Why China needs to talk trade with Canada

Click to play video: 'PM Trudeau begins 1st official trip to China by meeting business leaders' PM Trudeau begins 1st official trip to China by meeting business leaders
WATCH: Speaking to powerful Chinese businessmen in Beijing on Tuesday, Prime Minister Justin Trudeau said China should strengthen its connection to Canada as a way for the rapidly growing superpower to burnish its image on the world stage. Shirlee Engel reports – Aug 30, 2016

Prime Minister Justin Trudeau is on a mission to improve ties with China, on his first official visit to the country, but it might not be just traditional commodities that the Chinese government is after.

The current trade relationship with our second-largest trading partner is far from equal.

Canada has a $46-billion trade deficit with China: we imported $65.6 billion from China last year compared to just $19.7 billion of exports to China.

READ MORE: Canada’s trade deficit is widening, but expert says there’s more to the picture

“Even though there is a trade deficit, if we look at particular goods, we are an important supplier to them,” said Eva Busza, vice president of research and programs with the Asia-Pacific Foundation.

Canada’s top exports to China include wood pulp and paper products; oilseeds, fruits and grains; other wood articles and charcoal; resources like ore, oil and mineral fuels.

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But future trade with China, Busza explained, might focus less on traditional commodities and more on areas of growth like technology, technological services and green technologies — something the Trudeau government has made a priority for investment.

“Technologies for efficiency of energy use, both on the renewable side but also on the more traditional [side]… oil, coal, natural gas,” Busza said.
“Water and water management,” she added. “Over half of the lakes and rivers [in China], the water is not fit for human consumption and Canada is known as a country that can provide and has some very good water technologies and waste management.”
WATCH: Financial expert Preet Banerjee discusses the Prime Minister’s trip to China
Click to play video: 'What to expect from Trudeau’s trip to China' What to expect from Trudeau’s trip to China
What to expect from Trudeau’s trip to China – Aug 29, 2016

Busza pointed out there’s also opportunity to pique the interest of China’s growing middle class in Canadian services, such as health care and insurance products.

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“Who has good insurance products? Canada does. We’re well-known for our health system, our aged care, and China has a huge aging population,” she told Global News. “We’re not the only ones who can provide this, but that’s why it’s important for us to be developing these relations, so that we can actually compete instead of being shut out of those new sectors.

But another valuable attribute to a formal trade agreement with Canada goes beyond what we can buy and sell. Striking an agreement with Canada, she said, would give China a stronger toehold in North America and a launch pad for a deal with the U.S., similar to how Hong Kong has served as an entry point for Canada into mainland China.

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Yves Tiberghien, director of the Institute of Asian Research at the University of British Columbia, said hammering out a possible Canada-China deal is a “catalyst” for China engaging with much bigger economies like the U.S. and the European Union.

“It’s a testing ground,” said Tiberghien, who is also a senior fellow with the Asia-Pacific foundation. “Usually, when you do an FTA [free trade agreement] it’s a catalyst for closer relations across the board, it would be a catalyst for more people meeting each other.”
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China is also looking for a “strategic friend” in Canada, he added.

READ MORE: Chinese TV host accuses Canada tourism body of censorship

He explained China is facing a battle with the U.S. and EU over it qualifying for market economy status within the World Trade Organization (WTO).

Upon China’s admission to the WTO in 2001, it was told by other members that they would not use its published, state-controlled prices to judge whether or not it was “dumping” exports unfairly in their markets, but rather “surrogate” prices reflecting what it should be charging without state subsidies.

That was written into its WTO membership agreement in a clause that would expire after 15 years, on Dec. 11, 2016.

If the U.S., EU and other WTO members begin to take Chinese export prices at face value, it will be much harder for them to challenge China’s cheap exports.

“Canada doesn’t have as much at stake here,” Tiberghien said. “[China] would love to have Canada at least support them in this game.”

Canada won’t be going into any sort of discussions without its own interests being a priority, and Tiberghien believes a partnership can be crafted that will be mutually beneficial. But it’s going to take time, he said.

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“I don’t think there will be a massive breakthrough in this trip,” Tiberghien said. “It’s going to take years to get anywhere.”

With files from Reuters

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