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Trade

Trudeau’s trip a chance for China and Canada to talk free trade

An agreement between the two countries would be a landmark deal for both sides as Ottawa and Washington struggle to come to terms over Nafta

PUBLISHED : Sunday, 03 December, 2017, 8:07pm
UPDATED : Tuesday, 05 December, 2017, 2:38pm

Canadian Prime Minister Justin Trudeau’s trip to China will be a chance for the two countries to move ahead on trade talks as the United States retreats on free trade.

Such a deal would take years to nail down but momentum is building in Beijing and Ottawa for the launch of formal talks on such an agreement.

Trudeau will arrive in Beijing on Sunday for a five-day trip, which will include a visit to Guangzhou. He will meet Chinese Premier Li Keqiang on Monday.

His trip comes after the US’ decision to pull out of the Trans-Pacific Partnership (TPP) and efforts to re-negotiate the North American Free Trade Agreement (Nafta) appear to have stalled. At the same time, China is promoting itself as a standard-bearer for globalisation and free trade.

Charles Burton, an associate professor with Brock University and a consultant on China affairs to the Canadian government, said Trudeau’s visit might see both sides agreeing to initiate formal negotiations for a free-trade agreement.

“Uncertainty over the US imposing tariff and non-tariff barriers on Canadian goods and services increases the pressure on Canada to proceed with free trade with China,” Burton said.

Canada's Trudeau faces tough China talks on trade deal

China is Canada’s second-biggest trading partner, with bilateral trade reaching US$66.4 billion in 2016. Last year 4 per cent of Canada’s exports went to China, up from 0.9 per cent in 2000.

But the US is still Canada’s biggest trade partner by far, accounting for more than three-quarters of Canada’s exports. The trade has been covered by Nafta but Washington has proposed adding a sunset clause to the agreement and abandoning the pact’s trade dispute mechanism.

The future of the TPP is also still uncertain even though the 11 remaining members, including Canada, agreed to proceed last month.

Wang Heng, an international relations professor from the University of New South Wales in Sydney, said both China and Canada wanted to improve economic links.

“The US’ de-globalisation sentiment may bring the two countries closer,” he said. “[Trade talks with China] may increase the negotiation power of Canada under Nafta as Canada could have preferential market access to China.”

Canada’s views on China trade talks clouded by citizens’ concerns on rights, rule of law

A trade agreement with Canada would also be a big deal for China because it would be the first between China and a Group of Seven member.

“Beijing sees Canada as an influential US ally. Gaining greater influence in North America is a political win for China,” David Mulroney, Canada’s ambassador to China from 2009-2012 who is now President of the University of St. Michael’s College, said.

Hugh Stephens, from the Asia Pacific Foundation of Canada, said one of the benefits for China would be a more relaxed screening review of its investment in Canada. Ottawa, meanwhile, would gain from a potential agreement with a biding dispute settlement process and transparent rules.

But there are obstacles – Trudeau is aware of domestic unease and the government is concerned about the potential loss of jobs.

Trudeau’s trip may also be overshadowed by a commercial dispute that saw two Canadians, John Chang and his wife Allison Lu, detained last year over claims of smuggling and under-reporting the value of wine they exported to Asia. Chang is still in detention and Lu has been released but banned from leaving Shanghai.

Burton said China might also impose conditions on Canada, such as a non-reciprocal right of purchase of Canadian energy and mining companies.

Jeremy Paltiel, from Carleton University, said that in most sectors, trade with China was not a substitute for trade with the US.

“There is some concern … that opening FTA negotiations with China at a delicate time in the Nafta agenda may antagonise the US,” he said. “Our prime minister has a fine line to tread.”

Gordon Houlden, director of the University of Alberta’s China Institute, agreed that forming close trade ties with Beijing might affect the relationship between Ottawa and Washington.