Canada and China should move quickly toward a free-trade agreement, Beijing’s ambassador has urged, insisting it would provide a longer-term solution to questions about two-way investment sparked by the $15-billion Chinese takeover bid for Alberta oil firm Nexen Inc.
“Business is business,” Ambassador Zhang Junsai said on Friday, adding that Ottawa should decide whether to approve the takeover of Nexen by China’s state-owned oil giant CNOOC Ltd. based on its business benefits alone, not criticisms of China’s rights record, or domestic politics.
In an exclusive interview with The Globe and Mail at his Ottawa residence, Mr. Zhang, speaking in a forthright manner rare for a Chinese envoy, said that if Canada wants new broad, investment rules and guarantees that its companies will get greater access to investment and markets in China, it should strike a wide-ranging, “overall” free-trade agreement with Beijing.
“That’s why we need to talk with the Canadian side about an FTA. It’s time to open each other’s markets,” Mr. Zhang said. “It’s high time to do the exploratory work on the possibility of a free-trade agreement. Under a free-trade agreement, there will be more and more trade and investment.”
The idea has been floated as an eventual possibility by some business leaders and whispered lately within Stephen Harper’s Conservative government.
But for the first time, China’s representative is signalling a deal should be a near-term goal, covering investment, agriculture, manufacturing, and other areas – and work should start soon. Negotiations might take a few years, but less than a decade, Mr. Zhang said: “When we reach a common consensus, it’s easy.”
A full free-trade agreement with China would be a potential breakthrough in efforts to expand lagging trade with Asia, which is seen as crucial to Canada’s future economic growth. Some question whether real free trade is possible with China’s state-controlled economy. But for Mr. Harper, who has made economic ties with Asia and China a priority, it is a tantalizing offer.
The timing is no coincidence. The CNOOC bid for Nexen, which would be the first outright takeover of a substantial player in the energy sector, is a test of Canada-China relations. Rejecting it could cause the chill of earlier years to return. But Mr. Harper also must deal with domestic political qualms as some Canadians raise concerns about China’s rights record, its intentions, and questions from the business community about whether it would have equal access to China’s economy.
By suggesting a free-trade agreement, China is also offering the prospect of negotiated rules for future dealings, and expanded overall trade.
But Mr. Zhang warned against letting domestic politics dictate the Nexen decision: “Business is business. It should not be politicized,” he said. “If we politicize all this, then we can’t do business.”
And although the ambassador declined to comment explicitly on how Beijing would respond if the government rejects the Nexen bid, he said relations with Canada have warmed in the past three years, and that’s why Chinese companies want to do business. He said the relationship has developed rapidly since Mr. Harper made his first visit to China in 2009 and agreed with Chinese President Hu Jintao to start a “strategic partnership.”
“We should have solid ground for this development,” he said.
Mr. Zhang came to Canada less than a year ago from a posting as ambassador to Australia, where Chinese companies have invested heavily, sparking similar controversy. In the extensive interview, he made it clear his main mandate is to expand trade and investment – and it was apparent he is a new type of envoy.
Partly educated at Tufts University in Massachusetts, and previously posted mostly in Australia and New Zealand, Mr. Zhang, 59, speaks English without interpreters or dense diplomatic metaphors. He’s pithy, even direct, and at ease with controversial topics and Western journalists.
He argued that Canadians’ suspicions are misguided.
“We are not coming to control your resources,” he declared, unprompted. China’s investment amounts to only 2 per cent of the foreign investment in Canada, he noted. And he also dismissed the allegation that Beijing plans to reserve Canadian oil and gas for shipment to Chinese customers – noting there are no pipelines to the West Coast yet capable of carrying enough to Asia.
But the Nexen bid has raised other objections, including the fact that Canadian companies cannot launch similar takeovers in China.
Mr. Zhang, however, cited a long list of Canadian companies doing business in China – Manulife, Scotiabank, Bombardier, Bank of Montreal, and Eldorado Gold Corp. – noting that some went to China in the early 1980s, long before Chinese companies came here. He said 12,000 Canadian companies are in China now. If Canada wants new rules for investment, they should be negotiated in a free-trade agreement, he added.
That would likely cause political controversy, in part because some argue China’s human rights record is an obstacle, and should prevent approval of takeovers like CNOOC’s bid for Nexen. Mr. Zhang’s response: that China is trying to improve rights, but also has 1.3 billion people, and faces challenges on a massive scale to educate people and free hundreds of millons from poverty.
“It’s different countries,” he said. “Give us a break. You know? Let us develop. We’ve done no harm to your country. We see all this improvement. You should recognize improvement and development.”
Nexen, and business, should not be overwhelmed by such issues, he argued: “Be practical. It’s really the benefits that matter. But I stress: two-way benefits. Not one-way to China.”