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Chinese President Xi Jinping (R) shakes hands with Canadian Premier Justin Trudeau ahead of their meeting at the Diaoyutai State Guesthouse in Beijing, China, 31 August 2016. (Pool/Getty Images)
Chinese President Xi Jinping (R) shakes hands with Canadian Premier Justin Trudeau ahead of their meeting at the Diaoyutai State Guesthouse in Beijing, China, 31 August 2016. (Pool/Getty Images)

BROWN AND FARMER

Canada must look beyond China toward a broader Asian trade deal Add to ...

Joshua Brown is chief representative for Canada at Tractus Asia, an Asia-based business advisory firm, and Canada chair at the Canada ASEAN Business Council (CABC). Wayne Farmer is president of the CABC and managing partner of Islemount Capital, a financial and capital advisory firm.

Aggressively pursuing a trade agreement with China while so much is on the line for Canada on NAFTA renegotiations would be a mistake. The Trudeau government cannot afford to antagonize U.S. President Donald Trump’s White House with a preferential trade agreement that provides China access to the NAFTA trading bloc while trying to protect Canada’s own privileged access to the U.S. market.

ASEAN, the association of 10 Southeast Asian countries that as a group makes up Canada’s sixth largest trading partner, provides an attractive alternative for opening Asian markets to greater investment and trade in goods and services with Canada.

ASEAN’s increasingly middle-class, consumption-led economies and young demographic markets are experiencing an economic takeoff already well under way. The region’s institutional investors, large corporations and private-capital funds are increasingly venturing abroad and have begun to do deals in Canada. ASEAN’s vibrant technology startup community is unlocking nascent demand in the digital economy and in more traditional clean and agricultural technologies, areas where Canada possesses deep expertise.

Canada’s engagement strategy with ASEAN should be a pillar of strengthening economic relations with Asia more broadly, something nearly half of Canadians believe should be Canada’s top foreign-policy priority, according to a recent Asia Pacific Foundation of Canada poll.

While the regional grouping may seem far off and unfamiliar to Canadians, the trading bloc, which includes countries such as the Philippines, Indonesia, Singapore and Vietnam, is fertile ground for growth in high-margin, intellectual property-based exports. Imports of high-value goods such as mechanical and electrical equipment, aerospace equipment and parts, optical and medical equipment and pharmaceuticals accounted collectively for 29 per cent of ASEAN’s $5.2-billion of imports from Canada in 2015, according to UN trade statistics.

Preliminary results of a Canada-ASEAN free-trade agreement (FTA) impact study sponsored by the Asia Pacific Foundation of Canada, Business Council of Canada and Canada-ASEAN Business Council, show that such an agreement could deliver economic benefits on par with those from a comparable China agreement.

A Canada-ASEAN FTA with comparable economic returns on Ottawa’s efforts would also come at significantly lower political cost. Canadians have fewer negative perceptions of ASEAN than they do of China.

Nearly 90 per cent of Canadians don’t want Canada to grant China unfettered access to the Canadian economy, according to a recent poll commissioned by The Globe and Mail.

By comparison, the number of Canadians that support a Canada-ASEAN FTA has increased dramatically since 2014 and now accounts for the majority. Fifty-four per cent of those surveyed responded in favour of a Canada-ASEAN FTA, according to a 2016 Asia Pacific Foundation of Canada poll.

Until recently, Canada has been somewhat ambivalent in its approach to its relations with ASEAN and lags Japan, South Korea, New Zealand, Australia, China and India, fellow ASEAN dialogue partners, all of which have FTAs in place with ASEAN.

The Trudeau government has a window of opportunity built on goodwill created by the former government – and expanded by efforts of the foreign affairs and international trade ministers – to engage Asia in a more comprehensive way through ASEAN.

As Canada heads into its 40th year of diplomatic relations with ASEAN, Prime Minister Justin Trudeau can advance that opportunity through three clear measures. First, the Prime Minister can publicly announce his support for exploratory talks on a Canada-ASEAN FTA and emphasize related development assistance and defence initiatives with the region. Second, he can authorize his International Trade Minister to accelerate efforts announced by his predecessor to define terms of reference for a Canada-ASEAN FTA and fast-track negotiations, allocating scarce resources accordingly. Third, he can accept the standing invitation by Singapore to make a state visit, with other stops in the region, and leverage the opportunity to engage more personally with a region where his personal popularity is a significant asset for Canada.

Canada has done much to lay the groundwork for deeper economic ties with ASEAN. As public support for engagement with China falters, the federal government would be wise to capitalize on that goodwill to open alternative trade routes to Asia.

Focusing our limited resources on a more achievable, less politically-charged Canada-ASEAN FTA does not permanently forgo a Canadian interest in free trade with China. In fact, ambitiously engaging with high-growth emerging markets in China’s sphere of political and economic influence serves to strengthen Canada’s bargaining position and should be viewed as part of a collective Asia strategy.

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