The Canadian government has shifted its focus from a comprehensive trade agreement with China to instead concentrate on achieving a sector-by-sector deal with the world’s second-largest economy.
Ottawa has settled on four individual sectors where it wants to sign smaller trade deals in hopes it can more quickly boost economic interaction with China in agriculture, education, clean technology and tourism.
“The best way forward at this time is to focus on the art of the possible. And that is a sector-by-sector approach,” Treasury Board President Scott Brison said in an interview with The Globe and Mail in Shanghai Friday.
In doing so, the Justin Trudeau government has signed on to recommendations by some Canadian businesses and the Public Policy Forum, which in October proposed individual sectoral deals as a way to create “a more diversified and growing trade portfolio for Canada that does not run afoul of the virtual veto given to our North American trading partners in the new United States-Mexico-Canada Agreement.”
Canada and China have completed four rounds of exploratory talks toward a comprehensive free-trade deal, but the two sides have failed to formally launch negotiations. Beijing has resisted Ottawa’s demands for provisions on labour, economy and the environment.
Now, however, the federal government wants to split up the big deal into multiple smaller deals as it undertakes a new offensive to boost business with China. Mr. Brison and Minister of Agriculture and Agri-Food Lawrence MacAulay are both in China, and will be joined next week by Minister of Finance Bill Morneau and Minister of International Trade Diversification Jim Carr, who will discuss the sectoral deal approach with Chinese officials.
The smaller scope of such agreements, Ottawa hopes, will allow progress at greater speed. “The one at the top of that list, in my view, is really food and agriculture,” Mr. Brison said. Individual deals to foster greater co-operation in education, tourism and clean technology are other “obvious areas of priority,” he said.
The co-ordinated push to advance trade with China comes in the midst of a Sino-U.S. trade war, as the White House fights what it calls Chinese theft of intellectual property and failure to provide reciprocal access to its economy. Though China is an outsized global trading partner, the OECD ranks it in 59th place – out of 62 – among countries in an evaluation of openness to foreign direct investment.
China’s Communist Party leadership has also raised concern in Canada and its allies for efforts to spread influence and for what a Canadian diplomat, speaking at the United Nations this week, called a “broader deterioration of human rights” under President Xi Jinping. That includes the incarceration of large numbers of Muslims for political indoctrination and skills training.
The Trudeau government, however, has shown few indications of paring back its Chinese ambitions.
“Canada is the best friend for China,” Mr. Brison said, urging China to trust the country to supply high-quality food and education.
“I believe we can pursue these opportunities and respect our values,” he said, adding: “If we are not engaged commercially, it’s very difficult for us to be engaged actively or effectively on human rights.”
At the same time, Ottawa’s new push to advance smaller trade deals over a bigger agreement was welcomed by businesses hoping to escape tariffs that for some products, put Canadian goods at a significant competitive disadvantage.
Take the milk and yogurt made by Avalon Dairy, a Burnaby, B.C.-based company that is “the only Canadian pasteurized milk authorized to import into China,” chief executive Russ Rimmer said. But China assesses a duty of roughly 30 per cent on its products, while milk from Australia, which has a free-trade agreement with China, is “at zero.”
“So we are starting at a disadvantage right away,” Mr. Rimmer said. “The question I have is, why aren’t we going after freer trade?”
Atlantic Canada food producers face Chinese tariffs of 5 per cent for frozen French fries, 5 to 7 per cent for lobster and 30 per cent on frozen blueberries.
Other products are up against an even steeper tax barrier: China imposes a roughly 80-per-cent tariff on the fruit wines made by Canada Berries, a Richmond, B.C.-based company that bottles alcoholic drinks out of blueberries, cranberries, and raspberries.
Competing products from Chile have no additional tax and a quicker trip through customs quarantine, said Tom Yuan, founder and director of Canada Berries.
When, he asked, will there be progress to allow “our product to get into China hassle-free?”
It’s not clear how quickly Canada can complete a sectoral deal; neither Mr. Brison nor Mr. MacAulay would discuss Ottawa’s expected timeline.
But there is risk in moving slowly, warned Sarah Kutulakos, executive director of the Canada China Business Council. “There are sectors in which Chinese consumers are developing preferences for products that aren’t ours,” she said, because those Canadian products simply aren’t available.
She applauded Ottawa’s decision to take its eye off a comprehensive trade deal, which could take years to complete. “One of the benefits of a sector-by-sector approach is that we can take advantage of the market opportunities sooner,” she said.