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Economy Canada’s trade deal with China has opportunity, but experts urge caution

Chinese and Canadian flags

Fred Lum/The Globe and Mail

Canada did not dispatch any federal cabinet ministers to China last year for the first time since 1990, the year after the Tiananmen Square massacre. This year promises to be the opposite.

With 25,000 Syrian refugees now inside Canadian borders and the first budget delivered, the Justin Trudeau government will soon find itself more free for other priorities, such as turning its attention to China.

The Trudeau administration has already signalled it's willing to consider talks on a free-trade agreement with Beijing. The Prime Minister hopes to arrange a visit to China this year, which will likely take place some time in September, around the time of the Group of 20 talks in Hangzhou. Chinese officials are thrilled, eyeing the possibility of a friendlier new set of faces in Ottawa.

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But Mr. Trudeau might want to check his step before he races into a Chinese embrace. Even those who want warmer cross-Pacific ties say a free-trade deal with Beijing should not be top of the agenda, while others urge caution in the face of a Chinese crackdown on human rights.

On the trade file, Canada should first finish its free-trade agreement with Europe, said John Manley, the former Liberal minister who heads the Business Council of Canada. Next in line is completion of the globe-spanning Trans-Pacific Partnership. If that deal fails, given an uncertain future in the United States, Mr. Trudeau might want to complete a stagnant Japanese trade deal, he said in Beijing.

But Canada should feel no urgency on a Chinese agreement, he said. That document, which will take years to complete, should be left "as a second channel if TPP does happen."

A slower approach might provide time for concessions that Mr. Manley believes Canada should seek.

China and Australia recently put into force a free-trade deal, and his council has calculated that if Canada secures something similar, it would generate $7.8-billion in additional economic activity within 15 years. That number, however, is "less ambitious than I would like to see out of a Canada-China agreement," Mr. Manley said, "because I think we can do more than Australia could."

Australia has natural resources to sell. Canada, too, has oil, minerals and farmland – but also an advanced manufacturing industry, a vibrant tech scene and a singularly attractive position as a NAFTA member on the doorstep of the United States.

"Canada sits in a very privileged position," he said. For China, "it's potentially a very valuable opportunity," giving Mr. Trudeau a bargaining position he shouldn't be timid about using, Mr. Manley said.

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In particular, he said, Canada needs better guarantees from China on dispute resolution and non-tariff barriers, the sort of regulatory trickery that can be used to protect local markets and undermine a free-trade deal. Canada also has its own sectors to protect, such as steel makers.

That's not to say there isn't reason for Canadian leaders to court China, whose investments into Canada fell 24 per cent last year as tanking oil prices took energy deals with them.

Former Conservative cabinet minister Peter MacKay points to commercial real estate, infrastructure, transportation and entertainment as sectors Chinese deal makers have pursued elsewhere. "But Canada thus far hasn't really been able to capitalize on that," he said, speaking in his new role as partner with global legal giant Baker & McKenzie. That "indicates to me there is an opportunity."

Mr. Manley, too, believes "Canada and China ought to really reinvigorate the relationship."

At the same time, Mr. Trudeau has been urged to avoid a single-minded pursuit of trade when China under President Xi Jinping has further clamped down on free speech and jailed numerous people who defended workers and human rights.

Guy Saint-Jacques, the Canadian ambassador to China, was one of four signatories to a January letter sent to the Chinese Minister of Public Security to express concern over the damaging effects of new Chinese security laws on business and civil society. "The last six to eight months in China have been a bit difficult with regard to the crackdown on human rights," he said at a recent public event in Beijing.

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Raising human rights concerns with Beijing "sometimes causes some friction," Mr. MacKay acknowledged – his own government frequently angered China.

He nonetheless believes the Trudeau government should keep doing so.

"I don't think that we can simply back off, as far as raising these issues based on principle, and based on our desire as a free and democratic country to stand up for people in the world who are oppressed," he said. "The Uyghurs are certainly one of the most oppressed people in the world, as are Falun Gong."

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