Public consultations on a possible Canada-China FTA

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 21^st 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.

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

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.

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.

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).

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

• Certain Canadian stakeholders told us that the elimination of Chinese tariffs would increase their export competitiveness, especially in relation to other suppliers who already benefit from preferential access to China through existing FTAs, most notably Australia, New Zealand, Korea and Chile. Canadian products that could benefit most from the elimination of Chinese tariffs include a wide range of agriculture and agri-food products, fish and seafood products, finished forest products, and select industrial goods.
• The reactions from Canada’s agriculture stakeholders were especially supportive of a prospective FTA with China. China is seen as a market with great potential for an export-oriented sector like agriculture.
• Many agriculture stakeholders raised issues with China’s lack of transparency regarding the rules that apply and the unpredictable application of various measures, including sanitary and phytosanitary measures. It was also noted that rules and their application vary widely between the Chinese Central Government and the Chinese provinces and municipalities, as well as between various Chinese ports. Several agriculture stakeholders were of the view that China applies non-tariff measures as a means of controlling markets and favouring its domestic production.
• More specifically, agriculture stakeholders also made clear the importance of addressing barriers to innovation in the agriculture sector, particularly with respect to challenges with China’s approval system for genetically modified (GM) products for food and feed use, and the establishment of pesticide maximum residue limits for imports.
• The Canadian forestry sector also attributed high importance to a potential FTA with China given the magnitude of existing trade in forest products, and the opportunities it sees to further increase and diversify the trade relationship. Stakeholders in this sector are interested in seeing a potential FTA address Chinese technical barriers to trade, and put in place effective dispute settlement and enforcement mechanisms.
• On the other hand, some stakeholders noted that lowering Canadian tariffs would have significant repercussions for jobs in specific Canadian industries, including certain manufacturing sectors and supply-managed agricultural goods (i.e. poultry, eggs and dairy).
• Several Canadian automotive assemblers and parts producers acknowledged China’s growing capacity to supply its own domestic market and noted that Chinese firms may eventually seek to export to Canada.
• The Canadian metals sector, which notably includes steel and aluminium producers, expressed hope that a potential FTA could meaningfully address Chinese over-production.

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:

• There is a lack of transparency and consistency in how regulations are developed and enforced in China, which was the issue most commonly raised by stakeholders in a wide variety of sectors, including agriculture, mining, manufacturing, consumer products, and forestry. Stakeholders expressed frustration with the frequency of changes to Chinese regulations, which are often difficult to identify, and are sometimes applied differently across various jurisdictions within China.
• Likewise, Canadian stakeholders in a variety of sectors identified challenges regarding conformity assessment procedures. These rules dictate the process required to ensure that imported goods comply with relevant regulations and standards. A number of stakeholders raised concerns about the significant costs and lengthy procedures associated with obtaining the required China Compulsory Certification (CCC) mark for certain products for export to China.
• A number of stakeholders also encouraged the Government of Canada to explore ways to cooperate with Chinese regulators to bridge regulatory differences. Several Canadian stakeholders identified specific areas in which Canada and China should work to align regulations or encourage mutual acceptance of approaches, and noted that the Trans-Pacific Partnership outcome for areas like cosmetics, forestry, and wine would be suitable for an agreement with China.
• We heard from stakeholders about specific regulatory measures applied by China that cause problems for Canadian companies in certain sectors. Some examples include: labelling requirements for agriculture and agri-food; China’s non-use of international standards; and, discriminatory regulations and duplicative testing requirements in the manufacturing sector.
• In addition, some stakeholders identified the importance of maintaining Canada’s regulatory requirements for goods imported from China. For example, stakeholders noted the need to ensure that products coming from China continue to meet Canadian labelling requirements.

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:

• China's SPS measures in some instances are not based on science and are inconsistent with international standards.
• The extensive time and financial investment required by Canadian companies/industries to develop market access protocols and host incoming Chinese audits that are required in order to receive approval to export to China.
• China’s lack of transparency in the development and implementation of SPS measures, and significant delays in approvals, which were identified as major sources of unpredictability in the Chinese market.
• Delays in product movement into China, due to inconsistency at border points in the application of SPS measures.
• Chinese limits on the maximum amount of pesticide residue permitted to remain on food or animal feed, that differ from limits established by international standard-setting bodies.
• Delays in China’s approval system for genetically modified (GM) products, as well as China’s zero tolerance policy with respect to the low level presence of GM crops. Stakeholders assert that these delays and restrictions limit the ability of Canadian farmers to take advantage of new technologies because GM products are not generally commercialized until approved in major markets, including China. Stakeholders suggest that Canada should seek greater predictability in the Chinese GM product application, assessment and appeals processes.
• On the import side, a number of stakeholders voiced concerns over imported Chinese products, citing the need to ensure that the quality and safety of imports into Canada continue to be verified in a systemic manner.

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:

• A lack of transparency and consistency in China’s trade and border regulations, which result in delays at the border, sometimes for an extended period of time. In the case of perishable goods, these delays result in loss of quality and spoilage. Stakeholders also noted that import regulations are sometimes applied differently at various points of entry into China, further complicating the process of exporting there.
• Stakeholders noted that any possible FTA between Canada and China would need to include provisions related to the expedited release of goods.
• Stakeholders also voiced concerns regarding unannounced changes to regulations, the lack of compliance with international standards, the complicated transit of goods between local customs administrations, and the need for a more effective risk management regime.
• Due to complex import procedures requiring a high volume of documentation, Canadian stakeholders noted the need for a single-window approach to enable the submission of all customs and border data and documents through one interface, in order to streamline the clearance process for goods entering China.

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:

• Discriminatory practices that favour Chinese suppliers over Canadian suppliers, such as current or potential future Chinese barriers limiting the ability of Chinese consumers to come to Canada to consume Canadian services.
• Market access barriers, including numerical limitations and requirements for Canadian service providers to have an office in China.
• Regulatory requirements that are, for example, not applied in a transparent, impartial and consistent manner by Chinese authorities and that consequently create uncertainty for Canadian suppliers.
• Limitations, such as data localisation requirements and restrictions on data flows, that impede the ability of Canadian companies to engage in electronic commerce.

Labour mobility

• Concerns were raised by some regarding the potential inclusion of provisions in an FTA that facilitate labour mobility into Canada given potential impacts on the domestic labour market. At the same time, others highlighted the possible benefits for Canada of facilitating two-way mobility in specific sectors and categories of workers.
• With respect to Canadian access in to China, Canadian stakeholders acknowledged that China’s current domestic immigration regime generally facilitates access for skilled foreign workers. However stakeholders noted the potential for improvements, including in terms of transparency and consistency.

Financial services

• Financial services are an important component of the services trade relationship between Canada and China.  Several Canadian banks and life insurance companies have a commercial presence in China, while a number of Chinese banks have established branches or subsidiaries in Canada.
• Stakeholders noted the significant growth potential in many parts of the Chinese financial services market and indicated that an FTA has the potential to meaningfully expand these opportunities. 
• Stakeholders also identified a number of impediments that an FTA could help overcome, including: market access barriers to certain sectors, administrative burden in some areas, and various ownership restrictions for financial sector subsidiaries in China.

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:

• In general, Canadians welcome Chinese investment in Canada, and acknowledge its potential to create economic opportunities for both countries. However, there is concern that Chinese government influence over outward investment decisions could cause competition issues in Canada. For these stakeholders, Chinese investors in Canada should act in accordance with market principles and operate on a level playing field with Canadian firms.
• An FTA investment chapter should build on the Canada-China Foreign Investment Promotion and Protection Agreement, and align with the government’s commitment to progressive trade. An FTA investment chapter should reflect and be sensitive to Canadian values such as human rights, labour rights, and environmental protection.
• Business stakeholders see value in including investor-state dispute settlement (ISDS) procedures in order to resolve disputes and ensure compliance with the agreement. Nevertheless, some non-business stakeholders, especially civil society groups and private individuals, raised concerns about the inclusion of ISDS, as well as the importance of affirming Canada’s right to regulate in the public interest.

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

• Canada should seek to address our asymmetrical investment relationship with China, which, due to China’s greater level of restrictiveness to foreign investment, is imbalanced in China’s favour. Any FTA should aim to reset this balance to ensure reciprocity and mutual benefit for both countries. Canada should consider provisions to ensure adherence to the agreement, and set-out consequences for non-compliance.
• In key sectors such as the oil and natural gas exploration and development industry, China restricts the ability of foreign investors to exercise a controlling ownership. Instead, the foreign firm is forced to enter into a “joint venture” partnership with a Chinese firm, where the Chinese firm owns the controlling stake and benefits from the foreign firm’s business practices and know-how. At times, this can be a useful strategy for investors in China; for others, it has not always proven successful.
• Although China is working to improve its intellectual property protections, enforcement remains problematic.
• China imposes performance goals on investors so as to influence their behaviour. These arduous “performance requirements” include limitations on the ability of investors to source foreign-made technology in their operations; restrictions on their ability to transfer data out of China (or even across provinces in China); requirements to locate data storage centres in Chinese territory; and requirements to submit encryption codes and proprietary knowledge to the Chinese government.
• The process for obtaining operating or business permits is not always clear, and is particularly challenging for investors in China’s extractive sector (e.g. obtaining exploration licenses; environmental permits).
• China’s capital controls regime can restrict foreign firms’ financial transactions out of the country (e.g. repatriation of profits), as well as the ability of Chinese firms to invest in Canada. These restrictions are often communicated to banks in informal ways, which can cause confusion, in addition to contributing to the lack of regulatory transparency.
• Stakeholders noted how China’s domestic court system can be opaque, complex, labour intensive, and is perceived to favour Chinese firms over foreign firms. Canadian investors in China reported difficulties in enforcing commercial contracts.
• Chinese laws are often inconsistently enforced, with provincial and local officials having significant discretion and autonomy to interpret Chinese laws. This can increase the risk of discrimination against Canadian and other foreign firms 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:

• Competition policy provisions are important to include in a potential trade agreement. Such provisions should encourage the adoption and enforcement of domestic measures to proscribe anti-competitive business conduct.
• The importance of non-discrimination, transparency and procedural fairness in the application of competition laws.
• Anxieties about competing on a fair and level playing field with Chinese counterparts. On this issue, competition policy (including competition law enforcement) and the conduct of state owned enterprises (SOEs) were frequently cited in parallel.

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:

• Foreign investment by SOEs can benefit the local economy but there needs to be effective and enforceable rules to ensure that Chinese SOEs are competing on a fair and level playing field with Canadian business.
• There should be equal treatment for all businesses in the Chinese marketplace, whether foreign or domestic, state-owned or a private entity. SOEs should operate in a non-discriminatory manner, on the basis of commercial considerations and they should not be provided non-commercial assistance, such as subsidies, that causes non-competitive outcomes.
• China is undergoing domestic SOE reforms; however, there is skepticism on the effectiveness of these reforms and potential benefit for foreign businesses seeking to enter the Chinese market.
• Transparency and accountability for SOEs were also raised as key challenges. Improved disclosure and reporting practices in the oversight and operations of SOEs in China could address these concerns.
• There is also concern with the level of Chinese government intervention in SOE commercial activities. Such interventions are viewed as being conducted in a coordinated fashion, based on political direction rather than on the basis of market principles.
• In China, SOEs can benefit from preferential government policies and practices, such as advance notice of government policy changes and access to privileged information. Other examples include favoured treatment from regulators and unequal application of taxes and duties.

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:

• Frequent bad-faith registration, in China, of Canadian businesses’ names, brands and designs by Chinese third parties that use the rights so obtained to hinder the activities of these Canadian businesses in China, or even their access to the Chinese market.
• Widespread trademark counterfeiting, particularly on e-commerce platforms.
• Chinese third parties marketing products (which may be subpar or even hazardous) and services misleadingly suggesting that the product or service is from Canada or otherwise associated with Canada when that is not the case.
• Lack of certainty regarding China’s framework and requirements for the licensing and ownership of intellectual property, leading to Canadian businesses hesitating to market their technology in China or to partner with Chinese firms.
• Enforcement measures and penalties being insufficient to deter and prevent infringement of intellectual property rights by Chinese third parties, as well as difficulties with the enforcement of court decisions.
• Lack of predictability and transparency in relationships with administrative and judicial authorities, including in enforcement cases.

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:

• In general, industry stakeholders see the lack of transparency in Chinese procurement processes as a challenge, and are troubled by the fact that a clear preference is given to Chinese companies over foreign ones. They expressed hope that a Canada-China FTA would level the playing field.
• Cleantech industry stakeholders are strongly interested in having access to Chinese government procurement given that most clean technology projects in China are funded by the government. They also indicated the need for domestic support of the cleantech industry in Canada.
• Some stakeholders fear that government procurement provisions in a Canada-China FTA may diminish Canada’s ability to protect smaller, local economies, as well as increase restrictions on local government and MASH sector (municipalities, academic, social and health services) procurement.
• Several stakeholders identified the risk that Chinese state-owned enterprises could outbid Canadian competitors and win large infrastructure projects in Canada, for example, in the public transportation sector.
• Several provinces expressed interest in securing reciprocal access to China’s vast government procurement market.
• Some territories expressed an interest in preserving their existing government procurement policies that favour small, local suppliers.

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

• Canadian stakeholders argued that Canada must retain an effective trade remedy system to ensure that unfairly traded Chinese imports are not harming Canadian producers.
• The most common issue raised by stakeholders was that in order to maintain the effectiveness of the trade remedy system, Canada must maintain the ability to treat China as a non-market economy in anti-dumping investigations. As such, a potential FTA with China should acknowledge that certain sectors of the Chinese economy do not operate under market economy conditions and expressly authorize the use of alternative methodologies.
• Stakeholders expressed concerns about the persistence and magnitude of non-market economy conditions in the Chinese economy, including through concessional lending by state-owned banks, price distortions, the presence of state-owned enterprises and the widespread provision of subsidies.
• Stakeholders indicated that Canadian producers cannot be expected to compete with state-owned enterprises without the protections afforded by a robust trade remedy system, as state-owned firms derive many benefits from the state, including the absence of a profit imperative.
• Particular concerns were raised by stakeholders about the situation of over-capacity and over-supply in the Chinese steel industry, which allegedly fuels the dumping of steel in global markets, causing downward pressure on global steel prices.
• The strength of a country’s trade defense against China was flagged as a key factor in determining the location of investment by global steel companies.
• Concerns were also raised about the delicate balance presented by the prospect of simultaneous negotiations with China and with the United States and Mexico in the context of NAFTA renegotiations, in light of U.S. concerns with Chinese steel overcapacity and unfair trade practices.
• From an offensive perspective, some stakeholders that export to China indicated that a potential FTA with China should aim to improve disciplines on China’s use of trade remedies.

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:

• Stakeholders pointed to China’s past FTAs as evidence that it has previously agreed to impartial and neutral dispute resolution mechanisms, and conveyed that Canada should pursue a high-standard commitment from China in this respect.
• An effective and rules-based dispute resolution system that is equipped to contend with non-tariff barriers (particularly sanitary and phytosanitary issues) is critical to ensuring that a potential Canada-China FTA yields commercially meaningful market access for Canadian companies.
• A dispute resolution mechanism under a potential Canada-China FTA must be structured so as to deliver outcomes in an expeditious manner. Stakeholders told us that delays in resolving disputes around regulatory issues are expensive, and can harm the viability of their business operations in China.
• Stakeholders conveyed their view that the dispute settlement mechanism should be comprehensive in scope, covering most substantive commitments by parties, notably those pertaining to intellectual property, labour, and the environment.
• We heard that a dispute settlement mechanism must be flexible and capable of responding to the emergence of new barriers to trade, and must be able to address barriers that are introduced by Chinese authorities at the sub-national level.
• Several stakeholders noted that provisions should be included in a possible agreement that would serve to deter bad-faith or non-compliant behaviour by Parties to the agreement.
• In recognition of cultural differences between Canada and China, a few stakeholders suggested the possibility of cooperative mechanisms for resolving disagreements. These suggestions include establishing robust institutional dialogues that would address problems through the medium of an ongoing relationship rather than through an adversarial dispute settlement mechanism.

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:

• Stakeholders indicated they want Canada to promote environmental protection, sustainable development, and climate change in a potential FTA with China.
• Various stakeholders signaled the importance they place in including environmental protection commitments in an FTA, and a number called for binding and enforceable environment provisions (although some noted the possible complexity of enforceability). Stakeholders are seeking both to ensure that environmental protection is upheld, and that Chinese firms do not gain a competitive advantage due to lower environmental standards or requirements.
• Many stakeholders also raised the topic of climate change, and emphasized a need to ensure that Canada’s efforts to implement its climate commitments, including at the provincial level, are not jeopardized. Others raised issues related to carbon pricing and carbon leakage. A specific concern that we heard from industry stakeholders was in relation to potential competitiveness issues vis-à-vis firms in other countries that may not be subject to similar carbon pricing requirements.
• Other specific environment-related topics that stakeholders are interested in seeing in an FTA include: Multilateral Environment Agreements (MEAs), corporate social responsibility, biodiversity (including protecting traditional knowledge), sustainable development and the Sustainable Development Goals (SDGs), fossil fuel subsidies, human health, and elements building on the environment chapters in the Canada-EU Comprehensive Economic and Trade Agreement and Trans-Pacific Partnership (e.g., in the areas of fisheries and forestry).
• A number of stakeholders also see an opportunity to advance cooperation with China, either within or alongside an FTA, in such areas as climate change, environmental goods and services, air, water, soil, and marine protected areas.
• We heard wide interest in promoting ‘green trade’ and facilitating enhanced access to the Chinese market for Canadian environment goods and services, including clean-tech, through an FTA. Stakeholders in the clean-tech industry are interested in capitalizing on what they see as significant opportunities for clean technology exports to China as this country advances environmental priorities, including in areas such as the renewable energy sector and environmental remediation efforts.
• Clean-tech industry stakeholders also expressed concerns and challenges in a number of areas that they face in accessing opportunities, including intellectual property, certification, establishing a physical presence in China, lack of transparency and uneven/unclear application of environmental regulations in China. We also heard that major Chinese efforts to develop their own clean-tech capabilities could create competitiveness issues for Canadian firms.
• A number of stakeholders called for Canada to ensure that government authorities have the flexibility needed to regulate and implement appropriate environmental measures and standards. In particular, we heard that the Investment Chapter of a potential FTA remains a focal point for many stakeholders, especially concerns around the Investor State Dispute Settlement (ISDS) mechanism. Many civil society groups are opposed to the inclusion of ISDS provisions, and in one case called for environment measures to be exempt. Key concerns that were raised include: interference with governments’ right to regulate to protect the environment (risking a ‘regulatory chill’), placing corporate over public interests, and granting of greater rights to foreign than domestic firms.
• We heard about the need to consider possible environmental impacts of Chinese investment in Canada in natural resource sectors (including oil sands) and ensure that Chinese investors follow Canadian environmental regulations.
• Several stakeholders advocated for a transparent process and public input throughout the negotiations and implementation of FTAs, and for robust environmental assessment of the potential impacts of an FTA. There was also interest in an effective process for citizens to make submissions to Canada and China on environment provisions after an FTA would enter into force.

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:

• Protecting the right to freedom of association and collective bargaining;
• Abolishing the use of child and forced labour;
• Eliminating discrimination in the workplace; and,
• Providing protections in the areas of occupational health and safety, wages, hours of work and migrant workers.

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:

• Employers’ organizations expressed general support for Canada’s current approach to labour in FTAs, which includes strong enforcement mechanisms, as they believe including labour provisions in an FTA would help level the playing field for Canadian businesses in China. Some employers’ organizations expressed their continued support for trade agreements, and indicated that they plan to intervene to respond to potential negotiation details as they emerge.
• Labour unions expressed concerns with labour rights in China, particularly in relation to human rights, the right to work and decent wages, the lack of freedom of association, and the right to strike and workers’ representation. In this context, labour unions advocated for the inclusion of strong labour provisions in the potential FTA, effective worker representation on all levels, and strong enforceability through trade sanctions that would lead to better outcomes for workers.
• Labour unions more generally expressed the view that it would be a premature move to engage China in FTA negotiations in the current context.

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:

• In general, SMEs have access to fewer resources than their larger counterparts. As such, the barriers that Canadian businesses face in doing business overseas may have a greater impact on SMEs, and therefore many do not export overseas.
• The main challenges for SMEs doing business in China are a lack of transparency and clarity in the rules and regulations that businesses must follow. The cost of shipping, currency fluctuations, and duties and taxes also remain top challenges for all SMEs doing business abroad.
• As well, challenges regarding regulatory equivalency and compliance, especially with respect to food safety and the labelling of products, are top of mind for Canadian companies.

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:

• Several stakeholders recognized the growing importance of the Chinese market and the related business opportunities, particularly in the audiovisual and the multimedia industries.
• However, the great majority of stakeholders identified intellectual property and copyright violations, and the lack of enforcement, as keys barriers to greater market penetration.
• In addition, we also heard from the great majority of stakeholders that the lack of transparency and consistency in how regulations are developed and enforced in China cause difficulty in doing business in China and with Chinese partners in this sector.
• Many stakeholders described the negative impact of China’s restrictions on imports of books and audiovisual products, of difficulties with temporary entry into China, and of difficulties in securing royalties for music.
• Canadian stakeholders in a variety of sectors raised concerns regarding revenue sharing, and noted that in many cases, it is difficult to ensure fair revenue sharing from the distribution of cultural products.
• While the Chinese government has recently increased its foreign film imports, the current limit restricts access for the Canadian audio-visual industry.
• Many stakeholders reported that the mission to China by Minister Joly in January 2017 had been very useful and helped build further business opportunities. In addition, the Creative Industries Advisory Group, which was established by the Canadian Consulate in Shanghai and met with Minister Joly,enhances developing business relationships in different cultural sectors and supports the promotion of creative industries to access this market.

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

• Several stakeholders conveyed that Canada’s approach to trade agreements could be improved by the introduction of a comprehensive and independent human rights impact assessment process for all FTAs under consideration.
• Stakeholders offered a number of specific suggestions with a view to helping ensure that human rights are upheld in a possible FTA with China. These suggestions included: clear language to ensure that FTA provisions cannot be interpreted in a manner inconsistent with human rights obligations; subjecting human rights provisions in the FTA to the agreement’s dispute settlement process; and, the option to opt-out of the FTA if it is determined that implementation of the agreement is inconsistent with Canadian values related to human rights.
• Stakeholders also advocated for the inclusion of strong corporate accountability provisions in an eventual FTA with China, to ensure that Canadian businesses operating in China are nevertheless subject to Canadian human rights standards.
• Several stakeholders raised concerns related to China’s domestic human rights record, specifically with regard to Tibet and other ethnic and religious minority groups, the respect for the freedoms of speech and assembly, and the treatment of political dissidents, journalists, and lawyers.
• Some stakeholders expressed concern that a decision to negotiate an FTA could have a chilling effect on the Government of Canada’s willingness to raise sensitive issues related to human rights with China. These stakeholders were adamant that Canada’s ability and willingness to raise broach difficult issues with China should not be compromised.
• Other stakeholders told us that Canada should not overburden any possible trade agreement with tangential issues (e.g., human rights) that could undermine the possibility of reaching an agreement.

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

• A Canada-China FTA “gender agenda” should be integrated and cross-cutting, i.e., reflected in each element of a potential agreement.
• Canada should seek to obtain, as part of an FTA, specific commitments from China that would make a meaningful difference for women’s economic empowerment, whether in regard to access to finance or ICT services, promoting an increased number of women STEM workers, or enhancing protections for women and others against gender-related economic discrimination.
• Chinese firms that have discriminatory practices should not be permitted to do business in Canada.
• Although events/discussions focused on women and gender issues are welcome, this should not come at the expense of being invited to the “big table” where decisions will be made. There is a higher prospect for success through gender mainstreaming rather than separating women’s issues.
• Chinese large private sector multinational firms have shown the ability to implement progressive labour and hiring practices, much more so than SOEs.
• Canada and China are not that dissimilar when comparing the status of women in senior leadership ranks.
• Stakeholders suggested that for a progressive trade agenda to be successful, it will be important to have more women on boards and senior management positions to effect change.
• Advocacy from the PM on gender equality has been very valuable, and changes in the private sector have already been noted as a response to his example.

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

• Economic interest on the part of Indigenous business organizations was registered regarding the value of improved market access for animal parts or products, fisheries, and the protection of cultural authenticity in art and intellectual property.
• Increased engagement with China presents potential opportunities for infrastructure development and sectoral growth outside of urban areas, promoting broader distribution of economic benefits from increased Chinese investment and tourism to Canada.
• There are concerns about the adverse impact of a potential Canada-China FTA on the rights of Indigenous peoples in Canada, especially in areas such as energy and natural resources (incl. forestry, mining), fisheries, investment, and procurement and importance to reserve the ability to adopt or maintain measures that protect the rights or interests of Indigenous peoples.
• Stakeholders would like to see ongoing engagement with Indigenous groups throughout any potential FTA negotiation process. Interest expressed in furthering dialogue on the protection of the environment and the impact of increased economic activity on Indigenous lands. The need for foreign companies and investors to understand the duty to consult for the use of traditional Indigenous territory was raised.

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

• Stakeholder consultations reflected a number of concerns regarding Chinese foreign investments in property, whether residential, commercial or farm land. Chinese investments in Canadian real estate markets have contributed to higher real estate prices, which has benefited some owners, but have also had a variety of negative impacts on several communities. In farm communities, properties have been acquired and then left unattended, which has created a number of problems, including the spread of diseases, and other increases in farming costs (e.g., pollination of a working farm can be more costly when bees brought into a farm migrate to an unattended farm). Similarly, commercial properties owned by absentee landlords are sometimes boarded up, leaving once vibrant communities with hollowed-out commercial centres.
• Given the significant challenges of doing business in China, whether seeking to find the right partner or to learn how to effectively protect intellectual property, stakeholders noted the need for improved support and services for Canadian small and medium-sized enterprises to prepare them for doing business in China. Stakeholders noted the necessity of receiving assistance (in addition to services currently offered by the Canadian Trade Commissioner Service) to help Canadian companies in finding reliable and trustworthy partners and teaching Canadian companies about issues such as intellectual property protection in China.
• Stakeholders also stressed the need for improved infrastructure to better connect Canadian businesses to opportunities in China through the development of Canadian ports, rail networks, air transport and pipelines.
• There were also a number of calls for Canada to institute its own industrial policy to counter China’s robust policy framework, in areas such as advanced manufacturing, emerging sectors and innovation.

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