David Boileau, Office of the Chief Economist, DFAIT
With its strong growth in exports, China is becoming increasingly competitive to Canadian exports in third markets. This is specially a concern in Canada’s largest export market, the U.S., where China has quickly gained market share while Canada’s has decreased. This paper asks the question; is China competition to Canadian merchandise exports to the United States? Using a measurement of revealed comparative advantage shows that China is currently not competition to Canada, since China and Canada specialize in different sectors of exports to the U.S. market. On the other hand, constant market share analysis, which looks at the change in market share, indicates that China is rapidly gaining in sectors where Canada has enjoyed a large share of the U.S. market. Therefore, although China is not currently in direct competition with Canada in the U.S. market, its strong growth in many sectors where Canada has a revealed comparative advantage point to increased competition from China in the future.
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