Barriers to free trade with China
Justin Trudeau is apparently holding out for a more comprehensive trade deal with China. The prime minister should be careful what he asks for.
The much-discussed but still theoretical Canada-China free trade pact has been undergoing a kind of perils-of-Pauline adventure this week.
It seemed alive and well Sunday when the prime minister landed in Beijing, reportedly to announce with his Chinese counterpart that formal negotiations on the deal were ready to begin.
By Monday it seemed at grave risk, as it became clear that a significant snag existed, which precluded such an announcement.
By Tuesday, the hint of a deal was in the air again following news that Trudeau was leaving his international trade minister, Francois-Philippe Champagne, in China to keep on talking.
China and Canada have held preliminary discussions for roughly a year. Simply put, that means they have been trying to figure out whether they have enough in common to bother engaging in real talks.
China wants tariff-free access to Canada for its exports and the freedom for its companies, many of which are state-owned, to invest where they will. Canada wants reciprocal privileges but it also wants more.
Trudeau’s Liberal government wants what it calls a comprehensive and progressive deal that would cover a wide range of economic activities.
Specifically, as the prime minister noted this week, it wants a deal that would include gender, labour and environmental rights.
But I suspect that Canada’s wish list is quite a bit longer and involves areas that go beyond mere trade, such as intellectual property, dispute settlement mechanisms and regulatory harmonization.
All of these are part and parcel of the newest generation of trade deals, including the Comprehensive Economic and Trade Agreement between Canada and the European Union. Government officials routinely cite that pact as a model.
But do Canadians really want a comprehensive economic agreement with powerful yet low-wage China?
In some cases, the answer would be an unqualified yes.
As Australia has discovered, China is a master at using technical regulations to block agricultural imports that, under a 2015 trade deal between the two countries, are supposed to enter freely.
Presumably, in any Canada-China deal, Ottawa would try to curb Beijing’s use of these so-called nontariff barriers.
But Canadians might be less amenable if China insisted on challenging our health and safety or immigration regulations in the name of free trade.
In Australia’s case, China insisted that its firms operating in Australia be allowed to import temporary Chinese workers.
This almost cost the deal its bipartisan parliamentary support — until a compromise was reached whereby any Chinese temporary workers brought in were assured of Australian wage rates.
Australia’s experience highlights the difficulties of melding high-wage and lowwage countries in a single free trade pact.
The Trudeau Liberals argue that they can finesse this by including a labour rights chapter in any deal. But would the Chinese dictatorship of President Xi Jinping seriously countenance, say, independent trade unions?
It doesn’t tolerate any other power centre that might threaten the ruling Communist Party’s monopoly of control.
Comprehensive trade and investment deals are difficult enough when the signatories are of equal weight. They become more difficult when, as in the case of the North American Free Trade Agreement, one partner (Mexico) follows a deliberate low-wage policy. They can become impossibly tricky if that low-wage partner is also the dominant player in the relationship.
So raise a glass to the idea of modest goals. It took 10 years for China and Australia to hammer out their relatively primitive free trade deal. Canada and China have been at it for only one.
Trade with China is almost certainly a good idea. It’s already happening without a formal deal. But a comprehensive economic relationship? Maybe not.