The Security Dimension of a China Free Trade Agreement Balancing Benefits and Risk – The Security Dilemma
Creators: name: Houlden, Gordon
Publisher: name: The School of Public Policy Publications
Year: 2018

description: In 2017, Canada engaged in several rounds of exploratory discussions for a potential free
trade agreement (FTA) with the People’s Republic of China. It seemed probable that this
exploratory phase would be followed by the opening of formal rounds of negotiations, to
be announced during Prime Minister Justin Trudeau’s visit to China in December 2017. An FTA appeared to be a priority for Trudeau since his government came into office in 

2015 (Global Affairs Canada, 2017a; Lu, 2017; PMO, 2017); however, such negotiations were put on hold indefinitely, ostensibly due to irreconcilable differences on gender and labour issues.

Despite this setback, it is likely that the Canadian government will
continue to explore this option in the coming years, particularly with the North American Free Rade agreement (NAFTA) in jeopardy. While there are many potential benefits of a Canada-China free trade agreement (CCFTA), there are also significant national security implications that will deserve particular attention. The security dimension will
be the focus of this paper.

Prospective CCFTA negotiations with China would be both complex and time
consuming, in part due to the wide divergences between the Canadian and Chinese
economies, as well as differences between Canadian and Chinese administrative
and legal systems. Negotiations could therefore take several years to conclude, and
might not be finished until well after the 2019 federal election. It took a full decade
to sign and ratify the China-Australia Free Trade Agreement (ChAFTA), although it

appears that the most difficult portion of the negotiations was wrapped up in the final two years.
It is unlikely that a CCFTA will move as slowly as the Australian FTA did, in part because of
the established Australian precedent and because of China’s increasing familiarity with FTA
negotiations that involve advanced economies. For this reason, Canada would benefit from
approaching a CCFTA after Australia, but before many other Western countries.


Chinese and Canadian negotiators will be consumed with elaborating the principles of each side’s
responsive FTA approaches, as well as the myriad of details involving thousands of products and
services that a CCFTA’s provisions would affect. Canadian negotiators will seek a high-quality
FTA that covers a large percentage of our export and import products with China, as well as an
agreement that covers all key sectors and industries. There is also likely to be a Canadian focus on
addressing China’s use of non-tariff barriers to trade which currently inhibit Canadian firms from
taking full advantage of the massive China market. Such measures include the Chinese Ministry
of Health’s 2013 changes to food safety standards which required all imported food products to list
detailed nutritional components in Chinese. Procedural barriers such as this represent a significant
hurdle for Canadian firms, and cause uncertainty among international exporters that want to break
into the Chinese domestic market. In theory, the centralized Chinese economy lacks the regional
complexity of the Canadian federal state, characterized by sub-national units, but in reality, China’s
provinces and municipalities can, and often do, impose barriers to foreign imports, often to protect
market share for local substantive industries.


To date, China has FTAs with only a handful of developed countries. Australia, Korea, Switzerland,
Iceland, Singapore and New Zealand currently have bilateral FTAs with China, and several others,
such as Norway and Israel, are in FTA negotiations. China is also floating ideas for FTAs with
developing countries, including India. China is far more trade-dependent than the United States,
although by comparison China is not nearly as trade-dependent as Canada is.1 The balance of trade
is currently in China’s favour: China exports US$46 billion to Canada, versus the US$16 billion
that it imports from Canada (MIT, 2016a). However, it is important to note that China’s exports
to Canada account for only 2.2 per cent of China’s total merchandise exports (MIT, 2016b).
description: The School of Public Policy Publications, Vol 11 (2018)