National Column: Trade talks reopen Canada’s fascination with mysterious East

by Thomas Walkom

The mysterious East continues to beckon. Previous Canadian governments looked to trade deals with Japan and South Korea to massage this country’s economy. Now, Justin Trudeau is focusing on China.

On Thursday, the prime minister announced Canada and China have formally agreed to open free trade talks. Many Canadians might be surprised to discover Canada doesn’t already have some kind of free trade agreement with China.

From electronics to kitchenware, it is hard to find anything for sale that is not made in China.

On the other side of the ledger, China already freely buys vast quantities of Canadian raw materials, such as wood pulp and oilseeds. In terms of both imports and exports, China is Canada’s number two trading partner.

As well, the two countries have signed an agreement to protect each other’s corporate investors from unseemly government interference, such as environmental regulations that reduce profitability. This Canada-China Foreign Investment Protection Agreement of 2014 is binding for a minimum of 31 years.

What else is there to do? The answer, it seems, is more of the same.

As a senior Chinese official told the Globe and Mail newspaper this year, China would like more Canadian raw materials and agricultural products.

It wants the rule scrapped that limits the ability of state-owned Chinese companies to buy Canadian energy firms.

And it would really like Canada to build a pipeline that would bring Alberta oil to the British Columbia coast, where it could be shipped to China.

The Canada China Business Council estimates that a free trade deal with China would generate an extra $7.8 billion in Canadian economic activity over 15 years, or $520 million a year. Relative to the size of the roughly $2 trillion Canadian economy, that’s not a very big number.

But in this case size doesn’t matter. China has captured the imagination of a prime minister who is already firmly committed to free trade and foreign investment and who sees the path to Canadian prosperity as one that runs through Asia.

On the face of it, Trudeau’s fascination with China makes sense. It is the world’s most populous country. It is on track to replacing the U.S. as the world’s richest.

But Asia has long seduced the western imagination. The French who landed in Canada in the 16th century weren’t looking for Quebec. They were looking for a sea route to China.

Over the centuries, the sheer size of China made western business interests slather. The British made money selling opium to the Chinese. The Americans hoped to make money selling everything else.

As the head of the National Biscuit Co. noted when announcing his plan to enter the Asian market in the late 19th century, if every Chinese person bought just one of the firm’s Uneeda biscuits each day, the profits would be immense.

At different times, western business fascination with Asia has zeroed in on different countries. In the 1980s, Japan was the focus. It had the most innovative business techniques. Its form of state-directed capitalism was seen as a model for the world.

Canada was aching to sell two-by-four lumber and liquefied natural gas to Japan. In 2012, Stephen Harper’s Conservative government opened free trade talks.

But they never went anywhere. Japan lost interest in a bilateral deal when it decided to join the multilateral Trans-Pacific Partnership free trade talks that included Canada.

As well, after two decades of economic stagnation, Japan had lost its allure. It was no longer viewed in the West as the premier place to do business. That honour was bestowed on China.

Will a free-trade pact with China make us rich? Will it assuage our economic woes? Is it such a big deal?

Perhaps. But it’s worth remembering that such arrangements don’t always work out as planned.

In 2015, Canada’s free trade agreement with another vibrant Asian economy, South Korea, went into effect. Government figures show that in the first year of free trade, Canadian exports to South Korea fell while imports from that country jumped.

Canada’s trade deficit with South Korea rose from $3 billion to $3.8 billion.

I’m not sure this is the result Canadians expected from pursuing free trade with one of the Asian tigers. It is, however, the result we got.

Thomas Walkom’s column appears Monday, Wednesday, and Friday.

Copyright 2016 – Torstar Syndication Services

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