Canada and China deepening economic ties by embarking on possible free trade deal

Damon van der Linde | September 22, 2016 6:05 PM ET
More from Damon van der Linde

Canadian Prime Minister Justin Trudeau speaks with Chinese Premier Li Keqiang as they wait for a signing ceremony to take place in the Hall of Honour on Parliament Hill in Ottawa, Thursday.

Canadian Press/Adrian WyldCanadian Prime Minister Justin Trudeau speaks with Chinese Premier Li Keqiang as they wait for a signing ceremony to take place in the Hall of Honour on Parliament Hill in Ottawa, Thursday, September 22, 2016
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With the resolution of key trade disputes, Prime Minister Justin Trudeau and China’s Premier Li Keqiang signalled deepening economic ties between the two countries, opening the door to the possibility of a free trade agreement.

At a joint press conference in Ottawa on Thursday, the two leaders said they aim to double trade by 2025 and had resolved longstanding issues of access for Canadian beef and canola to China, while several companies signed commercial deals. They also announced talks aimed at an eventual free trade agreement.

Both leaders also addressed the rockier issues with the relationship, including China’s human rights record – it is one of a few countries that employs the death penalty – and domestic opposition to a proposed extradition treaty.

“I look forward to continuing the discussions on challenging issues, but also on all the opportunities that we know there are to create benefits for citizens of both our countries,” Trudeau said. 

HSBC Canada chief economist David Watt said China has been looking to create closer ties with the West as it undergoes a massive reform process, however there had been some reluctance from Canada due to the challenges of adapting to the rapidly changing Chinese market.

“I don’t want to say this is a thaw. I would just say we’re going to explore the one missing element of our relationship with China, which is potential free trade,” said Watt.

“It’s not necessarily going to be easy. We also have some degree of uncertainty in Canada over what sort of a relationship we want to have with China.”

China is Canada’s third largest trade partner, behind the U.S. and the EU. Economic activity between the two countries grew at a year-over-year increase of more than 10 per cent in 2015, reaching $85.8 billion in two-way merchandise trade.

“We need to recognize that our common interests far outweigh our differences,” Li said.

Watt says that for Canada’s heavily resource-based economy, there are clear benefits to trade deals with a country that is likely going to be a key driver of commodity prices for the next 30 years.

“If you’re a commodity exporter you probably want to have some idea what’s happening in China so you can take advantage of opportunities that are going to arise,” he said.

We also have some degree of uncertainty in Canada over what sort of a relationship we want to have with China

Watt says that China stands to benefit not only from access to Canada’s natural resources, but its financial sector knowledge and technical expertise.

Following Trudeau’s recent first official visit to China in August where more than 60 commercial deals were signed, the Prime Minister announced four business deals including a joint venture between SNC-Lavalin Inc., China National Nuclear Corp and Shanghai Electric Group Co Ltd. to develop, market and build new nuclear reactors.

The president of SNC-Lavalin’s power devision, Sandy Taylor, says implementing its technology to recycle fuel from China’s 33 light-water reactors not only gives it access to the local market, but also provides opportunities to collaborate on Chinese-led nuclear projects around the world.

“We have a very unique design that we’ve commercialized here and built and proven which is complementary to the direction of what the Chinese are doing,” said Taylor.

Sinoenergy Corp Ltd. also signed a deal to invest $500 million over two years in Long Run Exploration Ltd., an Alberta oil and gas company, while Iovate Health Sciences International Inc. and Xiwang Food Stuffs Co Ltd. signed a share purchase agreement worth $962 million.

In the financial sector, Canada Pension Plan Investment Board and the National Development and Reform Commission of the People’s Republic of China signed an agreement to collaborate on addressing the challenges of China’s aging population, including pension reform and investment in the domestic senior care industry from global investors.

Air Canada also says it will make an announcement Friday concerning air service to China.

Canada is currently in negotiations for free-trade agreements through the Trans-Pacific Partnership and the Canada and European Union Comprehensive Economic and Trade Agreement. However, with roadblocks to ratification to both the Atlantic and Pacific agreements, working more closely with China could be a better shot for Canada getting a better deal on its own terms.

“This bilateral trade deal with China could offer the chance for Canada to negotiate based on its own economic interests,” said Domenico Lombardi, Director of the Global Economy Program at the Centre for International Governance Innovation.

On Thursday Trudeau announced that Canada had secured access for its canola to the Chinese market through 2020, settling a dispute that previously threatened to halt exports. China had been poised to toughen restrictions on imports of canola seed from Canada, which were valued last year at $2 billion.

Canada’s canola growers have become increasingly reliant on export sales to China and the Asian country now accounts for 40 per cent of all canola-seed shipments.

With files from Bloomberg

Source: http://business.financialpost.com/news/economy/justin-trudeau-confirms-canada-china-exploring-free-trade-deal

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One Response to “Canada and China deepening economic ties by embarking on possible free trade deal”

  1. daveyone1 Says:

    Reblogged this on World Peace Forum.

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