Canada needs a “reality check” regarding the prospect of a free-trade agreement with China, according to a new report from a Canadian public policy think tank.
The political and industry narrative that a China-Canada Free Trade Agreement is urgently needed to provide access to a vast market critical to Canada’s prosperity belies a fundamental “institutional incompatibility” between the countries, according to the Thursday report from the MacDonald-Laurier Institute.
“Given the Chinese government’s command power over its economy, its persistent violations of World Trade Organization (WTO) rules and underhanded actions against the interests of its existing FTA (Free Trade Agreement) partners, Canada should not rush headlong into FTA negotiations with China,” the report reads.
The recent escalation of diplomatic tensions — spurred by the arrest of Huawei CFO Meng Wanzhou in Vancouver in December, and the subsequent detention of a pair of Canadians in China — may have cooled Canadian public appetite for closer ties with the single-party state, said Charles Burton, a senior fellow at the institute’s Centre for Advancing Canada’s Interests Abroad and spokesperson for the report.
But powerful Canadian corporations have long pushed for eased business restrictions between Canada and China.
According to the Office of the Commissioner of Lobbying of Canada’s database, Canadian development giant SNC-Lavalin twice exchanged “written and oral communication” with each of the past two Canadian ambassadors to China between 2014 and 2017.
The subjects of communication between the company and Canada’s heads of mission to China included: foreign policies affecting trade; increasing diplomatic resources to foreign markets; improved business travel visa services; international development policy, particularly with respect to the Canadian private sector; and concerns that budget cuts for Canadian diplomatic representation in foreign capitals — framed as “key export growth markets” — will hamstring opportunities for Canadian firms.
According to the same lobbying registry database, Canadian aerospace and transportation firm Bombardier exchanged “written and oral communication” with Canadian government officials 11 times between 2012 and 2015 on subjects including “introduction of a Canadian-China partnership agreement with respect to the Chinese aerospace market.”
SNC-Lavalin and Bombardier are just two of a vast number of powerful companies that actively lobby the government, Burton noted. Such actors “seem to have a terrific amount of access and influence over Canada’s China policy,” he said.
However, Burton said, “the Chinese government is holding out the prospect of enhanced access to the Chinese market through an FTA, but with conditions.”
According to Burton, such conditions include axing restrictions on Chinese state investment in Canada, relaxing controls on Canadian export of high tech to China and that “Canada should show what’s referred to as friendship,” which amounts to maintaining silence on issues such as human-rights abuses, China’s expansion in the South China Sea and support for rogue regimes.
The report’s close look at the outcomes of existing FTAs between China and other countries “really suggests that the Chinese government does not negotiate these agreements in good faith,” he added.
Using data and analysis drawn from dozens of national and international sources, the report finds that “China’s FTAs with its existing partners have been lopsided and frequently have led to abuse by China, which should alarm Canadians.”
In its FTAs with Pakistan and Switzerland, for instance, China manipulated tariff negotiations to quickly gain foreign market shares at the cost of its partner, the report says.
China’s 2015 FTA with Australia provides another example of “explicit asymmetrical treatment,” it continues. By the terms of that agreement, Australia treats Chinese investors as equal to its own investors, while China does not provide Australian investors the same entry to its own markets. This “one-sided open-door policy caused numerous Australian losses of critical infrastructure assets to China,” leading to deep penetration of Australia’s energy infrastructure by Beijing-controlled and Beijing-linked actors and corporations, the report says.
Leading up to Trudeau’s “disastrous” 2017 attempt at landing an FTA with the country, China had hoped to entice Canada into signing a “cut-and-paste of the Australian agreement,” Burton said.
In 2017, Canada’s annual trade deficit with China exceeded $44 billion, with China being the largest contributor to Canada’s trade deficit since at least 2010, according to the study. Based on China’s track record with other nations, this trade imbalance “would not likely be improved” by an FTA, the study argues.
China has meanwhile proven to be a recidivist breaker of World-Trade Organization rules, while “systemic theft of technology is a hallmark of the China model, whether through forced technology transfer, espionage or disguised control through investment,” the report continues.
With all of this in mind, the report concludes, it’s imperative Canada ask itself tough questions that are predicated “neither superficially on our need for economic growth … nor on the Chinese market potential, which is plainly obvious for all to see.”