Closer trade and investment ties to China turning into a big headache for Stephen Harper – by Les Whittington (Toronto Star – November 4, 2012)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

OTTAWA—Playing the China card, a key to Stephen Harper’s economic strategy, has proven a lot trickier than the federal Conservatives expected when the Prime Minister signalled in Beijing that Canada was open for business.

Increased trade, investment and energy dealings with Asia, particularly China, underpin the natural resources-heavy cure-all for the economy that the Harper government embraced last winter after U.S. President Barack Obama rejected the $7 billion Keystone XL pipeline from Alberta to the U.S. Gulf Coast.

In response, the Conservatives stepped up efforts to diversify trade and energy sales away from the U.S., touting as a national priority a proposed pipeline to carry oil sands-derived crude from Alberta to British Columbia for shipment to Asia. Regulatory approval was streamlined in hopes of fast-tracking energy sales to China, while the pipeline’s opponents were demonized as anti-Canadian.

And in February, Harper carried out a visit to Beijing characterized as a major breakthrough in Canada-China economic relations, with the Prime Minister initialling a long-sought investment protection agreement between the two countries.

But this approach to seeking prosperity through more trade and investment with the fast-growing economy is shaping up as a political minefield for Harper’s Conservatives.

While the government says the investment treaty will help protect Canadians wishing to do business in China, opposition parties deride it as a sellout that will allow huge state-controlled Chinese companies to challenge efforts by Canadian governments to protect the environment, public health and other concerns.

Although Harper denies this, the government has been under intense pressure to allow MPs to scrutinize the deal more thoroughly. Despite the uproar, the Conservatives have refused, and the treaty is expected to come into force in the near future.

The bigger problem for Harper has been how to handle large takeovers of Canadian natural resource companies by corporate buyers from Asia. The magnet for controversy here is the attempt by China’s state-owned oil giant to conclude a precedent-setting $15.1-billion purchase of Calgary-based oil producer Nexen Inc.

As they wrestle behind closed doors with whether to approve the buyout by Chinese National Offshore Oil Corp. (CNOOC), Harper and his cabinet ministers are attracting criticism from all sides.

Most pronounced have been complaints about the government’s inability to spell out publicly how it will ultimately judge the deal. Harper promised two years ago to provide clarity on what standards Ottawa will use to decide if proposed foreign takeovers meet the vague “net benefit” test under the Investment Canada Act.

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