|Question||In the past few years, trade between Canada and China has been growing quickly (though from a very low level). Many observers are concerned that Canadian firms are not able to compete with Chinese ones and that Canada may therefore be harmed by trading more with China. Comment on the following points in relation to the above worries:
a. “Chinese are the most expensive cheap labour I have ever encountered.” Statement by the owner of a Canadian firm that is moving back to Canada from China.
b. The theory of the gains from trade says that a high-productivity, high-wage country can gain from trading with a low-wage, low-productivity country.
c. Technological change is rapidly reducing labour costs as a proportion of total costs in many products; in many industries that use high-tech production methods this proportion is already well below 20 percent.