Canada must tread cautiously with China on BRI, says expert

Canada would be well advised to tread the path of caution when it comes to participating in China's multi-billion-dollar Belt Road Initiative (BRI), and especially assess the prevailing abysmal conditions and situation in Balochistan where Beijing is heavily invested, says an international expert.

In an article written for the Global Research web site, Asad Ismi, while flagging Beijing's desire for and encouragement to Canada to participate in the BRI, warns that "Canadian companies vying for BRI funding (could) get (not only) pulled into potential human rights disasters abroad," but also face possible "concerns related to Chinese government influence in Canada as well."

In his article, Ismi, however, states that many Canadian business groups see a free trade agreement with China as a way to quickly increase profit-making opportunities in Asia, and highlights that the initiative has been taken up enthusiastically by the Justin Trudeau government.

And to substantiate this view, he quotes Gordon Houlden, Director of the China Institute at the University of Alberta, as cautiously saying and suggesting that, "There is an opaqueness to the Chinese economy," and a free trade deal "could act a cudgel to break down barriers to investment and trade."

In return, China will expect "loosened investment rules" in Canada, he quotes Houlden, as adding, including a lighter touch when it comes to foreign takeovers.

"A free trade deal with China, like the FIPA (Foreign Investment Promotion and Protection Agreement of 2012) before it, would arguably make it more difficult to hold Chinese firms accountable for their actions in Canada," Ismi feels.

The Canada-China Foreign Investment Promotion and Protection Agreement (FIPA) was signed by the Harper government in 2012. The FIPA protects Chinese investment in Canada to a much greater extent than Canadian investment there, and includes a controversial investor-state dispute settlement (ISDS) mechanism.

Ismi quotes Scott Sinclair, Senior Researcher at the Canadian Centre for Policy Alternatives (CCPA), as saying that, "Canada should consider "a sectoral approach focused on developing ambitious strategies to co-operate in achieving both countries' urgently needed transition to renewable energy," an area where China has made great progress.

"A successful co-operative model in renewable energy could be built on and extended to other sectors."

Sinclair believes that the CCPA's submission to the federal government on a possible China FTA, pursuing this goal through a standard free trade deal "creates unacceptable risks for Canada, and particularly for Canadian workers."

Sinclair warns that a CCFTA will reinforce Canada's high trade deficits with China (which increased from $8.5 billion in 2001 to more than $43 billion in 2016), further eroding Canada's manufacturing base, intensify competition with lower-waged and poorly protected Chinese workers, and likely worsen domestic inequality.

"China is a superpower.

However painstaking Canada's negotiating strategy or skilled its negotiators, due to the vast power imbalance between the two parties, China will ultimately be the rule-maker and Canada the rule-taker in any one-on-one FTA negotiation," Sinclair warns.

Ismi maintains in his article, however, that China, through the BRI, is expected to spend eight trillion dollars over the next 20 years connecting Asia with the Middle East, North Africa and Europe, and it has already incurred an expenditure of 300 billion dollars by October 2017.

Canadian companies such as Montreal's Bombardier and Calgary's Grand Power Logistics Group are already tapping into the BRI by investing in Turkey's high-speed rail line and a rail service in China respectively. But overall, Canadian participation in the Chinese infrastructure vision is not yet extensive, Ismi says.

"With a few exceptions, our business community is behind the curve in terms of taking advantage of Belt and Road opportunities," he quotes Eva Busza, vice-president of research at the Asia Pacific Foundation of Canada, a corporate and government-funded think tank that promotes closer Canada-Asia relations, as saying in a recent blog post.

In a business survey released by the Canada-China Business Council in April 2017, 74 percent of respondents knew about the BRI and 44 percent saw opportunities for themselves in it.

He says "With this massive investment, China is 'quietly reshaping the world' in the words of Atlantic Monthly, in particular the lives of its closest neighbours.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)