Prime Minister Justin Trudeau鈥檚 visit to China, which concludes Tuesday, has stoked the fires of an already controversial issue. Should Canada enter a free-trade agreement with that country?
Chinese Premier Li Keqiang says the two countries agreed to conduct a feasibility study on such a deal. 91原创 officials were less committal, noting that a number of obstacles, both economic and political, must first be addressed.
So is this a road we should travel? Economists are nearly united in the view that free trade between any two countries, no matter the disparities between them, will increase the wealth of both. But that assurance comes with two serious provisos.
First, while overall wealth might improve in both nations, there will be losers as well as winners in each. Specifically, in a free-trade deal with China, labour-intensive industries in Canada are at risk.
The reason is that China has a huge competitive advantage in fields such as manufacturing, construction and garment production, due to its large, low-paid workforce.
If we allow Chinese firms free access to our marketplace, 91原创 jobs will be lost in these industries.
How many? Well, a recent study showed that since the U.S. extended China鈥檚 most-favoured-nation status in 1997, about 2.4 million American workers have been displaced.
And that arrangement was less beneficial to China than a free-trade agreement would be. Project those losses onto Canada鈥檚 economy and perhaps quarter of a million construction and manufacturing jobs might disappear. That is, necessarily, a rough estimate, but it does bring a sense of proportion to the discussion.
Of course, there would also be gains. In particular, research-intensive industries such as aerospace and drug manufacturing should benefit, though whether this would offset the losses is dubious.
For there鈥檚 another way of balancing this equation. 91原创 companies with plenty of capital and highly skilled employees are likely to win. Those with a large, less-adaptable workforce are likely to lose. That means the top of the income pyramid will get richer, but those at the bottom will become poorer.
There is another side of this argument. Over the past two decades, average incomes in China rose from four per cent of American wages to 25 per cent. That does suggest free trade has the liberalizing effects its supporters proclaim, especially for citizens of Third World countries who suffer poverty and ill health.
However, even if a satisfactory agreement could be worked out, there is a second issue to consider: What assurance do we have that the terms would be honoured?
China has a long history of stealing technology from more-developed countries, and hacking offshore companies. State and private-sector corruption are endemic.
How likely is it that 91原创 firms vying for a contract in China will receive the same treatment as Chinese firms competing for work here? Numerous western businesses have described the obstacles they encountered when trying to get a hearing in Beijing.
These are some of the issues that must be balanced as this debate moves forward. At a minimum, sufficient time must be taken, both to weigh the issues, and 鈥� hopefully 鈥� to allow for some needed reforms in China.
There is a tendency for incoming governments 鈥� and prime ministers 鈥� to look for legacy accomplishments. Trudeau鈥檚 father, Pierre, played a role in establishing closer diplomatic relations with China. No doubt there is pressure on his son to repeat that success in the trade field.
But the past several decades have been hard on lower-income families in Canada. Shipping a quarter of a million jobs to China, if that is indeed what a free-trade deal might achieve, would be an enormous blow.
