CHARLES BURTON

Trudeau’s dance with the devil: China must give as much as it takes

CHARLES BURTON

Special to The Globe and Mail

Published Wednesday, Jan. 13, 2016 

Charles Burton is an associate professor of political science at Brock University in St. Catharines, and is a former counsellor at the Canadian embassy in Beijing.

The news that Prime Minister Justin Trudeau will lead a high-level trade mission to China this spring signals that his government intends to put stronger engagement with China at the forefront of its economic game plan. Having a deal in place before the next election could be a cornerstone of this strategy, but it won’t be easy.

Australia and China finally achieved a free-trade deal last month, but it took 21 rounds of negotiations over more than 10 years – and the agreement remains controversial in Australia. For Canada, the question is whether we can negotiate something with China that will be of net benefit to Canada and does not require us to abandon principled commitments to uphold human rights and freedoms, here and throughout the world.

Interestingly, in 2014, China’s newly arrived ambassador to Canada, Luo Zhaohui, said that a Canadian-Chinese free-trade pact should be a Canadian national priority. Seeing as China already has extensive free access to our markets and enjoys a huge trade surplus with Canada, one wonders what Beijing hopes to achieve with such an agreement.

The ambassador also urged Canada to roll back “negative” foreign investment rules that former prime minister Stephen Harper’s government implemented in 2012, around the time it was considering approval of the China National Offshore Oil Corp.’s $15-billion acquisition of Canadian oil company Nexen. (Ottawa did ultimately approve the purchase.)

What Beijing wants is no restrictions on Chinese state investment in Canada, with no obligation to allow Canadian investment the same access in China. Consider the swift replacement of Nexen’s Canadian CEO Kevin Reinhart with a Communist Party cadre (despite Beijing’s earlier promise to maintain Nexen’s Canadian management), or the years-long controversy over Chinese mining concerns in Canada’s North bringing in Chinese miners on the absurd basis that they could not find local Mandarin speakers to apply for the jobs.

China wants its acquisitions in Canada to be fully integrated into China’s supply chain, and all revenue generated by them – right down to miners’ salaries – to benefit the Chinese state in every aspect. Mr. Luo also wants Ottawa to let Chinese state firms fully participate in constructing the Northern Gateway pipeline, in accordance, naturally, with Chinese environmental, labour and ethical standards that fall far short of Canadian benchmarks.

Meanwhile, polls by Canada’s Asia-Pacific Foundation show that nearly half of Canadians oppose free trade with China, and more than three-quarters don’t want state-owned Chinese firms buying out Canadian companies.

Mr. Trudeau’s government is feeling pressure to show it is taking steps to address Canada’s economic downturn and the growing federal debt; they want to be able to tout a free-trade deal with China as the road to Canada’s economic revival. The worry is that, under such political pressure, Canadian negotiators will commit to a deal that will serve China’s interests much more than ours.

Certainly the Canada-China Foreign Investment Promotion and Protection Agreement that came into effect in 2014 appears to fall into this category. Canada is constrained by its terms to protect Chinese investment from any negative impact of foreign investment, environmental or labour regulations that may be enacted by Ottawa or by provincial governments after 2014.

But Canada gets little reciprocal protection, given China’s lack of transparent and enforceable business regulations and law. It remains to be seen whether FIPPA leads to increasing Canada’s share in Chinese markets, or fairer resolution of contract disputes over protection of intellectual property, proprietary manufacturing processes and so on.

As we have been reminded by the run of stock-market turmoil, China’s economy is underperforming expectations, and in 2016, it is likely Beijing will continue to devalue the renminbi/yuan, making Canadian products even less competitive in China. Since slowing growth rates really do threaten China’s political stability, one wonders whether, under these circumstances, Beijing would genuinely be prepared to further open its market to the kinds of products and services in which Canada has clear comparative advantage. Canadian banks, securities and insurance firms are currently subject to highly onerous restrictions on their Chinese operations, severely constraining their ability to compete against state firms for the same business.

Any credible free-trade agreement has to have give and take on both sides, but the asymmetrical power relationship between the political economies of our two countries has in the past led to a lot more take than give on the Chinese side. Before Canada signs on the dotted line, it is paramount to our national interest that any agreement with China be intensely scrutinized, without regard to political considerations, to ensure there is a fair measure of net benefit for Canada.

There is no question that Canada needs to be doing more trade with China to sustain Canadian national prosperity in the years and decades ahead. But where do we draw the line on the political, non-trade conditions that the Communist regime will almost certainly impose on Canada in return? And to what extent are we prepared to offer Beijing economic and therefore political leverage if our economy becomes more and more dependent on the vagaries of Chinese state investment?

Before they give us what we ask, the Chinese side will inevitably insist that Canada show “friendship” to the Chinese regime by not engaging on Canadians’ concerns over allegations of human-rights abuse in any meaningful way, and not pressing too hard on consular cases such as that of Vancouver native Kevin Garratt, a Christian who has been jailed since August, 2014, without any due process of law.

The bottom line on enhancing our relations with China is whether, in our pursuit of the economic justice of fair trade, we have to largely abandon Canada’s proud commitment to political and social justice.