Facing a global economic slump and a sharply devaluating loonie, the government of Canada has strategically turned its attention on growing international markets with the goal of tapping into the economic benefits of global trade.

Prime Minister Justin Trudeau has demonstrated his desire to strengthen international trade ties by planning a major trade mission to China and India.

He has also invited former Australian Prime Minister Kevin Rudd into discussions with senior Canadian business leaders to seek a free trade deal with China, similar to that negotiated by Australia.

Despite the fact that there are currently no free trade negotiations between China and Canada, both countries have demonstrated a willingness to strengthen their trade relationships and promote foreign investments.

According to Sylvain Charbonneau, CITP®|FIBP®, an international trade professional with over 15 years of experience and an instructor at Ashton College in Vancouver, there are two sides to this discussion. He noted:

A Canada-China free-trade agreement should be beneficial for Canadians, but it could also bring challenges and risks of negative impacts in some areas.

This article explores the primary issues with regard to the establishment of free trade between the two countries.

Canada-China trade presents major challenges

There are several things to consider when it comes to trading with China. International trade agreements create ties of influence between the countries that can extend beyond import-export affairs. The Chinese government has different values and priorities when it comes to the issues of law, politics and human rights, amongst others.

Moreover increasing competition for Canadian companies and economic pressures have international trade experts concerned.

The most pressing challenges can be outlined as being:

China’s human rights record: It is hard to deny the fact that China has a well-known history of human rights violation and systematic repression of certain minority groups. One of the biggest concerns about opening a free trade agreement with China is whether Canadian export products might become involved in oppressive situations. Of course, we are not talking about an arms trade, but this is an important consideration nonetheless.

Intellectual property protection: Canada values the protection of intellectual property for owners, producers and creators of various products, goods and services. Reported cases of intellectual property violations in China, and the possibility of forged products circulating in the market, have been raised as another point of conflict.

Economic incompatibility: Ron Austin, an instructor in the International Trade department at Ashton College, points to the difficulty of aligning the two economic systems of both countries.

Trying to integrate two economies with such different economic conditions – which is what free trade agreements essentially accomplish – can be challenging.

“If we look at the European Union, for example, we see countries like Greece or Italy clashing with Germany and Sweden; countries which have greater capital and higher taxes. We would not want that to happen in a Canada-China trade relationship.”

Competition: Charbonneau points to concerns over competition from Chinese companies, noting that an increase here “could cause difficulties for many Canadian businesses if they can’t continue to innovate on an ongoing basis. This could also have an impact on the employment landscape in Canada”.

Trade with China could have huge positive impact

There is certainly another side to this story. A strong economic (and even political) relationship between Canada and China could bring real opportunities for Canadians. Most predictions foresee great benefits for Canadian exports as a result of a potential Canada-China free trade agreement.

Among the key advantages are the following:

Economic benefits: Even though China’s economy is slowing, its purchasing power cannot be ignored. There are several key areas in which Canada could diversify in China and increase exports.

According to Charbonneau:

Trade with China could represent great business opportunities for Canadian exporters of consumer products, equipment and machineries – especially with its growing middle class generating an increasing demand for commercial goods.

“The agriculture industry should see an increase in demand for such products as meat, canola, fish and seafood. The trade deal could also be favourable for the forestry industry, metals and minerals”.

Bringing Canadian services to China: The rapid rise of the Chinese middle class has created opportunities for Canada, from the possibility of offering pension funds and insurance in China, to the expansion of Canada’s infrastructure sector and services.

Charbonneau has pointed out engineering, financial services, information technologies and architecture as the key industries to benefit from the export of services. There is even a potential to expand Canada’s influence in the areas of green technology and natural resources.

Improving the Canada-China relationship: According to Trudeau, cooperation with China could bring benefits to both countries. Strengthening Canada-China relationships could go beyond economic ties, leading to political connections (an important tie, given China’s growing influence) and cultural exchange, including travel and education.

So what happens next?

Although concerns and hesitations about establishing free trade between Canada and China certainly exist, the general consensus is that the benefits outweigh the challenges. However, this does not mean those concerns should be disregarded.

Austin states:

I believe the key is to introduce trade agreements that would reinforce environmental protection and positive working conditions of the cooperating countries.

Indeed, careful negotiation is needed to ensure that any economic benefits are also aligned with Canada’s political and humanistic objectives.

Although concerns and hesitations about establishing free trade between Canada and China certainly exist, the general consensus is that the benefits outweigh the challenges.

However, this does not mean those concerns should be disregarded.

“I believe the key is to introduce trade agreements that would reinforce the environmental protection and positive working conditions of the cooperating countries,” states Austin.

Certainly careful agreements have to be established to ensure that economic benefits are also aligned with Canada’s political and humanistic objectives.

Do you think it’s a good idea for Canada to pursue a stronger trading relationship with China? Do the challenges in human rights and IP present too much risk to Canadian trade?

The post Do the rewards outweigh the risks when it comes to trade with China? appeared first on Trade Ready.

The Trans-Pacific Partnership (TPP) is a proposed trade agreement between twelve Pacific Rim countries, which evoked quite a bit of controversy among the general public due to its secretive negotiation process.

According to Global Affairs Canada, “[the TPP] is a comprehensive, economic, strategic and balanced agreement that will increase Canada’s foothold in the Asia-Pacific, a region that is expected to comprise two-thirds of the world’s middle class by 2030, and one-half of global gross domestic product (GDP) by 2050.”

Unprecedented access to a vast global market

The twelve countries involved represent a vast market of nearly 800 million consumers and almost 40 per cent of the global economy, with a combined GDP of about $28.5 trillion.

Some key parts of the agreement are the reduction (or elimination) of tariffs on a wide variety of goods and services, ranging from alcohol to beef and pork, and the creation of an investor-state dispute settlement mechanism.

Although trade experts and government officials are still combing through the fine print, it is clear that the TPP will lead to fewer international trade barriers among the twelve participating members.

The dispute-resolution provisions, which Canadian officials have claimed are similar to those contained in NAFTA, would also allow private companies to contest government decisions.

For Canada, the agreement will likely result in an increase in both imports and exports, including products such as machinery, canola, beef, pork, minerals and seafood.

Canadian companies will gain a competitive advantage over exporters from non-TPP countries who must still face the existing tariffs, while the same will be true for organizations importing goods to Canada.

A new world of opportunities for Canadian consumers, exporters and small business owners

The TPP has faced criticism due to the secretive nature of its negotiations, and provisions which industry experts say will have a negative impact on the Canadian auto and dairy industries.

The TPP would reduce the percentage of a vehicle’s content that must come from Canada to avoid import tariffs to 45 (down from 62.5) and would allow TPP countries duty-free access to 3.25 percent of Canada’s dairy market and 2.1 percent of its poultry market.

Despite the controversy, freer trade has a lot of potential for Canada that should not be ignored.

The benefits include:

• Increased purchasing power for consumers (even as real wages for millions remain stagnant) due to the elimination of a wide range of tariffs that will lead to more choice and lower prices for consumer goods.
• Increased recognition in the international market. One popular opinion is that it would be foolish to abandon the trading bloc and allow China to dominate the region because, once ratified, the TPP will result in free-trade agreements with roughly 60 per cent of the global economy.
• Potential benefits for small businesses. Opening new markets for Canadian products and services can give small businesses an opportunity to expand into the international markets and stay competitive – which is good news, considering that their revenues often rely on their ability to export products and services.

The urgent need for highly skilled global trade professionals

The increased level of trade in Canada (and around the world) is also likely to result in higher demand for international trade professionals, increasing the importance of international trade education and training programs.

Sylvain Charbonneau, CITP|FIBP, an international trade professional and educator at Ashton College, is particularly optimistic about the effect of the TPP on the Canadian trade job market.

“I believe that people in the trade industry are very lucky because it’s a field where the opportunities are growing, and we’re on the verge of some really exciting developments.”

“With the announcement of the TPP, it has suddenly become more important than ever to have knowledge of global supply chain management, international market entry strategies, and the legal aspects of international trade. There are so many different areas where individuals with knowledge in international business practices and trade relations can pursue a career.”

In the era of globalization and increased use of information technology, the goal is not to close off our borders, but to recognize emerging trends and take advantage of the world’s interconnectedness.

While some may argue against the TPP, it is hard to deny the potential for a competitive advantage in the global marketplace.

The TPP agreement facilitates the opening of new markets for international businesses of all sizes, and the focus should be on developing the skills and expertise to endure the increase of the volume and quality of our exports.

Understanding the realities of international trade is becoming more critical for Canadian businesses, and trade professionals with internationally-recognized qualifications like the CITP®|FIBP® designation now have more opportunities to utilize their education and training, and contribute to the growth and prosperity of the Canadian economy.

While the TPP is controversial, the benefits to Canadians and our economy cannot be overstated, and our inclusion in the partnership would be a major victory.

As President of the United States Barack Obama has made clear, the U.S. plans to ratify the TPP as soon as possible, meaning Canada would be isolated if we are unable to do so.

While the auto and dairy industries’ fear of cheaper import products and increased competition is understandable, the solution is not to close our doors to global trade and risk eroding Canada’s position in the world economy.

Do you think the TPP will be good for the Canadian economy? Do the pros outweigh the cons for Canadian industry and agriculture?

The post The TPP: What does it mean for Canadian international trade professionals? appeared first on Trade Ready.