Canada- China Trade 1
Canada and China Trade Relations
Present, Issues, Future
Brittany Sands and Kaitlin Clarkson
Global Trades: BICG9102 02
Siddiqui, Anjum
Novemeber 8, 2012
Canada- China Trade 2
Introduction
With China becoming Canada’s second largest trading partner of imported
merchandise in 2003, their relationship is now being increased since the U.S.
economy is stalled, also with the Eurozone trapped in sovereign debt crisis. Canada
imports manufactured goods (consumer goods, mechanical appliances and electrical
equipment) from China, while China imports Canada’s natural resources (timber,
metals, oil and gas). In 2011, Canada exported 16.3 billion to China, and they
imported $48 billion. The uncanny relationship between Canada and China is
usually unexpected, as the trade pattern between the two would usually be between
a rich and well-developed country, and a much poorer country, but their successful
trade pattern is completely flipped. In comparison to Canada’s trade with the rest of
world, recently, China has had the highest improvement of trade. Currently, Canada
has just signed a foreign Investment Promotion and Protection, also known as FIPA,
agreement with China. Which could benefit both nations in a positive way, when it is
put into act in the near future. This deal raises issues with Canada and China in
hopes that the Chinese will completely follow through with the concerns raised.
“This is a pie chart of the Canadian imports from China 2011. In terms of merchandise trade,
China is the third-largest importer of Canadian products, with imports of US$21.6 billion in
2011.China’s demand for resource-related goods remains the primary driver of trade even as
Canada looks to broaden its product offerings to an increasingly diversified Chinese
economy”.
Canada- China Trade 3
“This is a pie chart of the China imports from Canada 2011. Canada’s merchandise imports
from China have grown very rapidly over the past decade to reach US$48.6 billion (as
mentioned above) in 2011. China has become the second-largest supplier of merchandise to
Canada, after the United States”.
Canada- China Trade 4
Current Trade relations
Current relations with Canada and China is still successful, the people-to-people
ties have never been stronger, with a great growth in the amount of visitors and
students in both countries. Today, China is Canada’s second largest trading partner
and Canada is China’s 13th trading partner. Both are very strong trading nations,
external trade is essential for both to past and future economic growth. Not only is
the people-to-people strong, but the government-to-government cooperation is also
being reflected across a wide-range of priority areas. The Canada and China trade
relations just currently got stronger with the FIPA agreement1, which was being
kept a big secret until recently. Stephen Harper, the prime minister of Canada, met
with the Chinese president, Hu Jinato, and Canada signed the FIPA agreement. This
enormous investment treaty is known to what could be the biggest agreement since
NAFTA2. The FIPA agreement should be enforced as soon as December 2012. Some,
Canadian opposition, argue that the prime minister should’ve properly debated this
big decision on the agreement without going ahead and making it happen. Many
others are happy with the deal and say that trade relations between Canada and
China are moving all too slowly.
The agreement is designed to help Canadian businesses operate in China and
giving the Canadian businesses confidence that their legal rights in China will be
respected. Also, it is designed to attract more Chinese investment in Canada. This
deal will protect Canadians investing in China, as well as Chinese investors in Canada,
from "discriminatory and arbitrary practices." Once in place, investors can have more
confidence that rules will be enforced and valuable business deals will be subject to
predictable legal practices. This agreement is also assumed to deepen the relations
between both Canada and China, in hopes that it will present major opportunities
for the Canadian companies. Chinese consumers are seeking higher end protein
sources such as beef, pork, and seafood products from the agricultural sector which
the Canadians can well supply. In the technology area, Canada has commercially
ready answers to China with the problems that they are experiencing, in attempts to
lessen the environmental impact of economic growth. The aerospace industry was
one sector that was found to be where the Chinese have limited foreign
involvement, particularly in high technology areas such as flight control systems.
1
Ottowa is expected to ratify this new trade deal with China, 18 years of talk and negation on this
FIPA agreement.
2 NAFTA (North American Free Trade Agreement)- It broadens the ability to trade between and
amongst the Americas to lighten the burden of tariffs on imports and exports.
Canada- China Trade 5
Canada exported US$12.9 billion worth of regional and business planes, helicopters and parts
globally in 2011, making Canada the world’s fifth-largest exporter in this subsector. China’s
imports of aerospace goods from Canada in 2011 totaled US$661 million and varied highly
during the last decade—a reflection of the cyclical nature of the industry—averaging US$217
million annually during that period. In 2011, China imported US$438.2 million in aircraft,
US$96 million in flight simulation equipment and US$104.7 million in engines from Canada,
the latter representing more than an 11-fold increase over the last decade. (Canada.gc.ca)
Canada- China Trade 6
Imports from each country are used to characterize Canada-China bilateral trade in
both tables.
Two-way trade.
Table 2: Canada-China Merchandise Trade (US$ Billions)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Canada Exports
2.7
(China Imports)
2.6
Canada Imports
8.2
(China Exports)
10.2 13.3 18.6 24.4 30.5 35.9 39.9 35.0 43.2 48.6
3.4
5.2
6.0
6.9
8.9
9.9
9.7
12.9 17.0
11.0 12.8 16.7 23.8 30.4 37.3 44.8 49.8 44.7 56.1 65.6
Total
Source: Global Trade Atlas (Canadian statistics)
Table 3: Canada-China Merchandise Trade (US$ Billions)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
China Exports
3.3
(Canada Imports)
4.3
5.6
8.2
11.7 15.5 19.4 21.8 17.7 22.2 25.2
China Imports
4.0
(Canada Exports)
3.6
4.4
7.3
7.5
7.4
7.9
10.0 15.5 19.2 23.2 30.3 34.6 29.6 37.0 46.8
Total Trade
7.7
11.0 12.8 11.9 14.8 21.6
Source: Global Trade Atlas (Chinese statistics)
“Despite recent growth trends, bilateral trade currently still represents a relatively small
percentage of each country’s total international trade. It is clear that there is huge untapped
potential to increase trade between China and Canada”.
Canada- China Trade 7
Trade Issues
The issues that are rising with Canada and China trade were all based around how
to deepen their relation. Canada wants to completely ensure that China knows that
has to be a two way street. “China needs to be aware that within Canada, there is
growing public interest in the need for greater reciprocity in our relationship,” (Jim
Prentice) announced at a meeting with both Canadian and Chinese executives. In an
interview later, he added: “If it’s going to be a strategic partnership, it has to be a
partnership that works both ways”. China not only wants Canadian oil but also their
oilfield technology and the information needed to know how to do certain
techniques such as horizontal drilling. “China expects Canada to give it some
expertise, technology in the resource exploiting sectors,” (Ding).
China also seeks the manufacturing sector of Canada, civil aviation, and railways.
China pressed for Canada to move their research in China, without the Canadian
companies being so reluctant about doing so. “They should understand that China,
the Chinese market, would be a good one for Canadian firms to develop their
technologies and become global companies,” Ding said. “There are a lot of rumors
about China that China is not respecting [intellectual] property rights or something
like that. But, over time, these obstacles can be overcome.” (Ding) This all was to be
solved for the FIPA agreement to come into play. Now that the FIPA agreement
revisions have been reviewed, there are now issues that Canadian oppositions are
arguing. With the Canadian oil, China wants to buy Nexen for 15.1 billion dollars.
There are seventy percent of Canadians against this deal. Gus Van Harten fears that,
“[Canada is] giving up an awful lot for the promise of future access to the Chinese
market”. He also goes on to say how the agreement signed, was very one- sided,
since it only protects the investors that are now operating in the country. With
Canada welcoming Chinese investment, the Canadian businesses have become
frustrates and turning the other way. Critics also argue that they are taking a
ginormous leap of faith in hopes that Bejing will ever open their markets to
Canadian goods, services, and capital.
Canada- China Trade 8
Future trade relations
What is expected to happen with future relations between Canada and China, is to
improve the links with growing Asian economies, with the FIPA agreement.
Improving these connections, will lead to Canada diversifying away from traditional
trading partners (United States), this economic strategy has become the centerpiece
of the conservative government. The current trade deal, FIPA, is assumed to benefit
both nations specifically in seven key factors, which are agriculture, machinery,
clean technology, natural resources, services, textiles, and aerospace. In the future
when agreement is put into act, the Prime Minister, Harper, wants to see a “clear
two-way flow and clear benefits for both sides” given that dealing with the Chinese
is usually never quick or easy. “The Chinese have very different views of investment
policy, competition policy and the way state trading companies operate”, Mr. Hart
says.
Other assumed benefits for future relations with Canada and China is the oil
sector. Trade with China is expected to rise even faster in the years to come as the
oil and gas exports that were headed south to the US are now redirected westward
across the Pacific ocean. “China relies on Alberta to supply the energy that they need
to continue to grow, and we’re very pleased about that. Market access is among
Alberta’s most pressing priorities … one that will help define the future of our
energy industry, and how China can benefit from it,” (Alberta Redford). With the
Northern Gateway pipeline reviewed, Alberta’s oil sands and the Cheese market will
be “connected closer than ever before”.
Canada- China Trade 9
Conclusion
In conclusion, Canada and China’s trade relations have been very successful over
the past decades, and are assumed to only get better. Currently, with the FIPA
agreement soon to start, it raises issues that Canada is very much trusting China to
pull through and open up to them. The issues rising within Canada and China trade
is the rush of the FIPA agreement as well as most Canadians being against the selling
of Nexen for 15.1 billion dollars. Harper, is trying to deepen the relations with one of
the steps being the FIPA agreement in hopes that the trade between Canada and
China will become even more successful in the years to come. The future trade looks
successful thus far, but worrisome for Canadian business, in their lack of trust.
Canada and China trade is hoping to expand further with Canada being economically
strategic and moving trade away from the US to China.
Canada- China Trade 10
Works Cited
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Institute Studies in Chinese. Economic Policy, October 18. See,
http://www.fraserinstitute.org/research-news/display.aspx?id=12861
MacKinnon, Mark. (June 28th, 2012). Canada and China remain far apart on trade
issues. Business without Borders. Retrieved, October 19, 2012, from
http://www.bwob.ca/topics/global-issues/canada-and-china-remain-farapart-on-trade-issues/
Carbonated. Canada China Relationship. Canada China Business Council. Retrieved,
October 17, 2012. From http://www.ccbc.com/research-reports/sectorresearch/canada-china-relationship/
CBC News. (July 12, 2012). What does Canada trade with China? CBC News. Retrieved,
October 20, 2012. From http://www.cbc.ca/news/canada/story/2012/06/19/fcanada-china-trade.html
(May 18, 2012). Economic relations between Canada and China. Transport Canada.
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says. . Retrieved from http://www.theglobeandmail.com/news/politics/free-tradewith-china-still-a-decade-away-mulroney-says/article4587718/
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