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Chinese, Canadian companies show increased appetite for bilateral FTA

Both Chinese-owned companies operating in Canada and Canadian-owned businesses in China are showing increased favorability towards a potential China-Canada Free Trade Agreement (FTA), amid increasing efforts by the two countries to conclude the pact.

Companies revealed an optimism and eagerness to strengthen the bilateral ties in the Canada-China Business Survey 2016, released by the Canada-China Business Council (CCBC) on April 24. On the same day, a second round of exploratory talks about the China-Canada FTA opened in Ottawa.

The strong support for the potential FTA from companies on both sides is probably driven by their improved profitability and planned expansion, which has been inhibited by regulations and barriers in the respective countries, according to the survey.

About 60 percent of Canadian companies in China earned profits in 2015, and around 70 percent in 2016 planned to expand their businesses in China. Meanwhile, the numbers for Chinese companies in Canada were 80 percent and 88 percent.

However, both sides were concerned about administrative obstacles. For Canadian companies, four out of the top five obstacles to doing business in China are increasingly administrative, while 33 percent of Chinese companies in Canada see policies and regulations as obstacles.

Three quarters of the Canadian companies responding to the survey were aware of the China-proposed Belt and Road (B & R) Initiative which would see strengthened links between Asia and Europe via transportation and shipping infrastructure to reduce business costs and stimulate trade and investment.

Despite the fact Canada is not on the B & R path, 44 percent of the Canadian respondents see opportunities to participate in the B & R Initiative, which links positively to the “third country collaboration” priority established by Premier Li Keqiang and Canadian Prime Minister Justin Trudeau during the latter’s 2016 official visit to China.

Canadian companies called on Canada to embrace greater trade and investment opportunities with China, given the significance of the Chinese market in the world economy. They indicated an FTA would help Canada to catch up with Australia and New Zealand that have FTAs with China.

The five-day exploratory talks in Canada will continue to pave the way for establishment of the bilateral FTA. It is a further effort following the first round of such talks in Beijing in February.

China is Canada’s second-largest trading partner and is becoming increasingly important in terms of bilateral foreign direct investment. If China-Canada FTA is concluded, it will help add $4.1 billion US and $5.7 billion to Chinese and Canadian GDP by 2030.