Ottawa inches closer to free trade talks with Beijing

OTTAWA – The Conservative government is expected to announce in the coming days that it has cleared the first hurdle toward free trade talks with China.

Canada and China launched a joint study during Prime Minister Stephen Harper’s trip to China in February that is aimed at determining ways to enhance trade and economic activity between the two countries.

The study was to be completed by the end of May, and industry representatives say they have been told the high-level assessment went better than expected.

China has emerged as Canada’s second-largest trading partner after the United States and a major source of foreign investment — including $10 billion into Alberta’s oilsands and B.C.’s shale gas deposits.

Kathleen Sullivan, executive director of the Canadian Agri-Food Trade Alliance, said members of her association had expected the results of the study to be released last week, but the government seems to be waiting for the right moment.

Whenever the results are released, however, the key question will be what comes next.

“What we’re wondering is, based on the results, what then will China and Canada do in terms of next steps?” said Sullivan. “If there’s a positive result coming out of this study, and I would assume that there will be, will they then take the next step?”

That next step would be another, more in-depth and comprehensive study assessing whether free trade negotiations are the way to go — or whether another route is more likely to produce economic benefits.

“We understand this study looks at what Canada and China can offer each other, and sets the stage for holding further discussions on how to further grow trade between the two countries,” said Jean-Michel Laurin, vice-president of the Canadian Manufacturers and Exporters trade association.

The interest is there from both sides, said trade consultant Peter Clark.

“The Chinese want our resources and are interested in investment, and we want into the Chinese market,” he said.

Canada is already engaged in trade talks with the European Union, India and a number of other smaller countries. It also is seeking entry into the Trans-Pacific Partnership trading bloc and is looking to start trade negotiations with Japan and Thailand.

But China is seen as an extremely complicated trading partner — and there is a sense that an all-encompassing free trade agreement may not be the best way to go.

“If your goal is to increase trade with China, how do you even go about doing that? Is a free-trade agreement the vehicle?” asked Sullivan. “I think Canada and industry need to put a lot of thought into what happens next.”