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Trudeau arrives in China ahead of trade talks

Prime Minister Justin Trudeau arrives in Beijing, China on Sunday, Dec. 3, 2017.

Sean Kilpatrick/The Canadian Press

Justin Trudeau arrived in China Sunday for a trip that will mark an Asian pivot in Canadian foreign policy with an expected announcement that he will be the first leader among Group of Seven countries to launch free trade talks with the one-party dictatorship.

The Liberal government insists it still mulling this venture that polls show would divide Canadians but business lobbyists including Canadian Chamber of Commerce president Perrin Beatty say they expect the announcement during what is Mr. Trudeau's second official trip to China. This move, an effort to diversify outside of the United States' orbit, would also be a signal to the protectionist Trump administration that Canada is making backup plans as NAFTA negotiations sour.

Mr. Trudeau will meet with Premier Li Keqiang in Beijing Monday and President Xi Jinping Tuesday before heading to Guangzhou to tout trade with Canada.

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One economic expert is cautioning however that Canada will have to extract a better deal than any previous accord China has signed for such an agreement to be worthwhile for Canadians.

Beijing has long sought Canada's presence at the free trade negotiating table in part because such talks would grant it fresh leverage to convince other Group of Seven countries to follow suit. China has signed deals with jurisdictions ranging from Australia to Peru to Iceland and last week wrapped up an agreement with the Palestinian Authority.

"There is a lot of symbolism attached to this [for China]; it's more than just pure economic access," Patrick Leblond, an expert in global economics at the University of Ottawa's graduate school of public and international affairs.

The plight of detained Canadians looms over Mr. Trudeau's visit. Speaking to reporters Sunday en route to China with Mr. Trudeau, International Trade Minister Francois-Philippe Champagne went so far as to criticize Beijing for their treatment of B.C. wine merchant John Chang, who has been imprisoned for 20 months over a customs dispute. Mr. Chang's wife Allison Lu has also been prevented from leaving China.

"We have voiced very clearly our dissatisfaction and our concern with respect to that … this is a matter that should not have led to the type of action that was taken," Mr. Champagne said.

Mr. Trudeau, who once professed admiration for China's "basic dictatorship" because it allows the Chinese to "turn their economy around on a dime," has for some time set his sights on closer alignment with Beijing. His outreach is meant to undo the damage that business leaders and analysts said Stephen Harper caused to Sino-Canadian ties by a more standoffish and hawkish approach. Earlier this year the Trudeau government broke with the United States to join the China-led Asian Infrastructure Investment Bank, a counterpart to the U.S.-led World Bank.

Today, tense trade relations with the United States make it all the more imperative for Mr. Trudeau to seek out new markets for Canadian business. The protectionist Trump administration is trying to rewrite the North American Free Trade Agreement in ways that would undermine the advantages Canada gains from the economic pact that governs this country's top trading relationship. The future of NAFTA remains in doubt after Canada and Mexico flatly rejected several U.S. negotiating demands they described as unreasonable.

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Proponents argue that the reciprocal gains from allowing China greater access to Canadian markets are too good to pass up. A report by the Canadian Chamber of Commerce released in September cites economic projections that a free-trade agreement could boost Canada's annual economic output by $7.8-billion by 2030 and generate 25,000 new jobs. Major beneficiaries would be agricultural producers and technology or fuel that helps China power itself by cleaner means such as natural gas.

"We can't ignore a billion people," Stewart Beck, president of the Asia Pacific Foundation, a think tank backed by Ottawa, says.

The task of extracting a good deal from China will be difficult. China's brand of authoritarian capitalism means state-owned or sponsored enterprises dominate significant portions of the economy and benefit from major subsidies. Canada also has a major trade deficit with China today where in 2016 Canadians bought $64-billion from China but only managed to sell $21-billion to Chinese customers.

The plight of a B.C. businessman imprisoned by China for more than 20 months over a commercial dispute is overshadowing Mr. Trudeau's trip. The daughter of John Chang, a Taiwanese-Canadian who used to go on government trade missions to China, has called for the prime minister to put negotiations on hold until her father is released.

Mr. Beck, however, says Canadians shouldn't mix Canadian trade relations with Beijing and the plight of detained citizens. "Consular issues and trade issues: I know everybody likes to roll those things together. They have to be treated separately," he said.

The Asia Pacific Foundation president said China is making efforts to improve and the prime minister should not be expected to link these issues. "We've had 400 years of rule of law coming from a common law background. The Chinese have not had that. They are trying to work towards it."

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Falung Gong adherents announced they plan to hold a rally Sunday outside the Chinese consulate in the western Canadian city calling on Mr. Trudeau to press for the release of Qian Sun, a Canadian citizen who's been imprisoned since February over her religious beliefs. There will also be 12 other relatives of Canadians jailed in China over their practice of Falun Gong, a belief system that Beijing has for years campaigned to supress.

A poll commissioned by the Asia Pacific Foundation this year after Donald Trump was inaugurated as U.S. president suggested there's been a major increase in support among Canadians for free trade talks with China. A small majority of respondents – 55 per cent – back the idea of negotiations – a result that represents rise of 19 percentage points from support levels recorded in 2014, Mr. Beck said.

The Asia Pacific Foundation head said the results show Canadians are beginning to realize this country needs to diversify its trading relationship beyond the United States.

"It's a fragile support [though] so I think the government has to be careful," Mr. Beck said.

Prof. Leblond says many of the free trade agreements China has signed have been described as "trade light" in that significant categories of goods and services that are politically sensitive for Beijing and their partners are exempted from exposure to real competition and there are weak provisions to address dumping – selling at below cost prices – by either side.

He described the agreements China has inked as "NAFTA-minus" meaning they focus on merely removing tariffs on goods and to a limited extent provide better access to trade in services – one of the most promising and lucrative areas for Canadian firms.

Prof. Leblond said his major concern is that China even after signing free trade deals manages to place other obstacles in the way of foreign imports. As the Australians have been complaining, he said, even after the removal of tariffs for a foreign trading partner, "the Chinese find new ways of making life tough for companies that export to China."

He said Canada must insist on a mechanism within the deal to force China to address this – one that carries teeth so Ottawa has a way of punishing Chinese firms if all else fails.

"The anticompetitive nature of the Chinese market to me is the biggest concern," Prof. Leblond says.

"If they are weak in a sector [China] lets the foreigners come in, bring the technologies, bring the know-how but all the sudden when that knowledge transfer takes place the Chinese companies start to take over."

Pollster Darrell Bricker at Ipsos cautions against policymakers assuming Canadians are solidly behind a deeper economic relationship with China, saying the one-party government and purchases of Canadian firms by Chinese companies make Canadian anxious.

"I can tell you on China Canadians' opinions are decidedly tense. It's not like asking questions about a free trade agreement with Europe or the United States," he said. "They're seen as a country that is not a democracy."

The Trudeau government finds itself somewhat ahead of public opinion. Recently concluded government consultations with 600 businesses, academics and civil-society groups found significant skepticism about a free-trade deal with Beijing. Sarah Kutulakos, executive director of the Canada-China business Council, said the two-way relationship is important because communities across Canada already depend on China's economy for jobs, "from professors at universities who teach students from China, to tourist sites seeing increased numbers of guests from China to farmers selling crops."

She said Canada needs an economic agreement to establish strong rules of trade that would protect Canadian companies as they pursue new market opportunities with China's large and growing middle class.

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About the Author
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

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