Canada-China trade deal faces variety of hurdles

The pursuit of a Canada-China free trade agreement, or even an agreement covering just the agriculture sector, is becoming increasingly complicated, which is unfortunate, because there are benefits to a deal.

Western Producer reporter Robin Booker has posted a blog gleaned from information produced by an access to information request outlining the nature of concerns Canadians have about such an agreement, and they are not insignificant.

Briefing notes acquired by Booker intended for the minister of foreign affairs in advance of a June 2017 meeting with Chinese ambassador Lu Shaye detail concerns following a public consultation earlier that year.

They include China’s adherence to the rule of law, lack of transparency and predictability, technical and non-tariff trade barriers (for instance, approvals for Canada’s biotechnology products, and China’s focus on dockage in canola seeds), protection of intellectual property, potential widening of Canada’s trade imbalance with China ($36.6 billion in 2018), increased investment by state-owned or supported Chinese companies in Canada, an influx of low-skilled Chinese workers at state-owned companies, lending by state-owned banks, China’s subsidies (thought to be about $160 billion a year to the agricultural sector), and labour and environmental standards.

That’s quite a list.

The benefits of a trade agreement to both countries are discernible: China’s growing middle class seeks access to more Canadian agricultural goods and Canada seeks to grow global agriculture and food exports to $75 billion by 2025.

In November, the two countries agreed to double agricultural trade by 2025. Canada exports about $7 billion in agricultural goods to China annually. Canola products, seeds and oil, represent about $3.6 billion of that. Canada is China’s largest supplier of canola oil, seeds and meal, dried peas, flax and durum, the second largest supplier of barley and the fifth largest supplier of pork products.

The briefing notes for the minister of foreign affairs note that “canola exports are a crucial element of the bilateral commercial relationship.”

Yet China’s propensity to put its trade relationship with Canada at risk with political machinations is evident in that country’s ominous reaction to Canada’s arrest of Huawei executive Meng Wanzhou for extradition at the request of the United States in December.

Grain traders say it has become difficult to ship canola to China since then, lending credence to Canadian exporters’ concerns about China’s commitment to the rule of law. This won’t help Chinese President Xi Jinping’s stated goal of making China’s economy a global powerhouse, so we can see where his priorities are.

As well, it’s worth noting that while the 2015 free-trade agreement between China and Australia removes 95 percent of tariffs on Australian goods entering China, seeds and vegetable oil are not included.

Trade observers say China’s focus on food security — which it sees as self sufficiency — means it is unlikely that canola products will be included in a trade deal with Canada.

Still, business groups say it’s easier to reduce tariffs in free-trade agreements than in sector deals, which is important since China’s tariffs on imports of agricultural goods are about 15 percent higher than other goods.

Yet it is also notoriously difficult to address non-tariff trade barriers in trade deals.

China and Canada have been involved in exploratory free-trade talks since 2016. A joint feasibility study is also underway.

Is it possible to move ahead with all these contradictory signals?

If we don’t, would other countries take advantage, leaving Canada’s agricultural sector with lost opportunities?

It’s a complex relationship and progress on any deal can be expected to be slow. But progress is a must, even if it is incremental, since guarantees offered by an all-encompassing trade-agreement are uncertain.

Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.