Trudeau, Xi face off on future of trade as PM China trip begins in earnest

Smiles and warm handshakes, ceremony and splendour — all of it will be on vivid display on Monday when Chinese Premier Li Keqiang extends a red-carpet welcome to Prime Minister Justin Trudeau.

But the spectacle that will envelop Trudeau's arrival at Beijing's Great Hall of the People will shroud a starker reality: Canada's uphill fight to forge a fair trading relationship with a big, ambitious country that plays by its own rules.

The government is playing down the possibility that this trip would mark the start of formal free trade talks, but the prime minister will be looking to attract Chinese investors and move economic relations forward. China is eager to get on with actual negotiations after several long rounds of "exploratory" discussions with Canada.

But Canada needs something else first: guarantees from China the talks won't be strictly business.

Senior government officials, speaking on the condition of anonymity because of the sensitivity of the issue, say Canada wants China to agree to a framework for free trade talks that will include its so-called progressive trade agenda — environmental and labour, gender and governance issues.

International Trade Minister Francois-Philippe Champagne said Saturday that Canada has raised those issues in exploratory talks in order to gauge the reaction of the Chinese.

Chinese officials have repeatedly said any free trade deal with Canada should be divorced of human rights considerations. But Canada wants to continue to add what it sees as this broader progressive trade agenda that it successfully entrenched in its free trade deal with Europe and in the Trans-Pacific Partnership with Pacific Rim countries, not including China.

As one of the architects of the current world trading order after the Second World War, Canada wants to protect and advance the rules of progressive international trade. Exactly how Canada persuades China to take a broader view has become a major preoccupation across many federal departments, officials say.

"This is our turf in many respects. We're not really going to let anyone else rewrite the rules," one official said.

The recently completed rounds of the exploratory talks were "about gathering intel, about understanding the situation."

Canada isn't interested in negotiating a basic goods-and-services agreement similar to Australia's pact with China, nor is it interested in negotiating piecemeal, sector by sector, the official said. That's because if Canada and China strike a deal in aerospace, for instance, the principles that guide that agreement wouldn't necessarily be applicable when a dispute arises in another, say agriculture.

Champagne said in a recent speech that Canada wants to establish a broad framework "where issues can be addressed and rule of law is paramount."

Canada wants to level the playing field with a much larger country, including protecting the interests of small and medium sized companies, the minister said. And it is not interested in backing down from its progressive trade agenda.

"When it comes to trade, Canadians expect us to be resolute and steadfast in the promotion of our values abroad, in preserving and protecting our national security, and all the while growing our economy," Champagne said.

"We must see the entire chessboard and plan our moves accordingly."

But many analysts say that chessboard is heavily stacked in China's favour.

Canada faces China's most powerful leader in decades: President Xi Jinping, who solidified a bold vision for China's future at a landmark party congress in October. With the protectionist Trump administration in Washington, Xi has positioned himself as the protector of liberalized trade. But his speech to the party congress promised to project a China worldview that he called "socialism with Chinese characteristics."

"They have made crystal clear the future for China is not democracy and western human rights, not today, not tomorrow and not in the long term," said Paul Evans of the Institute of Asian Research at the University of British Columbia.

"It means they are more rigid than even on their approach to human rights," he added.

"Chinese leadership is really going to be welcome in several fields but it may be changing the rules in ways we should be nervous about."

David Mulroney, a former Canadian ambassador to China, said Canada needs a more comprehensive China strategy that addresses its continued rise as well as Canada's interests and values. So far, he said, he has not seen that.

"Xi is less interested in market forces than his predecessors, much more inclined to state intervention and much more inclined to do things that really cause the playing field to be skewed in China's favour," said Mulroney.

"Negotiating this with Xi Jinping makes the job a lot more difficult, but not impossible."

Trudeau is to meet Xi on Tuesday in Beijing.

Wendy Dobson, co-director of the Rotman School of Management at the University of Toronto, said she doesn't think Canada is prepared to start formal trade talks with China. The two countries need to establish some guidelines at the start "so that we're not surprised later."

"The template for us is CETA and TPP, which are very high-standard agreements, which include goods, services, investment, competition policy, state-owned enterprises," said Dobson.

China's view is more straightforward. "It's probably agriculture and natural resources and maybe kick us in the pants to build a pipeline to the west coast."

Champagne argued in his speech that Canada is more than a county of 35 million people because it has preferential access to a market of 1.2 billion through trade deals such as the Canada-EU pact and the much-threatened NAFTA.

Mulroney said Canada has other leverage, too. The Chinese continue to place stock in the long-standing historical connections to Norman Bethune and former prime minister Pierre Trudeau's breakthrough in establishing diplomatic relations.

"We may think it's quaint, but it's real to them," added Dobson.

"They've got 5,000 years (of history) and this is only five minutes ago."