DOING SOME DIGGING – Trade with China may backfire

Canada and the People's Republic of China signed two new co-operative agreements last month covering minerals, meta...
Canada and the People's Republic of China signed two new co-operative agreements last month covering minerals, metals and earth sciences. The deals were signed by the Hon. Jim Peterson, Canadian minister of international trade, and representatives of two Chinese ministries. An agreement with the Development and Reform Commission focuses on minerals and metals. Potential areas for co-operation include sustainable development policies and practices, technologies and scientific research, and trade, investment and training. The other with the Ministry of Land and Resources deals with earth sciences and minerals and metals. Potential areas for co-operation include basic geoscience in support of minerals and energy exploration, environmental geology, metals in the environment, non-conventional energy sources, and natural hazards preparedness and emergency response.

Surely our countries have much to learn from each other in these matters. Canadians have developed and employ the world's best technologies in all areas related to natural resources, and the Chinese want access to such expertise. China, on the other hand, has huge mineral deposits which Canadians are increasingly eager to find and develop.

The Canadian government aims to create a closer trading relationship and new links with China. It has said so repeatedly, much to the consternation of free trade advocates and some economists. The federal policy may backfire, shrinking Canada's economy and leaving this country with an even-larger Chinese trade deficit than the current $10 billion annually.

Should the federal government formulate a free trade policy with China, economists warn that Canada will be inundated with Chinese imports. The 1.3 billion Chinese citizens constitute a large, low-paid workforce who cannot yet afford to consume all they can produce.

Consider the strength of China's economy. The sleeping tiger has awakened, and its economy is growing at a yearly rate of 9%, three times faster than Canada's. Direct foreign investments in China have topped a half-billion US dollars in the past 25 years. Foreigners invest because of preferential government policies and a stable investment environment. For those of us in the mining industry, the country has vast mineral potential. Chinese demand for metals has done much to support the current strong prices enjoyed by producers.

China has entered the 21st Century with a roar. No longer can it be considered a "developing" country. It has developed the cash and desire to acquire overseas enterprises such as Noranda. The government needs to overhaul its trade, manufacturing and taxation policies, say analysts, if we are to compete against such a giant.


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