The Security Dimension of a China Free Trade Agreement Balancing Benefits and Risk – The Security Dilemma

In 2017, Canada engaged in several rounds of exploratory discussions for a potential freetrade agreement (FTA) with the People’s Republic of China. It seemed probable that thisexploratory phase would be followed by the opening of formal rounds of negotiations, tobe announced during Prime Minister Justin Trudeau’s visit to China in December 2017. An FTA appeared to be a priority for Trudeau since his government came into office in 2015 (Global Affairs Canada, 2017a; Lu, 2017; PMO, 2017); however, such negotiations were put on hold indefinitely, ostensibly due to irreconcilable differences on gender and labour issues.Despite this setback, it is likely that the Canadian government willcontinue to explore this option in the coming years, particularly with the North American Free Rade agreement (NAFTA) in jeopardy. While there are many potential benefits of a Canada-China free trade agreement (CCFTA), there are also significant national security implications that will deserve particular attention. The security dimension willbe the focus of this paper.Prospective CCFTA negotiations with China would be both complex and timeconsuming, in part due to the wide divergences between the Canadian and Chineseeconomies, as well as differences between Canadian and Chinese administrativeand legal systems. Negotiations could therefore take several years to conclude, andmight not be finished until well after the 2019 federal election. It took a full decadeto sign and ratify the China-Australia Free Trade Agreement (ChAFTA), although itappears that the most difficult portion of the negotiations was wrapped up in the final two years.It is unlikely that a CCFTA will move as slowly as the Australian FTA did, in part because ofthe established Australian precedent and because of China’s increasing familiarity with FTAnegotiations that involve advanced economies. For this reason, Canada would benefit fromapproaching a CCFTA after Australia, but before many other Western countries.Chinese and Canadian negotiators will be consumed with elaborating the principles of each side’sresponsive FTA approaches, as well as the myriad of details involving thousands of products andservices that a CCFTA’s provisions would affect. Canadian negotiators will seek a high-qualityFTA that covers a large percentage of our export and import products with China, as well as anagreement that covers all key sectors and industries. There is also likely to be a Canadian focus onaddressing China’s use of non-tariff barriers to trade which currently inhibit Canadian firms fromtaking full advantage of the massive China market. Such measures include the Chinese Ministryof Health’s 2013 changes to food safety standards which required all imported food products to listdetailed nutritional components in Chinese. Procedural barriers such as this represent a significanthurdle for Canadian firms, and cause uncertainty among international exporters that want to breakinto the Chinese domestic market. In theory, the centralized Chinese economy lacks the regionalcomplexity of the Canadian federal state, characterized by sub-national units, but in reality, China’sprovinces and municipalities can, and often do, impose barriers to foreign imports, often to protectmarket share for local substantive industries.To date, China has FTAs with only a handful of developed countries. Australia, Korea, Switzerland,Iceland, Singapore and New Zealand currently have bilateral FTAs with China, and several others,such as Norway and Israel, are in FTA negotiations. China is also floating ideas for FTAs withdeveloping countries, including India. China is far more trade-dependent than the United States,although by comparison China is not nearly as trade-dependent as Canada is.1 The balance of tradeis currently in China’s favour: China exports US$46 billion to Canada, versus the US$16 billionthat it imports from Canada (MIT, 2016a). However, it is important to note that China’s exportsto Canada account for only 2.2 per cent of China’s total merchandise exports (MIT, 2016b)