The Trudeau government is weeks away from an inaugural round of talks on a free-trade agreement with China as it presses ahead a central objective in its plan to deepen ties with the world’s second-largest economy.
Next month, Canada and China will meet in Beijing for exploratory talks, the first concrete step toward a deal that could economically intertwine the two countries in an unprecedented way.
The start of formal discussions is no guarantee of a final deal, which, in any case, could take years to complete. Exploratory talks provide an initial chance to decide whether it’s worth progressing to actual negotiations.
But with the 12-country Trans-Pacific Partnership on its deathbed after the election of Donald Trump and his threat to tear up the North American free-trade agreement, even the launch of preliminary trade talks with China carries symbolic weight.
It is “of special global significance at a time of major strategic turbulence,” said Paul Evans, a China expert at the University of British Columbia.
It may even prove to be a new landmark for China in its quest to elevate its global standing to that of leading champion of free trade.
Beijing may see reason to push through a more ambitious deal with Canada as proof of its dedication to tearing down barriers to the movement of goods, Prof. Evans said.
“This will be a test of how far China wants to go with developed economies in moving up to the next level. And it will be a test of how far Canada is willing to go to test the waters with China in an era when U.S.-China trade relations are likely to be more difficult.”
At the World Economic Forum in Davos on Tuesday, Chinese President Xi Jinping offered a vigorous defence of globalization, pushing back against the “America First” rhetoric of Mr. Trump.
Mr. Xi likened protectionism to “locking oneself in a dark room” and cutting off all “light and air.”
“No one will emerge as a winner in a trade war,” Mr. Xi said in the nearly hour-long speech to political leaders, CEOs and bankers, a first by a Chinese leader at an event that has become synonymous with global capitalism.
China sees opportunity to press ahead as problems with Canada’s traditional trading partners – both the United States and Europe, which is beset with Brexit fears and election uncertainties – override domestic anxieties about dealing with Beijing.
If Mr. Trump erodes NAFTA, “it’s going to be a major crisis for Canada,” said Tang Xiaosong, director of the Centre for Canadian Studies at Guangdong University of Foreign Studies. “Canada may place more attention and emphasis on the Chinese market as a result,” he said, adding that an accelerated deal could be possible.
“It would be better to finish quickly, because the global situation is changing in quite a significant way.”
The first talks are scheduled for Feb. 20 to 24. Another round in China is expected as soon as April.
Mr. Trudeau has made a large-scale expansion of economic activity with China a central ambition. The Prime Minister said last fall he wants to double trade between the two countries by 2025.
“Expanding trade and investment with large, fast-growing markets, including China, is a priority,” said Alex Lawrence, a spokesman for François-Philippe Champagne, the newly named Minister of International Trade.
But the start of talks will also set in motion a more intensive examination of an important question that lingers for Ottawa: Does the Canadian public really support further trade integration with a country whose authoritarian government continues to play an outsized role in directing its economy?
China heavily controls its currency – and has further strengthened restrictions in recent months. It keeps a large, though declining, number of sectors off-limits to outside investment. In recent years, too, foreign corporations have called China an increasingly less welcome place to do business.
“Part of the purpose behind the exploratory talks is to see whether major Canadian stakeholders will rally round engaging free-trade negotiations,” said Jeremy Paltiel, a political scientist and China specialist at Carleton University in Ottawa. For the Trudeau government, “this will require considerable finesse and skill.”
Much ground has already been prepared for a free-trade agreement, including a “complementarities study” released in 2012 that concluded the two sides “should continue to deepen and strengthen our bilateral trade and investment ties.”
But obstacles abound. The Canadian steel sector already accuses China of dumping. Agricultural industries will have to weigh their willingness to accept Chinese investment and the auto sector, including parts companies, will have to confront the possibility of lowered tariffs with the world’s biggest auto-manufacturing country. Canadian financial companies, meanwhile, have struggled to access the Chinese market.
“The question is whether China is prepared to move beyond a fairly shallow agenda centred on goods to a more inclusive and intrusive one that embraces services,” Prof. Paltiel said in an e-mail. Also at issue is “how both sides handle sensitive questions like national security (and its definition) as well as issues like China’s demand to be recognized as a market economy.”
History shows the task of negotiating through those problems takes time. The free-trade agreement between Canada and the United States took years of study and talks to complete; Australia’s deal with China was only concluded after 21 rounds of negotiations over nine years.
“So getting started matters. But this is not going to be some Big Bang,” said Wendy Dobson, an expert on Canada’s relationship with China who is co-director for the Institute of International Business at Rotman School of Management.
Ms. Dobson has recommended Canada first take a half-step toward free trade, through a less far-reaching Closer Economic Partnership Agreement that would cut fewer trade barriers, but do so more quickly.
There are, after all, areas where both sides stand to gain, she said: “China’s desire for secure supplies of energy, natural resources and food; Canada’s relative abundance in both.” China, too, has a rising appetite for clean energy and environmental cleanup technologies, while Canada possesses both uranium and engineering expertise.
For now, what will emerge from exploratory talks remains an open question – as does how long will they will take to conclude. Politically, Mr. Trudeau might want them complete within a year, in time to announce the start of formal negotiations at his next meeting with Chinese leadership, Prof. Paltiel said.
“There is no predefined number of meetings for the exploratory discussions,” said Mr. Lawrence, the International Trade spokesman. he said “Talks will continue until Canada is satisfied that it has sufficient information.”
With reports from Yu Mei and Reuters