Should the China-Canada investment agreement be considered "a game changer"?
Niagara Falls, Ontario - Wednesday, September 19, 2012
By: Joe Hueglin
Should the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA) be considered "a game changer" in Sino-Canadian economic relationships?
Signing FIPA, the most important action taken by Canada at the APEC meeting in Russia, solidifies an already increasing trade imbalance in China's favour, not only in the overall amounts traded but in the nature of the products. In 2011 China exported $48,149,298,046, largely manufactured, value added goods to Canada and imported $16,392,362,705 in Canadian raw materials. Unrefined oil sands will likely increase the imbalance in value added goods. (1)
Under the terms of FIPA, Canadian companies investing in China will have firmer legal footing and be encouraged to do so. Business contracts in both countries will be opened to bids from the others firms on more equal terms.(2) But there is no mention of reported endemic corruption, human rights and working conditions in China or that the Chinese government effectively controls all decision making on terms of business. (3)
What net benefit to Canada in jobs or economic development will follow even though some private firms may profit from manufacturing overseas? How will this effect the existing trade imbalance?
Under FIPA the Bank of Nova Scotia will be able to obtain a long delayed c.20% ownership ina Chinese bank with the Chinese government as the senior partner. (4) Chinese approval of this transaction is presented as a reason for accepting sale in its entirety of the $ 15 billion petroleum producing Canadian firm Nexen. to another Chinese state owned entity.(5)
Not taken into consideration are lower labour costs in China, less demanding environmental and safety regulations and a controlled currency. These factors already have led to replacement of many formerly Canadian made products in our retail stores. They will be brought to bear in competitive contract bidding. The results, predictably, will be similar dominance in obtaining contracts by Chinese firms in areas other than in producing value added goods.
The Agreement was concluded without public discussion of its ramifications. The "game" Canada has been losing will not be changed but continued and be broadened . China will no doubt continue to purchase our raw materials but, if the precedent be set with Nexen, increasingly from Chinese government owned enterprises.
These matters ought to be addressed so Canada, which has lost much of manufacturing production, does not become increasingly more a dependency of China.
References:
1. Canada's Merchandise Trade with China, Asia Pacific Foundation of Canada, as seen September 19, 2012
2. Akin, David, Canada, China ink trade agreement, September 8, 2012, Toronto Sun
3. McParland, Kelly, Free trade with China is one thing, corruption-free trade is another, September 11, 2012, National Post
….Kilgour, David, What Chinese Investment is Doing to Canadians, May 31, 2012, The Epoch Times
….Reichel, Justina, Canada Must Get Wise to How China Does Business: Report, September 12, 2012, The Epoch Times
4. Soh, Kelvin and Hopkins, Andrea, Scotiabank buys into Guangzhou Bank for C$719 million, September 9, 2012, Reuters
5. Murphy, Jessica, Investment agreement may ease trade concerns with China: Baird, August 28, 2012, Sun News
....In switch, Canadian papers back CNOOC's Nexen bid, September 11, 2012, Reuters