Canada - China Free Trade

Vincent J. Curtis

8 Dec 2017

Canadian Prime Minister Justin Trudeau does have leverage over the Chinese, though he may not be aware of it.

Due to its large balance of trade surplus with Canada, China has acquired a large number of Canadian dollars.  It can dispose of them in two ways: buy Canadian goods or buy Canadian assets, returning the cash to Canadian hands in exchange.  So far, China has preferred to buy Canadian assets because they amount to a better long term investment than, say,  food or beaver pelts for the Chinese market.

If Mr. Trudeau makes it clear that he is going to disallow the purchase by China of Canadian assets, China will have to choose either to stop exports to Canada, demand payment in US dollars,  or start buying more Canadian made goods.  They would like to buy our crude oil, but we can’t get a pipeline over the Rockies and to a western port.

Either way, a formal free trade deal with China won’t be necessary.  Simply by playing the cards we have, we can get China to buy more of our goods by forbidding the buying of our capital assets.

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