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With Trump threatening to dissolve NAFTA, should Canada look for trading partners elsewhere?

If you asked most people what world power is on the rise, most would probably say China. In recent years, the Chinese government has made impressive investments into infrastructure in their country and a new burgeoning Chinese middle-class has started to rise. Their economy is growing at an incredible rate and ignoring it would be a colossal mistake.

Thankfully, Canada seems to be paying attention! Recently, there have been talks about expanding trade with China. A free trade deal between Canada and China would be historic. Although ex-Prime Minister Stephen Harper signed a $2.5 billion trade deal with China in 2014, the free trade deal currently being discussed would dwarf the 2014 arrangement. It would be China’s first big trade pact with a G7 country and could bring a tremendous amount of capital and goods into Canada.

Of course, free trade agreements are never made in a political vacuum. With the Liberals in power, many Conservatives are striking a cautious tone about free trade with China. There are some Tories that are saying that by opening further free trade talks with China during NAFTA negotiations, the Liberals are intentionally antagonizing the US (and President Trump in particular).

In campaign speeches and multiple Twitter tirades, Trump has slammed China’s economic policies, saying that they’re taking advantage of the US. Many on both sides of the political divide are terrified that he’s going to start a trade war with China, which could be catastrophic to the US economy. (And that’s without even touching on the Chinese-North Korean relationship.)

What’s clear is that Trump sees China as the enemy, and there’s a potential that, by attempting to open free trade negotiations with China, Canada will be viewed negatively in future US trade negotiations. Of course, others are saying that by negotiating with China, Canada is sending the message that if the US decides to collapse free trade in North America, we’ll simply find somewhere else to peddle our goods.

While both sides may have points, neither side seems to be listening to the other. That seems to be one thing that you can always count on: When free trade is involved, hardcore partisanship will come into play on every side, drowning out all relevant or intelligent points in a sea of politics.

That’s not to say that there aren’t genuinely huge risks associated with free trade with China. Canada and China have two very different systems of government and differing views on capitalism. Much of the Chinese economy is state-run, and the country has been aggressively exploring international ventures in recent years. Over $21 billion dollars of Chinese money was invested in Canada in 2016 alone. And that’s peanuts compared to the amount of money they’ve sunk into the United Kingdom and the Netherlands. Does Canada really want to open up our resources market to China’s centrally-planned economy?

On the other hand, there are also huge advantages. We in Canada stand to gain more economic stability by diversifying our trade agreements, as can be seen with the recent trade agreement with the EU. Polls have shown that 2/3s of the Canadian population favours trade with China, despite half the population holding an unfavourable view of the country. This could be because of an increasingly negative perception of the political situation south of our border, not to mention anxiety about the future of NAFTA.

All of this said, we’re still a long way from a free trade agreement with China becoming a reality. A decision about opening negotiations appears to be coming before the end of 2017. Canada and the US both say that they hope a NAFTA deal will be on the table before the end of the years as well, but given the current political climate, we’ll believe it when we see it.

If you’d like more information about Inter Global Logistics, or if you would like some more information about how opening free trade negotiations with China could impact your business, please free free to fill out our contact form, or give us a call at 1-647-428-6537, or toll free at 1-866-777-7556. Just ask for Sheldon or Ken!

November 13th, 2017

Posted In: NAFTA

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