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Bridge to China: PM Harper’s Visit to China to Facilitate Canada-China Investment and Trade

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This article was written by Sandy Walker and Patrick Robert.

Beef producers, financial institutions, energy and resource companies, educators, researchers, uranium producers, canola growers, mining investors and pandas…

Question: What do they all have in common?

Answer: Each of them may benefit from Canadian Prime Minister Harper’s recent visit to China.

In the view of some seasoned China-watchers, the Prime Minister’s trip may be remembered as the most important visit by a Canadian prime minister in a decade for the sheer volume and depth of bilateral commitments and agreements achieved, including 23 agreements between Canadian and Chinese companies generating a reported $3 billion (not to mention China’s agreement to loan two giant pandas to Canada).

Though the U.S. continues to be Canada’s number one trading partner, China is its second most important by far and is anticipated to become even more so as China is expected to become the world’s largest economy by 2020. Canadian investment in China is at a record high, having increased by 38 percent over 2009 levels.

The four day visit by the Prime Minister included meetings with the highest level of Chinese Government officials: President Hu Jintao, Chairman of the Standing Committee of the National People’s Congress Wu Bangguo, and Premier Wen Jiabao. The Prime Minister’s entourage included business leaders from companies such as Bell, TELUS, Cameco and Bombardier and the Prime Minister attended and addressed the 5th Canada-China Business Forum put on by the Canada-China Business Council (CCBC). (See photograph of Michel Brunet, FMC’s Chair, and Peter Harder, President of the CCBC and FMC Senior Policy Advisor, Government Relations with Prime Minister Harper.)

Probably the signal accomplishment was the conclusion of substantive negotiations on the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA), an accord that has been in the works for the past 18 years and is expected to be among the strongest such agreements China has signed with foreign countries. Although the accord must still undergo internal approval processes in the two countries (including being presented to Parliament in Canada), the safeguards it provides for Canadian investors in China are significant. For example, the agreement provides Canadian investors with recourse against public policy actions by the Chinese government that are detrimental to their investments. As a result, investors would, to some degree, be shielded from unpredictable and arbitrary actions that may impede Canadian investment in China.

A second accomplishment is an agreement permitting Canadian uranium producers to export nuclear fuels and advanced nuclear technologies to China, the world’s largest energy consumer. This supplements the Agreement between the Government of Canada and the Government of the People’s Republic of China for Co-operation in the Peaceful Uses of Nuclear Energy of 1994. The Canadian Canada’s nuclear energy industry is significant, generating approximately $6.6 billion in annual revenue and $1.2 billion in exports each year. This agreement will level the playing field for Canadian uranium producers vis-à-vis other countries such as Australia and Kazakhstan which already benefit from such agreements.

The visit also generated the renewal or establishment of a raft of memoranda of understanding in a number of areas, including energy, fisheries, food inspection, natural resources and education. There will also be increased technical cooperation between Canadian and Chinese experts in research, technology and innovation.

The Canadian Government also regards developing increased trade in energy as crucial as Asian markets are both strategic significant and geographically accessible. In fact, the Prime Minister repeatedly stressed the importance of diversification of energy exports – away from reliance on the United States in view of the continued controversy dogging completion of the Keystone XL Pipeline project – and growth in the Asia Pacific region.

Both Prime Minister Harper and Premier Wen referred to the joint feasibility study underway to examine the potential of a free trade agreement. This study will report to both governments in the spring and could lead to the launching of free trade negotiations – which would undoubtedly be a long and challenging process. Any such negotiations would parallel multilateral talks under the Trans-Pacific Partnership which Canada is seeking to join and in which China has not yet indicated a willingness to participate.

Canada’s embrace of an Asian orientation will not occur without some detractors. For example, a free trade agreement would likely threaten Canadian agricultural supply management schemes.

Nevertheless, Harper’s achievements in China on this trip may well be viewed in the coming years as building the foundation for a new and wider bridge between Canada and China. Of course only time will tell if the promise of this visit materializes into concrete channels for trade and investment flows.