Bloomberg News

Harper’s Courting of China Wins Praise From Canada Companies

February 12, 2012

(Updates with Harper speech in fifth and sixth paragraphs.)

Feb. 10 (Bloomberg) -- Canadian Prime Minister Stephen Harper, who irked business leaders with his criticism of China when he took power six years ago, is now winning plaudits for seeking deeper ties with Asia’s biggest economy.

Harper, halfway through a four-day visit to China, has concluded a foreign investment-protection agreement and opened China to Canadian uranium exports as part of measures to bolster business and political relations between the two countries. The Canadian leader met Chinese Premier Wen Jiabao, President Hu Jintao, and Vice Premier Li Keqiang during the Beijing leg of the trip.

“We couldn’t deliver Canadian uranium here until this agreement was signed so it opens the door for us to do that,” said Cameco Corp. Chief Executive Officer Tim Gitzel, one of a delegation of more than 40 Canadian executives on the trip. Cameco, based in Saskatoon, Saskatchewan, is the world’s largest uranium producer.

Harper, traveling to China for the second time since 2009, is seeking to attract Chinese investment in Canada’s natural resources and sell more oil to Asia, while winning business for Canadian companies such as Manulife Financial Corp., Canada’s biggest insurer.

Business Speech

In a speech today at a business dinner in Guangzhou, Harper said he is committed to “profoundly” diversifying the country’s energy exports and will facilitate construction of new infrastructure needed to ship the country’s oil to China.

Canada, which holds the world’s third largest oil reserves, is seeking to reduce its reliance on the U.S., after President Barack Obama rejected TransCanada Corp.’s $7 billion Keystone XL pipeline to ship Canadian oil to the Gulf Coast. Canada sends 99 percent of its oil exports to the U.S.

“We want to sell our energy to people who want to buy our energy,” Harper said at a dinner organized by regional Canadian chambers of commerce in Guangzhou, capital of Guangdong, the nation’s most populous province. “It’s that simple.”

Harper, though, said his country’s quest for new markets won’t curtail its willingness to raise human rights issues with China.

Fundamental Freedoms

“In relations between China and Canada, you should expect us to continue to raise issues of fundamental freedoms and human rights and to be a vocal advocate for these just as we will be an effective partner in our growing and mutually beneficial economic relationship,” Harper said.

On the first day of his trip, Harper urged Wen to approve proposed investments by Manulife and Toronto-based Bank of Nova Scotia as part of a broader effort to win greater access for Canadian companies, said a person familiar with the talks.

Harper’s lobbying on specific deals should yield dividends, said John Manley, president of the Canadian Council of Chief Executives. “This is a country in which government assistance is very valuable in getting things done,” said Manley, a former deputy prime minister, referring to China.

The countries also announced the conclusion of talks on a pact aimed at shielding companies from discriminatory practices and enhancing mechanisms for settling disputes. The two sides will perform a legal review of the deal before signing it.

Geo-Strategic Positioning

“Canada has the resources, technological sophistication, and geo-strategic positioning to complement China’s economic growth strategy,” Harper told a business audience in Beijing yesterday after meeting Hu and Li. “And China’s growth, in turn, complements our determination to diversify our export markets.”

The two countries announced a pact that will give Canadian uranium producers more access to China’s civilian nuclear power industry, according to a joint statement released by Harper’s office. No details of the agreement were provided.

Harper also reached agreements to cooperate in areas such as air travel, energy, food inspections and fisheries, while paving the way for two giant pandas to spend a decade at zoos in Toronto and Calgary.

Possible Free Trade

After agreeing to the investment-protection pact, Premier Wen called for discussions on a possible free trade agreement, the Xinhua News Agency reported Feb. 8. He said China is “ready to expand imports of energy and resource products from Canada” and boost cooperation in areas including renewable energy and the peaceful use of nuclear power, according to Xinhua.

The two countries will seek “exploratory discussions” to deepen economic and trade ties after a joint working group study is completed in May, according to a joint statement issued yesterday.

Economic ties between China and Canada, which holds the world’s third-largest oil reserves, have been lopsided. Canadian direct investment in China was C$4.8 billion ($4.8 billion) in 2010, less than 1 percent of Canada’s total, and about one-third the level of investment in Canada by Chinese firms, Statistics Canada data show. With 99 percent of oil exports going to the U.S., Canada’s trade deficit with China was C$147.5 billion from 2006 to 2010, Industry Canada says.

Relations Cooled

Relations between Canada and China cooled in 2006 after Harper criticized China’s human-rights record, telling reporters that promoting trade shouldn’t require the government “to sell out important Canadian values.” A year later, new foreign investment rules, which put additional scrutiny on state-owned entities, raised questions about whether Canada was targeting China. Harper then chose to skip the 2008 Beijing Olympics.

The relationship began to improve in 2009 with trips to China by Canadian officials including Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney.

“The prime minister’s support for broadening the trade relationship with China is very positive,” Patrick Daniel, chief executive of Calgary-based Enbridge Inc., said in Beijing at a business conference attended by Harper. Enbridge is Canada’s largest oil pipeline company.

Improved relations between the Canadian and Chinese government will help business, said Pierre Beaudoin, chief executive of Montreal-based Bombardier Inc.

‘Always Helpful’

“Any discussions that can give support to transactions we would have in aerospace or in the train business is always helpful support because the infrastructure business like the train business is government related,” Beaudoin told reporters Feb. 8 in Beijing. Bombardier is a plane and train manufacturer.

“Whenever we have discussions on transactions, it’s always important to have the support of your government and I think that’s what the trade mission is doing.”

Gitzel said yesterday’s pact will allow the company to move ahead with supply agreements signed in 2010 to sell about 52 million pounds of uranium for Chinese reactors. China is showing “strong growth” in nuclear-reactor construction, Gitzel said in a separate interview with Bloomberg.

China, the world’s biggest energy user, is seeking to secure uranium supplies as it builds additional reactors. There are 434 operable reactors around the world and 61 under construction, according to the World Nuclear Association. China is building 26, plans to construct another 51 and has proposed 120 others, according to the association.

The two countries yesterday announced an agreement to reduce restrictions on air travel that will allow more flexibility in pricing and let China Southern Airlines Co. ship freight to the U.S. through Canada, according to the statement. Canada and China also agreed to update their tax treaty to reduce rates of withholding taxes that apply to cross-border payments and eliminate double taxation for individuals and companies.

China also pledged to work with Canada to resolve agriculture market access issues.

--Editors: Paul Badertscher, David Scanlan

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net; Andrew Mayeda in Ottawa at amayeda@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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