Quantifying a Canada-China Free Trade Agreement

Abstract

The possibility of a Canada-China Free Trade Agreement has been under discussion for some time. China has reportedly offered to negotiate an FTA with Canada, although this has not been officially confirmed by the Canadian Government. A tentative step towards a negotiation was taken in the 2012 Canada-China Complementarities Study. This note seeks to quantify the impact of such an agreement on Canada and China. We deploy a dynamic computable general equilibrium model that incorporates foreign direct investment and develop a realistic scenario based on the recently concluded China-Australia FTA. We find the main gains from a Canada-China FTA would come from tariff reductions and the binding of services commitments.

Keywords: Canada, China, FTA, CGE

JEL Classification: F13