Prime Minister Justin Trudeau greets Chinese President Xi Jinping during a meeting they had at the G20 Summit in Turkey last November.Sean Kilpatrick/The Canadian Press
In the late 1980s, the prospect of Canadian free trade with the United States quickly erupted into a nasty debate in this country between business boosters and sovereigntists, culminating in the fractious 1988 election.
Three decades later, there is distant rumbling of a free-trade agreement (FTA) with China, our second-largest trading partner, and a similar tension is already in place.
Canadians may see the financial wisdom of a pact, but they are also leery of playing mouse to yet another imperial elephant.
So far, Justin Trudeau has been treading slowly. The prospect barely came up during last year's election campaign and, on the eve of his first trip to China as Canada's leader, the Prime Minister has signalled that he is in no hurry.
While there is a gung-ho cadre within his party pushing for a deeper relationship with Beijing, public opinion suggests resistance. The resisters aren't alone. Many Sino-watchers preach caution.
An FTA "represents a very complex opportunity," says Eva Busza, vice-president of research and programs at the Asia Pacific Foundation of Canada.
"It's very heartening that the government is just looking – not rushing."
Here are six things to know about a possible agreement:
Average Joe Canada is on the fence – at best
In a survey the foundation published last fall, four people in 10 supported an FTA, while almost five in 10 opposed it, numbers reflected in a Nanos poll this year. But in general terms, China's regime wins no popularity contests in Canada. Nanos found a whopping three out of four people had a negative or somewhat negative opinion of its government and, even more damning, just one in 10 viewed it as positive or somewhat positive.
It's a good time to be negotiating a deal
With either Donald Trump or Hillary Clinton taking the White House, the winds of protection may blow north. Equally ominous for free traders, the Trans-Pacific Partnership is bogged down in Washington politics. "It looks as though it's going sideways," former prime minister Brian Mulroney told The Globe and Mail. "I wouldn't bet my mortgage on its future in the Congress." For Canada, that may mean looking elsewhere. And quickly. China, some say, is the natural next destination. "Should we begin? The answer is a resounding yes," Mr. Mulroney said. While it will take years to hammer out an agreement, he noted, the legacy of Justin Trudeau's father as a pioneer in Sino-Canadian relations would be invaluable to early discussions. The Chinese, he says, have long memories and never forget a friend. "Don't underestimate Mr. Trudeau's capacity to make very big strides in the relationship because of what his dad did by opening diplomatic relations," said Mr. Mulroney, the driver of the U.S. free-trade agreement. "This is important stuff for the Chinese."
But politically speaking, China is in a dark place
When it comes to thorny issues such as China's brutal human-rights record, or its lack of due process and legal recourse for Canadians doing business there, there are two schools of thought. The engagement camp insists that only a deeper relationship will change Beijing's behaviour. "Economic and social engagement would help build partnerships and influence some positive and progressive changes," says Jia Wang, deputy director of the University of Alberta's China Institute. The other side says that engagement hasn't worked and we should hold off until Beijing eases up on its own people. We're facing a China that is a bully: Look at what's happening in the South Chinese Sea, to the booksellers in Hong Kong, the treatment of Falun Gong and its ethnic minorities," says Cheuk Kwan of the Toronto Association for Democracy in China. Mr. Kwan says he does not oppose free trade, but he worries that doing business with China may degrade Canadian values, such as standards for workplace safety. This year, two employees at Nexen – owned by Chinese oil and gas giant CNOOC Ltd. since 2013 – died in an explosion at a company facility in Alberta's Oil Sands. The same site five months earlier had a pipeline spill.
Australia's FTA (a.k.a. ChAFTA)
The Aussies have confronted many of the same dilemmas as Canadians have: foreign interference on their soil, land speculation, maintaining the sovereignty of their natural resources. Despite these tensions with China, Australia's largest trading partner, the countries engaged in epic negotiations. Around a decade in the making and signed last December, ChAFTA had some benefits for consumers and businesses: a five-per-cent tariff on some Chinese products was lifted, making electronics, for example, a little less expensive. Tariffs were reduced on various exports to China, such as beef, wine and seafood. (Imagine the market potential for P.E.I. lobster!) The deal also offers improved access to legal and financial services, an important sector for Canada.
The downside is that there has been no tariff reduction on canola, whose seed is Canada's biggest export to China – and now threatened by new regulations. Lastly, the financial threshold for the screening of Chinese investment in "non-sensitive sectors" (excluding agriculture, media, telecoms and defence) rose fourfold, meaning many smaller companies can enter the market without regulatory holdups. Chinese firms will also have some ability to sue Australian governments for policy changes that adversely affect their interests.
China already has a big surplus
Over the past three years, the merchandise trade imbalance has ballooned by 30 per cent, to $46-billion in 2015, with Canadian exports more or less remaining flat. Despite the gap, the Chinese still want Canada to join the Asian Infrastructure Investment Bank, which is China's effort to reflect its financial influence. The U.S. and Japan also have been hesitant to participate. As well, Beijing wants Ottawa to loosen its foreign-investment regulations and provide greater clarity of its ownership laws. They want more oil pushed to the coast by pipeline. What's more, there is concern that Beijing may include demands unrelated to trade, such as "Operation Foxhunt," a bid to extradite former officials it consider corrupt. Other countries, including Canada, may not agree with.
But Canada still needs an FTA
"The aging population and slow growth of the G7 isn't going to pull Canada through the next generation," says Laura Dawson, director of the Canada Institute at the Wilson Center in Washington, D.C. While Ms. Dawson predicts that an FTA would be a tough but necessary process, Canada's economy needs a shot in the arm, and she believes that its innovators would benefit, as would engineering companies, plus the financial and clean-tech sectors.
In the meantime, Canada's competitors are clamouring to trade with Beijing. As she sees it, waiting for China to ease up on its own people hasn't worked. "Is it worth holding the economic future hostage to push those issues?" she asked.
Craig Offman is a Globe and Mail feature writer.