Canada and China won't be ready for a full free-trade agreement for at least a decade despite Beijing's expressed desire for such a deal, former prime minister Brian Mulroney says.
Mr. Mulroney – who travelled to Beijing in the 1980s as prime minister and earlier this month as a lawyer – said Wednesday that he is impressed with the progress China has made toward a market economy, but it is still far from being ready to enter a modern, bilateral trade deal.
"I think it is premature with China and I don't think we're going to do it – certainly not within a decade," Mr. Mulroney told The Globe and Mail's editorial board.
"The rule of law has to be acknowledged and strengthened, [as well as] the protection of intellectual property rights and all the others. There has to be a way for an investor to seek recourse before the courts that have decisions that can be exemplified and enforced. And that is not the case today."
Mr. Mulroney is currently a senior partner in Montreal for the international law firm Norton Rose LLP.
Prime Minister Stephen Harper and his Chinese counterpart, President Hu Jintao, signed a foreign-investment promotion and protection agreement in July, which is due to come into force this month. That deal provides for non-discriminatory treatment of one another's investors once they are operating in the other country and a dispute settlement process. But it is not a free-trade agreement – it does not open up sectors for new investment or deal with trading in goods and services.
China's ambassador to Canada, Zhang Junsai, said last month that the two governments should open exploratory talks aimed at negotiating a broad free-trade agreement. Three days later, Foreign Minister John Baird signalled that Ottawa is not ready to engage in such talks, saying the government wants to conclude some of the several bilateral and multilateral negotiations now under way.
New Zealand is the only developed country that has a bilateral trade deal with China, and its exports are largely agricultural. Australia has been negotiating with Beijing on a trade treaty for eight years. Australian officials have said recently that talks are bogged down and the two countries should look for other ways to expand commercial relations.
"Even if you started negotiating now, it would still probably take you more than a decade to conclude a broad trade agreement," said Gordon Houlden, director of the China Institute at the University of Alberta and former senior diplomat in Beijing.
He said the two countries might be better served starting with a "half loaf" that aims to reduce barriers to trade and investment in specific sectors.
Mr. Mulroney said Canadians should welcome foreign investment from whatever the source, though he offered no opinion on whether Ottawa should approve the $15.1-billion acquisition by China's state-owned CNOOC Ltd. of Calgary's Nexen Inc.
"Foreign investment creates jobs in Canada and foreign investment by Canadians elsewhere is huge for a country our size – huge. We invest around the world all the time, and I don't want people stopping us from investing," he said.
But he said Canadians should not expect reciprocity from the Chinese, noting the country has only been opening its economy for the past 30 years and is still developing.
"They've been at it for 30 years and look at the extraordinary progress they've made," he said. "And they are heading very much in the right direction and they want to get where we are."
Critics argue the Harper government – and the domestic proponents of an open-door policy for Chinese investment – are taking a huge leap of faith that Beijing will ever open its markets to Canadian goods, services and capital.
"We're giving up an awful lot for the promise of future access to the Chinese market," said Gus Van Harten, a professor at Osgoode Hall Law School in Toronto.
He said the investment protection agreement signed by Mr. Harper is one-sided because it only protects investors currently operating in the other country. And while Canada welcomes Chinese investment, Canadian business have often been frustrated going the other way.