U.S. wary as Canada talks of trade with China

He flagged a concern about the timing of Canada-China trade talks.

At a moment when China hawks are swooping into Washington, setting up nest in a new U.S. administration and eyeing opportunities to attack alleged commercial abuses, Canada is moving the other way: starting trade negotiations, discussing an extradition treaty and approving the Chinese takeover of a high-tech firm with military uses.

"Just be careful," said Zoellick, Bush's former U.S. trade representative, at a panel hosted by the Wilson Center.

"I suspect there will be some voices in Canada saying, 'Oh, well, the U.S. is kind of screwing it up with China. We'll go develop it with China.'... I'm not trying to interfere with your sovereign decisions... But given the personality (of Trump), just be careful about that. If you're going to do it, make sure you get something good for it.

"Otherwise you're going to pay a big price with this guy if his No. 1 enemy is China."

His advice to Canada was to emphasize how the North American neighbours could compete, together, as a global trading block. In essence, that's the message from Canada on issues like steel, and the related issue of Buy American rules for infrastructure.

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The Canadian government also says China talks are merely still exploratory.

But the early signs are worrisome, says the opposition — pointing to recent comments from the Chinese government about the substance of the talks, that human rights aren't up for discussion, nor are limits to takeover bids by state-owned firms.

Then there's the timing.

Canada is about to begin trade negotiations with its indispensable trade partner, the U.S., which buys three-quarters of this country's exports. Some of the people on the U.S. side are intensely critical of Chinese trade.

"The Trump administration is populated by a number of experts who have cut their teeth on being aggressive towards China. And the campaign was, in large part, run on a (promise of) very aggressive anti-China trade practices," said Maryscott Greenwood of the Canadian-American Business Council.

"It's a very careful line that Canada has to walk here."

She mentioned three members of the Trump trade team.

—Trade nominee Robert Lighthizer: A lawyer for U.S. steel companies, he repeatedly fought the Chinese government over alleged dumping. He's cast China's entry into the WTO as an economic tragedy and proposed a half-dozen actions, including aggressive U.S. lawsuits, anti-dumping duties and intellectual-property complaints. Lighthizer says the U.S. should even threaten to leave the WTO if those issues remain unresolved.

—White House trade adviser Peter Navarro: It's unclear whether he'll be involved in NAFTA. But this economist was Trump's senior trade adviser during the campaign. His most prominent work before entering the White House was a book and documentary titled, "Death By China." In it, he compared the purchase of Chinese exports to the financing of 1930s-style totalitarian regimes.

—Commerce Secretary Wilbur Ross: He is expected to play a leading role in NAFTA. He co-wrote Trump's campaign policy on trade with Navarro. It criticized U.S. open-trade policies, and mentioned Canada only once in passing; Mexico 10 times; and China 33 times. He's been more nuanced than Navarro.

The opposition says the government should hit the pause button. It says Canada would have more leverage if it waited to negotiate with China as a larger block, with the U.S. or other countries.

"We have to be very sensitive to what's going on down there (in the U.S.)," said Randy Hoback, the Conservative critic on Canada-U.S. relations. "I would prefer that if we're doing any trade negotiation with China, we don't do it alone."

But a trade expert says this is precisely the right moment.

In fact, says Laura Dawson, Canada's already late. Dawson, who hosted the pre-inauguration event with Zoellick, says Australian exporters already have a deal and a head start tapping into the massive Chinese market.

She cites other benefits: that Canada is better off with a rules-based framework with China; that trade within North America is increasingly unpredictable, prompting a need to diversify; and finally, she says, Canada could actually be doing the U.S. a favour.

This could be the test run for eventual U.S.-China talks, she said.

"China is worth the effort," says a paper she recently co-wrote, titled, "Chasing China."

"Doing nothing ... means falling further behind. Canada must act quickly and decisively to ensure that the China-sized hole in Canada’s trade policy does not create lasting damage from which we cannot recover."

That being said, she added in an email Tuesday: "Doing a deal with China is still going to be really difficult."

By Alexander Panetta, The Canadian Press