China is pushing Canada to resume stalled talks toward a free-trade deal, days after Ottawa agreed to a new North American trade accord that critics argue will make it difficult to pursue a similar pact with Beijing.
In a phone call on Wednesday, Chinese Foreign Minister Wang Yi told his Canadian counterpart, Foreign Affairs Minister Chrystia Freeland, that Beijing hopes Ottawa will “advance the establishment of a China-Canada free-trade zone” and “take practical actions to protect the global free-trade system with China.”
Mr. Wang also appeared to rebuke Ottawa for agreeing to a clause in the United States-Mexico-Canada Agreement (USMCA) that allows a country to be punted from the proposed North American agreement if it enters into a free-trade deal with a “non-market country.” That language is widely seen as a veiled reference to China, and critics have argued the clause gives the United States an effective veto over any prospective trade pact between Ottawa and Beijing.
“China is opposed to all sorts of protectionism and to double-standard practices under all kinds of names,” he said in paraphrased remarks reported by China’s central Xinhua News Agency. “Any attempts that aim to sabotage China’s modernization plan will fail.”
The comments underscored China’s mounting worry that the United States under President Donald Trump is intent on containing China – and Beijing’s desire to prevent other countries from joining that effort.
”The consensus in Beijing now is that this is not really about trade, it’s about stopping China’s rise, it’s about potentially a new kind of Cold War mentality,” said Andrew Polk, founding partner of Trivium, a Beijing-based business advisory firm.
Part of China’s response is “to scold anyone who is seen to be engaging in this kind of behaviour of encircling,” he said.
At the same time, increasingly punitive tariff barriers to the flow of goods with the United States have given Beijing fresh economic imperative to chase new trade deals elsewhere. China is “trying to reduce import and export tariffs for everyone besides the U.S., so that they can offset the weakening trade relationship with America,” Mr. Polk said.
Canada and China agreed in 2016 to begin exploratory talks toward a free-trade agreement. Progress has been stymied in part by China’s unhappiness over Canadian demands for labour, environmental and gender provisions in a trade pact. Global Affairs Canada lists four face-to-face exploratory meetings that took place in 2017, but none in 2018.
Observers do not expect any major advances on a Chinese trade deal at least until after the next Canadian federal election next year.
But Ms. Freeland sought to reassure China that the USMCA should not threaten the interests of other countries, and that Ottawa would continue to pursue free-trade talks. “Canada hopes to strengthen its strategic partnership with China, and expand exchanges and co-operation in all fields,” she told Mr. Wang, according to Xinhua.
In a statement Thursday, Ms. Freeland’s office confirmed the phone call, but made no mention of the Chinese demands. “The call this week was an opportunity for both Ministers to reaffirm their shared commitment to rules-based global trade, including the WTO,” the Canadian statement said. “They also discussed further multilateral collaboration between our two countries,” in addition to “the recently concluded negotiations on the USMCA.”
Chinese observers said the call was an effort to assuage fears in Beijing.
The “non-market economy” clause in the USMCA “has generated a lot of misunderstanding” in China, where some have seen it as evidence that Canada “is now trying to do something to block China,” said Wang Huiyao, president of the Center for China and Globalization, a leading Chinese think tank.
“This conversation is really good to mitigate these issues, and also negative feelings,” he said.
Canada and China should “speed up free-trade talks,” he said, arguing that “non-market economy” doesn’t mean China.
China has so far failed in its efforts to secure market-economy status with the World Trade Organization. The United States has openly opposed granting it that status.
But “China is a great market,” Mr. Wang argued. “China is now Canada’s second-largest trading partner. There’s no reason why Canada and China cannot get free trade.”
Indeed, Mr. Wang’s comments amount to saying “don’t close the door on more expansion of Canada-China relations,” said Victor Gao, chairman of the China Energy Security Institute. The United States may be Canada’s largest trading partner today, but China continues to rise in economic importance, and Canada “cannot close the door on the realities of tomorrow – and that tomorrow is happening very fast.”
The “non-market economy” clause in USMCA, he added, “is very Cold War-based, and also very reactionary. It’s not good for globalization, it’s not good for free trade. And it would involve a surrendering of sovereignty rights of a sovereign country: Canada.”