 2001-2011 period; the relevant coefficient estimate for the 1991-2001 period (in column 5)
was not statistically significantly different from zero. Thus, a more conservative estimate of the
net loss of manufacturing jobs over the 1991-2011 period would be around 105.2 thousand, ourestimate for the 2001-2011 period.24
The second caveat is that the 2001-2011 period encompasses the global recession of
2008-2009 and the beginning of the subsequent recovery. That recession led to a significant
disruption of global trade and to substantial employment losses in Canada. In unreported
regressions based on employment estimates from the Labour Force Survey, we estimatedequation (3) on a pooled sample of changes over the 1991-2001 and 2001-2007 periods (so that
our time period excludes the Great Recession and its effects). The coefficient estimate on
Chinese import exposure remains statistically significant and negative but is somewhat smaller inmagnitude.25 If we repeat the calculation in equation (6) using those alternative coefficientestimates, we obtain estimated employment effects of -32.2 thousand jobs over the 1991-2001
period and -51.4 thousand over the 2001-2011 period, for a total of 83.6 thousand lost
manufacturing jobs. While these numbers are not directly comparable to our main results (since
they are based on data from a different source), the possible sensitivity of our regression

23

Equation (6) reveals a third potential explanation: the estimated share of the increase in Chinese importpenetration that is attributable to China's rising exporting capacity (i.e. the partial R-squared from the first-stage ofthe 2SLS regression). However, our estimate of that share (0.57) is essentially the same as the share used by
Acemoglu et al. for the United States (0.56).
24
Note that the coefficient estimates in columns 3 and 7 of Table 12 are quantitatively similar. Recalculating theimplied manufacturing employment reduction based on column 7 would therefore yield close to the same number –about 105 thousand – that we obtained by applying the coefficient in column 3 to the 2001-2011 period.
25
The coefficient estimate is -0.76 and significant at the 5 per cent significance level. As in our main results,
estimation by sub-period finds statistical significance only in the second period, 2001-2007. The coefficient estimate
for 2001-2007 is -0.70 (significant at the 5 per cent level), similar to the estimate of -0.76 based on stacked changes
over 1991-2001 and 2001-2007.

35

estimates to the choice of the end date (i.e. 2007 or 2011) means that our results should beinterpreted with caution.26
That being said, it is not obvious that the 2008-2009 recession and its aftermath should be
excluded from the analysis. It could be the case that industry-level employment is more sensitive
to trade competition during recessions than during booms, so that we would miss an importantcomponent of the employment cost of rising import competition if we excluded the recession.
This is known to be true of other economic forces that are analytically similar to international
trade. Job losses due to the automation of routine tasks, for example, are concentrated inrecessions even though the underlying technological progress is not so concentrated (Jaimovichand Siu, 2015). If firms face fixed adjustment costs associated with shutting down, adopting a
new technology, or moving production to a new location, it may be optimal for them to wait until
a recession before doing so (Foote, 1998).

C. Step 2: Industry-level Indirect Effect via Input-Output Linkagesi. Empirical strategy
Equation (3) captures the direct effect of Chinese import competition on employment
within the manufacturing industry facing that competition. Additional employment effects (inboth manufacturing and non-manufacturing industries) may arise due to input-output
relationships between industries.
A given industry is indirectly exposed to import competition in other industries via'upstream' and 'downstream' effects:•

Upstream effect: an industry's exposure to the import competition faced by theindustries that buy its output.

•

Downstream effect: an industry's exposure to the import competition faced by theindustries from which it buys inputs.

For example, an increase in automobile imports would be part of the upstream effect on
auto parts manufacturers, since the automobile manufacturing industry is a buyer of the output of
the auto parts manufacturing industry. Everything else being equal, if car imports cause a decline
in activity in domestic auto manufacturing, demand for domestically-produced auto parts may
decline and lead to job losses in the auto parts industry.
On the other hand, an increase in auto parts imports would be part of the downstream
effect on automobile manufacturers, since the automobile manufacturing industry buys inputs
from the auto parts manufacturing industry. We might expect this effect to be less important thanthe upstream effect; even if imports lead to a decline in domestic auto parts manufacturing, theautomobile manufacturers can presumably replace those lost inputs with the newly available
imports.
26

This issue could also be addressed using data from the 2006 census. We leave this extension for future work.

36

To estimate these indirect effects, we combine the industry-level import exposure
measure ∆𝐼𝐸𝑗,𝑡 with input-output data to construct industry-level measures of upstream anddownstream Chinese import exposure. Let 𝑚
̂ 𝑖,𝑗 be the share of industry 𝑖's gross output that ispurchased as an input by industry 𝑗. Then the first-order upstream exposure of industry 𝑖 is given
by𝑈,1∆𝐼𝐸𝑖,𝑡= ∑𝑚
̂ 𝑖,𝑗 ∆𝐼𝐸𝑗,𝑡(7)𝑗

Similarly, let 𝑚
̃ 𝑖,𝑗 denote industry 𝑗's purchases of inputs from industry 𝑖 as a share of industry 𝑗gross output. Then the first-order downstream exposure of industry 𝑖 is given by
𝐷,1∆𝐼𝐸𝑖,𝑡= ∑𝑚
̃ 𝑖,𝑗 ∆𝐼𝐸𝑗,𝑡

(8)

𝑗
𝑈,1
So ∆𝐼𝐸𝑖,𝑡
is a weighted average of trade exposure changes faced by industry 𝑖's buyers, where
𝐷,1
the weights are the shares of industry 𝑖's output purchased by those buyers. ∆𝐼𝐸𝑖,𝑡
is a weighted
average of trade exposure changes faced by industry 𝑖's suppliers, where the weights are theshares of those suppliers' gross outputs purchased by industry 𝑖.

These first-order measures ignore the higher-order upstream and downstream effects
emanating from the import exposure faced by an industry's buyers' buyers, its buyers' buyers'buyers, its suppliers' suppliers, and so on. The full upstream and downstream import exposures
are given bŷ )−1 ∆𝐼𝐸𝑡
∆𝐼𝐸𝑡𝑈 = (𝐼 − 𝑀(9)̃ )−1 ∆𝐼𝐸𝑡
∆𝐼𝐸𝑡𝐷 = (𝐼 − 𝑀(10)where ∆𝐼𝐸𝑡 is the vector of direct Chinese import exposure changes for all industries, ∆𝐼𝐸𝑡𝑈 and̂ (or 𝑀̃ ) is∆𝐼𝐸𝑡𝐷 the vectors of upstream and downstream effects, 𝐼 is the identity matrix, and 𝑀thth27
the matrix with 𝑚
̂ 𝑖,𝑗 (or 𝑚̃ 𝑖,𝑗 ) in the 𝑖 row and 𝑗 column.
To measure the employment impact of upstream and downstream import competition, we
replace the change in direct import exposure ∆𝐼𝐸𝑗,𝑡 in equation (3) with the upstream or27

We measure direct import penetration only for manufacturing industries, but the upstream and downstream
measures are computed for manufacturing and non-manufacturing industries. To make the vectors and matrices inequations (9) and (10) conformable, we add zeros to the direct import exposure vector ∆𝐼𝐸𝑡 in positions that
correspond to non-manufacturing industries. Thus, we assume that only manufacturing industries experienced
increases in direct import competition from China over our sample period. The data presented in Table 1 earlier
suggest that this is not a problematic assumption; almost all of Canada's imports from China are manufacturing
imports.

37

downstream measures computed using (7) and (8) (for first-order effects) or (9) and (10) (for thefull effects).28
As in Step 1, we employ an instrumental variables strategy to identify the causal impactof rising Chinese export supply on Canadian employment. To construct instruments for ∆𝐼𝐸𝑡𝑈
and ∆𝐼𝐸𝑡𝐷 , we simply replace ∆𝐼𝐸𝑡 with ∆𝐼𝐸𝑂𝑡 in (9) and (10), where ∆𝐼𝐸𝑂𝑡 is the vector of
Chinese import exposure measures in other advanced economies defined in equation (5).
The only other change relative to Step 1 is that we include period-by-sector dummies in
the regression rather than just period dummies. By 'sector' we mean manufacturing or nonmanufacturing.
Once the regression coefficients are obtained, the effect on Canadian employment can beobtained using (6) as before with only slight modification.
ii. Results
Data summary
Table 15 presents summary statistics for the key variables used to estimate the indirect
effect of import competition on employment through input-output linkages across industries. An
important change relative to industry-level direct effect is that we have collapsed four-digit
NAICS industries to four-digit IOIC industries, as discussed earlier. This was necessary in order
to combine the input-output data with the employment data.
To test the importance of this change, we re-estimate the direct industry-level effect ofimport competition on employment using the IOIC-based data and compare the results to those
we obtained using the NAICS-based data. The first two columns of Table 16 contain thoseresults. It is reassuring that the coefficient estimate in column (2), -1.54, is statisticallysignificant (though only at the ten per cent level) and similar to the main estimate from column(3) of Table 12 (which was -1.36). The implied number of manufacturing jobs lost is given in thesecond row of Table 13. The total number over the 1991-2011 period is 191.1 thousand,somewhat larger than the NAICS-based estimate of 169.5 thousand but not dramaticallydifferent. Thus, the switch from NAICS-based to IOIC-based definitions (and the associatedreduction in the number of manufacturing industries from 85 to 42) appear not to have cost us
much information.
Estimation results
In Panel B of Table 16, we augment equation (3) with measures of the first-order
upstream and downstream import exposure measures defined in equations (7) and (8). It turns

28

The measures computed using equations (9) and (10) include the direct import competition faced bymanufacturing industries as well as the upstream and downstream effects faced by all industries. In somespecifications, we subtract the change in direct import exposure from these measures and include the direct,
upstream and downstream import exposure measures separately in the regression equation.

38

Table 15: Summary Statistics on Changes in Employment, in Direct Chinese Import Competition, and in Indirect Upstream
and Downstream Chinese Import Competition by 4-Digit IOIC Industry
1991-2011

1991-2001

2001-2011

No. of
Obs.

Mean

SD

Median

Min

Max

Mean

SD

Mean

SD

Direct

42

0.66

0.83

0.36

-0.01

4.35

0.37

0.58

0.89

1.12

Full Upstream

85

0.08

0.25

0.03

0.00

5.03

0.04

0.10

0.12

0.38

Full Downstream

85

0.33

0.46

0.18

0.00

5.01

0.18

0.24

0.44

0.64

Direct

42

0.61

0.79

0.28

0.01

3.25

0.31

0.46

0.84

1.12

Full Upstream

85

0.08

0.21

0.03

0.00

3.76

0.04

0.09

0.11

0.32

Full Downstream

85

0.32

0.44

0.18

0.00

3.75

0.15

0.19

0.45

0.64

Annual Δ in Chinese import exposure

Instrument for annual Δ in Chinese import exposure

Annual growth rate of employment
Total

85

0.98

1.66

1.03

-6.39

4.33

1.02

2.00

0.93

2.50

Manufacturing

42

-1.20

2.09

-1.08

-6.39

2.50

0.95

2.28

-3.36

3.13

Non-manufacturing

43

1.33

1.27

1.30

-2.58

4.33

1.04

1.97

1.62

1.50

Notes:The direct import exposure measure and its instrument are the same as described in the notes for Table 11, except they are computed for IOIC
industries rather than NAICS industries. The upstream and downstream measures are computed based on the direct measures as described in themain text. Employment changes are average annual per cent changes based on data from the 1991 and 2011 census and the 2011 National Household
Survey.
Observations are weighted by industry-level employment in 1991.

39

Table 16: Effect of Import Exposure on Employment in Canada Incorporating Input-Output Linkages, 1991-2011
A. Direct Effects

B. First-Order Input-Output Linkages

(1)
-0.99
(0.64)(2)-1.54*(0.83)

Upstream import exposure----

Downstream import exposure

--

--

--

Direct import exposure

(3)
-1.58
(1.13)
0.16(2.27)(4)-1.55(1.15)-0.09(2.56)
0.18(0.52)

Combined import exposure(direct + upstream)
Estimation Method

--

--

--

--

OLS

2SLS

2SLS

First-stage F statistics

--

53.2

48.4
511.7

2SLS
82.2
1002.5789.1(5)----1.08*(0.61)
2SLS
85.3

C. Full (Higher-Order) Input-Output Linkages)(6)-1.73*(1.05)
0.42(1.06)
--

(7)
-1.70
(1.08)
0.26(1.24)
0.11(0.33)

--

--

2SLS

2SLS
87.7
1023.51731.1

60.2
570.4

(8)
----0.72(0.44)
2SLS
132.0

Notes:In all specifications, the dependent variable is the average annual growth rate of employment by industry over the specified period.
Standard errors are in parentheses. Standard errors are clustered on 21 three-digit industry groups. All specifications include period x sector dummies, where'sector' is either manufacturing or non-manufacturing. The number of observations is 170, and observations are weighted by industry employment in 1991.
* p < 0.1** p < .05*** p < .01

40

out that when these measures are added to the regression, they do not prove to be statisticallysignificant determinants of employment growth. Moreover, the direct import exposure measure
loses its statistical significance (columns 3 and 4).
Similar results obtain when we move to the full higher-order upstream and downstream
measures defined in equation (9) and (10). These results are presented in Panel C of Table 16.
When the upstream exposure variable is added by itself (column 6), it is not statisticallysignificant. Moreover, it reduces the statistical significance of the direct exposure measure(although the magnitude of the coefficient estimate rises relative to the baseline estimate incolumn 2). When both the upstream and downstream measures are added, all the import
exposure measures lose their statistical significance (column 7).
One plausible explanation of these results is that they arise from a collinearity problem.
The upstream and downstream import exposure measures may not have much explanatory power
for employment growth over and above the direct import competition effect, but they are highly
correlated with the direct measure and with each other. The instruments have high degrees ofmutual correlation as well. This, together with the fact that our sample size is quite small, canlead to misleading coefficient estimates that are highly sensitive to small changes in model
specification. A larger sample size could help to address this problem, but data limitations
prevent us from pursuing that solution.
Instead, we estimate versions of the regression in which we include the sum of the direct
and upstream effects as a single regressor.29 This eliminates the collinearity problem at the costof imposing the assumption that the marginal impact of indirect upstream import exposure is thesame as that of direct import exposure. This is a strong econometric restriction, but it isconsistent with the theoretical model in the appendix of Acemoglu et al. (2016).
The results are presented in column 5 for the first-order upstream effect and in column 8
for the full upstream effect. The combined direct and first-order upstream Chinese import
exposure variable is a statistically significant determinant of employment growth at the ten percent level; the measure that includes the full upstream effect is not statistically significant.
Analysis of results
Overall, we regard the results in Table 16 as providing little evidence for important
spillover effects operating through input-output linkages.
The second row of Table 13 contains the implied employment losses (across allindustries) associated with the direct and first-order upstream effects of rising Chinese import
exposure over the 1991-2011 period and the two sub-periods (based on column 5 of Table 16).
The third row of Table 13 contains the implied employment losses in manufacturing, based on
unreported results from a similar regression in which we restricted the sample to manufacturing

29

Following Acemoglu et al. (2016), we do not include the downstream effects. As discussed earlier, theoreticalarguments imply that they are less likely to be important.

41

industries.30 Taken together, the results suggest that accounting for input-output linkages does
not substantially increase the estimated number of job losses. Total losses over the 1991-2011
period from the direct and first-order upstream effects are estimated at 202.8 thousand, of which
131.3 thousand occurred in the 2001-2011 sub-period. These totals are not much larger than theestimated direct effects based on the sample of IOIC industries (row 2 of Table 13).
For the 2001-2011 period, including the first-order upstream spillovers increases theemployment effect of rising Chinese import competition by 10.7 per cent (from 118.6 thousand
to 131.3 thousand). This input-output multiplier effect is tiny compared to those estimated by
Acemoglu et al. (2016) for the United States. They found that accounting for input-output
linkages magnified the employment losses from rising Chinese import competition by a factor of
between 2.8 (if only first-order linkages are accounted for) and 3.5 (if higher-order linkages areaccounted for). Our findings indicate that input-output spillovers are much less important as anamplifier of the employment costs of rising Chinese import competition in Canada than they arein the United States. The reasons for this difference are unclear and warrant further research.

D. Step 3: Reallocation and Aggregate Demand Effects within Local LabourMarketsi. Empirical strategy
The approach described in Step 2 should capture employment effects arising from direct
import competition and from indirect competition working through inter-industry input-output
linkages. There are additional effects that that approach may fail to capture:•

Labour reallocation: A trade-induced reduction in employment in one industry may
lead to an increase in employment in another industry as labour is reallocated fromdeclining to growing industries.

•

Aggregate demand: Trade-induced job losses in one industry may reduce the incomes ofdisplaced workers, leading those workers to reduce their consumption expenditures. This
reduces the demand for other industries' output, leading to further job losses, further
income declines, and so on, in a multiplier effect.

These effects would be difficult to capture at the national level without a structural economic
model. We can go some distance toward measuring their net effect by using information on
import exposure and employment within local labour markets. As a first pass, we estimate thefollowing equation:
𝐿∆𝐸𝑙,𝑡 = 𝛼𝑡 + 𝛽∆𝐼𝐸𝑙,𝑡+ 𝛾𝑋𝑙,𝑡 + 𝑒𝑙,𝑡(11)Here, ∆𝐸𝑙,𝑡 is the annual percentage-point change in the employment rate (i.e. the ratio of total
employment to the working-age population, defined as the population aged fifteen years and𝐿over) in locality 𝑙 over time period 𝑡; ∆𝐼𝐸𝑙,𝑡is the annual percentage-point change in the
30

In the regression on the manufacturing sample, the coefficient estimate on the combined direct and first-order
upstream import exposure variable is -1.03 and is significant at the ten per cent level.

42

exposure of locality 𝑙 to Chinese import competition over time period 𝑡; and 𝑋𝑙,𝑡 is a vector of𝐿controls to be specified presently. We measure ∆𝐼𝐸𝑙,𝑡
as the employment-weighted average of
our industry-level import competition measure from Step 1. It was defined earlier in equation(2); for convenience, we reproduce it here. It is:𝐿∆𝐼𝐸𝑙,𝑡=∑𝑗

𝐿𝑙,𝑗,𝑡∆𝐼𝐸𝑗,𝑡𝐿𝑙,𝑡(12)

where 𝐿𝑙,𝑗,𝑡 is employment in locality 𝑙 in industry 𝑗 at the beginning of time period 𝑡 and 𝐿𝑙,𝑡 ≡∑𝑗 𝐿𝑙,𝑗,𝑡 is total employment in locality 𝑙 at the beginning of time period 𝑡. The instrument for𝐿∆𝐼𝐸𝑙,𝑡is obtained by replacing ∆𝐼𝐸𝑗,𝑡 with ∆𝐼𝐸𝑂𝑗,𝑡 in equation (12).
As discussed earlier, our notion of 'locality' is the census metropolitan area or census
agglomeration (CMA/CA) as defined by Statistics Canada.
Once we have obtained an estimate of the coefficient 𝛽 in equation (11), we can computẽ𝐿 denote the part of the change
the implied decline in Canadian employment as follows. Let ∆𝐼𝐸𝑙,𝑡in the import exposure of locality 𝑙 over time period 𝑡 that is attributable to the Chinese export
𝑐𝑓
productivity shock, and let ∆𝐿𝑙,𝑡 be the difference between actual employment in locality 𝑙 at thẽ𝐿
end of time period 𝑡 and the counterfactual employment level that would have obtained if ∆𝐼𝐸𝑙,𝑡

had been equal to zero. Then using equation (11), the total employment effect is
𝑐𝑓

𝑐𝑓∆𝐿𝑡 = ∑ ∆𝐿𝑙,𝑡𝑙(13)𝑃𝑂𝑃𝑙,𝑡 ̃𝐿=∑𝛽∆𝐼𝐸𝑙,𝑡100𝑙where 𝑃𝑂𝑃𝑙,𝑡 is the working-age population of locality 𝑙 at the end of period 𝑡. As in steps 1 and̃𝐿 as the actual observed change in Chinese import exposure, ∆𝐼𝐸 𝐿 ,2, we measure ∆𝐼𝐸𝑙,𝑡𝑙,𝑡multiplied by the adjusted R-squared from the first-stage regression (which is 0.57).
The employment effect estimated in (13) should capture the direct impact of Chinese
import exposure on employment in local labour markets, plus the net effect of inter-industry
labour reallocation and demand spillover effects operating within local labour markets. It will not
capture the effects of labour reallocation or aggregate demand that operate across localities (i.e.
at the provincial, national or global levels). Moreover, our use of CMAs/CAs to define local
labour markets means that we are excluding any effects of rising import exposure on workers
who do not live in a CMA or a CA.31
31

According to the 2011 National household Survey, 82 per cent of Canadians aged 15 and over lived in a CMA ora CA in 2011.

43

Following Acemoglu et al. (2016), we further explore the impact of Chinese import
exposure in local labour markets by separately identifying the employment effects in three broad
sectors:•

Exposed sector: Industries that experienced large increases in direct Chinese importcompetition over our period of study;•

Non-exposed tradable sector: Industries that produce tradable outputs but that did notexperience large increases in direct Chinese import competition over the period;•

Non-exposed non-tradable sector: All industries not categorized in the first two
categories.

We define the exposed sector as the set of manufacturing industries for which the industry-level
Chinese import exposure measure ∆𝐼𝐸𝑗,𝑡 increased by at least two percentage points(cumulatively) over period 𝑡. We define the non-exposed tradable sector as the set of all nonservice industries in the manufacturing, agriculture, forestry and mining and oil and gas
extraction industry groupings, excluding the manufacturing industries already included in the
exposed sector. All remaining industries are categorized as non-exposed non-tradable.
With these definitions in hand, we estimate the following equation:
𝐿𝐿∆𝐸𝑘,𝑙,𝑡 = 𝛼𝑘,𝑡 + 𝛽1 ∆𝐼𝐸𝑙,𝑡𝕝{𝑒𝑥𝑝𝑜𝑠𝑒𝑑} + 𝛽2 ∆𝐼𝐸𝑙,𝑡𝕝{𝑛𝑜𝑛 − 𝑒𝑥𝑝𝑜𝑠𝑒𝑑 𝑡𝑟𝑎𝑑𝑎𝑏𝑙𝑒}𝐿+ 𝛽3 ∆𝐼𝐸𝑙,𝑡 𝕝{𝑛𝑜𝑛 − 𝑒𝑥𝑝𝑜𝑠𝑒𝑑 𝑛𝑜𝑛 − 𝑡𝑟𝑎𝑑𝑎𝑏𝑙𝑒} + 𝛾𝑋𝑙,𝑡 + 𝑒𝑘,𝑙,𝑡(14)

where ∆𝐸𝑘,𝑙,𝑡 is the change in the employment rate in locality 𝑙 in sector 𝑘 over time period 𝑡.32
This specification allows the slope coefficient on Chinese import exposure to vary across the
exposed, non-exposed tradable, and non-exposed non-tradable sectors.
Intuitively, rising Chinese import competition should have a substantial negative impact
on employment rates in localities’ exposed sectors. The effect on employment rates in the othertwo sectors (especially the non-exposed non-tradable sector) is a priori ambiguous because it
depends on the net impact of labour reallocation and local aggregate demand effects. If workers
displaced from the exposed sector find new jobs in the non-exposed sectors (within the same
locality), then we expect the coefficients 𝛽2 and 𝛽3 to be positive. If instead job losses in the
exposed sector lead to a decline in aggregate demand (within the locality) that reduces
employment in the other two sectors, then we expect those coefficients to be negative.
Given estimates of the regression coefficients in (14), we can compute the total
employment effect using (13) with minor modifications.

The ‘employment rate in sector 𝑘’ is total employment in sector 𝑘 divided by the working-age population of thelocality and multiplied by 100. In equation (14), the notation 𝕝{𝑘} denotes a dummy variable for sector 𝑘.
32

44

In terms of controls 𝑋𝑙,𝑡 , all specifications include fixed effects for six regions (theAtlantic region, Quebec, Ontario, the Prairie region, British Columbia, and the Northern region).
Following Acemoglu et al. (2016), we also control for the share of a locality's employment thatis in manufacturing at the beginning of each period. Conditional on the initial manufacturing
share of employment, variation across localities in Chinese import exposure arises only fromvariation in the extent to which localities' manufacturing employment is concentrated in highly
exposed manufacturing industries.
ii. Results
Data summary
Summary statistics for the variables are presented in Table 17. The increase in the growthof Chinese import competition after 2001 is evident; the mean annual change in Chinese import
exposure is 0.05 percentage points over the 1991-2001 period and 0.13 percentage points overthe 2001-2011 period. The summary statistics also display the turnaround in employment growth
after 2001; across all industries, the annual change in the employment rate averaged 0.05
percentage points in the 1991-2001 period and -0.16 percentage points over the 2001-2011
period.
The breakdown of employment rate changes by sector reveals that this turnaround wasconcentrated in the industries that were exposed to large increases in import competition from
China. The annual employment rate change in the exposed sector was 0.03 percentage points
over the 1991-2001 period and -0.24 percentage points over the 2001-2011 period. In contrast,
the employment rate change in the non-exposed non-tradable sector was positive in both subperiods and, in fact, increased after 2001.
Estimation results
We begin by estimating equation (11). Panel A of Table 18 presents the results. The OLS
results reveal that, across localities, increasing Chinese import exposure is negatively associatedwith employment growth as measured by the change in the employment rate (column 1). The
2SLS results are quite similar to the OLS results. According to our baseline estimate (in column2), a one percentage-point increase in the annual growth of Chinese import exposure reduces theannual growth of the employment rate by 1.0 percentage point. The regression coefficient ishighly statistically significant.
Panel B presents the estimates for equation (14), in which the change in the employment
rate is measured by sector and the slope coefficient on the change in Chinese import exposure isallowed to vary across sectors. Again, the OLS and 2SLS results are fairly similar. Focusing on
the 2SLS results (column 4), we find that rising Chinese import competition strongly reduces
employment rate growth in the exposed sector; a one percentage-point increase in the annual
growth of Chinese import exposure reduces the annual change in the employment rate of the
exposed sector by 1.78 percentage points.
For the non-exposed non-tradable sector, the coefficient estimate on the change in
Chinese import exposure is positive and statistically significant at the five per cent significance45

Table 17: Summary Statistics on Changes in Employment Rates and in Chinese Import Exposure across Local LabourMarkets, for All Industries and by Sector, 1991-2011
1991-2011

1991-2001

2001-2011

Mean

SD

Median

Min

Max

Mean

SD

Mean

SD

Annual Δ in Chinese import exposure

0.09

0.05

0.09

0.00

0.23

0.05

0.03

0.13

0.06

Instrument for annual Δ in Chinese import exposure

0.09

0.05

0.08

0.00

0.32

0.05

0.03

0.12

0.06

-0.06

0.15

-0.10

-1.00

0.52

0.05

0.19

-0.16

0.25

Exposed sector

-0.10

0.07

-0.09

-0.30

0.19

0.03

0.09

-0.24

0.14

Non-exposed tradable sector

-0.02

0.03

-0.01

-0.72

0.12

-0.03

0.07

-0.01

0.05

Non-exposed non-tradable sector

0.06

0.13

0.05

-0.43

0.54

0.03

0.17

0.09

0.19

Annual Δ in employment rate
All industries

Initial manufacturing share of employment-----13.8
5.8
13.7
5.7
Notes:
The annual change in Chinese import exposure is the employment-weighted mean (within the locality) of the industry-level import exposure
variable described in the notes for Table 11. The instrument is computed similarly. The sectoral employment rates by locality are measured as
100 x the locality's total employment in that sector divided by the locality's population aged fifteen and over; the variables summarized in thetable are the annual percentage-point differences in these employment rates over the time periods indicated. The definitions of the threesectors are given in the main text.
The initial manufacturing share of employment is the share of workers employed in four-digit NAICS manufacturing industries in the first yearof the period indicated.
The dataset contains 129 localities. Observations are weighted by the locality's working-age population in 1991.

46

Table 18: Effect of Import Exposure on Employment in Canadian Local Labour Markets, 1991-2011
A. Total Employment Effect(1)-1.05***(0.28)(2)-1.00***(0.27)CMA/CA import exposure x {exposed}----

CMA/CA import exposure x {non-exposed tradable}----

CMA/CA import exposure x {non-exposed non-tradable}----

Estimation Method

OLS

Number of observations

258

CMA/CA import exposure

B. Sectoral Employment Effects
(3)

(4)

--

--

2SLS

-1.62***(0.21)-0.19(0.26)
0.67(0.56)
OLS-1.78***(0.22)-0.35(0.25)
1.06**(0.51)
2SLS

258

774

774

First-stage F statistics-792.5-1,803.3
Notes:
In columns (1) and (2), the dependent variable is the annual percentage-point change in the employment rate within a CMA/CA overthe 1991-2001 and 2001-2011 periods. In columns (3) and (4), the dependent variable is the annual percentage-point change in theratio of sectoral employment to the total working-age population within a CMA/CA over the 1991-2001 and 2001-2011 periods andfor the exposed, non-exposed traded and non-exposed non-traded sectors as defined in the main text.
Standard errors are in parentheses. Standard errors are clustered on 129 CMAs/CAs. Specifications (1) and (2) include period andregion dummies; specifications (3) and (4) include period x sector dummies, region dummies, and the locality's initial manufacturing
employment share interacted with sector dummies. In all specifications, observations are weighted by CMA/CA working-age
population (i.e. population aged 15 and over) in 1991.
* p < 0.1** p < .05*** p < .0147

level. A one percentage-point increase in the annual growth of Chinese import competition in a
locality leads to a 1.06 percentage-point increase in the employment rate in non-exposed nontradable industries in that locality.
Analysis of results
The fact that the coefficient estimate for the non-exposed non-tradable sector is positive
indicates that, within local labour markets, the labour reallocation effect dominates the aggregate
demand effect. This result is consistent with the view that many workers displaced from exposedindustries in the manufacturing sector are able to find employment in the non-exposed nontradable sector.
We find no statistically significant impact of Chinese import competition on employment
rates in the non-exposed traded sector. Notably, this is the sector that includes the mining and oil
and gas extraction industry, the industry in which employment increased the fastest over the
2001-0211 period (Table 8). It may be that the mining and oil and gas industry (which isconcentrated in a few geographic locations) has absorbed displaced workers from CMAs/CAs
across Canada. Our empirical approach does not capture such cross-locality reallocation effects.
As in steps 1 and 2 of our analysis, we use the regression results to estimate the numberof jobs lost as a result of rising import competition from China. The fifth row of Table 13
contains the job losses implied by the regression estimates in column 2 of Table 18. The
estimated net loss of jobs as a result of rising Chinese import competition is 228.6 thousand overthe 1991-2011 period. This total loss is the result of losses of 59.4 thousand jobs over the 19912001 period and 169.1 thousand jobs over the 2001-2011 period. These numbers imply that if theincrease in Chinese import competition after 2001 had not occurred (and all other factors in theeconomy had remained unaffected), total employment across Canada's CMAs and CAs would
have increased by 9.6 per cent more than it did in reality over the 2001-2011 period (Table 14).
The bottom section of Table 13 presents the estimated job losses broken down by sector,
based on the regression results in column 4 of Table 18. Our estimates imply that the rise ofChinese import competition reduced employment in Canada by 209.3 thousand over the full
1991-2011 period. This total is the result of an employment loss of 347.9 thousand jobs in the
exposed sector, partially offset by an increase of 207.7 thousand jobs in the non-exposed nontradable sector.33
Again, most of the effect occurred in the 2001-2011 sub-period. Over that time, rising
Chinese import competition reduced employment in the exposed sector by 255.4 thousand. Thisaccounts for 74.2 per cent of the observed employment decline of 344.3 thousand in the exposed
sector over the 2001-2011 period (Table 14). The decline of employment in the exposed sector
was partially offset by an employment increase of 152.4 thousand in the non-exposed nontradable sector. Our estimates imply that the reallocation of labour into the non-exposed non33

We follow Acemoglu et al. (2016) in including employment effects in the non-exposed tradable sector in our
totals even though the coefficient estimates for that sector in Table 18 were not statistically significant. Setting themto zero results in total employment changes close to the estimates from steps 1 and 2.

48

tradable raised the increase in employment in that sector over the 2001-2011 period by 7.9 percent (from 1,934.4 thousand to 2,086.8 thousand).
In their analysis of U.S. data, Acemoglu et al. (2016) did not find statistically significant
evidence of employment gains in non-exposed industries to offset declines in the exposed sector.
They interpreted this as evidence that strong aggregate demand effects, operating within local
labour markets, were limiting employment gains in the non-exposed industries. In contrast, ourresults for Canada suggest that such demand effects have not completely inhibited thereallocation of labour into the non-exposed sector. That being said, the employment gains wemeasure in the non-traded non-exposed sector were not sufficient to fully offset the losses in the
exposed sector.
A more subtle point is that, under balanced trade, one would expect rising importcompetition in the exposed sector to result in a reallocation of labour into other traded industries(i.e. the non-exposed tradable sector) rather than into the production of non-tradables. Moreover,
local demand spillovers from job losses in the exposed sector − to the extent that they exist −should have a stronger employment-suppressing effect on local production of non-tradables thanon the non-exposed tradable sector.
Why, then, do we find large employment gains in the non-exposed non-tradable sector in
response to the China shock and no evidence of reallocation into non-exposed tradables? Part ofthe explanation may be that trade was not balanced over our period of study. In particular,
Canada's aggregate trade balance declined substantially over the 2001-2011 period during whichmost of the employment effects of the China shock occurred; net exports of goods and services
declined from 64.6 billion in 2001 to -21.2 billion in 2011 (Chart 7). A declining overall trade
Chart 7: Exports less Imports of Goods and Services, Canada, Billions of Dollars, 19912016
80

Billions of Current Dollars

60
40
20
0
-20
-40
-60
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Source: Statistics Canada CANSIM Table 380-0064.

49

balance (driven, in part, by rising imports from China) may have impeded the reallocation oflabour into the non-exposed tradable sector, making those workers available to the non-tradable
sector.
A second factor, already noted earlier, is that part of the reallocation of labour into thenon-exposed tradable sector (in particular, the mining and oil and gas extraction industry) may
have occurred across local labour markets rather than within them. To the extent that this is true,
our empirical approach will have failed to capture an important component of sectoral labour
reallocation in response to the rise of Chinese import competition.34 Further research on thisquestion is warranted.

IV. Conclusion
This report has assessed the impact on Canadian labour markets of a recent shock to
Canada’s import supply: the rapid rise of China as a manufacturing export superpower in the late
1990s and early 2000s. An instrumental variables strategy based on the work of Acemoglu et al.
(2016) was used to capture the causal impact of rising Chinese import competition on Canadian
employment.
Our first main finding is that 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 20.7 per cent of the actual observed decline in manufacturing
employment over that period (508 thousand jobs). Our estimates imply an additional loss of 64
thousand jobs over the 1991-2001 period, for a total loss of 170 thousand manufacturing jobs
over the 1991-2011 period.
These estimates are subject to important caveats. In particular, they may overstate theemployment costs of trade exposure in the 1991-2001 sub-period (for which we found that theeffect of Chinese import growth on employment growth was not statistically significant) andthey may inappropriately include some effects of the 2008 recession. However, even our mostconservative estimates imply that the increase in Chinese import penetration has accounted for alarge share of the actual manufacturing employment decline observed in Canada since 2001.
In a second step, we measured industries’ indirect exposure to import competition via
input-output linkages with other trade-exposed industries. Data constraints imposed limits on thequality of evidence we could generate in this part of the analysis. In our view, the results suggestthat the employment effect of indirect import exposure through input-output linkages is small in
Canada.

34

See Tusz et al. (2015) for a recent analysis of interprovincial migration flows in Canada and their implications for
aggregate productivity growth. They note that only two provinces − Alberta and British Columbia − had positive netinternal migration over the 1987-2014 period. Calculations by Kneebone (2014) suggest that the employment boomin Alberta created 411 thousand jobs over the 1995-2014 period, attracting workers from across Canada andreducing the national unemployment rate in 2014 by 2.2 percentage points.

50

In a third step, we used data on employment and Chinese import exposure in Canadian
local labour markets to assess the role of inter-sectoral labour reallocation and aggregate demand
effects operating within local economies. This analysis revealed somewhat larger employment
effects; the total decline in employment over the 2001-2011 period attributable to the rise ofChinese import competition is on the order of 150 to 170 thousand jobs. These totals represent
the net effect of countervailing sectoral effects. We found that the China shock led to very
substantial employment losses in the industries most exposed to Chinese import competition, butthat these losses were partly offset by employment gains in non-exposed non-tradable industries.
It must be stated that this is by no means a comprehensive assessment of the welfare
impact of international trade, or of trade with China in particular, on Canadians. Rising importcompetition from China led to a non-negligible reduction in employment in Canada,concentrated mostly in manufacturing. But those costs must be set against the benefits to
Canadian consumers in terms of lower prices and increased variety, expanded export
opportunities for Canadian firms, and the productivity gains associated with enhanced foreigncompetition. (Not to mention the incredible increase in the living standards of workers in China
who not long ago were quite poor.) A progressive trade agenda should seek to take advantage ofthe gains from trade while helping those who suffer economic dislocation to adjust.
The analysis in this report could be extended in many directions. We conclude by listing
a number of possibilities:•

It would be useful to examine the impact of the 'China shock' on outcomes other thanemployment. These might include wages, unemployment rates, usage rates of social
assistance or unemployment insurance benefits, health outcomes, and interprovincial
migration patterns.

•

A breakdown of the employment effects by occupational category could provide moredetailed insights into the kinds of jobs most affected by Chinese import competition.
Similarly, employment effects could be measured according to demographic orsocioeconomic characteristics of interest from an inclusiveness perspective (e.g. genderor level of educational attainment).

•

The rise of Chinese manufacturing in recent decades contributed to an increase in worldcommodity prices, and in particular the price of oil. It would be useful to extend ouranalysis to explicitly account for the effect of this on Canadian employment, given thatsome Canadian regions are major oil producers.

•

Our measures of Chinese import exposure accounted only for competition over the
Canadian domestic market. Canada exports a large share of its manufacturing output, so
Canadian employment may be affected by Chinese competition over foreign markets.
Our analysis could be extended to account for this.

•Acemoglu et al. (2016) found that input-output linkages multiplied the employment
impact of Chinese import competition dramatically in the United States, while we foundthat the input-output multiplier was small in Canada. What explains this difference?
51

References
Acemoglu, Daron, David H. Autor, David Dorn, Gordon H. Hanson, and Brendan Price (2016)"Import Competition and the Great US Employment Sag of the 2000s," Journal of Labor
Economics, Vol. 34, No. S1, Part 2, pp. S141-S198.
Acharya, Ram (2015) “Impact of Trade on Canada’s Employment, Skill and Wage Structure,”
The World Economy, Vol. 40, No. 5, pp. 849-882.
Angrist, Joshua D., and Jorn-Steffen Pischke (2009) Mostly Harmless Econometrics: An
Empiricist's Companion, Princeton: Princeton University Press.
Annabi, Nabil, Maxime Fougere and Min Li (2013) “Foreign Competition and Income
Distribution in Canada: A Dynamic Microsimulation CGE Model Analysis,” International
Economic Journal, Vol. 27, No. 4, pp. 525-547.
Autor, David H., David Dorn and Gordon H. Hanson (2013a) "The China Syndrome: Local
Labor Market Effects of Import Competition in the United States," American Economic Review,Vol. 103, No. 6, pp. 2121-2168.
Autor, David H., David Dorn and Gordon H. Hanson (2013b) "The Geography of Trade andTechnology Shocks in the United States," American Economic Review: Papers and Proceedings,
Vol. 103, No. 3, pp. 220-225.
Autor, David H., David Dorn and Gordon H. Hanson (2015) "Untangling Trade and Technology:
Evidence from Local Labour Markets," Economic Journal, Vol. 125, No. 584, pp. 621-646.
Autor, David H., David Dorn and Gordon H. Hanson (2016) "The China Shock: Learning fromLabor Market Adjustment to Large Changes in Trade," NBER Working Paper No. 21906,
January.
Autor, David H., David Dorn, Gordon H. Hanson and Jae Song (2014) "Trade Adjustment:
Worker-Level Evidence," Quarterly Journal of Economics, Vol. 129, No. 4, pp. 1799-1860.
Baldwin, John R., and Mohammed Rafiquzzaman (1999) “Trade, Technology and Wage
Differentials in the Canadian Manufacturing Sector,” in D.B. Audretsch and R.A. Thurik (eds.)
Innovation, Industry Evolution and Employment, Cambridge: Cambridge University Press.
Baldwin, John R., and Beiling Yan (2017a) "Trade and Productivity: Insights from CanadianFirm-Level Data," in Stephen Tapp, Ari Van Assche and Robert Wolfe (eds.) Redesigning
Canadian Trade Policies for New Global Realities, Montreal: Institute for Research on Public
Policy.
Baldwin, John R., and Beiling Yan (2017a) "Global Value Chain Participation and theProductivity of Canadian Manufacturing Firms," in Stephen Tapp, Ari Van Assche and Robert52

Wolfe (eds.) Redesigning Canadian Trade Policies for New Global Realities, Montreal: Institutefor Research on Public Policy.
Beaulieu, Eugene (2000) “The Canada-U.S. Free Trade Agreement and Labour Market
Adjustment in Canada,” Canadian Journal of Economics, Vol. 33, No. 2, pp. 540-563.
Breau, Sebastien, and David L. Rigby (2010) “International Trade and Wage Inequality in
Canada,” Journal of Economic Geography, Vol. 10, No. 1, pp. 55-86.
Calver, Matthew, and Evan Capeluck (2016) "Further Evidence on the Contribution of Services
Outsourcing to the Decline in Manufacturing's Employment Share in Canada," CSLS Research
Report 2016-11, July. http://www.csls.ca/reports/csls2016-11.pdf.
Capeluck, Evan (2015a) "Explanations of the Decline in Manufacturing Employment in
Canada," CSLS Research Report 2015-17, October. http://www.csls.ca/reports/csls2015-17.pdf.
Capeluck, Evan (2015b) "The Evolution of Manufacturing Employment in Canada: The Role of
Outsourcing," CSLS Research Report 2015-18, October. http://www.csls.ca/reports/csls201518.pdf.
Chetverikov, Denis, Bradley Larsen and Christopher Palmer (2016) "IV Quantile Regression forGroup-Level Treatments, With an Application to the Distributional Effects of Trade,"
Econometrica, Vol. 84, No. 2, pp. 809-833.
Costa, Francisco, Jason Garred and Joao Paulo Pessoa (2016) "Winners and Losers from a
Commodities-for-Manufactures Trade Boom," Journal of International Economics, Vol. 102, pp.
50-69.
Foote, Christopher L. (1998) “Trend Employment Growth and the Bunching of Job Creation and
Destruction,” Quarterly Journal of Economics, Vol. 113, No. 3, pp. 809-834.
Francis, Michael (2007) "The Effect of China on Global Prices," Bank of Canada Review,
Autumn 2007, pp. 13-25.
Freeland, Chrystia (2016) “Address by International Trade Minister Chrystia Freeland at theConference of Montreal,” speech, Montreal, Quebec, June 15.
http://news.gc.ca/web/article-en.do?nid=1096369.
Gaston, Noel, and Daniel Trefler (1997) “The Labour Market Consequences of the Canada-U.S.
Free Trade Agreement,” Canadian Journal of Economics, Vol. 30. No. 1, pp. 18-41.
Harrison, Ann, John McLaren, and Margaret McMillan (2011) "Recent Perspectives on Tradeand Inequality," Annual Review of Economics, Vol. 3, pp. 261-289.

53

Helpman, Elhanan (2016) "Globalization and Wage Inequality," working paper, Harvard
University, December.
Horowitz, Karen J., and Mark A. Planting (2009) "Concepts and Methods of the Input-Output
Accounts," Bureau of Economic Analysis, April.
https://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
Jaimovich, Nir, and Henry E. Siu (2015) “Job Polarization and Jobless Recoveries,” working
paper, University of British Columbia, May.
http://econ.arts.ubc.ca/hsiu/research/polar20150503.pdf.
Kneebone, Ron (2014) "The Canadian Unemployment Rate − With and Without Alberta's
Boom," University of Calgary School of Public Policy, SPP Communiqué, Vol. 6, Iss. 8,
November.
http://www.policyschool.ca/wp-content/uploads/2016/03/kneebone-unemplfinal.pdf.
Lileeva, Alla (2008) "Trade Liberalization and Productivity Dynamics: Evidence from Canada,"
Statistics Canada, Economic Analysis Working Paper No. 051, May.
http://www.statcan.gc.ca/pub/11f0027m/11f0027m2008051-eng.pdf.
Hakobyan, Shushanik, and John McLaren (2016) "Looking for Local Labor Market Effects of
NAFTA," Review of Economics and Statistics, Vol. 98, No. 4, pp. 728-741.
Lemieux, Thomas (2005) “Trade Liberalization and the Labour Market,” in R. Harris (ed.)
Social and Labour Market Aspects of North American Linkages, Calgary: University of Calgary
Press.
Morel, Louis (2007) "The Direct Effect of China on Canadian Consumer Prices: An Empirical
Assessment," Bank of Canada Discussion Paper 2007-10, September.
http://www.bankofcanada.ca/wp-content/uploads/2010/01/dp07-10.pdf.
Murray, Alexander (2016) "Developing an Inclusive Innovation Agenda for Canada," CSLS
Research Report 2016-18, December.
http://www.csls.ca/reports/csls2016-18.pdf.
OECD (2011) "STAN Indicators," http://www.oecd.org/sti/ind/47447210.pdf.
OECD (2014) All on Board: Making Inclusive Growth Happen, Paris: OECD Publishing.
http://www.oecd.org/inclusive-growth/all-on-board-making-inclusive-growth-happen.pdf
Ostry, Sylvia (2001) "WTO Membership for China: To Be and Not to Be: Is That the Answer?"in Patrick Grady and Andrew Sharpe (eds.) The State of Economics in Canada: Festschrift in
Honour of David Slater, Montreal and Kingston: McGill-Queen's University Press.

54

Pierce, Justin R., and Peter K. Schott (2012) "A Concordance between Ten-Digit U.S.
Harmonized System Codes and SIC/NAICS Product Classes and Industries," Journal of
Economic and Social Measurement, Vol. 37, No. 1-2, pp. 61-96.
Pierce, Justin R., and Peter K. Schott (2016) "The Surprisingly Swift Decline of US
Manufacturing Employment," American Economic Review, Vol. 106, No. 7, pp. 1632-1662.
Roache, Shaun K. (2012) "China's Impact on World Commodity Markets," IMF Working Paper
WP/12/115, May.
https://www.imf.org/external/pubs/ft/wp/2012/wp12115.pdf.
Sawhill, Isabel V. (2017) "Inclusive Growth Requires Maintenance of Full Employment,"
Brookings.edu, April 25.
https://www.brookings.edu/opinions/inclusive-growth-requires-maintenance-of-fullemployment.
Statistics Canada (2011) “Census Dictionary: Census Year, 2011,” Catalogue No. 98-301X2011001.
http://www12.statcan.gc.ca/census-recensement/2011/ref/dict/98-301-X2011001-eng.pdf.
Townsend, James (2007) “Do Tariff Reductions Affect the Wages of Workers in Protected
Industries? Evidence from the Canada-U.S. Free Trade Agreement,” Canadian Journal of
Economics, Vol. 40, No. 1, pp. 69-92.
Trefler, Daniel (2004) “The Long and Short of the Canada-U.S. Free Trade Agreement,”
American Economic Review, Vol. 94, No. 4, pp. 870-895.
Tusz, Roland, Erika Rodrigues, and Matthew Calver (2015) "Interprovincial Migration in
Canada: Implications for Output and Productivity Growth, 1987-2014," CSLS Research Report
2015-19, November.
http://www.csls.ca/reports/csls2015-19.pdf.
Wilkins, Carolyn (2016) "China's Great Transition: What it Means for Canada," remarks to theGreater Vancouver Board of Trade, Vancouver, British Columbia, April 5.
http://www.bankofcanada.ca/wp-content/uploads/2016/04/remarks-050416.pdf.

55