Worried about NAFTA’s fate, Wynne calls for more trade with China

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Worried that NAFTA talks are not going well, Ontario Premier Kathleen Wynne says there is urgent need for Canadian companies to build up new business in China and elsewhere.

"The NAFTA conversation makes it much more obvious that we need to do this," Ms. Wynne said Friday in Beijing, at the outset of a trip to China and Vietnam accompanied by Ontario firms and mayors.

U.S. NAFTA negotiators have taken aim at Canada's supply managed agricultural sectors and hardened Washington's stance on rules of origin provisions on manufactured goods.

Ms. Wynne said she remains hopeful that common ground will be found, but acknowledged a rising possibility that NAFTA will fall apart.

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"The nature of the positions that the Americans put on the table and seem to be standing behind make it a much more difficult conversation than I had expected," she said.

"I feel less optimistic than I did a few months ago," she added.

The fifth round of NAFTA talks ended in Mexico this week with few obvious signs of progress. Another round is scheduled for December, but negotiators remain far from a resolution.

That has added new importance for Ontario's corporate sector to find buyers and trading partners outside the United States, she said.

"To pretend that we don't have to diversify would be really dangerous for our economy," she said.

Ontario's trade with China, at $42-billion, is a fraction of its $355-billion trade with the United States.

China is Ontario's second-largest source of imports, but only its fourth-biggest destination for exports. The imbalance is striking: Ontario exports less than $3-billion to China, barely half what it exports to Indiana.

In China over the next few days, the Ontario delegation expects to announce deals worth about $2-billion, although such headline figures typically represent an optimistic view of the business that can be done.

Ms. Wynne arrived in Beijing little more than a month after Chinese President Xi Jinping consolidated his power through a twice-a-decade congress in which he offered a new vision of China under the strict leadership of the Communist Party.

"The Party exercises overall leadership over all areas of endeavour in every part of the country," he said.

Chinese authorities have sought to make that vision a reality, building up new party committees inside private and foreign firms, imprisoning dissidents, pursuing "sinicization" of religion and dragging large numbers of people into political re-education.

Ms. Wynne said she is willing to discuss her views on China's human rights record "if I am asked," but otherwise deferred to Ottawa.

"I think it really is for our national leaders to speak to the national leaders [in China] on those issues," she said.

"My role is to connect our economies."

She acknowledged, however, that intermingling of China's corporate and party interests could complicate matters for Canada as it contemplates a free-trade agreement with China.

As if to underscore the point, Ms. Wynne attended a signing ceremony on Friday for the establishment of a $500-million high-tech venture fund between Ontario mutual fund dealer Queen Financial Group and two Chinese firms, Funding Investment Management and China Taihe Group.

According to Taihe, one of the aims of the fund is "the export of 'OBOR' concepts," a reference to the Beijing-led One Belt One Road, a concept that seeks to spread China's development model and extend the influence of its corporations.

Prime Minister Justin Trudeau is expected to announce the formal launch of free-trade talks during a visit to China in early December.

Ms. Wynne supports the idea, but acknowledged the difficulties it could present for manufacturing and agriculture in Ontario.

"There's a sense that we don't want to be taken over – we don't want to be taken over by the United States, we don't want to be taken over by China. And by taken over, I mean our economy kind of subsumed," Ms. Wynne said.

But as neighbours of the United States, "we actually know what it's like to deal with a giant right beside us," she said.

When it comes to free trade with China, she added, "there need to be caveats and there need to be protections. But I think if we stay out of the game, I think if we pretend that somehow we'll be fine if all these other countries connect with China and we just stay at home – I think we're missing huge opportunity. And I don't think that's smart."

With reporting by Alexandra Li.