Vers un commerce international plus inclusif pour le Canada.

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1 Alliance canadienne pour des soins de santé durables Vers un commerce international plus inclusif pour le Canada. Aperçu Le commerce mondial a amélioré le niveau de vie au Canada et dans le monde, mais beaucoup dans les économies avancées ont l impression de ne pas en profiter. Le commerce a des effets négatifs durables sur certaines personnes, sur certaines collectivités et sur certains groupes. Au lieu d ériger des obstacles au commerce pour protéger les emplois, un commerce canadien inclusif maximiserait les retombées des échanges, tout en en faisant profiter largement au Canada et dans le monde. Au-delà des accords commerciaux, cette voie suppose une approche stratégique intérieure globale afin de préparer les travailleurs à la poursuite de la mondialisation et à de nouveaux changements technologiques. Une version anglaise exhaustive de cette publication suit ce résumé en français. NOTE DE RECHERCHE MAI 2018

2 Vers un commerce international plus inclusif pour le Canada Résumé Le commerce international, c.-à-d. l échange de biens et de services entre des personnes ou des entreprises de différents pays, est un élément clé du concept plus général de mondialisation économique qui comprend aussi les flux internationaux de capitaux, de technologies, de personnes et d idées. Le commerce mondial a beaucoup contribué à faire sortir de la pauvreté plus d un milliard de personnes. Pour les pays en développement, le commerce a conduit à des emplois mieux rémunérés dans des industries exportatrices plus lucratives. Le Canada a lui aussi tiré son épingle du jeu. Le commerce des biens et des services représente une part importante (64 %) de l économie canadienne. Le commerce apporte des avantages aux consommateurs canadiens, y compris un plus grand choix de produits et des prix plus bas. De plus, à mesure que les marchés émergents en pleine croissance s intègrent dans l économie mondiale, et que les produits et services s échangent de plus en plus de façon électronique, les entreprises canadiennes verront se présenter de nouvelles possibilités de croissance. Les faits semblent montrer que les effets à long terme du commerce sont nettement positifs pour le Canada et le monde. Au Canada et ailleurs, les décideurs canadiens ont toujours mis l accent sur les effets globaux du commerce à long terme. Les analystes commerciaux et les chercheurs reconnaissent depuis longtemps que l ouverture des marchés entraîne la délocalisation, ou la disparition, de certaines entreprises et des pertes d emplois, mais peu d études s intéressent au coût pour les personnes, les groupes et les collectivités. Beaucoup dans les économies avancées ont l impression de ne pas profiter des retombées du commerce ou de la mondialisation. De nouvelles données montrent que ceux qui subissent le contrecoup de la concurrence des importations gagnent moins d argent et/ou connaissent un chômage prolongé. Des groupes comme les femmes et Consultez les recherches du Conference Board à 2

3 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. Le Conference Board du Canada Au lieu de protéger des emplois en dressant des obstacles au commerce ou en résistant aux nouvelles technologies, mieux vaudrait protéger et soutenir les travailleurs. les Autochtones sont sous-représentés dans le commerce et ne peuvent donc pas en tirer pleinement avantage. Pour avoir un programme commercial plus inclusif, il faut que les décideurs canadiens pensent plus délibérément à ces groupes et aux collectivités qui risquent de perdre des emplois ou qui ne peuvent pas profiter de débouchés commerciaux. Il s agit d une question bien plus complexe qui dépasse la politique commerciale. Au lieu de protéger des emplois en dressant des obstacles au commerce ou en résistant aux nouvelles technologies, mieux vaudrait protéger et soutenir les travailleurs. Pour cela, il faut des mesures de politique intérieure coordonnées afin de préparer tous les travailleurs à la poursuite de la mondialisation et à de nouveaux changements technologiques. Les auteurs de ce compte rendu de recherche, qui est le premier d une série sur le commerce inclusif, examinent les données sur les effets du commerce et analysent ce à quoi pourrait ressembler une approche inclusive du commerce. Les travaux suivants visent à déterminer si des groupes particuliers, comme les femmes, les Autochtones, les immigrants et les petites entreprises, réussissent à profiter pleinement des retombées du commerce. Évaluez cette publication et courez la chance de gagner un prix! Consultez les recherches du Conference Board à 3

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5 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. Global Commerce Centre Toward More Inclusive Trade for Canada. At a Glance Global trade has improved living standards in Canada and globally, but many in advanced economies feel they have not benefited. Trade has had negative and long-lasting impacts for some individuals, communities, and groups. An inclusive Canadian trade agenda would maximize the benefits of trade while distributing those benefits widely in Canada and globally. More than just trade deals, this path requires a comprehensive domestic policy approach to prepare all workers for further globalization and technological change. BRIEFING MAY 2018

6 Toward More Inclusive Trade for Canada Executive Summary International trade the exchange of goods and services between individuals or companies from different countries is a key element of the broader concept of economic globalization that also includes flows of capital, technologies, people, and ideas across borders. Global trade has played a key role in lifting over a billion people out of poverty. For developing countries, trade has led to better-paying jobs in more lucrative export industries. Canada has also benefited substantially from trade. Trade in goods and services is responsible for a significant share (64 per cent) of the Canadian economy. Canadians enjoy the benefits that trade brings, including increased availability of products, and lower prices. And, as fast-growing emerging markets integrate into the global economy, and as services and products are increasingly traded digitally, Canada s businesses will have new growth opportunities. The evidence suggests the long-term impacts of trade have been overwhelmingly positive for Canada and the world. Traditionally, policymakers in Canada and around the world have focused on these aggregate, long-term impacts of trade. Trade analysts and academics have long acknowledged that opening markets causes some firms to relocate, or go out of business, and workers to lose their jobs, yet little attention has been paid to the cost to individuals, groups, and communities. Many in advanced economies feel they have not shared in trade or globalization s benefits. There is new evidence that those negatively affected by import competition may make less money and/or experience a period of extended unemployment. Groups such as women and Indigenous peoples are under-represented in trade and are therefore not able to fully leverage its benefits. A more inclusive trade agenda requires Canadian policy-makers to think more deliberately about those groups and communities that may lose jobs or are not able to seize trade opportunities. This is a much more complex issue that goes beyond trade policy. Instead of protecting jobs 6

7 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada Policy-makers have become concerned that a rising share of their citizens believe trade and globalization have had a negative impact on them. via trade barriers or resisting new technologies, a better approach is to protect and support workers. This requires a coordinated domestic policy response to prepare all workers for further globalization and technological change. This briefing, the first in a series on inclusive trade, examines the evidence on trade s effects and discusses what an inclusive approach to trade might look like. Future work examines whether specific groups, such as women, Indigenous peoples, immigrants, and smaller businesses, have been able to take full advantage of trade s benefits. Introduction International trade the exchange of goods and services between individuals or companies from different countries is a key element of the broader concept of economic globalization that also includes the flow of international capital, technologies, people, and ideas across borders. In this briefing, we focus on trade, while acknowledging the many interconnections between trade and other aspects of globalization. This is the first in a series on inclusive trade. Future work will more closely examine whether certain groups have been underexposed to trade s benefits. Policy-makers in many advanced economies have become increasingly concerned that a rising share of their citizens believe trade and globalization have had a negative impact on them. Commentators commonly cite the U.K. vote to leave the European Union, the rise of nationalist Marine Le Pen to political prominence in France, and Donald Trump s election as President of the United States as evidence of a growing anti-trade and anti-globalization sentiment. The evidence from public opinion surveys in the United States is more nuanced. More than half of Americans do indeed support free trade agreements, according to a 2017 Pew Research Center survey. 1 However, according to the same survey, a large share of Americans believe free trade agreements have been bad for the U.S. (40 per 1 Jones, Support for Free Trade Agreements. 7

8 Toward More Inclusive Trade for Canada cent) and have hurt their families (38 per cent). 2 In 2016, less than half of Americans, British, and French who were polled believed that globalization is a force for good, according to polling by YouGov for The Economist magazine. 3 Anti-trade sentiment isn t as strong in Canada. For example, one recent survey in Ontario found that 81 per cent of Ontarians support Canada negotiating new trade agreements. 4 Canada is more dependent than most other countries on trade. Therefore, Canada has a larger stake in maintaining or regaining the global consensus in favour of open markets. With a small domestic market, access to the U.S. and global markets allows Canada far higher living standards than otherwise would be the case. Canada also provides greater social supports (e.g., universal health care and education, national employment insurance) to help cushion the blow from job losses. Have these sentiments translated into more anti-trade actions? Under President Trump, U.S. anti-trade policies have increased. Notable examples include the U.S. leaving the Trans-Pacific Partnership negotiations, threatening to cancel the North American Free Trade Agreement (NAFTA), and imposing new tariffs. However, a more nuanced picture emerges globally. Countries introduced far fewer total measures restricting trade, such as increased tariffs, import quotas, and local content requirements, in the period than in any of the previous four years. Moreover, governments globally introduced more trade-facilitating measures, such as reduced tariffs or simplified customs processes, than restricting ones over the past four years. Protectionism is an ongoing issue, but it is not necessarily worsening globally. Overall, trade has been a positive for the global economy, as it has helped to lift more than a billion people out of poverty worldwide. However, if the gains from trade are not shared widely, it could undermine further growth in global trade and the benefits that come from further expansion. As an economy that is highly dependent on trade, Canada has a strong interest in ensuring the benefits of trade are more 2 Ibid. 3 The Economist, The, Daily Chart. 4 Mutz, Mass Opinion Toward Trade; Mazereeuw, Anti-Globalist Movement; and Alwani and others, International Trade & Globalization. 8

9 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada There is a wellestablished link between trade and living standards. widespread. Not doing so could undermine the Canadian consensus for freer trade and, in turn, the living standards for all Canadians. For its part, the Canadian government has implemented a progressive trade agenda. The government s approach is three-pronged: an informed and inclusive approach to trade policy-making (such as consultations with women, small and medium-sized enterprise, (SME s) indigenous peoples, youth); progressive content in trade agreements (such as improving labour and environmental protections, and seeking chapters in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and a renegotiated NAFTA on trade and gender, SMEs, and Indigenous peoples); international engagement to advance support for progressive trade initiatives (such as increased participation in OECD and other forums that are increasingly examining inclusivity and trade). 5 There is a concern that most studies and policy attention have focused on trade s benefits, rather than on those individuals and groups who have lost out due to trade or on those who never reaped its benefits. The Organisation for Economic Co-operation and Development (OECD) and other international organizations are now studying and prescribing policies for more inclusive growth and inclusive globalization. In this briefing, we compile the available evidence and examine the idea of making trade more inclusive. What are trade s effects on the livelihoods of Canadians and those in developing economies? Why do many believe trade has made them worse off? Have trade s benefits been spread widely? What can and should Canada s leaders do to make trade more inclusive today and tomorrow? What Are Trade s Effects? There is a well-established link between trade and living standards, as a recent OECD meta-analysis shows. 6 Consumers benefit from access to a wider variety of products (e.g., fresh fruit in Canada during winter) and 5 Usher, Global Affairs Progressive Trade Policy. 6 Newfarmer and Sztajerowska, Trade and Employment in a Fast-Changing World. 9

10 Toward More Inclusive Trade for Canada lower prices. At the same time, when businesses sell into global markets, they increase their sales and productivity, and enjoy economies of scale. They can also import lower-cost inputs and have access to new technologies and innovations. This leads to higher productivity, more jobs, and higher wages. (See Exhibit 1.) Research by The Conference Board of Canada shows that exporting boosts the profits of Canadian SMEs, compared with Canadian SMEs that do not export. 7 Exhibit 1 Trade Boosts Standards of Living Trade Consumers Firms and workers Lower prices and increased variety Higher productivity and wages Increased standards of living Sources: Foreign Affairs and International Trade Canada; The Conference Board of Canada. We highlight here some of trade s benefits for the world and for Canada. For a more comprehensive discussion of the importance of trade, we suggest consulting Global Affairs Canada s special feature on the topic. 8 Trade Has Reduced Poverty One of the most striking impacts of trade has been its key role in lifting over a billion people out of poverty. Thirty-five years ago, 2 billion people (or 40 per cent of the world s population) lived on less than $2 a day. Today, that number is fewer than 750 million, making up less than 10 per cent of the population. (See Chart 1.) This dramatic reduction in poverty took place alongside the integration of China and other emerging markets into the global economy. Brazil, China, and India all liberalized their trade over this period. These new market opportunities increased the number and quality of jobs, stimulated economic growth, and drove productivity increases, all contributing significantly to poverty reduction. 9 7 Sui and Goldfarb, Not for Beginners. 8 Foreign Affairs and International Trade Canada, Canada s State of Trade: Trade and Investment Update World Bank Group and World Trade Organization, The Role of Trade in Ending Poverty. 10

11 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada Chart 1 Trade Played Key Role in Lifting Over a Billion People Out of Poverty (billions of people, 2011 purchasing power parity) In absolute poverty Not in absolute poverty Note: Absolute poverty is defined as living on less than 1.90 international dollars per day. Sources: World Bank Databank; The Conference Board of Canada. Trade has also played a key role in helping women escape poverty. Increased trade openness has brought new job opportunities, increased wages for women working in export-oriented sectors, and increased access to markets for women. 10 Trade Has Dramatically Lowered Consumer Prices in Canada and Other Advanced Economies Another striking impact of trade has been to dramatically lower the prices consumers pay. Canadian consumers pay less today for many items than they did in the late 1990s. (See Chart 2.) This is not just a result of adjusting for inflation. Actual prices are lower than they were in the 1990s. Increased access to lower-cost labour markets and improved manufacturing technologies lowered production prices and made goods more affordable. Because they tend to spend a bigger share of their household budgets on consumer goods 11 and they buy more goods from internationally traded sectors, poor households benefit disproportionately from lower consumer prices Ibid. 11 Fajgelbaum and Khandelwal, Measuring the Unequal Gains From Trade. 12 Ibid. 11

12 Toward More Inclusive Trade for Canada Chart 2 Canadian Consumers Are Paying Less Today for Many Household Items (consumer price index for select items, 2002 = 100, nominal prices) Household appliances Clothing and footwear Sources: Statistics Canada; The Conference Board of Canada. Trade Opened Opportunities and Boosted Earnings Before Canada embraced free trade in the 1980s, much of the Canadian business landscape was focused solely on the domestic market, which is relatively small. Starting with the Canada-U.S. Free Trade Agreement (CUSFTA) in 1989, Canada has reduced tariffs and other trade barriers with numerous other countries. In opening its own markets and achieving greater access to the world, Canadian businesses have been able to scale up and reach new markets. Freer trade has also enabled Canadian companies to access cheaper inputs, pursue investment abroad, and form partnerships with global firms. The evidence suggests that trade has improved the productivity performance of Canada s industries, particularly in the manufacturing sector. 13 Why? To be able to do business abroad, firms often invest in advanced technologies, research and development, and training activities that typically support productivity gains. 14 By having access to larger markets, firms can also boost productivity by taking advantage of economies of scale, specializing their production and ultimately becoming more efficient. 15 Increased productivity, in turn, fuels profits 13 Baldwin and Yan, Trade and Productivity. 14 Ibid. 15 Ibid. 12

13 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada There is mounting evidence that people displaced by trade do not always find new jobs quickly. and wage growth for these companies workers. For example, one Canadian study estimated an export-oriented firm had a wage premium of 6 per cent compared to firms that did not export (controlling for plant size and other characteristics). 16 Imports have also been a considerable source of productivity gains in Canada. Between 2000 and 2007, imports of intermediate inputs (largely in the United States) accounted for two-thirds of Canada s effective productivity growth. 17 Why Do Many Feel They Have Not Benefited From Trade? Most trade analysts acknowledge that in the short term, reducing tariffs and opening domestic markets will lead some firms to relocate or go out of business, resulting in some workers losing their jobs. The commonly held view was that a dynamic economy can create new jobs in more productive areas of the economy, and that the overall benefits of trade lower costs, greater market access, and higher firm productivity over the long term greatly outweigh these adjustment costs. But, there is mounting evidence that people displaced by trade do not always find new jobs quickly. There are often deep and lasting costs concentrated in certain regions, industries, or age groups especially for older workers. 18 Workers in the U.S. in regions most affected by imports generally have greater unemployment and reduced income for the rest of their lives. 19 As well, job loss due to trade can also result in depressed wages in other jobs in the same region, including those in non-traded sectors Breau and Brown, Global Links: Exporting, Foreign Direct Investment, and Wages. 17 Baldwin and Yan, Trade and Productivity. 18 Copeland, Trade and Inequality. 19 Acemoglu and others, Import Competition and the Great US Employment Sag of the 2000s. 20 Copeland, Trade and Inequality. 13

14 Toward More Inclusive Trade for Canada In addition to those who have lost jobs due to trade, there are individuals and groups who may not have been able to take full advantage of trade opportunities. These might include smaller businesses that make up the bulk of Canada s economy, but take little advantage of global markets. Other groups to consider include women and Indigenous peoples, who tend not to be employed in export-oriented sectors. As well, immigrants have natural advantages of culture and language in export markets, but may not have been able to take full advantage of trade opportunities due to their weak Canadian business connections. 21 We explore these groups further in a forthcoming briefing. Several factors may have contributed to disenchantment with trade and globalization. In this section, we look briefly at middle-class wages, income inequality, the role of automation, and the impact of job loss due to trade. Middle-Class Wages Middle-class wages in OECD countries have stagnated. Branko Milanovic s elephant chart shows that as the world globalized and opened to global trade over the last two decades, most of the world saw strong income growth. But at the same time, the right side of the chart shows that the middle class in advanced economies saw few income gains. 22 (See Chart 3.) This stagnant wage growth persisted over a long period of time. Moreover, the financial crisis made the situation worse in Canada and the United States. 23 So, the perception that many in the middle class have been made worse off is real. Since stagnant middle-class wage growth has happened at the same time trade has opened up, it suggests that trade may have played a role. 21 Sui and Morgan, Selling Beyond the U.S. 22 Lakner and Milanovic, Global Income Distribution 23 Sydor, Economic Origins of Concerns Over Trade and Globalization. 14

15 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada Chart 3 Stagnant Middle-Class Income Growth, (percentage change, real global income growth, 2011 purchasing power parity) Emerging countries middle class Advanced countries middle class Poorest Richest Sources: Lakner and Milanovic, The Conference Board of Canada. Income Inequality Income inequality in most advanced economies has worsened substantially over the past 40 years 24 and is currently at record high levels in many OECD economies. 25 And, the literature on global inequality shows that trade can contribute significantly to increases in inequality. 26 Nevertheless, Canada s inequality does not seem to have worsened in the past two decades. Using the Gini coefficient, a standard inequality measure, that Canada s level has changed little since Canada also fares well on more dynamic indicators. Canada has more intergenerational mobility than the OECD average 28 and Canada is among the top OECD countries with the largest share of top-performing students that have a low socio-economic background. 29 Since we don t observe a recent worsening of income inequality in Canada, it therefore 24 Copeland, Trade and Inequality. 25 OECD, Centre for Opportunity and Equality, Income Inequality Update. 26 Copeland, Trade and Inequality. 27 OECD, Centre for Opportunity and Equality, Income Inequality Update. 28 OECD, Centre for Opportunity and Equality, The Only Way Is Up? 29 Ibid. 15

16 Toward More Inclusive Trade for Canada Many workers have been dislocated due to a combination of trade and technological change. seems unlikely that trade is worsening income inequality here. Still, this is an area for further exploration, as little work has been done using Canadian data. 30 Automation Could trade be taking the blame for job loss caused by changing technologies and robotics? The evidence suggests that automation accounts for far more dislocation than trade does. For example, automation and better technology accounted for close to nine out of 10 U.S. manufacturing jobs lost between 2000 and 2010, with just over one of 10 lost due to trade. 31 Many Canadians and others in OECD countries have lost their jobs because of rising global competition, especially after China entered the world trading system. The Centre for the Study of Living Standards estimates that trade with China resulted in a net loss of 150,000 Canadian manufacturing jobs between 2001 and This amount represents about one-fifth of the overall decline in Canada manufacturing employment during this time. Trade with China during the 2000s led to a net loss of 2 million to 2.4 million jobs in the United States. 33 And, despite the overall long-term benefits of free trade with the U.S., tariff reductions implemented under the Canada-U.S. Free Trade Agreement also led to a loss of 100,000 Canadian manufacturing jobs. 34 In short, many factors interact with trade, so it is difficult to disentangle the various effects. However, it is clear that many workers have been dislocated due to a combination of trade and technological change. What Can Be Done? The nature of trade is changing toward more digitization and servicesoriented trade. Technology, including the use of automation and machine 30 Copeland, Trade and Inequality. 31 Hicks and Devaraj, The Myth and the Reality of Manufacturing in America. 32 Murray, The Effect of Import Competition on Employment in Canada. 33 Acemoglu and others, Import Competition and the Great US Employment Sag of the 2000s. 34 Trefler, The Long and Short of the Canada-U.S. Free Trade Agreement. 16

17 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada learning, seems likely to accelerate these types of trade. Emerging markets are now more fully integrated into the global economy. These trends provide tremendous opportunities for Canada and emerging markets, and also mean heightened global competition. In such a dynamic context, policy-makers will need to maximize the potential gains from trade while ensuring the benefits of trade are spread widely so that all can enjoy the boost of living standards that trade provides. The first step toward an inclusive Canadian trade policy should be to protect existing trade relationships and develop new opportunities. Canada should advocate strongly against protectionist policies, and equally strongly in favour of policies that further open trade. To leverage the maximum benefit, this should extend to fast-growing and newer forms of trade, such as traded services. However, the benefits of trade will not automatically be shared broadly. In an age of globalization and technological disruption, policy-makers will need to take a more nuanced approach to maintain the overall benefits of trade. The traditional approach to trade has been to: focus on the overall, long-term benefits of market opening; assume that workers would recover quickly from job loss due to trade; address trade via trade policies. Canadian policy-makers are already starting to think more deliberately about those groups and communities that have lost their jobs due to trade or other factors, or those left out of trade s benefits. To ensure Canada s future trade is inclusive and prepares Canadians for the future, policy-makers will need to continue to understand and address: trade s impacts on communities and individuals; the length of adjustment to trade; how technology interacts with trade and may alter the distribution of trade s benefits; why some groups are underexposed to trade s benefits; newer types of trade and how their impacts might differ from traditional manufacturing-based trade; the impacts of Canada s trade agenda on the global poor. 17

18 Toward More Inclusive Trade for Canada Policy-makers across different levels of government will need to collaborate to spread the benefits of globalization more widely. Canada s progressive trade agenda begins to address these issues. Future trade negotiators should factor impacts on specific groups and regions into their approaches, leaving flexibility in trade deals to be able to address these impacts. 35 A more inclusive trade agenda requires Canadian policy-makers to think more deliberately about groups and communities that will inevitably lose their jobs or are not able to seize trade opportunities. This is a complex issue that goes beyond trade policy and requires coordinated economic and social polices. Instead of protecting jobs via trade barriers or resisting new technologies, a better approach is to protect and support workers. One key area will be continuing investments in education and innovation to help move workers into new jobs and become life-long learners. Education, housing, tax, labour market, and infrastructure policies will all be critical to helping Canadians become more resilient in the face of intense global economic and technological pressures. Policy-makers across different levels of government will need to collaborate to spread the benefits of globalization more widely and create a dynamic economy that can absorb the losses that globalization and technological change can bring. Business leaders will also need to play a role in ensuring that their workers can adapt to the dramatic changes that globalization and technological change bring. Canada should consider not only trade s impact on Canadians but also its outcomes in other countries. Access to markets brings developing countries more fully into the global economy. It particularly helps women in these economies gain income by participating in the more lucrative export-oriented sectors. From this perspective, Canada s trade policies that open up opportunities for those in developing economies are inclusive. Conclusion This briefing looks at a complex issue. More disruptions further technological transformation and implications of climate change are 35 Copeland, Trade and Inequality. 18

19 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada on the horizon and will lead to continued dislocation. The distribution of trade s benefits going forward could look very different as new forms of trade advance and combine with major technological advance. We will need to better understand the impact of these disruptions, not just in overall trade and economic data, but in how they affect individuals and communities. The evidence is clear that trade s impact is, on balance, positive over the longer term for the world and for Canada. Developing countries have been key beneficiaries of trade, with millions of people moving out of poverty. Trading beyond a small domestic market provides Canadians higher living standards than they would otherwise enjoy. Lower prices due to trade spread widely to all Canadian consumers, which has a disproportionate benefit for poorer Canadians. Disenchantment in advanced countries with existing global trade approaches has led policy-makers to recognize that they need to pay more attention to ensuring the benefits of trade are broadly shared. Job and wage losses due to trade are real, and displaced workers may find themselves without equivalent work for an extended time. Policymakers need to pay more attention to these negative impacts on groups and regions, both the immediate effects and the longer-term implications. They also need to address those that have been on the margins of the economy, and who have not been adequately exposed to the wage and job benefits of trade. Trade policy and trade agreements with other countries can help provide opportunities for firms and individuals to benefit from trade. But a more coordinated policy approach needs to be taken across different levels of government to truly make trade more inclusive. Companies and other institutions also play an important role in managing this transition for those who may be negatively affected by changes brought on, at least in part, by trade. The goal should be to make sure that there are tangible benefits to international trade and they spread more widely so that all can experience higher living standards. 19

20 Toward More Inclusive Trade for Canada Acknowledgements The authors would like to thank Craig Alexander, Kristelle Audet, Susan Baka, Brent Dowdall, Kareem El-Assal, Adam Fiser, Glen Hodgson, Stephen Tapp, and Global Affairs Canada for their comments on this briefing. This research was funded by the Global Commerce Centre members. The findings and conclusions are those of the authors alone. About the Global Commerce Centre The Global Commerce Centre ( helps business and government leaders respond effectively to the dramatic changes in the global economy. The Centre provides evidence-based tools and strategies to help companies succeed in global markets, and brings together public and private sector leaders to discuss effective solutions to global commerce challenges. Champion Level Export Development Canada Global Affairs Canada Lead Level Atlantic Canada Opportunities Agency British Columbia Ministry of International Trade Business Development Bank of Canada Canada Economic Development for Quebec Regions Federal Economic Development Agency for Southern Ontario Innovation, Science and Economic Development Canada Ontario Ministry of Economic Development and Growth Ministère de l Économie, de la Science et de l Innovation Transport Canada Partner Members Agriculture and Agri-Food Canada Bank of Canada Maersk Line Nova Scotia Business Inc. 20

21 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. Appendix A The Conference Board of Canada APPENDIX A Bibliography Acemoglu, Daron, David Autor, David Dorn, Gordon H. Hanson, and Brendan Price. Import Competition and the Great US Employment Sag of the 2000s. Journal of Labor Economics 34, no. S1 (Part 2, January 2016): S141 S198. Alwani, Kiran, Giancarlo Acquaviva, Robert Wolfe, and Andrew Parkin. Portraits 2017: International Trade & Globalization. Toronto: Mowat Centre, University of Toronto, March wp-content/uploads/publications/163_portraits_international_trade_ globalization.pdf. Baldwin, John R., and Beiling Yan. Trade and Productivity: Insights From Canadian Firm-Level Data. In The Art of the State Volume VI: Redesigning Canadian Trade Policies for New Global Realities, eds. Stephen Tapp, Ari Van Assche, and Robert Wolfe. Montréal: Institute for Research on Public Policy, May 28, Breau, Sébastien, and W. Mark Brown. Global Links: Exporting, Foreign Direct Investment, and Wages: Evidence From the Canadian Manufacturing Sector. Ottawa: Statistics Canada, August Copeland, Brian. Trade and Inequality. Draft, University of British Columbia, May 28, Economist, The. Daily Chart: What the World Thinks About Globalisation. Graphic Detail blog. November 18, com/blogs/graphicdetail/2016/11/daily-chart-12. Fajgelbaum, Pablo D., and Amit K. Khandelwal. Measuring the Unequal Gains From Trade. The Quarterly Journal of Economics 131, no. 3 (August 2016):

22 Toward More Inclusive Trade for Canada Foreign Affairs and International Trade Canada. Special Feature: International Trade and Its Benefits to Canada. In Canada s State of Trade: Trade and Investment Update 2012, Ottawa: Global Affairs Canada, Hicks, Michael J., and Srikant Devaraj. The Myth and the Reality of Manufacturing in America. Muncie, I.N.: Ball State University Center for Business and Economic Research, June Jones, Bradley. Support for Free Trade Agreements Rebounds Modestly, but Wide Partisan Differences Remain, Pew Research Center, Fact Tank, April 25, Lakner, Christoph, and Branko Milanovic. Global Income Distribution: From the Fall of the Berlin Wall to the Great Recession. The World Bank Economic Review 30, no. 2 (January 2016): Mazereeuw, Peter. Anti-Globalist Movement Hasn t Hit Canada Yet, Poll Suggests. The Hill Times, April 5, Murray, Alexander. The Effect of Import Competition on Employment in Canada: Evidence From the China Shock. Ottawa: Centre for the Study of Living Standards, July Mutz, Diana. Mass Opinion Toward International Trade in the United States and Canada. Presentation at the Centre for the Study of Democratic Citizenship, McGill University, Montréal, QC, February 24, Newfarmer, Richard, and Monika Sztajerowska. Trade and Employment in a Fast-Changing World. In Policy Priorities for International Trade and Jobs, ed. Douglas Lippoldt, Paris: OECD, Organisation for Economic Co-operation and Development (OECD), Trade and Agriculture Directorate. Making Trade Work for All. Paris: OECD, May Chapter 2: How to Make Trade Work for All. In OECD Economic Outlook, Volume 2017 Issue 1, Paris: OECD, June

23 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. Appendix A The Conference Board of Canada. Centre for Opportunity and Equality. The Issues Note. The Only Way Is Up? Social Mobility and Equal Opportunities. Paris: OECD, May Accessed March 20, inequality-and-opportunity/the-issues-note-social-mobility-and-equal- Opportunities-May pdf.. Income Inequality Update. Paris: OECD, November Accessed March 20, Inequality-Update.pdf. Organisation for Economic Co-operation and Development. Part II, Chapter 5, Reducing Income Inequality While Boosting Economic Growth: Can it Be Done? In Economic Policy Reforms 2012: Going for Growth, Paris: OECD, February Statistics Canada. CANSIM table , Consumer Price Index (CPI), monthly (2002=100). Accessed March 20, statcan.gc.ca/cansim/a26?lang=eng&id= Sui, Sui, and Danielle Goldfarb, Not for Beginners: Should SMEs Go to Fast-Growth Markets? Ottawa: The Conference Board of Canada, February 5, Sui, Sui, and Horatio M. Morgan. Selling Beyond the U.S.: Do Recent Immigrants Advance Canada s Export Agenda? Ottawa: The Conference Board of Canada, June Sui, Sui, and Stephen Tapp. Going Global: Canadian SME Trade and Emerging Markets. In The Art of the State Volume VI: Redesigning Canadian Trade Policies for New Global Realities, eds. Stephen Tapp, Ari Van Assche, and Robert Wolfe, Montréal: Institute for Research on Public Policy, October 13, Sydor, Aaron. Economic Origins of Concerns Over Trade and Globalization. Presentation at The Conference Board of Canada s Global Commerce Centre meeting on Developing a Progressive Trade Agenda for Canada, Ottawa, ON, November 23, Trefler, Daniel. The Long and Short of the Canada-U.S. Free Trade Agreement. American Economic Review 94, no. 4 (September 2004):

24 Toward More Inclusive Trade for Canada Usher, David. Global Affairs Progressive Trade Policy. Presentation at The Conference Board of Canada s Global Commerce Centre meeting on Developing a Progressive Trade Agenda for Canada, Ottawa, ON, November 23, World Bank Group and World Trade Organization. The Role of Trade in Ending Poverty. Geneva: World Trade Organization,

25 The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. About The Conference Board of Canada We are: The foremost independent, not-for-profit, applied research organization in Canada. Objective and non-partisan. We do not lobby for specific interests. Funded exclusively through the fees we charge for services to the private and public sectors. Experts in running conferences but also at conducting, publishing, and disseminating research; helping people network; developing individual leadership skills; and building organizational capacity. Specialists in economic trends, as well as organizational performance and public policy issues. Not a government department or agency, although we are often hired to provide services for all levels of government. Independent from, but affiliated with, The Conference Board, Inc. of New York, which serves nearly 2,000 companies in 60 nations and has offices in Brussels and Hong Kong.

26 Insights. Understanding. Impact. Toward More Inclusive Trade for Canada Jacqueline Palladini and Danielle Goldfarb To cite this briefing: Palladini, Jacqueline, and Danielle Goldfarb. Toward More Inclusive Trade for Canada. Ottawa: The Conference Board of Canada, The Conference Board of Canada* Published in Canada All rights reserved Agreement No *Incorporated as AERIC Inc. An accessible version of this document for the visually impaired is available upon request. Accessibility Officer, The Conference Board of Canada Tel.: or The Conference Board of Canada and the torch logo are registered trademarks of The Conference Board, Inc. Forecasts and research often involve numerous assumptions and data sources, and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice. The findings and conclusions of this report do not necessarily reflect the views of the external reviewers, advisors, or investors. Any errors or omissions in fact or interpretation remain the sole responsibility of The Conference Board of Canada. 255 Smyth Road, Ottawa ON K1H 8M7 Canada Tel Fax Inquiries conferenceboard.ca PUBLICATION PRICE: Complimentary