Breaking rules of business in China
Prime minister can’t hide that he miscalculated
Justin Trudeau left China’s capital without a deal to l aunch f ree- t rade negotiations with the world’s second-largest economy.
But after the prime minister met with Chinese President Xi Jinping Tuesday, an agreement appeared close. Sources suggested the deal was on and then off again at various points Tuesday evening. As the Canadian delegation set off for the Fortune Global Forum in Guangzhou, the two sides appeared to be on the verge of an agreement, with International Trade Minister François- Philippe Champagne staying behind in Beijing to carry on talks.
The day before, Trudeau’s meeting with Premier Li Keqiang ended in stalemate after the two sides could not agree on language about the inclusion of labour protections in the framework for talks.
The episode is a cautionary tale for anyone doing business in China. On day two of the prime minister’s excellent adventure, he spoke to a roundtable of Canadian business leaders. Too bad he didn’t talk to them before sitting down with Li on Monday.
They might have told him there are three golden rules to doing business in this country: you never try to impose your own values; you never interpret acknowledgment during a meeting as agreement; and you don’t assume the people in that meeting have the authority to strike a deal.
Ottawa seems to have broken all three rules.
Trudeau arrived in Beijing thinking the Chinese had agreed to his “progressive trade agenda.” The prime minister had been assured the Chinese were onside with the inclusion of labour protections as part of the framework for formal free- trade talks between the countries.
It was only when he sat down with Li that it became apparent the premier was not ready to commit his country to anything that suggested more onerous health and safety obligations, minimum wages or collective bargaining.
The disconnect appears to be a result of the Chinese trade ministry giving the Canadians the impression that labour standards would be written into the framework.
The Canadian side insists their interpretation is that the inclusion of labour protections is simply a starting point for negotiation. But on Monday, the Chinese side made the point that a country with 150 million rural-tour-ban migrants a year cannot make concessions that could end up granting workers four months of maternity leave — a provision in the Canadian Labour Code.
At least that’s what Li is said to have told Trudeau. It may simply have been the kind of Chinese haggling — “one last go” — familiar to anyone who has shopped at Beijing’s famous Silk Market.
“You need to be a tough negotiator with the Chinese because as much as they talk about win-win relationships, it is really about them winning or being in control,” said one businessman with years of experience trading in China.
That approach stands in marked contrast to the one advocated by Trudeau in his press conference.
“Canada is not in the business of creating winners and losers in trade deals — they can benefit all parties involved,” he said.
The Canadian delegation say they were not bullied by their hosts. They stress that Trudeau has good personal relations with Li, after hosting him at the prime minister’s Harrington Lake retreat last year.
But though the prospects of a deal were still alive late Tuesday, the prime minister can’t hide the fact that he miscalculated.
We are going to have to get smarter and tougher.
“Trade t hat benefit s everyone,” “putting people first” and “Canadian values on the environment, labour and gender” mean little to leaders set on ushering in a new era of glory for China — a rejuvenation that would end the country’s 200- year absence from being the centre of the world.
The Chinese have shown where the real power lies, as surely as they did Monday when the tiny Canadian delegation was greeted in the Great Hall of the People by the immaculate massed ranks of an honour guard with bayonets fixed.
Trudeau may have pretensions about changing the world but China is in the process of ushering in a new world order — a model of global governance that’s an alternative to Western liberal democracy.
On a more prosaic level, the gathering of business leaders gave a sense of what a more open Chinese market may mean for them.
The Canadian Cattlemen’s Association has already won some concessions, allowing f or t he i mport of f resh chilled beef, and has made progress toward a deal on bone- in imports ( currently only frozen, boneless beef is allowed into China).
But those imports are still subject to a 12- per- cent import tariff, while the Australian competition now pays just seven per cent, falling to zero by 2024.
Trudeau said in his press conference that he wants to make “solid and steady” progress to give Canadian businesses some predictability at a time when “populism and resurgent nationalism” is creating risks elsewhere.
Uncertainty over trade relations with the United States looms in the background of events in Beijing this week — and perhaps explains the Chinese enthusiasm to forge closer ties with Canada.
But that should be put in perspective. The most likely reason Li didn’t concur with terms agreed to by people lower down the bureaucratic food chain is that relations with Canada probably didn’t much cross his mind before Monday.
While he talked about a new “golden era” of Canada-China relations, he has held 33 bilateral meetings in recent weeks — and for all the conceit of its prime minister, Canada is just not that important to the Chinese.