Canada’s Progressive Trade Agenda and a Free Trade Agreement with China: Are They Incompatible?

Negotiating a free trade agreement (FTA) with China will be very different from negotiating one with a country that shares Canada’s Western values. However, an FTA with China makes good economic sense, and while there are some unique obstacles to reaching such an agreement, they are not insurmountable. In fact, Canada can use the same models in negotiating with China that it has used with Western countries. Such an approach combines trade goals with respecting Chinese cultural and political differences, particularly those that fall into the category of progressivism. This category includes labour rights, Indigenous and gender issues, and governance. Prime Minister Justin Trudeau’s government is focused on progressive elements in trade deals, while China has made it clear it is not interested in including them in any such pact. Concluding an agreement means that China and Canada must both recognize the political requirements and dynamics on the opposite side of the negotiating table, while seeking common ground diplomatically. Side agreements such as those that exist in NAFTA and in the Comprehensive Economic and Trade Agreement (CETA) are one way to work with the two countries’ differences. Many of the provisions in a side agreement are not binding and thus not subject to the agreement’s dispute settlement mechanism or trade sanctions. Instead, they are more aspirational and sometimes lay out a process for civil society groups to raise issues and help the thinking on those issues evolve, rather than simply holding the parties accountable for breaches. Canada is rightly concerned about Chinese stances on human rights, labour, environmental and gender issues. However, instead of including these issues in the main document on trade, they can be dealt with as shared interests between the two countries. Establishing separate but parallel mechanisms to deal with these issues would be a practical way to make progress. Focusing on micro, small and medium-sized businesses as one Chapter of the Trans-Pacific Partnership (TPP) did, could be another successful approach. Women own many of these businesses in developing countries, so such a focus would make a substantial contribution to their welfare. None of this means Canada should kowtow to China or look the other way on important values and issues. Side agreements and special focuses have formed parts of agreements with other countries that already share Canada’s Western values. This type of give-and-take is present even when Canada negotiates with countries that are not polar opposites. No country’s interests are exactly the same as those of any other and it’s unrealistic to expect unanimity on every issue. Language and firm commitments on progressive issues are still evolving in many of Canada’s free trade agreements. It would be unreasonable to hope that everything can be achieved in an agreement with China on the first go-around. Rather, viewing an FTA with China as a work-in-progress means controversial elements can be brought into the negotiations and language used that reflects the understanding that these issues are evolving. It will require creative thinking, flexibility and joint commitment to find a solution, but it should be possible without having to resort to creative ambiguity.Nonetheless there are good economic reasons for Canada (and for China) to pursue bilateral trade negotiations. This paper argues that there are ways to meet the objectives of both sides by borrowing models from NAFTA, the trade agreement with the EU (CETA) and the Trans-Pacific Partnership (TPP). The NAFTA side agreements on labour and the environment offer one option while the Canada-EU Strategic Partnership Agreement offers another model. In practical terms, focus on Small and Medium Sized Enterprises (SMEs) in a Canada-China agreement, modeled on the TPP, would make a concrete contribution to the welfare of female and indigenous businesses. Shared interests in labour and environmental standards as expressed through their common membership in the International Labour Organization (ILO) and the Paris Climate Accord provide Canada and China with another way to identify convergence of interests. While these issues may not be formally incorporated into the text of a bilateral trade agreement, joint cooperation by Canada and China on these subjects would affect trade outcomes over the longer term. Equally important, it would allow both sides to proceed with negotiations while remaining faithful to their overriding domestic political objectives and imperatives. Further delay in starting negotiations raises the risk that the joint interest of both parties in proceeding will be hijacked by extraneous factors, and the window of opportunity will close. Political will and creative and flexible negotiation mandates are needed on both sides, allowing the two countries to find a way to meet their respective negotiating objectives. Each needs to accept a slightly different package in design and wording, recognizing the political requirements and dynamics they each face, while finding the diplomatic common ground that will allow them to proceed.