(The following is a guest entry by Hugh L. Stephens, Executive in Residence at the Asia Pacific Foundation of Canada)
After months of relentless pursuit Canada was finally welcomed into the Trans-Pacific Partnership (TPP) negotiations on June 19, a day following the invitation to Mexico. With some controversy surrounding the conditions under which the latest entrants were admitted it is not surprising that opposition has been expressed, from the naysayers opposed to trade liberalization generally but also from those who argue that the TPP is not the right vehicle for addressing trade issues.
One of the sticking points for Canada (and Mexico) is the limitations placed on their ability to negotiate due to their late arrival. These limitations are reported to include having to accept all positions already agreed upon prior to their arrival.
This does not seem unreasonable from the point of view of the existing negotiating parties since the original nine members do not want to have to renegotiate agreed points with each new member who joins the process. Moreover, at the end of the day, neither Canada nor Mexico (nor Japan if it joins the negotiations) are required to accede if the conditions are too onerous or the benefits too slight.
Against this backdrop of ambivalence on the part of some toward the TPP (which at least for the foreseeable future will not include China), the Asia Pacific Foundation of Canada has just published the results of its most recent survey of the attitudes Canadians engaged in Asia have of the desirability of a potential Canada-China Free Trade Agreement (FTA). The results show that Canadians engaged in Asia, both those living in Canada as well as those residing in the Asia-Pacific region, strongly support negotiating an FTA with China. Of the respondents, 47% placed negotiations with China as a priority, followed by Japan (16%), India (15%), EU (11%), Korea (10%), and Thailand (2%). It is worth noting that the Canadian government currently has ongoing trade negotiations with the EU, India, and Korea and has launched economic studies to determine the benefits of FTAs with Japan and Thailand—as well as China.
But, just as with the TPP, there are also some concerns about negotiating closer economic relations with China. Among these are worries that Canadian businesses would be at a disadvantage as the Chinese system is not based on market forces, concerns that an FTA would disproportionately advantage China since Canada’s investment regime is more open, and fears that an influx of cheap Chinese goods would undermine Canadian manufacturing. Those who fear a Chinese takeover of Canadian energy and mineral companies will not be reassured by the news of CNOOC’s bid for Nexen, although the Harper government has thus far been non-committal and has said that the deal will be thoroughly scrutinized.
With Prime Minister Harper having made a major play to improve relations with China, especially in the energy field after the delays on the Keystone XL pipeline in the U.S., the odds are that the deal will be approved, although likely with some undertakings to maintain Nexen’s headquarters in Calgary. Most of its assets lie outside Canada.
With its move to gain access to the Trans-Pacific Partnership negotiations, its more intensive outreach to ASEAN- including a recent announcement of the opening of Canada’s first embassy in Burma- and its courting of Chinese and other Asian nations’ interest in Canada’s oil and gas assets, the Harper government has firmly set in place the foundations of a long-term Asia strategy for Canada. In this strategy, China will play a central part. And, as the just-released Asia-Pacific Foundation survey clearly shows, despite concerns about the potential drawbacks of closer relations to China, Canadians engaged with Asia seem to realize that there is really no alternative.
Hugh L. Stephens is Executive in Residence at the Asia Pacific Foundation of Canada, in Vancouver, with 35 years of government and business experience in Asia. He is also principal of Trans-Pacific Connections.