The Canada-China Trade Relationship

By Samukele Ncube (Intern, Dawson Strategic)

June 12, 2017

As part of Canada’s broader diversification strategy to reduce trade dependence on the United States, there has been a renewed interest in strengthening Canada’s trade relationship with China. The two countries share a long-standing bilateral relationship across several key areas such as trade, governance, energy, and education.

Currently, China is Canada’s third largest trading partner, with two-way bilateral trade between the countries totaling $85.9 billion in 2015. Prime Minister Justin Trudeau has indicated a desire to double trade between Canada and China before 2025, and steps have been taken to that end. In February 2017, an inaugural round of talks on a potential free trade agreement between Canada and China took place.

Canada has been working towards increasing trade with China over the past few years. In 2014, Canada and China signed a Foreign Investment Protection Act (FIPA), which offers both material and symbolic support for closer bilateral relations. This agreement aims to protect Canadian investors in China, as well as Chinese investors in Canada, protect against expropriation and discriminatory treatment, in addition to facilitating longer term market opportunities across a range of sectors.

The Canada-China FIPA lays the groundwork for an eventual Free Trade Agreement (FTA) between the two nations. It is suggested that such an FTA would increase Canadian exports to China by almost $7.7 billion, as well as Canadian GDP by approximately $7.8 billion (or 0.14 percent) by 2030. This would translate to the creation of 25,000 Canadian jobs across all skill levels.

Although engagement in exploratory talks does not guarantee a Canada-China FTA, it is evident that both countries are working to strengthen the relationship and recognize the potential advantages of stronger ties with each other.

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