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New Chinese ambassador laments Canadian red tape

If China's new ambassador to Canada is eager to mend an occasionally fractious relationship between the two countries, he's going about it in an unusual way.

In an exclusive interview with The Globe and Mail, Luo Zhaohui painted a picture of a government eager to expand trade and investment ties, but stymied by various Canadian obstacles. These include excessive red tape, lengthy delays in project approvals and a policy shift designed to block China's huge state-owned enterprises from grabbing control of Canadian companies operating in sensitive Canadian resource sectors like the oil sands.

What's needed, Mr. Luo declared, is more "political engagement" to foster mutual trust. What he means is that Ottawa should remove its irritating trade and investment barriers, throw open Canada's doors to powerful Chinese interests and do something to speed up environmental and other assessments so that Beijing's favoured flag-bearers can get on with the task of pulling resources out of Canadian ground with as little interference as possible.

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It's one thing to assail Ottawa's lack of clear or even fair and consistent rules governing foreign investment in key sectors. But it takes a lot of gall for a government that turned the application of bureaucratic red tape and other investment barriers into an art form to describe Canada's own safeguards as excessive.

The last time we checked, China wasn't exactly putting out the welcome mat for investment in such key areas of interest to Canada as banking and insurance. And its unfair quotas, duties and other trading practices keep World Trade Organization dispute-resolution panels working overtime.

China recently lost a major dispute stemming from its curbs on exports of rare-earth metals, of which it is the world's largest producer. A WTO panel rejected dubious arguments that the stiff quotas and duties it imposed in 2010 – which spread panic among high-tech manufacturers – were needed to conserve the precious resources and safeguard the environment.

The WTO has also cited concerns about such non-tariff barriers in China as farm production subsidies and price controls, a lack of information about particular investment rules, customs processes, export restrictions and a failure to protect intellectual property rights.

In fact, China ranks near the top of the OECD's list of large economies that continue to throw up the strongest obstacles to trade in financial, telecom, technology and other services.

To be sure, China's current crop of technocratic leaders seem determined to improve market access and make investment policy more welcoming to foreign business interests. Mr. Luo, for example, will not arrive in Ottawa bearing only rhetoric.

He signalled that China will buy more Bombardier jets and "encourage" Chinese companies to increase business with Canada. And if we want to sell blueberries or more beef to a market that has placed restrictions on such agricultural imports in the past, cost will be the deciding factor. "If the price in your country is reasonable, why can't we import more?"

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But resolving the larger issue of re-opening Canada's resource sector to the Chinese powerhouses will be far thornier.

When Chinese state-controlled oil producer CNOOC Ltd. was allowed to proceed with the $15.1-billion takeover of Calgary-based Nexen Inc., it proved deeply unpopular. As a result, the Conservative government drew a line in the oil sands, effectively barring state-owned foreign companies from acquiring control of major resource companies. The worry was that they might be tempted to put geopolitical interests ahead of economic or market needs.

As might be expected, Mr. Luo would prefer a return to the old, more laissez-faire Canadian investment policies. "Some media, some officials from your side, the economic circle from my side, the state-owned companies – they both think that that new policy is not positive," he said. "We will wish that if that policy is negative, it must have some kind of changes."

We will wish Beijing follows such a policy prescription itself. But we won't hold our breath.

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About the Author
Senior Economics Writer and Global Markets Columnist

Brian Milner is a senior economics writer and global markets columnist. In a long career at The Globe and Mail, he has covered diverse business beats, including international trade, the automotive industry, media, debt markets, banking and the business side of sports. More

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