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Make trade with China a priority

Date: August 29, 2016

Publication Type: Articles

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Written by Don Lindsay, President & CEO of Teck Resources Limited. As originally appearing in the Financial Times.

The upcoming G20 summit in China and week-long visit by Prime Minister Justin Trudeau are shining a light on Canada and China’s economic ties at a pivotal time for both our countries. Recent negative economic headlines aside, China remains a key trading partner and Canada’s prosperity now – and in the years ahead – continues to be closely tied with theirs.

But in order to move the Canada-China relationship forward in a way that supports Canada’s long-term prosperity, it is critical that we imbue our trade discussions with a sense of purpose and momentum. Our new government needs to strengthen economic and diplomatic ties with China.

China remains Canada’s most important trading partner next to the United States, yet we continue to struggle with how to best cultivate and grow this partnership. China is both the top overseas destination for our exports and the largest overseas source of imports to Canada. It is the most important non-U.S. destination for our lumber, minerals and agricultural products and, by extension, vital to the more than 800,000 people working in those sectors. For Teck – which directly employs about 8,000 people at operations and projects across Canada – China is the most important growth market for the copper, zinc and steelmaking coal we produce.

While the pace of growth in China has slowed somewhat, it is still massive in scale. The Chinese government released its 13th five-year plan in March, covering 2016-2020. The plan emphasized continued growth – reaffirming China’s target to double GDP and people’s incomes by 2020 from 2010 figures. This would require 6.5 per cent GDP growth per year for the next five years. The Chinese leadership also reiterated its focus to achieve economic growth in a more sustainable way. This near-term drive for growth, coupled with longer-term trends of increasing urbanization and a growing middle class, will require greater and greater quantities of the wood, metals and minerals and other goods and services that Canada has to offer.

Nations competing with Canada for customers in the global marketplace have, to date, outpaced us in their efforts to strengthen their own ties with China and gain a competitive advantage. Australia is a heavily resource export-dependent economy, much like ours. That nation initiated free trade talks with China a decade ago, culminating in a free trade agreement that took effect in 2015. This agreement eliminates 95 per cent of trade tariffs between the two countries and will inject an additional A$18 billion into Australia’s economy over the next 10 years. A 2016 white paper commissioned by the Canadian Council of Chief Executives and the Canada-China Business Council – “Chasing China: Why an economic agreement with China is necessary for Canada’s continued prosperity” – shows a free trade deal would bring similar benefits for Canada, generating an estimated $7.8 billion in additional economic activity within 15 years and supporting 25,000 new jobs.

The time is right to advance discussions to strengthen our trade relationship with China. A national survey released earlier this year by Abacus Data shows that more Canadians support growing our economic and trade relationship with China than not, with the majority expecting that relationship to expand over the next 10 to 20 years. That same survey also shows Canadians have a very real hunger for more information about what a free trade deal would look like and what it would mean for Canada. Of those surveyed, 46 per cent say they could be persuaded to be supportive of a closer relationship with China, if they knew more about what was involved and how it would benefit Canada.

The Trudeau government should be commended for signaling that the Canada-China relationship is high on its agenda. Trudeau’s visit to China next week is an encouraging and an important first step. Leaders in commerce, academia and provincial governments need to rally to support the federal government in these efforts, and help to build diplomatic momentum. Sharing information with Canadians, and ensuring that any agreement is entered with all due diligence to ensure it is in Canada’s best interests, must also be a part of the discussion.

This will not be a short or easy road. It took Australia close to 10 years of negotiation to achieve free trade with China. We must all roll up our sleeves and begin that work today. To do any less would mean passing up a generation’s worth of jobs, growth and opportunity for Canadians.

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