Farm groups are thrilled with the news that Canada has begun exploratory free trade talks with China.
“China is the world’s largest banquet and we want Canada to be the caterer,” said Canadian Agri-Food Trade Alliance president Brian Innes.
“With this step forward we are closer to taking advantage of a huge opportunity to increase trade.”
China is already Canada’s second largest agri-food export market, buying $5.6 billion of crops and meat products in 2015.
Canola accounts for more than half of those sales followed by soybeans in second spot and wheat in third.
Innes said 500 million of China’s 1.4 billion people are interested in the agri-food products Canada exports.
A free trade agreement would eliminate punitive tariffs and non-tariff barriers. China’s average tariff on agricultural products is 15.1 percent compared to 8.6 percent for industrial goods.
Innes said there would be an opportunity to eliminate barriers to trade, such as the nine percent tariff on canola seed and the three percent tariff on soybeans.
It would be more difficult to get a tariff reduction for a product like wheat, where China is determined to remain self-sufficient.
Competitors such as Australia, New Zealand and Chile already have free trade agreements with China.
“It’s time Canada was in the game,” said Innes.
Lawrence Herman, an international trade lawyer with Herman and Associates, said there is no doubt a free trade deal with China would be a boon for western Canadian agriculture but he advised farmers not to hold their breath.
“It is going to take a long time before anything remotely concrete emerges,” he said.
It took seven years to conclude a free trade agreement with the European Union. That was a simple deal by comparison because it was between two highly industrialized regions with common interests and similar legal regimes.
The proposed China pact is between two countries that have a different set of objectives, dissimilar economies and distinctive legal systems.
He can foresee problems in getting convergence on regulations and dispute settlement mechanisms. And there are other potential stumbling blocks.
“One of the real problems with this deal, I can tell you, is going to be the steel industry,” said Herman.
He said the Chinese dump excess steel production onto the world market at subsidized prices.
“Canadian manufacturers are going to have some concern about opening the door further to unfairly priced Chinese goods,” said Herman.
“Those are going to be tough issues to settle in this deal.”
Innes said the time it takes to hash out an agreement depends on what the two countries decide during exploratory talks to include in the agreement.
“What we’ve seen is that if China wants an agreement that it can happen quite quickly,” he said.
The agreements with Australia and New Zealand were hashed out in short order.
“The ability to achieve something quickly really depends upon the scope of the negotiation,” said Innes.
“If the scope is simple it could be achieved quite quickly with China.”
He said a deal with China would put Canada in an enviable position because it would have deals with North America, Europe and the world’s biggest growth market for agricultural imports.
“Right now there have been very positive relations between the Government of Canada and China in a way that other countries would be envious of,” said Innes.
“That is a significant opportunity for us in agriculture.”
Herman said an agreement with China would give Canadian farmers a leg up on their U.S. counterparts.
“There is no appetite in Washington now to have a U.S.-China trade deal concluded,” he said.
The U.S. Congress is incensed with China about the currency issue.
“The Americans are very concerned about what they see as Chinese currency manipulation,” said Herman.
“(They are) keeping the exchange rate low so they can sell products cheaper on world markets.”