Stephen Harper China Trip: Canada, China Free Trade Talks In The Works

Canada China Free Trade

First Posted: 02/ 9/2012 4:19 am Updated: 02/10/2012 10:40 am

BEIJING, China - A raft of agreements between Canada and China may see the two countries ready to set sail on free trade talks.

But even as Chinese Premier Wen Jiabao appeared ready to jump on that ship, Trade Minister Ed Fast was already backpaddling away from the possibility that Canada is ready for a trade deal that could revolutionize the economy.

The potential political fall-out from Canada-China free trade talks was made evident in a Canadian Press-Harris Decima survey suggesting Canadians are wary of having the Chinese play a controlling role in the domestic economy.

The spectre of a free trade deal was raised as the two countries released a joint statement committing to complete an joint economic study by May.

That paves the way, the prime minister said, to move the economic relationship to the next level.

"Further diversifying our trading relations has the potential of greatly expanding Canadian growth and job creation," Harper said in a speech to the Canada-China business forum at the close of his stop in Beijing.

In a statement posted to the Chinese Foreign Ministry website, Wen had gone further, saying the feasibility of a free trade agreement should be on the table.

But when asked directly, Trade Minister Ed Fast said Canada was taking things one step at a time.

"We're not going to get ahead of ourselves," he said.

"Our end game is to deepen our trade relationship in one of our key priority markets," he added.

The Harper government has placed a premium on signing free trade deals, launching and concluding negotiations with several countries over the last six years.

But they can be political hot potatoes as the Mulroney government learned in the late 1980s when it was negotiating a deal with the United States and had to fight an election on its merits.

The subsequent agreement reshaped the Canadian economy and to a large extent defined economic policy for the next 20 years.

The Conservatives have made it clear the time has come to look beyond the U.S. for export markets and all eyes are on China.

"If you want to organize a free trade agreement, why not do it with a country that's got growth," said Peter Kruyt, the head of the Canada-Chinese Business Council.

In the Canadian Press-Harris Decima survey released Thursday, 51 per cent of Canadians polled welcomed Chinese investment when it helps fuel business that otherwise wouldn't get off the ground.

But the poll suggests Canadians are less enthused about the Chinese having a controlling stake in Canadian-owned or operated companies.

"The data shows that the historic thinking of foreign ownership being either desirable or undesirable is no longer valid," said Doug Anderson, senior vice-president of Harris-Decima.

"Opinion has evolved and Canadians now judge different types of foreign investment very differently."

Forty-nine per cent of those polled feel Chinese companies taking over an existing foreign-owned company operating in Canada is bad or very bad, while 71 per cent felt Chinese companies taking a majority controlling interest in an existing Canadian-owned operation is a bad thing.

The survey of just over 1000 people was carried out between February 2 and 5 and has a margin of error of 3.1 per cent, 19 times out of 20.

Direct investment in Canada by China now stands at $14.1 billion a year, with the lion's share in the natural resources industries.

Since 2005, Chinese companies have been slowly buying pieces of Canada's oil and gas companies and projects.

Last month, PetroChina became the first Chinese company to have full ownership of an oilsands project, when it bought out Athabasca Oil Sands Corp.'s (TSX:ATH) remaining stake in the MacKay River project, one of the newest of northern Alberta's oilsands developments.

The president of Enbridge (TSX:ENB) said it's more Chinese capital that's needed, not less.

"That capital is something we badly need in Canada to develop our resources, so I think it's been a very good relationship," Patrick Daniel told reporters.

Harper highlighted 22 commercial agreements officially signed during his stop in Beijing, saying they are worth $3 billion to the two economies.

Seventeen government-to-government deals were also announced, though many of the plans are incremental steps forward in complex bilateral pacts.

Fast said the investment promotion agreement was a key milestone, as it will allow companies hoping to invest, and those already invested, in each others markets to get equal treatment to domestic investors.

The deal still has to undergo legal review and be ratified by both countries.

News of the potential investment agreement wasn't pleasing all though.

"The signing of a Canada China FIPA (foreign investment promotion and protection agreement) undermines any talk of human rights that Harper may raise on this trip," said Maude Barlow, National Chairperson of the Council of Canadians.

"This investment deal will give Canadian corporations operating in China a tool to fight any improvements in human rights, labour, or environmental standards in that country. Conversely, Chinese investors in the Alberta tar sands will use it to fight higher environmental standards in the Canadian energy sector."

In Beijing, there was also a promise to open Chinese markets to Canadian uranium, and both countries agreed to increase their dialogue on human rights, as well as elevate education to be a strategic priority for both sides.

The agreements may sound cut and dry but at least one is warm and fuzzy.

The Chinese government is allowing Canada to borrow a pair of pandas.

The pair will be go to the Toronto and Calgary zoos for 10 years of collaborative research on conservation.

A formal announcement of the pandas is expected Saturday when Harper visits the city of Chongqing.

The joint statement released Thursday came after Harper met with Chinese President Hu Jintao and Vice Premier Li Keqiang.

Relations between the leaders and Harper were decidedly warmer than the prime minister's last visit in 2009, when Wen had chided him for not coming sooner.

Now the talks were full of praise.

"You put a lot of value on Canada's relationship with China and are strongly committed to promoting the practical co-operation between our two countries," Hu told Harper.

"I appreciate your efforts."

Loading Slideshow...
  • Here are a few details of the major investment deal coming soon between Canada and China, as well as a list of what CBC chief political correspondent Terry Milewski calls a "small blizzard of incremental agreements," signed in Beijing. <em>With files from CBC</em>. (Diego Azubel-PoolGetty Images)

  • The Big One: FIPA

    Prime Minister Stephen Harper called the foreign investment promotion and protection agreement (FIPA) between Canada and China the first "comprehensive economic agreement" between the two countries. In fact, what was signed by Harper and Chinese Premier Wen Jaibao in Beijing is not the final deal, but a declaration of intent: Now it must be legally reviewed and ratified by both governments, which for Canada will mean a debate in the House of Commons. Once both countries complete this process, it will need to be formally signed to take effect. This deal will protect Canadians investing in China, as well as Chinese investors in Canada, from "discriminatory and arbitrary practices." Once in place, investors can have more confidence that rules will be enforced and valuable business deals will be subject to predictable legal practices. Harper told reporters in Beijing he "absolutely" expected that it will make a "practical difference." "The agreement does not override existing Canadian law in regard to foreign investment and foreign investment review," Harper said. "Those laws remain in place." Negotiations for this agreement took 18 years, and key players in manufacturing, mining and the financial sectors were consulted to get to this stage. It's not unusual for Canada to have this kind of an agreement with a trading partner. FIPAs are in force with 24 other countries that trade with Canada, and active negotiations are underway with 10 other countries, according to the government's announcement. (Diego Azubel-PoolGetty Images)

  • The 'Blizzard' (By Sector):

    (AP Photo/Valentina Petrova)

  • Agriculture

    - A new protocol, building on a 2010 agreement to restore Canada's market access to the Chinese market for Canadian beef following the 2003 BSE outbreak and resulting border closures, to allow industrial beef tallow (fat) to be imported for the first time in almost a decade. China used to be Canada's top export market for tallow ($31 million in 2002), and now Canada has a shot at a share of the $400 million in tallow China imports from around the world. - A memorandum of understanding (MOU) on canola research, to address a recent fungal disease in canola and rapeseed that threatens Canada's valuable trading relationship with China in canola. - On Tuesday, Chinese aquaculture feed company Tongwei announced it will increase its purchase of Canadian canola by up to $240 million per year by 2015. (DAVID BUSTON/AFP/Getty Images)

  • Natural Resources:

    - A MOU between Natural Resources Canada and the Chinese Academy of Sciences to collaborate on scientific research on sustainable development of natural resources. The government release touts benefits including new technologies for resource firms, carbon emissions reduction strategies, reduced environmental impacts and natural hazards from resource development, and new opportunities for Canadian suppliers of equipment and services. - A MOU spelling out a "framework" for Parks Canada and China's state forestry administration to collaborate and share scientific expertise in the management of national parks, natural reserves and other protected areas. The agreement includes language around ecological restoration, conservation measures for endangered wildlife, wetlands development, and the preservation of forests and wetlands. (<a href="http://www.flickr.com/photos/47096398@N08/" target="_hplink">Flickr: eleephotography</a>)

  • Energy

    - A continuation of the MOU, first signed in 2001 and renewed in 2006, on energy co-operation to "engage China on energy issues" through a Canada-China joint working group on energy co-operation, chaired by Natural Resources Canada and China's national energy administration, which is responsible for Chinese energy policy. The working group oversees joint research projects, exchange of expertise, and co-operation between energy companies in both countries, including the promotion of energy efficiency and renewables. It aims to both attract capital investment and improve market access for Canadian energy resources and technology. (MARK RALSTON/AFP/Getty Images)

  • Science and Technology

    - Approval of seven projects, valued at $10 million, under the Canada-China framework for co-operation on science and technology and innovation, including: a diagnostic kit for acute kidney injuries, a wind energy seawater desalination system, a waste heat-recovery system to help oil refineries consume less fuel, new solar cells for renewable energy panels, a real-time multi-sensor navigational tracking device for hand-held devices, a blue-green algae bloom warning system and "next generation" large-scale geographic information systems. - Two more calls for proposals, valued at $18 million ($9 million from each country) for joint research under the same framework. These proposals are for the development of "innovations with high commercial potential" in the areas of human vaccines and clean automotive transportation. The Canada-China joint committee on science and technology, made up of individuals from industry, academia and government, sets the priorities and oversees these projects. (To date, 21 projects ranging from nuclear power to AIDS drugs, to clean technologies for pulp and paper have received some $28 million in funding.) (TOSHIFUMI KITAMURA/AFP/Getty Images)

  • Education

    - A renewed MOU extending and modifying the Canada-China scholars' exchange program, which has seen 900 students travel between Canada and China since 1973. New eligibility rules and scholarships will be in place for the next round of competitions in 2012, including eight to 12 Canadian scholarships for Chinese professionals and 20 awards for Canadian university students. (<a href="http://www.flickr.com/photos/plutor/" target="_hplink">Flickr: Plutor</a>)

FOLLOW HUFFPOST CANADA POLITICS

Filed by Ron Nurwisah  |