Canada changes tack on China trade agree­ment

The Globe and Mail (Alberta Edition) - - BUSINESS - NATHAN VANDERKLIPPE

Ot­tawa says it will seek sec­tor-spe­cific deals in lieu of com­pre­hen­sive pact

The Cana­dian gov­ern­ment has shifted its fo­cus from a com­pre­hen­sive trade agree­ment with China to in­stead con­cen­trate on achiev­ing a sec­tor-by-sec­tor deal with the world’s sec­ond-largest econ­omy.

Ot­tawa has set­tled on four in­di­vid­ual sec­tors where it wants to sign smaller trade deals in hopes it can more quickly boost eco­nomic in­ter­ac­tion with China in agri­cul­ture, ed­u­ca­tion, clean tech­nol­ogy and tourism.

“The best way for­ward at this time is to fo­cus on the art of the pos­si­ble. And that is a sec­tor-by-sec­tor ap­proach,” Trea­sury Board Pres­i­dent Scott Bri­son said in an in­ter­view with The Globe and Mail in Shang­hai on Fri­day.

In do­ing so, the Justin Trudeau gov­ern­ment has signed on to rec­om­men­da­tions by some Cana­dian busi­nesses and the Pub­lic Pol­icy Fo­rum, which in Oc­to­ber pro­posed in­di­vid­ual sec­toral deals as a way to cre­ate “a more diver­si­fied and grow­ing trade port­fo­lio for Canada that does not run afoul of the vir­tual veto given to our North Amer­i­can trad­ing part­ners in the new United States-Mex­ico-Canada Agree­ment.”

Canada and China have com­pleted four rounds of ex­ploratory talks to­ward a com­pre­hen­sive free-trade deal, but the two sides have failed to for­mally launch ne­go­ti­a­tions. Bei­jing has re­sisted Ot­tawa’s de­mands for pro­vi­sions on labour, econ­omy and the en­vi­ron­ment.

Now, how­ever, the fed­eral gov­ern­ment wants to split up the big deal into mul­ti­ple smaller deals as it un­der­takes a new of­fen­sive to boost busi­ness with China. Mr. Br is on and Min­is­ter of Agri­cul­ture and Agri-Food Lawrence Ma­cAulay are both in China, and will be joined next week by Min­is­ter of Fi­nance Bill Morneau and Min­is­ter of In­ter­na­tional Trade Di­ver­si­fi­ca­tion Jim Carr, who will dis­cuss the sec­toral-deal ap­proach with Chi­nese of­fi­cials.

The smaller scope of such agree­ments, Ot­tawa hopes, will al­low progress at greater speed. “The one at the top of that list, in my view, is re­ally food and agri­cul­ture,” Mr. Bri­son said. In­di­vid­ual deals to foster greater co-op­er­a­tion in ed­u­ca­tion, tourism and clean tech­nol­ogy are other “ob­vi­ous areas of pri­or­ity,” he said.

The co-or­di­nated push to ad­vance trade with China comes in the midst of a Sino-U.S. trade war, as the White House fights what it calls Chi­nese theft of in­tel­lec­tual prop­erty and fail­ure to pro­vide re­cip­ro­cal ac­cess to its econ­omy. Al­though China is an out­sized global trad­ing part­ner, the Or­ga­ni­za­tion for Eco­nomic Co-op­er­a­tion and Devel­op­ment ranks it in 59th place – out of 62 – among coun­tries in an eval­u­a­tion of open­ness to for­eign di­rect in­vest­ment.

China’s Com­mu­nist Party lead­er­ship has also raised con­cern in Canada and its al­lies for ef­forts to spread in­flu­ence and for what a Cana­dian diplo­mat, speak­ing at the UN this week, called a “broader de­te­ri­o­ra­tion of hu­man rights” un­der Pres­i­dent Xi Jin­ping. That in­cludes the in­car­cer­a­tion of large num­bers of Mus­lims for po­lit­i­cal in­doc­tri­na­tion and skills train­ing.

The Trudeau gov­ern­ment, how­ever, has shown few in­di­ca­tions of par­ing back its Chi­nese am­bi­tions.

“Canada is the best friend for China,” Mr. Bri­son said, urg­ing Bei­jing to trust the coun­try to sup­ply high-qual­ity food and ed­u­ca­tion.

“I be­lieve we can pur­sue th­ese op­por­tu­ni­ties and re­spect our val­ues ,” he said, adding :“If we are not en­gaged com­mer­cially, it’s very dif­fi­cult for us to be en­gaged ac­tively or ef­fec­tively on hu­man rights.”

At the same time, Ot­tawa’s new push to ad­vance smaller trade deals over a big­ger agree­ment was wel­comed by busi­nesses hop­ing to es­cape tar­iffs that for some prod­ucts, put Cana­dian goods at a sig­nif­i­cant com­pet­i­tive dis­ad­van­tage.

Take the milk and yo­gurt made by Avalon Dairy, a Burn­aby, B.C.based com­pany that is “the only Cana­dian pas­teur­ized milk au­tho­rized to im­port into China,” chief ex­ec­u­tive Russ Rim­mer said. But China as­sesses a duty of roughly 30 per cent on its prod­ucts, while milk from Aus­tralia, which has a free-trade agree­ment with China, is “at zero.”

“So we are start­ing at a dis­ad­van­tage right away,” Mr. Rim­mer said. “The ques­tion I have is, why aren’t we go­ing af­ter freer trade?”

At­lantic Canada food pro­duc­ers face Chi­nese tar­iffs of 5 per cent for frozen French fries, 5 per cent to 7 per cent for lob­ster and 30 per cent on frozen blue­ber­ries.

Other prod­ucts are up against an even steeper tax bar­rier: China im­poses a roughly 80-per-cent tar­iff on the fruit wines made by Canada Berries, a Rich­mond, B.C.based com­pany that bot­tles al­co­holic drinks out of blue­ber­ries, cran­ber­ries and rasp­ber­ries.

Com­pet­ing prod­ucts from Chile have no ad­di­tional tax and a quicker trip through cus­toms quar­an­tine, said Tom Yuan, founder and di­rec­tor of Canada Berries.

When, he asked, will there be progress to al­low “our prod­uct to get into China has­sle-free?”

It’s not clear how quickly Canada can com­plete a sec­toral deal; nei­ther Mr. Bri­son nor Mr. Ma­cAulay would dis­cuss Ot­tawa’s ex­pected time­line.

But there is risk in mov­ing slowly, warned Sarah Ku­tu­lakos, ex­ec­u­tive di­rec­tor of the Canada China Busi­ness Coun­cil. “There are sec­tors in which Chi­nese con­sumers are de­vel­op­ing pref­er­ences for prod­ucts that aren’t ours,” she said, be­cause those Cana­dian prod­ucts sim­ply aren’t avail­able.

She ap­plauded Ot­tawa’s de­ci­sion to take its eye off a com­pre­hen­sive trade deal, which could take years to com­plete. “One of the ben­e­fits of a sec­tor-by-sec­tor ap­proach is that we can take ad­van­tage of the mar­ket op­por­tu­ni­ties sooner,” she said.


Trea­sury Board Pres­i­dent Scott Bri­son hopes Canada and China can reach a deal on food and agri­cul­ture first.

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