Friday, November 2, 2012

Thoughts on trade between Canada and China

In continuation with my apparent fascination with authoritarian governments, I decided it's time to explore our growing trade relationship with China. The theme of this relationship comes down to: we don't like you, but we need you. This comes as no surprise for after the global financial crisis, we are running out of the countries to trade with! Europe seems to be going down the drain, while USA is still struggling. Therefore, we find ourselves looking at CHINA!

Trading with China is tricky because it's politically sticky; and yet, it is financially smart. Therefore, true to our Canadian values, Harper snubbed Chinese government for the beginning of his term as Prime Minister. As most of us still do, Harper had a huge issue with creating a close trade relationship with a country that had a long record of human right violations. He agitated China by awarding honorary Canadian citizenship to the Dalai Lama, criticizing China's human rights record, accusing China of commercial espionage, delaying a meeting between foreign ministers, and making overtures toward Taiwan. He also did not attend the opening ceremonies of Beijing Olympics.  However, in recent years, the relations have improved.  Again, this is largely due to the fact that Harper's other two major partners, Europe and US, are having major economic issues, while China’s economy is still robust.  Thus Harper made a visit to China in 2009 to meet with the President to discuss their trade opportunities. In 2010, the President Hu Jintao made an official visit to Canada. In 2012, Harper went back to China to sign Foreign Investment Promotion and Protection Agreement.  The main purpose of the agreement is “ensure greater protection to foreign investors against discriminatory and wholly arbitrary practices, to provide adequate and prompt compensation in the event of an expropriation and to enhance predictability of the policy framework affecting foreign investors and their investments.” It is clear that the trade between these two countries will greatly increase in the coming years.

However, Final Environmental Assessment of the Canada-China Foreign Investment Protection Agreement (FIPA) states “FIPA does not impose new market access obligations or liberalize existing investment restrictions. Companies and individual investors determine risks through independent economic and political assessments, and determine their willingness to accept those risks and invest in a given market. It cannot directly facilitate new investments or directly create new opportunities for investment.” Thus there are likely to be a lot of new policies that facilitate new investments and liberalize existing investments restrictions. But, is this growing relationship for the best or for the worst?

There is a great need for increased clarity, efficiency and predictability in the context of direct investments for these countries.  There is a fear that the Chinese might “spy” via their enterprises on the Canadian government or on Canadians. There is also a fear that they might not to conform to Canada’s environment standards. Thus it is necessary to create policies that will Chinese companies to full disclose their activities to the government. Regulatory agencies should be created to review on bi-annual basis that these Chinese companies are complying with all the Canadian regulations.  There should be a policy that lays out the standards each company has to meet before the directly invest into Canada

Trade aside, Chinese human rights record is still an issue. I think Canada should take a stand towards China’s human rights record, otherwise Canada’s record of being a peaceful and liberal country will be tarnished. However, it is easier to influence friends than enemies. Thus Canada should explore incremental ways that China can improve its human rights record. It should probably promote discuss of change in the areas where change is easiest to make and will not cost money to China (because let's be serious, its all about money).  Canada should strongly suggest these changes to China, but without making any ultimatums. Just the act of trying to improve their human rights record will help Canada save face when dealing with someone who has such terrible record. In the end, the more China becomes dependent on its trade with Canada, the more Canada will have to bargain with in  improving Chinese human rights record. 

Check out the video below : Why China Cannot Rise Peacefully - John Mearsheimer

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