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The Canadian Press - ONLINE EDITION

Canada and China set table for possible free trade talks in the future

By: Stephanie Levitz, The Canadian Press

Posted: 02/9/2012 3:20 AM | Comments: 0 (including replies) | Last Modified: 02/9/2012 11:18 AM

Canadian Prime Minister Stephen Harper meets with Chinese President Hu Jintao at the Great Hall of the People in Beijing, Thursday Thursday, Feb.9, 2012. THE CANADIAN PRESS/Adrian Wyld

BEIJING, China - A raft of agreements between Canada and China may see the two countries ready to set sail on free trade talks.

But even as Chinese Premier Wen Jiabao appeared ready to jump on that ship, Trade Minister Ed Fast was already backpaddling away from the possibility that Canada is ready for a trade deal that could revolutionize the economy.

The potential political fall-out from Canada-China free trade talks was made evident in a Canadian Press-Harris Decima survey suggesting Canadians are wary of having the Chinese play a controlling role in the domestic economy.

The spectre of a free trade deal was raised as the two countries released a joint statement committing to complete an joint economic study by May.

That paves the way, the prime minister said, to move the economic relationship to the next level.

"Further diversifying our trading relations has the potential of greatly expanding Canadian growth and job creation," Harper said in a speech to the Canada-China business forum at the close of his stop in Beijing.

In a statement posted to the Chinese Foreign Ministry website, Wen had gone further, saying the feasibility of a free trade agreement should be on the table.

But when asked directly, Trade Minister Ed Fast said Canada was taking things one step at a time.

"We're not going to get ahead of ourselves," he said.

"Our end game is to deepen our trade relationship in one of our key priority markets," he added.

The Harper government has placed a premium on signing free trade deals, launching and concluding negotiations with several countries over the last six years.

But they can be political hot potatoes as the Mulroney government learned in the late 1980s when it was negotiating a deal with the United States and had to fight an election on its merits.

The subsequent agreement reshaped the Canadian economy and to a large extent defined economic policy for the next 20 years.

The Conservatives have made it clear the time has come to look beyond the U.S. for export markets and all eyes are on China.

"If you want to organize a free trade agreement, why not do it with a country that's got growth," said Peter Kruyt, the head of the Canada-Chinese Business Council.

In the Canadian Press-Harris Decima survey released Thursday, 51 per cent of Canadians polled welcomed Chinese investment when it helps fuel business that otherwise wouldn't get off the ground.

But the poll suggests Canadians are less enthused about the Chinese having a controlling stake in Canadian-owned or operated companies.

"The data shows that the historic thinking of foreign ownership being either desirable or undesirable is no longer valid," said Doug Anderson, senior vice-president of Harris-Decima.

"Opinion has evolved and Canadians now judge different types of foreign investment very differently."

Forty-nine per cent of those polled feel Chinese companies taking over an existing foreign-owned company operating in Canada is bad or very bad, while 71 per cent felt Chinese companies taking a majority controlling interest in an existing Canadian-owned operation is a bad thing.

The survey of just over 1000 people was carried out between February 2 and 5 and has a margin of error of 3.1 per cent, 19 times out of 20.

Direct investment in Canada by China now stands at $14.1 billion a year, with the lion's share in the natural resources industries.

Since 2005, Chinese companies have been slowly buying pieces of Canada's oil and gas companies and projects.

Last month, PetroChina became the first Chinese company to have full ownership of an oilsands project, when it bought out Athabasca Oil Sands Corp.'s (TSX:ATH) remaining stake in the MacKay River project, one of the newest of northern Alberta's oilsands developments.

The president of Enbridge (TSX:ENB) said it's more Chinese capital that's needed, not less.

"That capital is something we badly need in Canada to develop our resources, so I think it's been a very good relationship," Patrick Daniel told reporters.

Harper highlighted 22 commercial agreements officially signed during his stop in Beijing, saying they are worth $3 billion to the two economies.

Seventeen government-to-government deals were also announced, though many of the plans are incremental steps forward in complex bilateral pacts.

Fast said the investment promotion agreement was a key milestone, as it will allow companies hoping to invest, and those already invested, in each others markets to get equal treatment to domestic investors.

The deal still has to undergo legal review and be ratified by both countries.

News of the potential investment agreement wasn't pleasing all though.

"The signing of a Canada China FIPA (foreign investment promotion and protection agreement) undermines any talk of human rights that Harper may raise on this trip," said Maude Barlow, National Chairperson of the Council of Canadians.

"This investment deal will give Canadian corporations operating in China a tool to fight any improvements in human rights, labour, or environmental standards in that country. Conversely, Chinese investors in the Alberta tar sands will use it to fight higher environmental standards in the Canadian energy sector."

In Beijing, there was also a promise to open Chinese markets to Canadian uranium, and both countries agreed to increase their dialogue on human rights, as well as elevate education to be a strategic priority for both sides.

The agreements may sound cut and dry but at least one is warm and fuzzy.

The Chinese government is allowing Canada to borrow a pair of pandas.

The pair will be go to the Toronto and Calgary zoos for 10 years of collaborative research on conservation.

A formal announcement of the pandas is expected Saturday when Harper visits the city of Chongqing.

The joint statement released Thursday came after Harper met with Chinese President Hu Jintao and Vice Premier Li Keqiang.

Relations between the leaders and Harper were decidedly warmer than the prime minister's last visit in 2009, when Wen had chided him for not coming sooner.

Now the talks were full of praise.

"You put a lot of value on Canada's relationship with China and are strongly committed to promoting the practical co-operation between our two countries," Hu told Harper.

"I appreciate your efforts."

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