Where is the Liberal government’s China strategy going? That’s a lot less clear than it was a year ago.
This time last year, Prime Minister Justin Trudeau was preparing for a meeting with Chinese Premier Li Keqiang where it was expected formal free-trade negotiations would be launched. But that went off the rails when Mr. Trudeau insisted the announcements include nods to his “progressive trade” agenda, such as labour standards, and the Chinese balked.
Now, Mr. Trudeau’s government is further away from getting free-trade talks started. There are more complications in the way and conflicting opinions about the next step.
There are certainly efforts to get things back on track. Canadian cabinet ministers are visiting China: Agriculture Minister Lawrence MacAulay was at a Shanghai trade expo, Treasury Board President Scott Brison joined him on an Atlantic Canada trade mission, and Finance Minister Bill Morneau and Trade Minister Jim Carr have arrived for formal financial and economic talks. On Wednesday, Mr. Trudeau is set to meet Mr. Li again.
What’s the plan? Well, that’s a bit murky.
Last week, Mr. Brison appeared to signal a shift in strategy, suggesting a free-trade agreement might but too difficult right now, and Ottawa will focus on industry-by-industry “sectoral” agreements. “The best way forward at this time is to focus on the art of the possible. And that is a sector-by-sector approach,” he told The Globe and Mail in Shanghai.
But that was a slip. That wasn’t the government line. Mr. Brison, bullish on a mission signing concrete business deals, got carried away. The Trudeau government policy is still to pursue a full-scale, free-trade agreement – and Mr. Morneau and Mr. Carr are expected to reiterate that this week.
After the launch of free-trade talks were kiboshed last year, the Chinese aren’t rushing to start over. In addition, Ottawa is trying to reset Chinese expectations, insisting a deal has to be broader than China’s free-trade agreement with Australia, because Canada’s economy is more diverse. There is political skepticism in Canada. And there is concern, after the signing of a new North American trade deal, that a Canada-China deal could lead to blowback from a U.S. administration mounting a trade war with Beijing.
The “sectoral” approach raised by Mr. Brison is a plan put forward by gung-ho advocates of expanding trade with China who fear that a full free-trade deal can’t be done in the near term. Mr. Brison was, in effect, echoing the views of that gung-ho crowd that wants Ottawa to get moving quickly on trade. But there are more cautious voices in Mr. Trudeau’s government, concerned about Mr. Trump, and Canadian voters.
The Public Policy Forum, an Ottawa-based think tank, issued a paper last month proposing a “sectoral” strategy as a way to move quickly, with fewer obstacles. Canada could seek agreements that deal with specific issues – although not tariffs – in a few sectors. It could start to work out tricky issues such as dispute-settlement mechanisms. Later, that could help work for a full free-trade agreement.
And, the PPF recommended, the deals could start with two sectors: agriculture, a field where Canada wants more access to Chinese markets, and natural resources, where China has the right to invest in Canadian supply.
Yet, that idea is fraught with potential setbacks, too. Guy Saint-Jacques, Canada’s ambassador to China from 2012 to 2016, said what Beijing really wants isn’t just trade arrangements with Canada; it wants its first trade deal with a Group of Seven country.
The prestige and precedent of that make it more valuable to China than the sum of its parts. To balance what Canada wants in one sector, such as agriculture, it will have to provide concessions in another – China wants guaranteed access for investment, particularly for state firms, for example – and that’s harder to work out when the deals cover just a few sectors, Mr. Saint-Jacques said.
Sectoral agreements, he said, would be “a temporary Plan B,” he said, but it’s not at all clear China would be interested, or whether that plan would even work. In the meantime, however, Plan A appears less advanced than it was a year ago – and it is less clear how Mr. Trudeau plans to move forward.