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69% of Canadians support a Free Trade Deal with China

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69% of Canadians support a Free Trade Deal with China

Postby Martin Su » Sun Oct 29, 2017 12:33 am

In the year 2000, Canada's ($24,221) nominal per-capita GDP was higher than Australia's ($20,860).
Today, Australia's ($56,135) nominal per-capita GDP is significantly higher than Canada's ($44,773).

The primary difference in the huge swing between Australian and Canadian nominal per-capita GDP was probably China. China is Australia's largest trade partner and the Chinese economy is growing robustly at 6.5% per year.

"The China-Australia Free Trade Agreement (ChAFTA) entered into force on 20 December 2015." (China-Australia Free Trade Agreement (ChAFTA) | Australian Government)

It has dawned on the Canadians that they need a free-trade-agreement (FTA) with China before Australia monopolizes the Chinese market.

The National Post reports 69% of Canadians support an FTA with China (see first citation below).

However, there is a twist to this story.

"The federal government in Ottawa has been rebuked by U.S. officials in Washington, D.C. over efforts to establish a free trade agreement with China" (see second citation below).

The United States government is putting political pressure on the Canadian government to stop pursuing an FTA with China.

Will Canada succumb to US pressure? Or will the Canadian government take a risk and try to establish economic relationships with other major countries?

The China-Canada-US drama looks like it's heating up and the outcome is unknown.

Will Canada have the freedom to pursue a free-trade-agreement with China? Or will Australia keep growing richer while Canada stagnates?

More than two-thirds of Canadians support a free trade deal with China | National Post (October 23, 2017)


U.S. Warns Ottawa Against Pursuing A Free Trade Deal With China | Baystreet (October 27, 2017)

Martin Su
Posts: 2092
Joined: Wed Oct 30, 2013 7:17 pm

Re: 69% of Canadians support a Free Trade Deal with China

Postby Martin Su » Sun Oct 29, 2017 4:17 pm

Canadian competitors have free-trade-agreements (FTAs) with China.

In September 2010, the China-Taiwan FTA agreement was implemented.

"The Economic Cooperation Framework Agreement (ECFA) is a preferential trade agreement between [China and Taiwan] that aims to reduce tariffs and commercial barriers between the two sides.
The deal is thought to be structured to benefit Taiwan far more than mainland China. The 'early harvest' list of tariff concessions covers 539 Taiwanese products and 267 mainland Chinese goods. The advantage to Taiwan would amount to US$13.8 billion, while mainland China would receive benefits estimated at US$2.86 billion. Mainland China will also open markets in 11 service sectors such as banking, securities, insurance, hospitals and accounting, while Taiwan agreed to offer wider access in seven areas, including banking and movies."

This means Taiwan has an advantage over its competitors in trade with China. Taiwan is an industrialized country and 539 Taiwanese products will face little or no Chinese tariffs. Additionally, major mainland Chinese service sectors would become open to Taiwanese companies.

To offset the Taiwanese advantage, South Korea signed its own FTA with China that came into effect on December 20, 2015. "Xi and Park announced that negotiations had been completed on a deal expected to eventually eliminate tariffs on 90 percent of the goods traded between China and South Korea."

The Australians were not about to stand aside while Taiwan and South Korea had a huge trade advantage with China through their FTAs.

Australia implemented its own FTA with China on December 20, 2015.

"According to the Australian Department of Foreign Affairs and Trade, in 2014, China was Australia's largest export market for both goods and services, accounting for nearly a third of total exports, and a growing source of foreign investment.
Upon full implementation of the agreement, 95 percent of Australian exports to China will be tariff free. These will include many agricultural products, including beef and dairy. In addition, there will be liberalization of market access for Australia's services sector, and investments by private companies from China under 1,078 million AUD will not be subject to FIRB approval. In addition there will be an Investor State Dispute Settlement mechanism under the treaty."

The pressure is now on Canada. Canada has been very late in entering negotiations for a Free Trade Agreement with China. Negotiations will probably require ten years. The Chinese economy has a nominal GDP of $12 trillion and will grow by about $1 trillion per year.

While Canada sits on the sideline, Taiwan, South Korea, and Australia will boom economically.

The lesson here is that the RULES OF THE GAME in trade are extremely important. If your competitors face no tariffs and your company faces high Chinese tariffs then the playing field is not level. We already know the low/no tariff company will win.

This brings us to the United States. The United States government does not want Canada to sign an FTA with China, because this will give Canadian companies an "unfair" advantage versus American companies in trade with China. For example, Pratt & Whitney Canada will be able to outbid any US company. Jobs from trade with China will migrate to Canada under a China-Canada FTA. American companies will be the losers.

Hence, it is important for the United States government to halt a Canada-China FTA.

There is enormous pressure on the industrialized country next-in-line that lacks an FTA with China. The United States government is trying to stop Canada from joining the cascade of countries with Chinese FTAs.

2010: China-Taiwan ECFA
2015: China-Korea FTA
2015: China-Australia FTA

Canada is left out in the cold while other countries benefit from China's booming economy. Canada held exploratory talks for a China-Canada FTA. Canada has hinted it may enter official negotiations soon with China for an FTA.

To maintain parity, the United States needs to keep Canada from securing an "unfair" trade advantage with China via an FTA because the United States has no discussion with China for a China-US FTA.

The trade rules determine the winner. Canada is feeling the heat of being "disadvantaged" in its trade with China. Canada is trying to fix the problem. However, a Canada-China FTA creates a new set of "unfair" larger industrial competitors (such as Canadian nuclear parts suppliers) for American companies.
Martin Su
Posts: 2092
Joined: Wed Oct 30, 2013 7:17 pm

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