Source: Global Times    Published: 2019-01-15

Canadian officials boasted of a "unique" trading relationship with China just three months ago, but souring bilateral ties have cast a shadow over further bilateral trade.

As the diplomatic row sparked by Canada's arrest of a Chinese technology executive in December saw fresh escalation this week, bilateral trade could suffer, with talks on a free trade agreement (FTA), investments to Canada and deals on Canadian agricultural, energy and lumber exports likely to be put on hold, Chinese analysts noted on Tuesday.

Tensions between Beijing and Ottawa escalated sharply on Monday after Canadian officials harshly criticized a ruling by a Chinese court, which sentenced Canadian citizen Robert Lloyd Schellenberg to death for smuggling drugs and participating in organized international drug trafficking. The officials also moved to issue warnings about travel to China.

Following the ruling on Monday night, Canadian Prime Minister Justin Trudeau, who repeated invoked Canada's judiciary independence to avoid discussing the arrest of Huawei CFO Meng Wanzhou, wasted no time in condemning the Chinese court's ruling.

"It is of extreme concern to us as a government, as it should be to all our international friends and allies, that China has chosen to begin to arbitrarily apply the death penalty," Trudeau told reporters in Ottawa.

His comment followed by a decision by Global Affairs Canada, the country's foreign ministry, to warn Canadians to be wary of the risk of "arbitrary enforcement" when visiting China.

That prompted mockery of Canada's hypocrisy and double standards from Chinese officials in Beijing. "Canada's issuing a travel security warning is like a thief yelling 'stop the thief'," Hua Chunying, a spokesperson for the Chinese Foreign Ministry, told a briefing on Tuesday. "It is Canada that arbitrarily detains foreign citizens, not China."

China on Tuesday also warned Chinese citizens planning to travel to Canada to caution, citing Canada's arrest of a Chinese citizen at the behest of a third country.

"There is no way that China could allow Canada to walk away with billions of dollars in trade deals and then turn around and bite us this time. China previously tried to separate business from politics in dealing with countries, but given the rise of anti-China moves, this can't be business as usual," Jiang Yong, an expert at the China Institutes of Contemporary International Relations in Beijing, told the Global Times on Tuesday.

China and Canada enjoyed steady growth in bilateral trade in recent years, with two-way trade rising 22.7 percent year-on-year to $63.54 billion in 2018, according to China's General Administration of Customs. During the year, China imported $28.38 billion worth of Canadian goods, up 39 percent from 2017.

China is one of the largest importers of Canadian agricultural products, energy and lumber. After his trip to China in November that saw more than a dozen agricultural deals signed worth $353.3 million, Canadian Agriculture Minister Lawrence MacAulay declared on Twitter that the two countries share a "unique trading relationship" and vowed to further open the Chinese market.

To further boost bilateral trade, Chinese and Canadian officials have been holding talks for an FTA. As recently as mid-November, both sides vowed to push forward negotiations.

"With diplomatic ties deteriorating, I don't see how officials could carry forward those negotiations," Jiang said, adding that more than just the FTA talks, deals on purchasing Canadian products and investing in Canada could be "put on a temporary halt."

Chinese investments in Canada have also been increasing. In 2018, while Chinese foreign direct investment (FDI) in the US fell 83 percent year-on-year to a mere $5 billion, Chinese FDI into Canada jumped 80 percent to $2.7 billion, according to figures released by global law firm Baker & MacKenzie on Monday.

"Obviously, if the diplomatic relationship further deteriorates, it will have a major impact on trade and investment as businesses will try to avoid getting caught in the crosshairs," said Liu Ying, a research fellow at Renmin University of China's Chongyang Institute for Financial Studies.

"From the Chinese government's perspective, China will not pursue trade protectionist moves and will continue to be open for Canadian businesses," Liu said.

Liu Ying is  a senior research fellow at Chongyang Institute for Financial Studies, Renmin University of China.