Canada-China Trade Relations and Agreements Essay (Literature Review)

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Canada and China enjoy a long and healthy trading history. As a matter of fact, modern trade between Canada and China dates back to early 1960s when Canada started selling wheat to the Chinese. This was further facilitated by establishment of formal diplomatic relations in 1970 and later signing of the first trade agreement in 1973. Trade between the two countries was taken a step further in 1979 when Canada included China among the countries it classified under its General Preferential Tariff (MacDonald 104). The 2001 accession of China to WTO saw increased commitment between the two nations through enhancement of pillars of a strong multi-lateral trading system as well as increased commitment to rights and obligations as per WTO regulations.

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Multiple experts and researchers emphasize that trade cooperation between Canada and China is widely based on bilateral agreements and MOUs in various fields including science and technology, agriculture, marine transportation, and energy, among others. Additionally, education is cited as one of the major areas that form the pillars of economic cooperation between Canada and China (Stanford 114).

As a matter of fact, skills transfer and education are complementary services aiding trade between the two nations. Currently, China stands as a top origin for international students to Canada. Over 70,000 Chinese students are studying in Canada as at now (MacDonald 104). The importance of this area was emphasized by the visit by Prime Minister Stephen Harper’s China where China agreed to raise education as an emergent strategic priority and seek more ways of expanding two-way academic transfer.

The recently concluded substantive negotiations between the two countries on FDI promotion and protection marked a new trading milestone between the two countries. The move is anticipated to facilitate flow of investment between the two countries. Thanks to such major milestones, China is now Canada’s second largest trading partner while Canada is the 13th largest China’s trading partner (Scott 42). However, as is common, there are always some differences in trading levels between countries. In the case of China and Canada, the trade is currently skewed in favor of China (Tiagi 86). Despite these variations, statistics show that trade between the two nations has been on the rise from both sides as shown in the table below,

20012002200320042005200620072008200920102011
China Exports(Canada Imports)3.34.35.68.211.715.519.421.817.722.225.2
China Imports (Canada Exports)4.03.64.47.37.57.711.012.811.914.821.6
Total Trade7.47.910.015.519.223.230.334.629.637.046.8

Figure 1: Canada-China Merchandise Trade (US$ Billions) (Palley 21).

Nonetheless, despite trade growth between the two countries, the figures still reflect a small percentage of the nation’s international trade. Clearly, there is a huge potential yet to be tapped between the two nations.

According to Weir, China currently imports more than USD 21.6 billion worth of goods from Canada (56). A majority of China’s imports from Canada are raw materials including timber, pulp, metals, and other natural resources. Agricultural imports include seafood and oilseeds, among others. In essence, resource-based goods remain a major driver of Chinese imports from Canada. On the other hand, goods Canada imports from China are valued at over USD 50 billion (Scott 51). These include goods such as textiles and apparel, foot-wear, toys, bags, and furniture, among others. A growing portfolio of goods currently includes electronics, plastics and machines.

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In terms of services, all major areas of trade incorporate substantial elements of service. Service trade is therefore a major component of value chains between the two countries. This area however remains open to extensive growth taking into consideration the fact that Canada is amongst the most open service economies worldwide. Currently, China has engaged more than 65% of its entire service sector (Stanford 117). It should however be noted that accurate quantification of service trade is difficult as there exists no official statistics. Existing trends however show that bilateral services between Canada and China have immensely grown (Scott 47).

Unconfirmed figure put the value at over USD 8 billion. Additionally, there is potential further growth. Currently, China sources financial, communications, engineering and management services from Canada. As a matter of fact, unlike in goods, china is running at a deficit when it comes to services. Amongst Canada’s service imports from China are transport services which account for one-third of Canada’s service imports from China.

In essence, trade between China and Canada remained a balanced affair. While Canada records a deficit in goods trade, China records and deficit in services trade. Additionally, existing literature reveal that China and Canada still possess great potential to further expand their trade both in goods and services sector. Information on services sector remains scanty but still there are signs of a great potential for services trade to grow. Goods trade on other hand is bound to continue an upward trend as the countries become more and bilateral engaged. The skew in favor of china is unlikely to shift soon.

Works Cited

MacDonald, Ian. Free Trade: Risks and Rewards. Montreal & Kingston: McGill-Queen’s University Press, 2011, p. 104.

Palley, Thomas. “The Troubling Economics and Politics of the U.S. Trade Deficit,” National Strategy Forum Review 15.4 (2013): 20 – 23.

Scott, Robert. NAFTA’s Legacy: Rising trade deficits lead to significant job displacement and declining job quality for the United States. Washington, DC: Economic Policy Institute, 2013.

Stanford, Jim and Daniel Poon. Employment Implications of Trade Liberalization with East Asia Toronto: Canadian Auto Workers, 2012.

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Tiagi, Raaj and Zhou Lu. Canada’s Economic Relations with China: Studies in Chinese Economic Policy. The Fraser Institute, 2009.

Weir, Erin. The Manufacturing Crisis. Ottawa: Canadian Labor Congress, 2013.

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