The Impact on Canada of the Rise of the Chinese Economy: Good, Bad or Indifferent? (Working Paper 50)

From humble beginnings less than twenty years ago, the economic relationship between Canada and the Chinese has flourished so that China is now Canada’s second most important trading partner after the United States. The Chinese demand for Canada’s exports, in particular in the natural resource sectors, has been a clear win for Canada, especially during the recent Great Recession where demand from other countries dropped sharply. But other aspects of the relationship have led to suggestions of costs. Canada’s large trade deficit with China at least looks superficially as a drag on the Canadian economy. It has been suggested the greater exposure to a low cost producer has displaced Canadian production and jobs and lowered wages. We find that each argument for costs to the relationship ignores important factors. On balance we conclude the relationship has been good for Canada, and it could be even better in the future.

Three Essays on Economic Development in the Natural Resources Sector

This thesis examines two ongoing development projects that received financial support from international development organizations, and an alternative mining tax proposed by the academia. Chapter 2 explores the impact of commoditization of coffee on its export price in Ethiopia. The first part of the chapter traces how the Ethiopian’s current coffee trade system and commoditization come to be. Using regression analysis, the second part tests and confirms the hypothesis that commoditization has led to a reduction in coffee export price. Chapter 3 conducts a cost-benefit analysis on a controversial, liquefied natural gas export project in Peru that sought to export one-third of the country’s proven natural gas reserves. While the country can receive royalty and corporate income tax in the short and medium term, these benefits are dwarfed by the future costs of paying for alternative energy after gas depletion. The conclusion is robust for a variety of future energy-price and energy-demand scenarios. Chapter 4 quantifies through simulation the economic distortions of two common mining taxes, the royalty and ad-valorem tax, vis-à-vis the resource rent tax. The latter is put forward as a better mining tax instrument on account of its non-distortionary nature. The rent tax, however, necessitates additional administrative burdens and induces tax-avoidance behavior, both leading to a net loss of tax revenue. By quantifying the distortions of royalty and the ad-valorem tax, one can establish the maximum loss that can be incurred by the rent tax. Simulation results indicate that the distortion of the ad-valorem tax is quite modest. If implemented, the rent tax is likely to result in a greater loss. While the subject matters may appear diverse, they are united by one theme. These initiatives were endorsed and supported by authorities and development agencies in the aim of furthering economic development and efficiency, but they are unlikely to fulfill the goal. Lessons for international development can be learnt from successful stories as well as from unsuccessful ones.