Canada ready to shift focus to trade talks with China, Trudeau says

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Ottawa is turning its attention to trade talks with China and won’t be deterred by language in the tentative United States-Mexico-Canada Agreement that targets future pacts with Beijing, Prime Minister Justin Trudeau says.

The commitment by Mr. Trudeau comes as he disclosed for the first time that China was the focus of a clause in the trade agreement dealing with “non-market" countries. Canada resisted a U.S. push for much stronger rules that would have hampered Canada’s ability to do future trade agreements with China, the Prime Minister said.

“They put forward a proposal in the USMCA originally that was very, very rigid on trade with China,” Mr. Trudeau said in an exclusive interview Monday with The Globe and Mail. The final agreement is different: “We got them to a place where we agree to mutually discuss trade negotiations we might make with China, which is positive for us,” he said.

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Mr. Trudeau did not elaborate on how Canadian negotiators managed to get the United States to soften its demands. But the USMCA, reached on Sept. 30, obliges Canada, the United States and Mexico to give one another three months' notice before starting free-trade talks with a “non-market country" – a clause widely seen as directed at China. The United States has refused to recognize China as a market economy, 17 years after the Asian country joined the World Trade Organization.

The USMCA also gives signatories the right to withdraw from the agreement within six months of one of the countries signing a trade deal with a non-market economy such as China.

Last week, Chinese Foreign Minister Wang Yi told his Canadian counterpart, Foreign Affairs Minister Chrystia Freeland, that Beijing invited Ottawa to “advance the establishment of a China-Canada free-trade zone.”

Nearly a year after efforts to formally launch free-trade negotiations with China stalled, Mr. Trudeau said Canada is ready to intensify talks.

“Let’s talk about where we can work together, in areas that make sense for both of us that will benefit Canadians,” Mr. Trudeau said.

“Certainly, discussions are continuing with China on moving forward on various trade opportunities," he said, although he did not give specifics.

Mr. Trudeau, who was in Toronto on Monday meeting Canadian and foreign business leaders, said one of the lessons of the long and contentious negotiations to salvage the North American free-trade agreement is that Canada is too reliant on the United States – the destination for nearly three-quarters of Canadian exports.

“I think we’ve all recognized that diversifying our trade is extremely important and we’re happy to continue to engage with the Chinese, there’s no question about that,” Mr. Trudeau said.

There are early signs that Canadian companies are already heeding the call to find new customers in China. From April to August of this year, the value of Canadian merchandise exports to China rose 23 per cent, a surge of nearly $2-billion over a period that coincides with the period of greatest tariff escalation between the United States and China.

Mr. Trudeau cautioned that whatever comes of its trade talks with the Chinese, Canada will be mindful of protecting national security and other Canadian values.

“We know there are real challenges involved in trade with China, and being alert to those and thoughtful about those is completely logical,” Mr. Trudeau acknowledged.

Speaking later at a Fortune magazine economic conference in Toronto, Mr. Trudeau reiterated the need to forge closer ties with the world’s second-largest economy.

“We have been over the past years, increasing our trading relationship with China, and we will continue to, in thoughtful ways,” he said.

In his interview with The Globe, Mr. Trudeau highlighted how the USMCA has lifted a cloud of uncertainty that has hung over the Canadian economy. “Having that off the table as a concern is a very big thing,” he said.

Canadian businesses have complained for months that uncertainty over NAFTA’s future has put a damper on investment decisions. Renegotiating the now-renamed deal will help ease those concerns, the Prime Minister said.

The decision earlier this month by LNG Canada to press ahead with a long-planned liquefied natural project in the northern B.C. community of Kitimat is a “concrete illustration” of the message Ottawa has been sending resource companies for nearly three years, Mr. Trudeau said.

“If you want to get a project done and be safe from court challenges and get that public support, you need to be really thoughtful about environmental impacts and about Indigenous partnership, and that is something that LNG Canada has really done right,” he said.The $18-billion Kitimat marine terminal is the centrepiece of a $40-billion investment by LNG Canada’s five co-owners – Royal Dutch Shell PLC, Malaysia’s state-owned Petronas, PetroChina, Japan’s Mitsubishi Corp. and South Korea’s Kogas.

Mr. Trudeau also vigorously defended his government’s approach to getting pipelines and resource projects build – by forcing provinces to put a price on carbon and bolstering the federal review process.

That trade-off is as “essential” as ever, even as the Trans Mountain oil pipeline expansion remains stalled and several provinces, including Ontario, are balking at Ottawa’s imposition of a carbon tax.

“I haven’t met many Canadians that have actually said, ‘You know what, we do want to make a choice between what’s good for the economy and what’s good for the environment,’ ” Mr. Trudeau said. “Every single person I’ve ever spoken to, at the highest or the most basic level, wants us both to protect our environment for future generations and create good jobs now and into the future.”

With a report from David Parkinson