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Trade war

Canada minister admits Huawei spat leaves Ottawa in tight spot

China tensions pose risks to bid to diversify overseas trade

Canada's International Trade Diversification Minister James Carr put strained relations with Beijing down to "a difference in definition of rule of law" in an interview with Nikkei.

TOKYO -- The Canadian trade minister has admitted Ottawa has been put in a difficult position by souring relations with Beijing since the arrest of Huawei executive Meng Wanzhou.

"This is a tough patch" said James Carr, the country's minister of international trade diversification, blaming the diplomatic spat on "a difference in definition of rule of law" in an interview with Nikkei in Tokyo.

Canadian authorities arrested Meng, the chief financial officer of the telecom giant, at the request of the U.S. government in Vancouver in December. Just over a month later, a Chinese court sentenced a Canadian citizen to death for drug smuggling.

Carr said his government shares U.S. concerns over Chinese entities' intellectual property violations and forced technology transfers, but pointed out that the relationship between Canada and China is "sophisticated and multi-layered," and that there was "an interest to maintain commercial relationships for both sides."

Canada is heavily dependent on the U.S. market, the destination for over 70% of its exports, and China is crucial to its attempts to diversify its overseas markets. 

"We hope, before too long, [the] situation will return to [a] less tense moment," he added.

When asked about his government's trade objectives, he described the Comprehensive and Progressive Agreement for Trans-Pacific Partnership as a "very important agreement" for all trade-oriented countries.

"We think CPTPP is a template for the world for nations who believe [in a] rule-based international trade system," he said in reference to the multilateral deal that replaced Trans-Pacific Partnership following Washington's withdrawal.

His government is willing to work to help expand membership of the pact, which took effect at the end of 2018. "Canada is happy to play a role encouraging nations to consider making applications if they are prepared to meet the high standard," he said.

Thailand and Indonesia are among the countries that have expressed an interest in joining.

Last year, Canada signed the United States-Mexico-Canada Agreement, a renegotiated version of the North American Free Trade Agreement.

The Canadian government hopes the USMCA can be ratified by the country's parliament in the first half of 2019.

Certain elements of the deal, such as commitments to sourcing car parts from within the region, have been criticized as running against the principles of free trade, not least in relation the Trump administration's "America First" agenda. But Carr argued that it was the best accord the members could hope for under current circumstances.

"We tabled [it] December 2018. [It is a] high priority for Canada," he said.

"It was a difficult negotiation," Carr said. "Not everybody gets [everything] they want in any trade deal," but the USMCA was the "best available at the moment for [the] three countries."

Ottawa has also signed the EU-Canada Comprehensive Economic and Trade Agreement, and will seek a seamless transition to a similar deal with the U.K. when it leaves the bloc.

Carr assumed his current role after a cabinet reshuffle in July last year, when Prime Minister Justin Trudeau added the word "diversification" to the title of the trade portfolio.

Under Carr's stewardship, Canada will also pursue trade agreements with the Pacific Alliance, which is comprised of Chile, Colombia, Mexico and Peru, and South American trade bloc Mercosur.

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