Any free-trade deal with China needs clear, enforceable rules

Canadians have reason to be skeptical about closer ties, says Pitman Potter.

Following Prime Minister Trudeau’s visit to China to discuss the possibility of a future bilateral free trade agreement (FTA), many Canadians are unsettled about closer ties with China. And for good reason. China’s compliance with existing trade agreements has been problematic. China’s widely documented practices of subsidizing exports and dumping exported goods at prices that do not reflect market costs (one of many ongoing reasons to oppose China’s classification as a market economy) along with imposing non-tariff barriers on imports violate trade rules agreed to under the WTO.

On the investment side, while the detention of Canadian investors John Chang and Allison Lu for commercial disputes with politically connected counterparts in China has gotten most of the publicity, other practices, such as imposing technology transfer requirements on foreign investors, targeting foreign over local firms in enforcing environmental rules, and denying reciprocal treatment of investments in resource projects, banking, telecommunications and professional services are also cause for serious concern.

Lurking behind all of this is China’s human rights record. Not surprisingly, a PRC government that denies legal rights to its own citizens has a difficult time convincing Canadians that it will honour their rights as expressed in a free-trade agreement.

Nonetheless, integrating China more thoroughly into a rule-based system such as that presented under a possible FTA is preferable to allowing Beijing to remain outside the law. An FTA with China has potential to clarify standards for reciprocal treatment of trade, market access and fair dispute resolution. While there are concerns about China’s compliance, a rule-based system with consistent and rigorous monitoring and enforcement can begin to provide greater certainty and fairness to trade relations.

Yet the question remains: What might be the terms under which a possible FTA could be pursued?

Foreign Minister Chrystia Freeland recently articulated a progressive trade agenda for NAFTA, emphasizing gender equality, Indigenous rights, labour rights, environmental protection and dispute resolution. Each of these issues should be applied to China as well.

Within the past year, feminist activists in China advocating gender equality and women’s rights have been harassed and imprisoned. China has been justly criticized for marginalizing indigenous “minority nationalities” and punishing those who seek better treatment. China continues to deny basic labour rights around independent trade unions and collective bargaining. China’s environmental crisis continues unabated due to corruption and lax regulation. China’s judicial and other dispute-resolution mechanisms are expressly directed to protect the interests of the state and the Communist Party over the rights of appellants.

A Canada-China FTA with clear and enforceable rules on these and other issues can help ensure that trade with China benefits Canadians and honours Canada’s commitments to human rights.

China’s public position has generally been to resist calls for reform and to label as “protectionist” efforts by international partners calling China to strengthen its compliance with international trade and investment agreements. Claims by Chinese officials that they have bigger problems to solve than human rights tend to underscore the conclusion of many that promoting the economic interests of privileged elites is more important than honouring legal obligations to the people of China; indeed, the UN Special Rapporteur suggested as much in his comments on inequality and government authoritarianism at the conclusion of his fact-finding trip to China.

While FTA negotiations with China present Canada with important opportunities to open markets and diversify our international trade posture, essential to this is the insistence on an enforceable rules-based system that protects the rights of trading companies and citizens in both countries.

Protecting legal rights is not trade protectionism.