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Canada, China to Conduct Exploratory Talks for Free Trade

| Jan 19, 2017 08:13 AM EST

Canadian Prime Minister Justin Trudeau speaks at a news conference on Sept. 20, 2016 in New York City.

Next month, the Trudeau government will be engaging China in exploratory talks for a free trade agreement. Both countries are optimistic despite existing problems and the possible change in dynamics under the incoming Trump administration.

A free trade agreement could economically intertwine the two countries in an unprecedented way.

While everyone is looking forward to the end result, problems currently exist in the trade relations such as the Canadian steel sector accusing China of dumping; the willingness of the agricultural industries to accept Chinese investment; and the automobile sector confronting the possibility of lowered tariffs with its Chinese counterpart. Meanwhile, Canadian financial companies are struggling to access the Chinese market.

Previous experiences have shown that things won't just fall into place. For example, the free trade agreement between Canada and the U.S. took years of study and talks to complete; while China and Australia sealed the deal only after 21 rounds of talks in a span of over nine years.

"So getting started matters. But this is not going to be some Big Bang," said Wendy Dobson, co-director for the Institute of International Business at Rotman School of Management.

New Envoy in China to Play a Key Role

Former bank economist John McCallum will be playing a key role in the said talks.

McCallum, who was appointed as Canada's new ambassador to China earlier this month, was an obvious choice for the position.

"We needed a very senior voice, especially because we are launching exploratory trade talks, so there's a lot happening there," said a senior government official.

The newly appointed ambassador shared that Trudeau spoke of the importance of having a strong connection between the Prime Minister's Office and Canada's envoy in China - which is why McCallum didn't have second thoughts about accepting the position.

Changing Dynamics Under Trump

The inauguration of Donald Trump has sparked a shuffle of officials in Trudeau's government.

Aside from the exploration of a free trade agreement, the Canadian federal government approved of the Kinder Morgan pipeline to export Alberta oil through the West coast. This is viewed as another step to 'open a new Canadian economic lifeline to China' just in case things don't go too well with the new U.S. President.

The free trade talks between China and Canada have its prospects and challenges. It is important that everyone is in it for the long haul in order for it to be successful.

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