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Canadian executives back TPP, stronger ties with China

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Canadian executives overwhelmingly support expanded international trade deals, including more open commerce with the United States and a free-trade deal with China.

The latest quarterly C-Suite Survey of corporate leaders shows that a large majority now believe in broader global trade, and want more agreements to make that happen.

Eighty-seven per cent support Canada's ratification and implementation of the Trans-Pacific Partnership (TPP), while ninety per cent said they would like to see a customs union with the United States, where all tariffs are removed and most non-tariff barriers dropped. Seventy-six per cent would like to see that kind of open arrangement expanded to include Mexico some time in the next decade.

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These results show that "Canadian business has become more international by its very nature," said David MacDonald, chief executive officer of Softchoice Corp., a Toronto-based information technology and services company. One reason for that, he said, is that Canada's diversity has made business much more aware of the value of engaging in global commerce. "When you look at the tech sector, we have a lot of new Canadians participating in it and they have an international view."

At the same time, Mr. MacDonald said, it has become clear to executives that freer trade is good for business. "The reality is that almost every trade treaty that Canada has signed has increased economic activity. It has become more and more obvious that [these deals] are critical."

Indeed, the C-suite survey participants expressed concerns about what would happen if deals such as the TPP and the Canada-Europe trade agreement are not ratified. Ninety-five per cent of respondents said that if both agreements collapsed, it would damage Canadian growth prospects over the long term.

When it comes to broadening trade with China, executives are also enthusiastic. More than half of those surveyed see Canada's current trade relationship with China as too restrictive, and 78 per cent would support a free-trade agreement with China if it were to be negotiated in the next five years.

There are some voices of caution, however. Robin Goad, CEO of Fortune Minerals Ltd., said he's generally supportive of trade deals, but low labour rates in China could make it hard for Canadians to compete there in a free-trade environment. "The Chinese market is not a free market, it is a controlled market," he said. "As long as there is a level playing field, I would support [free trade], but I don't believe that would be the case."

Ken Seitz, CEO of Canpotex Ltd., which sells Canadian potash in international markets including China, says he understands those kinds of concerns. But he also thinks China is making "great strides" to open up its markets, and sees no alternative to negotiating with the Chinese on free trade. "We have to make progress on this front and the only way to do that is to engage."

Mr. Seitz said there are currently no barriers to Canadian exports of potash to China, but he thinks free trade would still help his company in subtle ways. "If there is increased trade between Canada and China as a result of a constructive free-trade discussions, that will benefit us in terms of our relationship and how the Chinese view Canada and Canadian potash."

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Mr. Seitz said it is no surprise there is such widespread support for free-trade deals of all kinds among Canada's business leaders. "There is an overwhelming recognition [among executives] that bringing down trade barriers, exploiting trade and increasing the competitiveness of Canadian expertise are all really healthy things."

While Canada may be increasingly open to trade deals, protectionist sentiment in the United States appears to be growing, with both presumptive presidential candidates expressing concerns about free-trade arrangements.

Still, a strong majority of C-Suite respondents (64 per cent) think it is unlikely that the next president of the United States will try to renegotiate the North American free-trade agreement (NAFTA) and 52 per cent don't think they will block the ratification of TPP. As for the election itself, two-thirds of Canadian executives would prefer to see Hillary Clinton win and 21 per cent opt for Donald Trump. (Of Alberta-based executives, 27 per cent prefer Trump.)

Willy Kruh, global chair of consumer markets at KPMG and a long-time advocate of a more international outlook among Canadian business, said U.S. protectionism is a "temporary blip" that results from dissatisfaction with a relatively weak labour market. "I think this is political rhetoric in an election year," he said, although it also shows that Canada needs to diversify its trade relationships to be less dependent on the United States, he added.

Over all, Mr. Kruh said he is pleasantly surprised that Canadian businesses appear to be more committed to international trade than ever, and he hopes that small and medium-sized firms will begin to play on the global stage along with some of our bigger companies.

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