Canada is on the road to freer trade with China

“Restarting” the relationship with China is a major economic and foreign policy priority for the new prime minister, says a senior government official.

Thestar.com
Jan. 7, 2016
By Tonda MacCharles

Prime Minister Justin Trudeau is reportedly intent on pursuing a free trade agreement with China although the Liberal party platform and his officials do not go that far.

Speaking on background, a senior government official said only that “restarting” the relationship with China is a major economic and foreign policy priority for the new prime minister.

So what are the next steps and considerations in moving to freer trade with China?

PEOPLE-TO-PEOPLE TIES

It’s a cliché but true. The Chinese are all about relationships and Trudeau has a head-start with China. As prime minister, his father, Pierre, established official diplomatic relations between Canada and the People’s Republic of China in 1970, making Canada one of a few Western nations to recognize the one-party socialist republic. In 1973 he became the first Canadian prime minister to make an official visit to China.

FROSTY PAST

Conservative prime minster Stephen Harper got off to a frosty start when he vowed not to “sell out Canadian values” to the “almighty dollar” when it came to criticizing China’s human rights record. Things later improved after Harper visited China three times in December 2009, February 2012 and November 2014. Still Harper and the Chinese leadership never warmed to each other.

WELCOME MAT OUT

Two weeks after taking power, Justin Trudeau met Chinese President Xi Jinping at the G20 summit in Turkey on Nov. 16. Xi praised Pierre Trudeau’s foresight 45 years ago. “That was an extraordinary political vision. China will always remember that,” he said. Justin Trudeau said he was “well aware we have an opportunity to set a fresh approach in our relationship right now…I look forward to a very productive engagement in the coming years.” The two leaders have already exchanged formal invitations to visit.

GROUNDWORK LAID

The Harper government ratified a Foreign Investment Protection and Promotion Agreement with China, and conducted a joint 2012 “complementarities” study as a precursor to launching “exploratory free trade talks.” That study identified seven sectors where Canada and China could benefit from freer trade. They are:

• Agriculture and agri-food;
• Clean technology and environmental goods and services
• Machinery and equipment, technology and know-how, especially agricultural and mining equipment;
• Natural resources;
• Services such as health-care service delivery or engineering, according to former trade minister Ed Fast;
• Textiles and related products;
• Transportation infrastructure and aerospace

CONCERNS AND CONSIDERATIONS

The same 2012 study identified concerns including intellectual property protection, standards and certification requirements, and tariffs that could hinder trade growth. It recommended improvements to the “clarity, efficiency and predictability” of investment-related regulations, to the “compatibility of certification systems” and speedier approval processes for goods such as equipment in the mining and resource sectors. But full exploratory free trade talks never got underway. “Our sense . . . was that a significant advantage to China would come from a full-blown free trade agreement at Canada’s expense including in areas that would be sensitive for Canada, including manufacturing and some services to a degree. So I think questions still remain on that front,” says consultant Adam Taylor, a director at Ensight Canada’s international trade practice, and former advisor to Conservative ministers Lawrence Cannon and Fast.

CONSERVATIVES’ ADVICE

Today, former Conservative trade minister Fast says Trudeau’s trade priority should be to ratify the free trade agreement between Canada and the European Union and its 28 member states and the Trans-Pacific Partnership free trade agreement with nine signatory countries. After that, Trudeau should pursue formal consultations with Canadian industry and civil society before launching into full free-trade talks with China, he said. Conservative government efforts slowed because trade negotiators were “neck-deep” in the other two sets of talks, investment interests had shifted after Harper slapped new rules on investment by state-owned enterprises in Canada’s resource sector, and cyber-security concerns were raised about Chinese espionage.

“The relationship with China has both high opportunity and high risk. And I think Canadians expect us to act responsibly as we move forward with deepening our economic relationship with China,” said Fast.

PROVINCIAL CHEERLEADER

Brad Wall, the country’s lone Conservative provincial premier, gave a full-throated endorsement to Trudeau pursuing freer trade with China. In an interview on CBC, Wall said China is second-most important trading partner for Saskatchewan and he welcomed a diversification of Canada’s trade beyond its traditional partner, the United States.

“Now is the time to be engaging in a more robust trade relationship not just with China but with Asia,” Wall said. “Obviously human rights is important to all Canadians,” said Wall. “I just think we have a better chance of our prime minister and our country having an influence on human rights if we engage with them.”