Canada's Trade Strategy towards Asia; the Comparative Advantage of Canadian Exports

Hugo Paquin

Master's thesis

Abstract:

The goal of this thesis is to determine how Canada's competitiveness is being affected by its commodity-based, US-centric export mix, if it is justified to talk about a ''resource curse'' and if efforts to diversify should be pursued. In the end, the aim is to understand how the chosen trade strategy will impact Canadian efforts to tap into the Asian markets. Chapter 1 will first look into the theory of comparative advantage which was first established by David Ricardo and then extended through several neoclassic theories (namely, the Heckscher-Ohlin model), the various assumptions made will be considered and put into today's context of globalized trade exchanges. As the 'case study', the economy of Canada and more specifically its trade exchanges will be analyzed in Chapter 2. As an oil-centric (and generally, commodity-centric) economy, the question of whether the Dutch Disease and the commodity 'supercycle' pose threats to Canada's trade strategy and competitiveness will be answered. Finally, in Chapter 3, the concepts gathered in Chapter 1 as well as the observations made in Chapter 2 will come together and explain how Canada can, through a diversified export mix, better seize the economic opportunities which Asia will represent in the years to come. The conclusion is that the endowment of resources should be exploited but not relied upon, and that government policies and active investments should be redirected towards innovative, value-adding industries.

Abstract:

The goal of this thesis is to determine how Canada's competitiveness is being affected by its commodity-based, US-centric export mix, if it is justified to talk about a ''resource curse'' and if efforts to diversify should be pursued. In the end, the aim is to understand how the chosen trade strategy will impact Canadian efforts to tap into the Asian markets. Chapter 1 will first look into the theory of comparative advantage which was first established by David Ricardo and then extended through several neoclassic theories (namely, the Heckscher-Ohlin model), the various assumptions made will be considered and put into today's context of globalized trade exchanges. As the 'case study', the economy of Canada and more specifically its trade exchanges will be analyzed in Chapter 2. As an oil-centric (and generally, commodity-centric) economy, the question of whether the Dutch Disease and the commodity 'supercycle' pose threats to Canada's trade strategy and competitiveness will be answered. Finally, in Chapter 3, the concepts gathered in Chapter 1 as well as the observations made in Chapter 2 will come together and explain how Canada can, through a diversified export mix, better seize the economic opportunities which Asia will represent in the years to come. The conclusion is that the endowment of resources should be exploited but not relied upon, and that government policies and active investments should be redirected towards innovative, value-adding industries.

Keywords

comparative advantage, competitiveness, asia trade, canada

Keywords

competitiveness, comparative advantage, canada, asia

Language used: English

Date on which the thesis was submitted / produced: 30. 6. 2014

Thesis defence

• Date of defence: 3. 6. 2015
• Supervisor: Pavel Žamberský
• Reader: Josef Taušer

Vysoká škola ekonomická v Praze

Master programme / field:
Mezinárodní ekonomické vztahy / International and Diplomatic Studies