FTA with China will create billions in Canada's growth: study

Negotiating a Canada-China free trade agreement (FTA) would increase investment, spur exports and create high-value Canadian jobs, according to a new study released in Toronto this week.

The report - "Chasing China: Why an economic agreement with China is necessary for Canada's continued prosperity" - estimates that a free trade deal would generate 7.8 billion Canadian dollars, or 5.5 billion U.S. dollars, in additional economic activity within 15 years, supporting 25,000 new Canadian jobs.

Canada has a huge trade imbalance with China. Total bilateral trade was 63 billion Canadian dollars in the first nine months of 2015, but nearly 49 billion of that came from Chinese imports.

China is rapidly developing an urban middle class of consumers with a taste for fish, wine, pork and other goods produced in Canada. Canadian seafood exports to China alone jumped by 16.2 percent between 2012 and 2013. Demand will only increase, as the Chinese middle class is projected to reach 854 million by 2030.

"If there is an FTA arrangement between China and Canada, you can see a flooding of potash, agricultural products and energy products from Canada to the market of China," a visiting senior Chinese official said in Ottawa.

Tentative trade talks with the previous Canadian government collapsed almost overnight when Ottawa imposed stricter investment rules in 2012 after China National Offshore Oil Corp. agreed to purchase Nexen Inc. for 15 billion U.S. dollars.

Beyond advocating trade negotiations, the study recommends a number of ways to strengthen Canada's relationship with China, including deepening bilateral ties in energy, agriculture and economic sectors.

The study suggests that Canada should join Australia, the United Kingdom, France and other leading economies in signing on to the Asian Infrastructure Investment Bank, which was initiated by China to help finance infrastructure projects across Asia.

It encourages companies to take advantage of Canada's RMB trading hub, which decreases the cost of doing business between the two countries by directly converting Canadian dollars into Chinese currency.

The study also recommends to launch a bilateral green technology project to link sustainable energy and environmental objectives.

The study points out that Australia, which has a resource-based economy similar to Canada's, launched free trade talks with China in 2005, culminating in an agreement that took effect just in December 2015. The pact will eliminate 95 percent of tariffs between the two countries over the next decade and is projected to generate 18 billion Australian dollars (12.6 billion U.S. dollars) in additional economic activity in Australia.

According to a soon-to-be published survey by Abacus Data, a Canadian polling and market research firm based in Ottawa, most Canadians support building stronger ties to China, with the majority expecting that the bilateral economic and trade relationship will expand over the next 10 to 20 years.

Commissioned by the Canadian Council of Chief Executives and the Canada-China Business Council, the report was written by Laura Dawson and Dan Ciuriak. A specialist in trade policy, Dawson is director of the Canada Institute at the Washington D.C.-based Wilson Center. Ciuriak is former Deputy Chief Economist at the Department of Foreign Affairs and International Trade.

"There is no better time to begin crafting an economic engagement strategy that will serve Canadian interests for the next several decades," Dawson and Ciuriak write in their report.

The Canada China Business Council (CCBC) is the country's leading bilateral business and trade organization between the People's Republic of China and Canada and has six offices in both countries. Founded in 1978, CCBC has been the leading voice of Canadian businesses in China for over 37 years and provides the knowledge and connections our members need to succeed in China and Canada. Enditem