Canada, China to Explore Potential for Trade Deal, Officials Say

29 September 2016

In Ottawa last week, Canadian Prime Minister Justin Trudeau told reporters that his country will commence “exploratory talks” as a first step towards potentially negotiating a free trade agreement, following a meeting with Chinese Premier Li Keqiang.

The decision was made “in acknowledgement of the interconnected nature of the two economies and the untapped potential of the Canada-China economic and commercial relationship,” said the two sides in a joint statement issued on 23 September.

The announcement was paired with a new goal to double bilateral trade between the two nations by 2025, relative to 2015 statistics, as well as the launch of the Canada-China Economic Strategic Dialogue. Trudeau said that the latter will serve as a forum to “guide the economic relationships” between China and Canada.

A report commissioned by the Canadian Council of Chief Executives (CCCE) and the Canada-China Business Council (CCBC) suggests that deeper trade ties could potentially yield up to 25,000 new Canadian jobs, helping to drive up the volume of investment and exports, culminating in C$7.8 billion (US$5.9 billion) in additional economic activity in Canada in a timeframe of 15 years.

The 2015 figure for Canadian exports to China exceeded C$20 billion (US$15.1 billion), where Canadian imports from China amounted to almost C$66 billion (US$49.9 billion).  China is Canada’s second largest trading partner behind the United States.

Integration efforts

Currently, the Asian economic giant is also pursuing trade deals with a number of other partners, such as the ongoing talks to ink a Regional Comprehensive Economic Partnership (RCEP) with 15 other economies. Beijing also recently concluded the ChAFTA, a free trade agreement between China and Australia which was signed in June 2015 after a decade of talks and ratified later that same year. (See Bridges Weekly, 12 November 2015)

The CCCE-CCBC report suggests that the China-Australia pact – which included notable concessions from Beijing on agriculture and services – could potentially be a good indicator for the possible success of a deal with Canada, given the similarities between the Canadian and Australian economies.

Canada itself has been pursuing a broad agenda of new trade deals, including but not limited to Peru in 2009, Colombia in 2011, and Panama in 2013. Canada is also a signatory to the Trans-Pacific Partnership (TPP), the 12-country trade deal signed early this year that is now in the ratification stage. That deal features 11 other Pacific Rim countries – including the US – and does not currently include China. (See Bridges Weekly, 15 September 2016)

Also currently on the table for Canada is the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), which has yet to be signed or ratified. A signing ceremony could occur during a bilateral EU-Canada summit on 27 October, officials say, pending the outcome of other processes. (For more on the CETA, see related story, this edition)

While the EU and China do not currently have a trade deal, they are undergoing negotiations for a bilateral investment pact, and Brussels has suggested that the outcome of this process could be indicative of whether a free trade agreement would be successful. The CETA would also be among those deals setting the benchmark for a future EU-China trade agreement, if negotiated. (See Bridges Weekly, 30 June 2016)

ICTSD reporting; “Canada, China agree to tighten trade ties, mull extradition pact,” REUTERS, 22 September 2016; “Canada and China Will Enter Trade Talks, Justin Trudeau says,” THE NEW YORK TIMES, 22 September 2016.

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