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The British Columbia-Asia Economic Connection

Hugh Stephens on the benefits of a stronger trade relationship with Asia, especially for Canada’s West Coast.

By: /
24 October, 2014
Hugh Stephens
Distinguished fellow at the Asia Pacific Foundation of Canada and executive fellow at the School of Public Policy of the University of Calgary

Asia, a major driver of global economic growth, is both a source of competitive imports but increasingly an important destination for exports for the Canadian economy, a growing market for resource-based commodities but also agri-food products, specialized manufactures, financial and other services and, potentially, energy.

British Columbia sends 44 percent of its exports to Asia, the highest percentage by far of any province. (The next closest in terms of export percentage is Saskatchewan, which sends just over 20 percent of its products to Asia.)

The reliance of British Columbia on Asian markets underlines the importance for the west coast of the developments in trade structures (so-called “trade architecture”) and regional economic integration taking place in the Asia Pacific region.

With the ongoing impasse at the WTO, Asia Pacific economies have seized the initiative by negotiating a series of bilateral and plurilateral trade agreements amongst themselves. Some of these agreements have resulted in significant market opening; others have been of lower standard and have dodged the tough issues necessary to maximize income gains from trade; still others have resulted in trade diversion rather than trade creation and have created a so-called “noodle bowl” of overlapping and sometimes contradictory agreements that have become a thicket of regulations that businesses often find difficult to understand.

Canada has been active in negotiating bilateral free trade agreements (FTAs) but until this year, when the Canada-Korea FTA was finally concluded, Canada had not been able to conclude an agreement with a single Asian country. (Both the U.S. and EU started their negotiations with South Korea after Canada began its negotiations, yet concluded their agreements several years ago). Canada, along with the U.S., Japan, Australia and others, is also a member of the 12-nation Trans-Pacific Partnership (TPP) trade negotiation which seeks to lower barriers to trade both at the border (tariffs and customs regulations) and behind the border (competition policy, standards, intellectual property and investment regulations etc.). These negotiations are now bogging down, caught between a U.S. Congress that is reluctant to grant more trade-negotiating authority to the Obama Administration and a Japan that is reluctant to remove, among other barriers, traditional measures protecting its ever-decreasing farming population.

Canada has also moved recently to implement a bilateral investment protection agreement with China, a move designed to improve protection for Canadian investors in China but which has been attacked in some quarters as giving too much leeway to Chinese investment in Canada, especially in the area of energy.

Supplying energy across the Pacific

The export of energy to Asia, either LNG from B.C. or bitumen from Alberta, is a potential game changer in trade with Asia for both B.C. and Canada. At present, almost all Canadian exports of oil and gas go to the U.S., which is becoming once again a major producer in its own right, and a potential competitor for offshore markets.

Asia has long-term supply needs and wants to diversity its sources of supply. Canada can provide a significant amount of that supply, but there are huge infrastructure and environmental challenges in getting these products across the Pacific. On the LNG front, there are almost 20 proposed projects on the drawing board, involving construction of gas pipelines from northeastern B.C. to tidewater, and construction of massive liquefaction plants. There is huge potential for B.C. but also huge obstacles to bringing even a couple of these projects to fruition. With regard to oil exports, the product from Alberta has to be moved across B.C. (more pipelines needed) and shipped in tankers (more port construction) to Asia. There is no shortage of opposition, from environmentalists to First Nations groups to those who want to see a greater percentage of revenues flowing to B.C.

The environmental challenges are undeniable, but can they be managed in such a way as to mitigate the risk to an acceptable and predictable level?

These questions — trade, energy and managing the environmental challenges— will be the themes of an upcoming conference, Pacific Northwest Gateway to Asia, being organized and hosted by the Victoria Branch of the Canadian International Council on Oct. 28. The all-day event will take place at the Union Club of British Columbia, adjacent to the Inner Harbour.

With its setting on southern Vancouver Island, the conference will also examine the implications and opportunities for cross-border cooperation with neighbouring U.S. jurisdictions in the Pacific Northwest in responding to Asia’s economic rise.

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