China and Canada Fail to Agree on Launching Free Trade Talks

(Bloomberg) -- A push to launch free trade negotiations between China and Canada fell flat Monday, with the nations abruptly scrapping a planned press conference and agreeing instead to extend exploratory talks. 

Prime Minister Justin Trudeau signaled one sticking point was Canada's preference for sprawling “progressive” pacts, and that the countries only wanted to launch formal talks if they were more confident a deal could be reached. It's the second time in a month that Canada has effectively left a trade partner at the altar.

Trudeau and Chinese Premier Li Keqiang canceled their joint media availability in Beijing, with each leader instead making a brief statement pledging cooperation on climate change and clean growth. The two countries had been expected to cement their desire for a free trade agreement, though officials had said right up until the last minute no decision had been made.

“Canada is committed to moving forward on progressive trade deals that involve things like chapters on gender, on the environment, on labor,” Trudeau told Canadian reporters at a hotel late Monday, after his appearance with Li. “China is very aware that this is a precedent as they move forward with their first trade deal with a G-7 country and there's a desire to make sure we get it right.”

Both leaders downplayed any tensions from the event, held on the first full day of Trudeau's visit.

Sticking Points

Li said the two countries “are entering what we call a golden age in our relationship,” noting exploratory talks and feasibility studies toward an FTA will continue while alluding to an impasse. “On human rights, rule of law and some other issues we have also had discussions,” he said. “Both sides should view that, due to the different national circumstances, it is only natural that we don't see eye-to-eye on some issues.”

The episode was reminiscent of last month's scuttled round of Trans-Pacific Partnership talks in Vietnam, when Canada angered trading partners including Japan when it balked at finalizing a revamped deal. The TPP has nonetheless been rebranded as the Comprehensive and Progressive Trans Pacific Partnership, reflecting Canada's push to frame trade deals within Trudeau's domestic agenda in part to make them more palatable to voters.

Progress was nonetheless made Monday, with Trudeau saying Canada's beef and pork producers will have greater access to the Chinese market. The two countries will also continue to work together to resolve a canola dispute after an existing deal expires in 2020.

‘High Expectations'

“I'm pleased that we'll continue our exploratory discussions toward a comprehensive trade agreement between Canada and China,” Trudeau said alongside Li in the Great Hall of the People. The Canadian leader told reporters afterward the two countries only want to proceed if they can meet the “high expectations” that launching talks would create.

“There wasn't one specific issue -- there's a coming together on the sense that this is going to be a big thing, not a small thing,” Trudeau said.

Canada is seeking to diversify trade away from the U.S., and that effort intensified after the Trump administration threatened to tear up the North American Free Trade Agreement if it couldn't wring concessions from Canada and Mexico. Negotiations on a revamped Nafta deal have been extended into next year.

--With assistance from Josh Wingrove and Brendan Scott

To contact Bloomberg News staff for this story: Chris Fournier in Ottawa at cfournier3@bloomberg.net, Peter Martin in Beijing at pmartin138@bloomberg.net.

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net, Stephen Wicary, Theophilos Argitis

©2017 Bloomberg L.P.

With assistance from Chris Fournier, Peter Martin