Canada and China next steps could include free trade deal

Prime Minister Stephen Harper's trade mission toChina is still celebratingits newtwo-way investment deal, but Thursday also brought hints that the "deepening" economic relationship won't stop there, and could eventuallylead to some kind of free trade deal between the two countries.

This spring, Canada and China will wrap up a joint study identifying areas in each economy whereeliminating trade barriers would be most productive. Then, thetwo sides willbegin"exploratory discussions on deepening trade and economic relations."

"We are well ahead of the trade objectives that were set during your visit to Canada in 2010," Harper told Chinese President Hu Jintao on Thursday.

"It's a great day," International Trade Minister Ed Fast told Canadian reporters on the tour in Beijing,but hetried to manage expectations about the prospect of a formal free trade deal.

"We're not going to get ahead of ourselves," Fast said, portraying the China trade strategy as justpart of Canada's Asia-Pacific gateway initiatives that are helpful "to allow Canada to ensure its long-term prosperity."

"Our end game is to deepen ourtrade relationship in one of our key priority markets, which isChina," Fast said.

At last November's APEC Summit, Canada appeared poisedto join Trans-Pacific Partnership trade negotiations to lower and eliminate trade barriers with other Asia-Pacific countries. But China is not part of those talks, soCanada must negotiate separately with Asia's biggest economy.

$3B in commercial agreements signed

For the second day in a row, Harper presided over signing ceremonies forcommercial dealswith the potential to keep that growth rolling along.

"Together, the value of these 21 agreements is close to three billion dollars," Harper said in a speechto the Canada-China business forum at the close of his stop in Beijing.

"Two-way investment between Canada and China has increased by 700 per cent in seven years," reported CBC senior correspondent Terry Milewski, who is travelling with the prime minister. "You can't dismiss that as hype. That means thatthis is, as International Trade Minister Ed Fast put it today, a watershed moment in the enormous expansion of trade between Canada and China."

Seventeen specific government-to-government issues alsowere dealt with over the past two days in areas such as energy co-operation, human rights and agriculture.

"We have seen remarkable growth in two-way investment, and trade, people-to-people ties, and bilateral co-operation during the last few years," Harper said.

"It is no accident, I think, that Canada and China camethrough the global recession avoiding the severity of the financial, economic and employment crises seen elsewhere."

China remains adistant No. 2 to the U.S. in terms of trade volume with Canada, Milewski said."But with the U.S. economy floundering and on the way down, you have to wonder when China will become No. 1."

Still, it could be a while before the Canadian economy benefits from the government-level co-operation, as a number of announced plans are incremental steps forward in complex bilateral pacts.

Thursday'sagreements build on Wednesday's announcement ofthe end of negotiations on a Foreign Investment and Protection Agreement (FIPA), which would make investment in China less risky for Canadian businesspeople currently limited by unpredictable legal and bureaucratic regimes in China.

Resource deals 'important to Canada's prospects'

Among the highlights of Thursday's announcements is a new export agreement for Canadian uranium.Chinahas beenprohibited from purchasing Canadian yellowcake uranium, but the new agreement calls on the Chinese government to verify Canadian uranium isused only for appropriate civilian purposes such nuclearpower generation, a cleaner source of energy than the coal-fired plants that continue to be built to satisfy China's growing appetite for electricity.

Saskatoon-based Cameco can now proceed with uranium supply agreements signed in 2010, are worth up to an estimated as $3 billion.

"What we're doing here is being noticed not just in our countries, but more broadly," Harper told a roundtable of Canadian businesspeople from the naturalresources sector."Obviously from our point of view what we can do in resources is very important to this country and to our prospects."

Harper has repeatedly emphasized the need for Canada to diversify its markets for natural resource exports,crude oil in particular.

"Canadians don't get full world pricing for their crude oil selling into one market alone [the U.S.]. By being able to broaden that out, we will," Patrick Daniel, president and CEO of Enbridge, told reporters Thursday."The value to Canada in terms of tax revenue, royalty revenue to individual producing companies is huge. It's in the billions of dollars."

"We can't sell our most important export at such a discount to the world market," Daniel added. "We need a second market at least."

Pandas to return to Canada

Among the cut and dried business dealsis at least one warm and fuzzy development: the Chinese government will allow Canada to borrow a pair of pandas, according to a joint statement released Thursday.

The pair will go to the Toronto and Calgary zoos for 10 years of collaborative research on conservation.

A formal announcement of the pandas is expected Saturday when Harper visits the city of Chongqing.

The joint statementcame after Harper met with Chinese President Hu Jintao and Vice Premier Li Keqiang Thursday.

Harper met with Chinese Premier Wen Jiabao Wednesday.

Relations between the leaders and Harper were decidedly warmer than the prime minister's last visit in 2009, when Wen had chided him for not coming sooner.

This time, the talks were full of praise, withthe chairman of China'snational peoples congress, Wu Banggou,touting the "rich and productive program" for Harper's 2012 visit.

"This is a tremendously exciting time in Canada-China relations," Harper told Wu.

"You put a lot of value on Canada's relationship with China and are strongly committed to promoting the practical co-operation between our two countries," President Hu Jintao told Harper. "I appreciate your efforts."