Trudeau can strengthen Canada-China economic ties if he can avoid political battles: experts

[Prime Minister Justin Trudeau will leave for Asia next Tuesday. REUTERS/Chris Wattie]

Prime Minister Justin Trudeau’s first official visit to China next week will offer many opportunities to strengthen the economic ties between the two countries, say analysts, if Trudeau can manoeuvre through tricky dialogue on political issues.

Trudeau will travel from Aug. 30 to Sept. 6, a period that includes the G20 leaders’ summit in Hangzhou, China, on Sept. 4-5.

In doing so, he will be retracing the steps of his father, Pierre Trudeau, who established diplomatic relations with China in 1970 and made an official visit to the country three years later, the first Canadian prime minister to do so.

“There appears to be an effort to put things on a more even keel, to sustain the engagement and not to hang it on one issue or another issue,” Ron MacIntosh, senior research fellow and Ottawa chapter representative at the University of Alberta’s China Institute, told Yahoo Canada News.

Trudeau knows that his father’s work still “means something to the Chinese,” said MacIntosh, who had a career in the foreign service that took him to several assignments in the Asia-Pacific region.

But while both sides are trying to build on that, “what that doesn’t mean, of course, is that all problems go away.”

The previous government’s time in office was characterized by major shifts in the tone of relations with China. There were icy-cold low points in 2006 and 2007, when then-prime minister Stephen Harper remarked Canada wouldn’t “sell out” to the “almighty dollar.” There was a warming period around 2010 as Harper hosted former Chinese president Hu Jintao.

Then, another cooling-off in 2012 when Harper set new investment terms for the Alberta oilsands, virtually blocking state-owned enterprises, and further in 2014 when the government publicly blamed China for a cyberattack. That same year, Canadians Kevin and Julia Garratt were arrested in China; Julia was released on bail but Kevin remains jailed on espionage charges.

In June, China’s foreign minister scolded a reporter in Ottawa after she asked a question about human rights. The Garratt family is asking Trudeau to move Kevin’s case forward, while the Canadian Coalition on Human Rights in China is urging the prime minister to make human rights a “priority” in the upcoming visit.

But too much discussion of such things won’t get the Canadians very far, said Yongjing Zhang, assistant professor at the Graduate School of Public and International Affairs in the University of Ottawa, who focuses on Chinese governance and the economy.

“Of course we have concerns about political divergence, ideology — but that’s off the table when it comes to trade,” he said.

“It’s very important for the two governments to strengthen economic sides, [as opposed to] an agreement on the political side.”

In general, there is much room for growth on the economic front. Even though China is Canada’s second largest trading partner after the United States, China had about $20 billion worth of foreign direct investment (FDI) in Canada in 2015, while Canada had about $12 billion, according to Statistics Canada. By comparison, the U.S. had $387 billion in FDI to Canada that year.

Another way of comparing the figures is that the amount of China’s FDI in Canada, $20 billion, is a bit larger than the annual budget of a single Canadian federal government department, that of defence.

“Chinese investment is strong; it’s still controversial but we’ve not had problems with Chinese investors” wanting to get in the game, MacIntosh said.

One broad-based issue that appears to be pushed off the front burner, at least for now, is a free trade agreement. The two sides have been talking up the idea, but whispers of any sort of deal don’t seem to be particularly forthcoming ahead of Trudeau’s visit, MacIntosh noted.

After witnessing the Harper government spend lots of political capital pushing through a politically explosive foreign investment agreement, the Liberals may not feel like they’re under a lot of public pressure to forge ahead with a Chinese trade deal, he said.

“I think you’ll see a strong indication that we want our economic relationship strengthened, and probably not too much more specific than that,” MacIntosh said.

What the Chinese want

In late 2012 the Harper government approved the sale of Canada’s Nexen Energy to Chinese oil company CNOOC for $15 billion but then placed a near-ban on future investments by state-owned enterprises in the oilsands, saying it would only happen under exceptional circumstances.

CNOOC is now facing a $1.16 billion net loss, a situation it blames, in part, on “the adjustment in operating plan[s] for oil sand[s] assets in Canada.” Finance Minister Bill Morneau didn’t rule out changes to the oilsands foreign investment policy when he was asked about it last week, Bloomberg reported.

The Chinese want a “steady hand on investment policy,” MacIntosh said. “I think the Chinese would like to see Canada emerge as a resource supplier, whether through investment or other things.”

Zhang said investment from Chinese is in the interests of both countries. “There are 1.5 million Chinese-Canadians, and they do business with the Chinese anyway,” he said.

“If we want to sell our energy, sell our resources, that’s still a big market in China. If we want to improve our productivity, the Chinese people have put tons of money on the international market … get the money to come here.”

He also said tourism and travel was another potential growth area; Chinese tourism in Canada is rising.

Canada also passed on the opportunity last year to join the Beijing-led Asian Infrastructure Investment Bank. The door to new members shut after the initial round, but is opening back up, and Canada is interested, according to a Globe and Mail report in June.

“My impression is that the thinking in downtown Ottawa is evolving on this,” MacIntosh said.

“I think it would be welcomed by the Chinese side … infrastructure in Asia is the centre of global business in that sector.”