Why the government should actively pursue a trade deal with China

Posted on in Debates

NationalPost.com – Full Comment
June 28, 2016.   Lauren Heuser, National Post

As anti-trade sentiment roils the Western world, it is now more important than ever to have leaders who understand the benefits of trade agreements and can make a case for why they matter. Yet, if Canada’s prime minister possesses these skills, he’s not showing it.

In a recent interview, Prime Minister Justin Trudeau said Canada is in no rush to complete a free-trade agreement with China, the world’s second-largest economy. The country needs to improve its human rights record and provide assurances that it will treat Canadian companies fairly before Canada pushes ahead with negotiations, Trudeau said.

These arguments are as noble as they are tired. They also have things exactly backward. Trade agreements can both directly and indirectly help to promote human rights. They are also one of the best ways to ensure Canadian companies are treated fairly by foreign governments when operating abroad.

Soft diplomacy, by comparison, has been proven time and again to do little to get China to change its practices. The EU, the Clinton administration and the Harper government all played diplomatic hardball with China over human rights for a time, only to abandon this approach after it became clear it was leading nowhere. It is implausible to think that this government — whose milquetoast foreign affairs minister didn’t dare speak up when a Chinese official tore into a journalist for raising human rights issues — would have any greater success on this front.

Trade agreements, on the other hand, are mutually beneficial for both countries and can be used to advance political objectives not directly linked to trade. In recent decades, there has been a proliferation of trade agreements containing enforceable human-rights conditions. Europe and the U.S. have been at the forefront of this trend, but at least 150 countries have signed agreements of this variety.

The Liberals should be aware of these possibilities. It was at the party’s behest that the 2008 Canada-Columbia Free Trade Agreement became the world’s first trade agreement to include a Human Rights Impact Assessment (HRIA) requirement, which requires both governments to assess and respond to the impact the trade agreement has on human rights.

Of course, Canada has a greater ability to insist upon a HRIA or other such terms when it’s dealing with the Columbias of the world, rather than with the Chinas. It is no accident that the EU and the U.S. are leading the charge to link trade with human rights: they’re among the few players that can insist upon terms that other countries can ill-afford to walk away from.

It is certainly possible Canada would have some success getting China to agree to human rights conditions in a trade agreement. But even then, an agreement without these conditions would do more to help advance human rights than simply forgoing one.

For one, trade agreements typically usher in economic reforms that, over time, transform the daily lives of citizens, exposing them to greater opportunities, material abundance and global ideas. Eventually, this leads voters to demand greater political and social rights. China’s burgeoning middle class, for example, is increasingly demanding changes in how their cities are run — and that’s likely just the start. A government is far more likely to respond to pressures from within its borders than outside of them.

Second, rhetoric around human rights can belie their reality. It is one thing to declare that all people are imbued with inalienable rights — such as the right to life, to education or to social security — but quite another to recognize them. Doing so requires robust government institutions and ample resources. By increasing a country’s fiscal capacity, trade liberalization increases the government’s ability to underwrite programs that actually support and enforce human rights.

Trudeau’s other assertion — that China will need to treat Canada’s investors fairly before we enter a trade agreement with them — misunderstands what trade agreements exist to promote and protect. In addition to granting preferential access to each other’s markets, trade agreements can be used to protect investors who are doing business within a trading partner’s borders.

NAFTA, and TransCanada Corp.’s recent suit against the U.S. government under it, are prime examples of this. TransCanada, a Canadian company, is suing the U.S. government for $15 billion, claiming that it treated the Keystone XL pipeline differently than similar domestic pipeline applications. By providing investors with recourse for unfair government treatment, NAFTA protects investors. Canada can best hope to protect Canadian companies doing business in China by trying to negotiate similar terms in a trade or investment agreement.

Canada’s ability to to change the Chinese government is, by any measure, infinitesimally small. But it’s better to pursue a method that can produce small but attainable changes than a grandiloquent one that is based on unrealizable dreams.

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