Chinese dragon sets its eyes on Canada

By Tim Kalinowski

Closer Canadian ties with China might be inevitable given how important the Chinese economy is, and will continue to be, in the decades ahead, but current trade tensions with the U.S. could accelerate that closening of ties even more, says Brad Gilmour, Distinguished Fellow with the Asia Pacific Foundation of Canada.

“I think our relationship with China can and will deepen because both of us are inadvertently in a similar situation (with the U.S.),” says Gilmour. “That being said, I don’t think we should be desperate and do anything with China hastily. There has been over the years different efforts to look at the complementarities between Canada and China … It’s about knowing what we want as Canadians in our engagement with them, and to engage them on those terms.

“And hopefully they reciprocate constructively.”

China has been pushing more overtly for a free trade agreement with Canada over the past few years, and Gilmour says Canadian agriculture could be one of the biggest benefactors from it.

“The areas where I see the biggest opportunities to run through are in perishable, time sensitive products that are high value and differentiated,” he says. “We have been a modest player (in the Chinese market) in some of these areas and a bigger player in others, but if we have enterprises which already have a commercial relationship with China then there is an opportunity to considerably expand because the U.S. is vacating the field there.”

Of particular interest to southern Alberta in this regard would likely be the potato industry, states Gilmour.

“An area where we already have a strong presence in China is in processed potato products, French fries, hashbrowns … As China got wealthier, particularly in urban areas, it has started to embrace some of the more Western diet, and is starting to go more for convenience foods at stores and for preparation at home.”

Beef, barley and durum, where Canada is already a strong exporter to China, may also get a boost with China’s current trade war with the United States still ongoing. But opportunities for Canadian soybean and canola will likely be far more limited, he expects.

“Chances are China will go to Brazil and Argentina first, and if there is a few things to pick up around the edges Canada may have some opportunities there. It is possible we could move more canola meal and canola products into China.

“That being said, they are imperfect substitutes for soybeans; so there would be a modest opportunity there.”

Gilmour admits part of what has been holding the Canadian-Chinese trade relationship back is Canadians’ wariness of certain Chinese trade practices and policies, which sometimes put international trading partners at a tremendous disadvantage in terms of free access to the Chinese consumer market.

“Nobody wants to be taken for a ride,” states Gilmour, “but in that sense China might also see this trade spat between them and the U.S. does have elements of these intellectual property disputes. You know, they want ours, and they don’t want to share theirs, kind of thing? The fact this has unfolded with the world’s two largest trade players would probably give Chinese negotiators and analysts pause for thought in terms of is they way we are moving— is that going to give people a willingness to deal with us in the future?”

China has been trying to improve its image in recent years to open more lucrative markets to its goods, says Gilmour, and this may mean Canada could get a good bilateral trade agreement out of them which is truly mutually beneficial for both countries.

“If you have everybody dealing with you with suspicious minds then you are not going to get the deals you want,” says Gilmour matter-of-factly. “Some concessions might be forthcoming from China in that respect because they are being dealt with more forcefully by the U.S. and by others.”

Although China cannot replace the value offered by our trading relationship with the United States, Gilmour believes any expansion of the current trading relationship with China will bring solid benefits to Canadian farmers and other industries.

“Canada is a good match for China with what it might have to offer,” says Gilmour. “So if there is recognition on both sides of something that is closer to free trade— because all free trade agreements are  preferential trade agreements rather than free trade agreements— there should be added impetus to get there …

“I think we are long overdue in terms of diversifying some of our agro-food markets to be less independent on the U.S. market alone.”