U.S.-China deal may hurt Canada: analysts

The signing of a phase one U.S.-China trade deal this week is expected to create a brief respite from uncertainty for the global economy — but that’s unlikely to last as long as U.S. President Donald Trump is in the White House, analysts say.

What’s more, Canadian exporters could become collateral damage of a deal that will see China commit to purchasing vast amounts of U.S. agricultural products and other goods.

Top officials are slated to sign the pact in Washington on Wednesday following two years of trade strife in which the U.S. slapped tariffs on nearly two-thirds of Chinese imports and Beijing targeted more than half of all goods purchased from the U.S.

Though the official text of the deal has yet to be released, U.S. Trade Representative Robert Lighthizer has said China will purchase an additional US$200 billion in American goods over the next two years, including US$40 billion to US$50 billion in agricultural products.

The upending of trade flows as a result of such a commitment could create painful headaches for Canadian agricultural producers.

“The reason Canada should be worried about this is what is China actually agreeing to do?” said Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington. “Are they agreeing to open their market for everybody? Or are they agreeing to reorient their purchases away from everybody else and toward American purchases? That matters.”

Indeed, Canadian canola producers are already experiencing the chill of lost sales to the powerful Chinese market — which once accepted 40 per cent of their exports — after Beijing blocked all purchases of the oilseed.

Though Lighthizer has said the pact will be compliant with World Trade Organization rules, the Chinese purchasing commitments have also raised concerns about discrimination against some markets in favour of the U.S.

The WTO’s “most favoured nation” rule requires all trading partners to be treated equally unless a full free trade agreement is forged. The U.S.-China deal covers only a limited range of goods.

“It does seem like it undermines the fundamental principles of non-discrimination if it were to work the way the U.S. describes it,” said Simon Lester, a trade policy analyst at Washington’s Cato Institute.