Public consultations on a possible Canada-China FTA

Table of Contents

Executive summary

Between March 4 and June 2, 2017, the Government of Canada conducted public consultations to solicit the views of Canadians on a possible Canada-China free trade agreement (FTA). The views of Canadians were collected in a number of ways, including through in-person meetings and teleconferences  with Canadian stakeholders, and through the publication of a Canada Gazette notice and dedicated consultation website inviting Canadians to submit their views. Since March 4, 2017, Government officials interacted with over 600 stakeholders and partners and received over 130 submissions from Canadians.

In keeping with the Government of Canada’s commitment to transparency, this report aims to provide a summary of the views that were conveyed by Canadians during this official consultation period. Despite the conclusion of this official consultation period, the Government of Canada remains committed to hearing from Canadians on this important subject and will ensure that Canadians continue to have the opportunity to provide their views as we engage with China.

Send your submission or any questions by email: chinatrade-consultations-commercechine@international.gc.ca.

As whole, Canadians told us that they see both opportunities and challenges associated with a possible Canada-China FTA. On the one hand, Canadians recognize the significant opportunities for Canadian businesses and consumers offered by the Chinese market, and the importance of China for the future of the global economy. Whether in supplying China’s appetite for high-quality agricultural products and natural resources, making inroads into its massive government procurement market, or leveraging China as a source of, and destination for, foreign direct investment, many Canadians told us that they see real opportunities in deepening Canada’s trade relationship with the world’s second largest economy.

These opportunities are not easily accessed, however, and many Canadians also told us they see significant challenges associated with doing business in China. Perhaps the greatest obstacle identified by Canadians in doing business in China relates to its unpredictable and opaque regulatory environment. This lack of predictability and transparency raises costs for Canadian business. While a range of the difficulties identified by Canadians, like tariffs, permitting issues, establishment requirements, and customs procedures could be mitigated or resolved by a possible FTA, Canadians also told us about concerns that are more difficult to resolve using a traditional approach to free trade agreements. These concerns included challenges arising from the nature of China’s state-run economy; the interplay between trade and China’s human rights, environmental and labour rights records; and the inconsistent rule of law in China, especially in relation to the enforcement of intellectual property rights.

Ultimately, many stakeholders told us that a potential Canada-China FTA would be judged by its ability to create meaningful and stable market access for Canadian businesses, while simultaneously avoiding negative impacts on Canadian people, jobs, resources, environment, innovation and public policy.

1. Introduction

Canada has always been a trading nation. Whether in the context of grain exports from the Prairies to the far corners of the world, the fur and lumber trade of central Canada, the historic Basque and Breton fisheries of the Atlantic, or inter-tribal trade among Indigenous groups, it is clear that Canadians have long relied on strong trading relationships as a means of fuelling domestic growth. Today, approximately one in six jobs in Canada depend on exports. In 2016, international trade was equivalent to 64 percent of Canada’s GDP, with Canada exporting $628.7 billion worth of goods and services and importing $676.7 billion. This focus on trade has contributed to make Canada into one of the world’s most prosperous countries.

Canada’s prosperity in the 21st century will continue to depend on ensuring that Canadian companies and workers remain competitive and that our goods, services and investments have access to global markets. In this regard, Canada is intensifying its efforts to deepen economic relationships with large, fast growing markets around the world, including in the Asia-Pacific region.

In this context, Canada has been engaged in exploratory discussions to examine the prospects for a possible free trade agreement (FTA) with China since September 2016. Cognisant of the opportunities, challenges and risks associated with such an initiative, the Government is committed to engaging with Canadians in a dialogue to help define Canada’s interests in a possible FTA with China. This is why the Government—in parallel to exploratory discussions—has held wide-ranging consultations to seek the views of Canadians regarding a possible Canada-China FTA. It is a function of the Government’s commitment to transparency that this report aims to provide a summary of the views that were conveyed by Canadians throughout the official consultation period, which lasted from March 4 to June 2, 2017.

As the world’s second largest economy and Canada’s second largest single-country trading partner, the size and growth of China’s market represents significant commercial opportunities for Canadian businesses and workers in a wide variety of sectors from coast to coast to coast. Beyond the opportunities associated with the size of the Chinese market, the complementary patterns of economic activity between Canada and China suggest that Canadians stand to benefit from deeper trade and investment and the elimination of existing barriers in the Chinese market. Moreover, there is some urgency to delineating the future of Canada’s engagement with China; some of our global competitors are forging ahead with, or already have, preferential trade agreements with China.

Nevertheless, the opportunities associated with the Chinese market are not devoid of practical and structural challenges. Whether on issues related to over-capacity in steel production; product and food safety; labour mobility; a lack of reciprocity in the trade and investment relationship; or a variety of other bilateral trade irritants, the Government shares the concerns of Canadians about the risks of closer engagement with China. Indeed, Canada and our global partners have raised many of these issues with China through existing multilateral fora like the WTO and through bilateral dialogues. Given the persistence of these issues, however, it is clear that the status-quo is not delivering the best possible outcomes for Canadian businesses and workers.

Greater engagement with China also poses challenges given the differences between our countries with respect to values. The Government is confident that increased engagement with China will neither compromise the interests nor the values of Canadians. Core Canadian values, including respect for human rights, democracy, and the rule of law, will remain a fundamental aspect of our engagement with China, and the Government’s calculus on how to proceed will ultimately be rooted in what makes sense for Canadians.

Despite the conclusion of the formal 90–day period of public consultations, the Government remains interested in hearing from Canadians on their views regarding any forward initiative related to increasing trade and investment between Canada and China. Officials continue to meet with interested Canadians on this matter, and the Government continues to welcome letters and emails from Canadians voicing their opinions on this important initiative.

2. How the government is exploring potential FTA negotiations with China

On September 22, 2016, Prime Minister Trudeau and Chinese Premier Li announced the launch of exploratory discussions to examine the prospects for a possible Canada-China FTA. Work on the exploratory discussions has been ongoing since the fall of 2016 with four sets of face-to-face meetings held to date in 2017: February 20 to 24 in Beijing; April 24 to 28 in Ottawa; July 31 to August 4 in Beijing, and September 12-13, in Ottawa.

Exploratory discussions are a series of discussions held with potential FTA partners who are interested in assessing the prospects for negotiations aimed at concluding an FTA. These discussions are a key step in determining whether there is sufficient interest and economic benefits to pursue formal negotiations. During exploratory discussions, parties exchange information in order to determine each other’s respective approaches to an FTA and to define the scope and parameters of a possible negotiation.

Exploratory discussions are not negotiations, and do not pre-judge whether the two countries will ultimately decide to launch FTA negotiations. Rather, the purpose of the exploratory discussions is to inform what issues or areas could be part of a potential FTA negotiation, based on the realities of the Canada-bilateral commercial relationship and each country’s interests. In other words, exploratory discussions “test the waters,” and facilitate an assessment of whether there is sufficient common ground to engage in trade discussions that will have reasonable prospects to bring about meaningful economic benefits for Canada.

In conjunction with the exploratory discussions, Canada and China are conducting a joint feasibility study. The joint feasibility study will provide factual overviews of Canada and China’s respective policies for trade and investment and will estimate the possible economic impact that a hypothetical FTA could have on both economies. The results of the joint feasibility study will be made public once the study is complete.

Decisions by the Government of Canada on next steps, including whether to launch formal negotiations, will take into account the outcomes of exploratory discussions, key findings of the joint feasibility study, ongoing and past internal analysis, and the feedback from Canadians resulting from consultations. While this assessment will consider a multitude of factors, the most important consideration will be whether an FTA with China will serve the best interests of Canadians.

Public consultations

Given the complexities associated with a potential Canada-China FTA, on March 4, 2017, the Government of Canada launched public consultations to seek the views of Canadians. Officials held public consultations over a 90-day period ending on June 2, 2017. The consultations included a formal Canada Gazette notice requesting written submissions from Canadians, the creation of a dedicated website, and numerous meetings and phone calls with a broad range of stakeholders. The Government of Canada’s objective was to enable the Canadian public and interested Canadian stakeholders to help define Canada’s interests in a possible FTA with China, and identify ways of maximizing the economic and social benefits of such an agreement.

The Government of Canada undertakes extensive stakeholder engagement anytime that it is considering whether to launch FTA negotiations with a prospective partner. In anticipation of the high level of interest among Canadians with respect to a possible Canada-China FTA, the duration of the consultation period (90 days) was significantly longer than prior consultations and covered an extensive range of interests and stakeholders across the country. Government officials engaged with over 600 stakeholders and partners from all provinces and territories. In addition, the Government solicited written submissions through a Canada Gazette notice and a dedicated consultations website.

The Government is committed to set a higher bar for openness and transparency in its progressive trade agenda. In line with this principle of open government, accountability and transparency, the Government is releasing a public report summarizing what we heard from stakeholders throughout the public consultation on a possible Canada-China FTA. As a Government, we think it is important that Canadians are aware and understand what other Canadians have said about a possible Canada-China FTA and how best we can deepen two-way trade and investment between our two countries.

3. Who we consulted

Public consultations on a possible Canada-China FTA were comprehensive, involving interactions with over 600 stakeholders and partners across Canada, covering a broad range of sectors and interests. Working in collaboration with the provincial and territorial governments, federal officials conducted face-to-face consultations in all 10 provinces as well as the Northwest Territories. Federal officials also conducted teleconferences with stakeholders and officials from Yukon, Nunavut, and across the country. In total, the Government conducted over 70 plenary roundtables and workshops, and over 130 meetings with individual stakeholders. In addition, since March 4, 2017, the Government also received over 130 written submissions through the Canada Gazette process and the web forms contained on the dedicated “Consulting Canadians on a possible Canada-China FTA” website. Figure 1 illustrates the various types of interactions that the Government undertook during the public consultations period.

Canada Gazette process and the web forms contained on the dedicated “Consulting Canadians on a possible Canada-China FTA” website. Figure 1 illustrates the various types of interactions that the Government undertook during the public consultations period.

Figure 1. Interactions during public consultations according to type

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Methods of consultation (percentages)

  • Call (7.24%)
  • Meeting (37.05%)
  • Roundtable (19.78%)
  • Workshop (0.84%)
  • Canada Gazette (24.23%)
  • Website Submission (10.86%)

Stakeholders were identified in coordination with the provinces and territories, local chambers of commerce, industry associations and civil society and non-government organizations. We consulted with businesses of all sizes, including some of Canada’s largest companies as well as small-medium sized enterprises from nearly every sector of Canada’s economy. Many businesses the Government consulted have experience doing business in China, but we also spoke with Canadian firms that are seeking to expand into China or are seeking investment opportunities from China.

The Government also engaged in a dialogue with civil society groups, including unions, academia, and youth on areas such as human rights, the environment, and labour protections. Individuals were also consulted through one-on-one meetings and were encouraged to submit their Gazette submissions in the same manner as business and civil society associations. Consultations were also undertaken with Indigenous business associations and with certain National Indigenous Organizations during the 90-day public consultations period.

3.1 Interactions — Meetings, phone calls, roundtables and workshops

Figure 2. Stakeholders and partners met that took part in consultations

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Stakeholders consulted (percentages)

  • Business (80.85%)
  • Non-business (13.16%)
  • Indigenous (1.88%)
  • Individuals (4.10%)

Officials met with a broad range of business and non-business stakeholders during the public consultations period. The types of business stakeholders ranged from large corporations to small and medium-sized enterprises, as well as industry associations. Public consultations covered a comprehensive range of sectors of the Canadian economy, representing 27 different industries and sectors (Figure 3). Nearly 25% of firms and industry associations consulted were from the agriculture and agri-food sector, indicative of the high level of interest among stakeholders in this sector in a potential FTA with China. Other sectors consulted include automotive, cleantech, consumer products, fish and seafood, forestry, industrial machinery, life sciences, creative industries, education, financial services, professional services, and tourism.

Figure 3. Business stakeholders consulted by sector

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Business stakeholders consulted by sector

  • Aerospace (2)
  • Agriculture (114)
  • Automotive (14)
  • Chem., Plast., Rubber (7)
  • Cleantech (29)
  • Consumer Products (22)
  • Creative Industries (27)
  • Defence and Security (2)
  • e-Commerce (1)
  • Education (16)
  • Financial Services (20)
  • Fish and Seafood (13)
  • Forestry (17)
  • Industrial Machinery (20)
  • ICT (8)
  • Infrastructure (7)
  • Life Sciences (18)
  • Mining (10)
  • Nuclear (3)
  • Ocean Tech (3)
  • Oil and Gas (13)
  • Professional Services (41)
  • Textiles and Apparels (5)
  • Tourism (7)
  • Transport (10)
  • Wine, Beer, and Spirits (8)
  • Multi-Sector Org. (36)

The Government also engaged with a variety of non-business stakeholders, including 47 universities and academics, 16 labour unions, 11 non-governmental organisations (NGOs), and 4 independent think tanks. The Government also consulted with a number of Indigenous partners, including National Indigenous Organisations. Federal officials also engaged with students and other private citizens. Figure 4 illustrates the types of non-business stakeholders that the Government engaged with during the public consultations period.

Figure 4. Non-business stakeholders consulted, sorted by type

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Non-business stakeholders consulted by type

  • Academia (47)
  • Labour Unions (15)
  • NGOs (11)
  • Think Tanks (4)
  • Indigenous (11)
  • Individuals (24)

3.2 Written submissions

Since March 4, 2017, the Government has received over 130 submissions from Canadians expressing their views on a possible Canada-China FTA. The submissions were received by email through the Canada Gazette notice, as well as through the web form on the Canada-China exploratory discussions website. 43% of written submissions came from civil society groups and individuals; the remaining 57% of written submissions came from business stakeholders, mostly in the agriculture and agri-food sector (Figure 5).

Figure 5. Stakeholder types from written submissions (percentages)

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Stakeholder types from written submissions (percentages)

  • Business (57%)
  • Non-business (16%)
  • Individuals (27%)

4. What we heard from stakeholders

4.a. Key themes / overview of consultations

Consultations with stakeholders and individuals highlighted the significant opportunities for Canadian businesses and consumers offered by the Chinese market, and the importance of China for the future of the global economy. Whether expressing interest in supplying China’s growing appetite for high-quality agricultural products and natural resources; making inroads into its massive government procurement market; or leveraging China as a source or destination for foreign direct investment, it is apparent that Canadian companies recognize the significant opportunities associated with trading with the world’s second largest economy.

Stakeholders identified a number of concrete areas where an FTA could help improve market access and the business environment for Canadian companies in China. Both companies already doing business in China and those that are considering expanding their operations into the Chinese market highlighted specific tariff and non-tariff barriers that they would like to see addressed in a potential FTA. The removal of these obstacles would improve the competitiveness of Canadian exporters relative to other international competitors, by levelling the playing field with competitors from countries that have FTAs with China (e.g. Australia, New Zealand, Korea and Chile), and providing Canadian suppliers with preferential access compared to those from countries without an FTA with China. These potential gains in competitiveness were highlighted not only by business involved in the export of traditional goods like agricultural products, fish and seafood, and commodity exports, but also to companies active in advanced manufacturing, tourism, service-delivery, and investment.

For stakeholders with an interest in exporting goods to the Chinese market, challenges raised often centered on non-tariff measures applied at and behind the border that could be addressed under a potential FTA. For example, stakeholders throughout the country conveyed that one of the greatest obstacles they face in doing business with China is an unpredictable and opaque regulatory environment. We heard about the experience of Canadian business in facing different customs procedures depending on their port of entry, and about regulatory requirements being changed without any notice. This lack of predictability and transparency raises costs for Canadian businesses, and in some instances, Canadian stakeholders expressed concerns that trade-restrictive measures are sometimes adopted as a means of protectionism. Tariff liberalization and workable rules of origin were in many cases cited as secondary, but still important, priorities.

Throughout our consultations, we heard widespread concern about the rule of law in China, and uncertainty as to the Chinese government’s willingness or ability to adhere to its obligations under a potential FTA. Canadian stakeholders told us that while China’s legal system has improved in recent years, especially in areas such as intellectual property (IP), China is still not providing the enforcement and remedial awards needed to ensure the protection of IP rights. To ensure China would abide by its commitments under an FTA, a range of stakeholders highlighted the crucial importance that a robust and effective dispute settlement mechanism would play in any FTA. In order for Canadian companies to benefit from meaningful market access, a potential FTA would need an innovative approach to resolving disputes that would deliver outcomes in a timely manner and deter bad-faith or non-compliant behaviour. Furthermore, in recognition of cultural differences between Canada and China, a few stakeholders proposed establishing robust institutional mechanisms that would address certain types of problems and irritants through bilateral dialogue rather than through an adversarial dispute settlement mechanism.

Nevertheless, not all stakeholders are confident that an FTA with China would be able to meaningfully address the full spectrum of challenges faced by Canadian businesses trading with China. Many stakeholders highlighted the complex nature of the Chinese market, with its state-run economy and the prominence of its SOEs. Given these structural differences, a common view expressed during the consultations was that China represents a unique partner for Canada. Undertaking an initiative to liberalize trade between Canada and China would consequently require that an innovative approach be deployed, rather than applying a standard FTA model. Stakeholders told us that a potential Canada-China FTA will ultimately be judged by its ability to create meaningful and stable market access for Canadian business, while simultaneously avoiding the exploitation of Canadian people, jobs, resources, and know-how.

Stakeholders, especially civil society groups and individuals, expressed concerns that increased engagement with China could lead Canada to compromise on its values, and that it would remain essential for Canada to continue to engage with China on sensitive issues including human rights, cybersecurity, Tibet, and regional security issues. Issues corresponding to the Government’s Progressive Trade Agenda, including protection of the environment, improving engagement with Indigenous groups, upholding Canadian labour standards, and addressing gender, also featured prominently throughout the consultations. A few stakeholders indicated that Canada’s approach to trade policy could be improved by the introduction of a comprehensive and independent human rights impact assessment process for all of its FTAs, and that Canada’s FTA should include clear language to ensure the agreement cannot be interpreted in a way that contravenes human rights obligations.

Concerns were also voiced, primarily from civil society groups and several business stakeholders, on the possible effects of a potential FTA with China on Canadian jobs and competitiveness in certain sectors, especially mining and certain manufacturing sub-sectors. On several occasions, businesses told us that the influx of low-cost Chinese imports since the early 2000s—when China acceded to the World Trade Organisation—had driven down margins, and in some instances driven Canadian businesses out of the market. Canadian stakeholders pointed to a number of factors that account for concerns in these areas, including China’s lax labour standards, lower environmental requirements, state-driven subsidization of production, export subsidies, Chinese overcapacity, and the dumping of Chinese products on international markets. These Canadian stakeholders were adamant that without addressing these challenges in a meaningful manner, an FTA with China would only result in a hollowing-out of Canadian manufacturing and increased job displacement.

Finally, we repeatedly heard from stakeholders that the Government must be as transparent as possible and that it must do its best to keep Canadians informed of the progress of any possible FTA initiative.

4.b. Snapshots

4.b.i. Market access

Throughout the Government of Canada’s extensive and wide-ranging consultations with Canadians on a potential FTA with China, many individuals and stakeholders, especially businesses, took the opportunity to raise issues related to trade in goods. Provisions aimed at improving market access, lowering tariffs and establishing workable rules of origin for goods being traded between the two parties, represent a cornerstone element of any FTA.

We heard from stakeholders that while the elimination of Chinese tariffs under an FTA would benefit Canadian exporters of goods, such benefits would need to be balanced against Canada’s domestic sensitivities in the context of trade liberalization. Industry stakeholders, think tanks and academics expressed their views on the dynamics of the Canada-China trade in goods relationship, identifying opportunities for Canadian firms as well as challenges that could be addressed through an FTA.

For those stakeholders with an interest in exporting goods to the Chinese market, tariff elimination and rules of origin are in many cases secondary priorities. Stakeholders instead told us that they are more concerned with the lack of transparency and unpredictable regulatory regimes in China, and provided concrete recommendations on how these could be improved under a potential FTA. The key issues affecting trade in goods for Canadian businesses in China include inconsistent technical regulations and standards; the lack of protection in the area of intellectual property; and state subsidization of land, labour, and equipment.

Details of what we heard

4.b.ii. Technical barriers to trade

The Government of Canada heard considerable interest from Canadians in taking steps to remove technical barriers to trade that restrict access for Canadian exporters into the Chinese market. Technical barriers to trade (TBTs) refer to technical regulations, standards, and testing and certification procedures imposed on products that are more burdensome than necessary to fulfill legitimate objectives such as consumer and environmental protection, and which therefore have the effect of unduly restricting access into a national market.

Stakeholders from various sectors of the economy, including agriculture and agri-food, industrial products, aerospace, cosmetics, mining, and forestry, told us that a range of technical barriers currently prevent them from meaningfully penetrating Chinese markets. These issues include a lack of regulatory transparency and consistency, a need to improve the procedures by which Canadian goods are certified for access to the Chinese market, and the need for effective dispute settlement. The comments received also stressed the value of regulatory cooperation and/or alignment to address specific regulatory differences.

Details of what we heard

Stakeholders identified opportunities for Canada to address technical barriers to trade in several specific areas:

4.b.iii. Sanitary and phytosanitary issues

Canadian stakeholders underscored the opportunity for a potential Canada-China FTA to address challenges with China’s opaque regulatory environment in terms of its sanitary and phytosanitary (SPS) measures. These measures refer to the standards applied by governments in importing products to protect against risks to food safety, and animal or plant life or health. Canadian stakeholders stressed the need to seek robust implementation of SPS provisions in a potential FTA, with the expectation that doing so would increase clarity and predictability of the regulatory regime, while also resulting in meaningful market access for Canadian products.

Interest in SPS-related issues was high among representatives from across Canada’s agriculture and agri-food, fish and seafood, and wood product industries, for whom SPS issues are most relevant.

Details of what we heard

Stakeholders expressed views regarding a number of challenges that they would like to see addressed through an SPS chapter in a potential FTA between Canada and China, such as:

4.b.iv. Trade facilitation

The Government of Canada also heard from Canadians on challenges related to the movement of goods between Canada and China. To facilitate the flow of goods, trade facilitation (TF) provisions in FTAs strive to modernize, simplify, and standardize trade-related customs procedures, reducing transaction costs for traders while maintaining appropriate security measures.

Stakeholders from various sectors of the economy, including agricultural and agri-food, courier services, forestry, and technology industries identified a range of Chinese measures that are non-trade facilitative, and which consequently prevent goods from entering the Chinese market efficiently. These issues include a lack of transparency and consistency in the applicable regulations, a need to improve the timeframe for the release of goods from customs, and a lack of advance notice of changes in customs regulations in China.

Details of what we heard

Stakeholders identified challenges and concerns related to trade facilitation in several specific areas:

4.b.v. Services

In general, consultations revealed significant interest on the part of Canadians regarding a possible Canada-China FTA that could improve market access for service providers to the Chinese market. Throughout the consultations period, the Government of Canada received significant feedback related to service providers involved in the production, distribution, marketing, sale, and delivery of a service. In general, Canadian stakeholders indicated that the Chinese market is of strategic and commercial interest, and that they see value in an FTA as a tool for addressing certain impediments that currently exist.

At the same time, stakeholders expressed a range of views with respect to the labour mobility provisions of a potential FTA with China, which are principally used by service providers. These provisions encompass obligations that facilitate the entry of certain skilled professionals to work temporarily in the countries covered by an FTA. While some stakeholders felt that strong temporary entry commitments that allow greater two-way labour mobility would benefit Canadian industry, others noted the need to protect the Canadian labour market from an influx of Chinese workers.

Details of what we heard

Stakeholders provided the following comments related to trade in services:

Cross Border Trade in Services

Stakeholders identified a number of barriers that an FTA could meaningfully address, including:

Labour mobility
Financial services

4.b.vi. Investissements

On investment, officials heard from a range of Canadians, including businesses operating in China, academics, unions, advocacy groups, and concerned citizens.

China has made significant progress in opening up to foreign investment. Nevertheless, China remains a challenging business environment, with significant barriers still in pace with respect to the establishing and operating inside their market. Business and non-business stakeholders see value in an FTA investment chapter, provided it increases Canadian investment opportunities in the maturing Chinese market, encourages beneficial Chinese investment to Canada, and safeguards the Government of Canada’s right to regulate in the public interest.

Details of what we heard

Canadian stakeholders registered a range of views on investment:

Stakeholders also raised a number of ongoing challenges for Canadian companies investing in China:

4.b.vii. Competition policy

The Government of Canada heard interest from Canadians in ensuring that the benefits of trade liberalisation from a potential Canada-China FTA are not offset by anti-competitive conduct. Competition laws and policies are necessary to ensure that the benefits of trade liberalisation are not offset by anti-competitive business conduct. For example, competition law helps to ensure that cartels do not block market access gained through a potential trade agreement.

Details of what we heard

Stakeholders noted:

4.b.viii. State owned enterprises (SOEs)

Canadian businesses, academia and civil society registered considerable concerns in relation to Chinese SOEs. One key issue raised was how best to ensure the ability of Canadian businesses to compete fairly with Chinese SOEs in China. An SOE is a legal entity (either wholly or partially owned by the government) that undertakes commercial or public welfare activities on behalf of the state.

Academic experts and Canadian businesses from across various sectors, including agriculture and agri-food, financial services, advanced manufacturing, mining and forestry, expressed concerns about the real and potential competitive advantages that Chinese SOEs have over their private competitors. When doing business in China, there are specific concerns on the part of Canadian companies relating to the lack of transparency and preferential government policies and practises favouring Chinese SOEs, such as special forms of financial assistance available only to SOEs.

Details of what we heard

Stakeholders raised the following views on SOEs:

4.b.ix. Intellectual property

In the area of intellectual property (which includes issues related to rights such as patents, trademarks, copyright, industrial designs and trade secrets, along with the enforcement of those rights), Canadian stakeholders from a wide variety of sectors, including agriculture and agri-food, cleantech, consumer products and information technology, have identified China as a highly challenging, uncertain, and particularly competitive environment. With businesses in any given sector being likely to hold intellectual property in some form, challenges related to intellectual property in an important market like China can and do affect not only major Canadian companies, but also individual creators, innovators and small-business owners. Among other intellectual property issues, the Government of Canada heard from stakeholders regarding their experience in China related to, primarily, trademarks and the enforcement of trademark rights.

Details of what we heard

Stakeholders identified opportunities for addressing the following intellectual property issues, among other areas:

4.b.x. Government procurement

The Government of Canada heard from stakeholders about their interest in gaining reciprocal access to the Chinese government procurement market, including procurement by state-owned enterprises (SOEs), through a potential Canada-China FTA. Government procurement refers to the acquisition of goods, services and construction services by governments at the central and sub-central level, as well as SOEs.

Stakeholders and partners that raised government procurement during consultations included different industry sectors, academia, civil society, and provinces and territories.

Details of what we heard

Stakeholders identified specific opportunities and risks related to government procurement:

4.b.xi. Trade remedies and non-market economy status

Canadian stakeholders registered concerns regarding dumped and subsidized imports from China, which, in the absence of appropriate remedies, could risk displacing domestic production in Canada and disrupting regional supply chains. Canada maintains a trade remedy system to address injuries to domestic producers caused by unfairly dumped and subsidized imports. We heard from Canadian stakeholders that an effective trade remedy system is an essential tool for addressing unfairly traded imports from China and ensuring that Canadian producers are competing on a level playing field.

Concerns were also raised about the distortions resulting from government involvement in the Chinese economy, including distorted prices and costs, as well as influence over specific industries, such as steel and copper. Many stakeholders indicated that to address such distortions, Canada must retain the ability to treat China as a non-market economy in anti-dumping investigations.

Details of what we heard

4.b.xii. Dispute settlement

The Government of Canada heard widespread interest in provisions related to dispute settlement in an FTA with China. The dispute settlement provisions in an FTA establish a rules-based mechanism that allows parties to settle disagreements pertaining to the interpretation or application of an FTA, and seek remedies for breaches of obligations under the agreement. The dispute settlement mechanism is distinct from investor-state dispute settlement, in that it creates a formal process for resolving disputes between the parties to the agreement, rather than between an investor and a party.

Stakeholders who mentioned dispute settlement are overwhelmingly in favour of a robust mechanism that can resolve disagreements between parties in a timely and efficient manner. Given the challenges arising from the lack of transparency and predictability of China’s regulatory framework, stakeholders see a robust dispute settlement mechanism as a means of ensuring that Parties abide by the commitments and obligations taken in an agreement. Moreover, several stakeholders expressed concerns that the obligations taken by China in a possible FTA might not be respected and that some means of enforcement would be necessary.

Details of what we heard

Stakeholders raised the following views in relation to the settlement of disputes:

4.b.xiii. Environment

The Government of Canada heard strong support from a range of stakeholders (including civil society, academia, industry, provinces, and private citizens) for robust provisions related to environment and climate change in an FTA with China.

Stakeholders raised concerns over lower levels of environmental protection and standards in China, and noted that an FTA with China could pressure Canada to reduce its own environmental standards and levels of protection, including in order to compete with Chinese firms. Many stakeholders will be looking for strong environment commitments in a potential FTA, as well as provisions to ensure that Canada preserves its ability to maintain high levels of domestic environmental protection, and to introduce and enforce environmental laws and regulations, including to meet climate change goals and commitments.

At the same time, stakeholders also see an opportunity through an FTA to advance a progressive trade approach and enhance collaboration on environment and climate change issues with China.

Details of what we heard

Stakeholders identified a variety of opportunities for environmental considerations to be addressed:

4.b.xiv. Labour

The Government of Canada received considerable feedback from Canadians regarding Canada’s approach in relation to labour in a possible FTA with China, underscoring the necessity of an enforceable labour chapter.

Labour provisions and labour agreements are being included with increasing frequency in the context of FTA initiatives by both advanced economies and developing countries. Canada expects its trading partners to provide safe and fair working conditions for all workers, consistent with internationally recognized labour rights and principles. In this context, Canada’s trade-related labour agreements commit our partners to effectively enforce laws that must respect internationally-recognized labour standards, including the International Labour Organization’s 1998 Declaration on Fundamental Principles and Rights at Work. These obligations include:

Labour provisions in FTAs and labour agreements provide a mechanism through which the public can raise concerns, and a robust dispute resolution mechanism to ensure enforceability of obligations.

As part of consultations on a potential FTA with China, we’ve heard from key stakeholders including employers’ and labour unions. Exchanges with employers’ organizations indicated broad support for Canada’s current approach on labour, whereas labour unions have raised several concerns regarding Canada’s traditional approach in FTAs.

Details of what we heard

Stakeholders identified opportunities and challenges for the inclusion of a labour chapter in a potential Canada-China FTA:

4.b.xv. Small and medium-sized enterprises

The Government of Canada heard cautious interest from Canadian SME stakeholders regarding the Government of Canada’s proposal to include provisions that will directly address the needs of Canadian small and medium-sized enterprises (SMEs) in a potential Canada-China FTA. Canadian SMEs play a key role in the Canadian economy, representing approximately 99 percent of all businesses in Canada and ninety percent of the private sector workforce. Approximately 12 percent of all Canadian SMEs export, making up $172 billion (or 38 percent) of the total value of Canadian exports.

Details of what we heard

Stakeholders identified a number of key challenges regarding China:

4.b.xvi. Culture

The Government of Canada heard considerable interest from Canadians in ensuring that a potential Canada-China FTA improves access to the Chinese market for Canadian cultural and creative industries. Stakeholders have also indicated that an FTA would need to preserve Canada’s flexibility to adopt and maintain cultural policies. Key industries from which we heard included films, music, books, magazines, performing arts, video games, and new technologies.

Stakeholders identified different challenges that restrict access for Canadian cultural and creative industries into the Chinese market such as the lack of transparency of the regulatory system, foreign film quotas, and lack of enforcement of laws and regulations and piracy.

Details of what we heard

Stakeholders identified opportunities in a potential Canada-China FTA for addressing issues as they relate to cultural and creative sectors:

4.b.xvii. Human Rights

The Government of Canada heard considerable interest from Canadians who expressed concerns regarding human rights violations by the Government of China and its respect for the rule of law. Stakeholders who raised these issues conveyed that human rights considerations must be at the centre of Canada’s engagement with China, rather than a marginal factor to be balanced against others.

Details of what we heard

4.b.xviii. Gender

As part of the Government of Canada’s Progressive Trade Agenda, the Government is interested in understanding how trade agreements can support women’s economic empowerment. During consultations on the possible FTA with China, the Government of Canada consulted Canadian female business leaders on a possible Canada-China FTA, and received several submissions touching on gender issues.

Input received demonstrates that Canadians want to ensure that Canada’s trade agenda helps to advance China’s respect for women’s rights and contribute to women’s economic empowerment. There are many ways in which China is currently perceived to limit economic opportunity for women  and any steps that a possible FTA might take towards facilitating access to finance, markets, training, or other prerequisites for entrepreneurship are seen as a useful part of overall efforts to help advance universal values, including respect for human rights, in China.

Details of what we heard

4.b.xix. Indigenous groups and businesses

The Government of Canada consulted a number of Indigenous business associations during the 90-day public consultations period and met with certain National Indigenous Organizations (NIOs). These organizations registered the need for the Government to maintain exceptions and reservations for Indigenous peoples in a potential Canada-China FTA, ensuring that Indigenous rights are not compromised by any potential FTA. Certain Indigenous stakeholders and NIOs, as well as some non-Indigenous Canadians, also expressed the need to consult with Indigenous groups throughout any potential FTA negotiation process. In addition, interest was raised in the potential opportunities that may emerge for Indigenous communities as a result of increased trade and investment under a possible Canada-China FTA.

Details of what we heard

5. Non-FTA specific feedback from Canadians

Although our conversations with Canadians in the context of public consultations were primarily focused on issues that would constitute part of a potential FTA, stakeholders also told us about a range of issues related to doing business with China that fall outside the traditional scope of FTA negotiations. Stakeholders also took the opportunity of the consultations to express views on some key domestic policy issues which the Government will need to consider as Canada deepens its economic relations with China, including land use, support for Canadian companies wishing to understand the Chinese market, and the need for improvements to Canadian logistics and transport infrastructure.

What we heard

6. Next steps

Following the conclusion of FTA exploratory discussions, the governments of Canada and China will separately decide whether they wish to proceed with FTA negotiations. For Canada, any decision on whether to launch FTA negotiations with China will take into account the results of the exploratory discussions, key findings of the joint feasibility study, ongoing and past internal analysis, and the feedback we received from Canadians throughout consultations. This assessment will ultimately be rooted in a determination of whether an FTA with China serves the best interests of Canadians.

While the initial public consultations have now concluded, we remain committed to hearing from Canadians on their views regarding a possible Canada-China FTA. Ongoing engagement with Canadians will be essential to determine how to best deepen Canada’s bilateral trade relationship with China in a manner that benefits Canadians and our economy. This is why we continue to consult with Canadians and a broad range of stakeholders across the country, and will hold additional consultations if the decision is made to proceed to FTA negotiations.

If you would like to share your views on a possible Canada-China FTA negotiation, we would invite you to contact us by email at ChinaTradeConsultations/ConsultationscommerceChineTCA@international.gc.ca

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