So What Happened to Free Trade with China?

Well, the news this morning was that the anticipated start of free trade talks between Canada and China has now been put off and the two countries will continue to explore whether to launch negotiations.  Given the hoopla that seemed to surround Prime Minister Trudeau's departure for China, it does seem a remarkable turn of events and somewhat of a loss of face.  According to the Globe and Mail, Mr. Trudeau declined to say what had stalled the free trade talks but said that Canada was holding out for a better deal.  Indeed, Canada may also be more wary in the light of reports that competition from Chinese manufacturing has had a negative effect on Canadian manufacturing employment and part of the delay is Trudeau playing to a domestic audience.

Of course, there is probably more to the story.  On the one hand, this could be the Prime Minister once again demonstrating to the Americans on the eve of the NAFTA talks in Montreal that Canada is prepared to walk away from a trade deal if it does not get a good deal.  Indeed, the Globe story noted that Canada wants a broader deal with China whereas China seems interested in a more "pared-down" deal.  If this is the case, then China will no doubt not be amused by being used as a negotiating ploy thereby making future negotiations more prickly. 

Still  perhaps the stumbling point was more on China's side.  From China's perspective, if they expect NAFTA to fall through then they may see it as improving their bargaining position with respect to Canada in any trade talks.  Waiting out the NAFTA negotiations to see if they fall through is a prudent strategy from their perspective and swooping in afterwards when Canada "needs" the deal more can be to their advantage if indeed what they want is a pared-down deal.

In any event, Canada is a small open economy and quite dependent on international trade.  Playing these type of negotiating tactics - if that is what they are - may actually make our life more difficult on the international stage.  On the other hand, what is going on here may simply be beyond Canada's control and Trudeau is simply reacting as best he can to moves on the part of both China and the United States acting in their own perceived best interests.