Ministers Bruce Ralston and George Chow talk trade, cannabis, softwood lumber, China and Donald Trump

Amid trade tensions with the U.S., the B.C. government is looking to Asia and other regions for diversification

With a protectionist Donald Trump in the White House, life won’t get any easier for the provincial government during its second year in office. B.C. has no choice but to find new markets outside the U.S. In a recent interview, Bruce Ralston, minister of jobs, trade and technology, and George Chow, minister of state for trade, listed the NDP’s efforts to diversify.

Among them: a January mission to China, Japan and South Korea, B.C.’s No. 2, 3 and 4 trading partners after the U.S. In China, the government promoted tourism and encouraged use of structural wood laminate as a low-carbon building material. In Korea, the Interactive & Digital Media Industry Association of British Columbia (DigiBC) signed a collaboration deal with its counterpart in Gyeonggi province.

In Japan, IT giant Fujitsu expressed an interest in B.C.’s burgeoning quantum computing sector, whose players include hardware pioneer D-Wave Systems and software developer 1QBit. “I’m optimistic that we may be able to establish a cluster for quantum computing in British Columbia that I think would be authentically world-leading,” Ralston said.

The provincial government is also working with Montreal-headquartered Rio Tinto Alcan and Richmond-based Catalyst Paper Corp., which are feeling the effects of 10-percent and 25-percent U.S. tariffs on aluminum and newsprint imports, respectively. Rio Tinto employs about 1,000 people at its plant in Kitimat, Ralston said, while Catalyst accounts for some 1,500 direct and 6,000 indirect jobs throughout the province.

The Washington-based United States International Trade Commission will make a decision on newsprint, Ralston explained. “The determination is under trade law whether there was injury [to U.S. industry],” he said. “If there’s a finding that there was no injury, then the duty would be taken off and the money that was collected rebated.”

Here are a few other highlights from the discussion with Ralston and Chow.

Can you give us an update on the softwood lumber dispute and its impact on B.C.?
Bruce Ralston: When [Premier John Horgan] was sworn in, there was a possibility, we thought, realistically, of being able to incent a settlement. In July 2017, the premier met with the prime minister and the federal trade minister, and then went to Washington and met with Secretary of Commerce [Wilbur] Ross and trade representative [Robert] Lighthizer in an effort to spur a deal. Because there was a sense at that point that there was an opening where a deal might be made. Obviously that didn’t happen.

I think the good news is that prices of Canadian exports—because British Columbia is 50 percent of the softwood sales into the United States, so it’s a vital industry for us—have been very good; they’ve been high. And so notwithstanding the tariff that is levied against Canadian softwood imports, we’ve still been able to be successful and make money. The American consumer, people who buy houses in the United States, are paying a higher price because of the added cost of Canadian lumber.

So there’s all those issues, and then there’s an effort to diversify. British Columbia is less dependent on the American market than many other provinces: Ontario, it’s about 80 percent of their exports; British Columbia, it’s about 50 percent. But in the present environment, we want to look at other opportunities. So it’s the Asia-Pacific, whether it’s ASEAN [Association of Southeast Asian Nations]—we recently opened a British Columbia trade office in Singapore—and the opportunities that CETA [the Comprehensive Economic and Trade Agreement] represents in Europe as well.

The federal [trade] ministry is now called the Ministry of [International] Trade Diversification. So I think there’s a sense among policymakers that this is the time to think about other alternatives. Having said that, we are still continuing north-south in North America. These are single-person offices—they’re not lavish—but we have a representative in Seattle, in San Francisco; we have an office in Los Angeles as well. Because north-south, whether it’s Microsoft or Amazon or any of the big technology companies, in Silicon Valley generally there’s a real interest in the talent that we offer. I think in some ways, Microsoft sees us as the version of the United States that they would prefer to see, so they’re very bullish on Vancouver, on British Columbia, and have demonstrated that by the expansion plans they’ve made.

So the opportunity is to demonstrate that British Columbia is indeed open for business, and people, I think, have that message and are coming here for a variety of reasons.

What is the status of the U.S. government’s complaint to the World Trade Organization about the province’s decision to block non-B.C. wines from grocery stores?
BR: There’s a phase where there’s discussion; I think there’s a 90-day or 120-day period. Our obligation as the British Columbia government is to advance and defend the interest of British Columbia wineries, which are very good. So we’re following that process in that dispute.

The president of Washington State Wine has suggested that his state and B.C. work together to break into the international market. How much potential is there for collaborations with U.S. states and regions that bypass the Trump administration’s protectionism?
BR: I hadn’t heard that one, but I think that’s the right spirit, to look north-south. The premier has a very good relationship with Governor Jay Inslee of Washington; he was the first governor of Washington State to address the B.C. legislature since the 1980s. So that spirit of cooperation north-south at the state and provincial level, I think that’s a good recommendation.

What effect might the Canada’s legalization of recreational cannabis have on B.C.’s trade relationship with the U.S.?
George Chow: Given the existing administration, I think there could be some friction because President Trump is probably very negative on that. So we need to be very careful that the people here know that once you cross the border, it’s totally different. We’ll see what happens. It is a sensitive issue. Even though Washington, Oregon, California, Colorado and Alaska are all legalized, when you go through the border, it’s still federal jurisdiction.
BR: It’s a real constitutional standoff in the United States, where you have the states that have gone in one direction and the American federal authority is in a completely different direction.

The good thing here in Canada is that whether people agree with it or not, the federal government has made the decision. It will come about October 17. [Public Safety] Minister [Mike] Farnworth here has been in charge of creating the [B.C.] regulatory framework. I think we’re going to have a good, effective regulatory framework here in British Columbia.

And there are business opportunities here. British Columbia historically has had a good reputation for quality. I think there’s an effort to elevate what will be B.C. brands that will emerge once full legalization takes place.

How worried are you about Donald Trump’s willingness to risk an international trade war?
BR: It’s a very unpredictable time. When I was in Ottawa in the fall, I met with Steve Verheul, who’s the chief Canadian negotiator on the NAFTA [North American Free Trade Agreement] file. He’s a very experienced negotiator at the WTO, and he was involved in agricultural negotiations as well internationally. And he said it’s like nothing he’s ever seen before, ever.

So it is worrisome. It’s disrupted very stable long-term relationships and expectations that people have had over decades. But we’re prepared and ready to respond. I think that’s where the diversification comes in, and that’s why the federal government is moving in that direction as well.

GC: It’s worrisome, too, in that with the trade war between the U.S. and China, it affects us because some ingredients that we’re using will also be subject to extra duty.

If NAFTA does fall apart, how could that impact B.C.?
BR: People have run various scenarios. British Columbia, again, I think is less dependent. They run by sector and by region—I know the federal government has done that as part of their preparation. Obviously it would be a major disruption to well-established supply chains.

I’m not sure that it’s going to happen. The recent indications are that there’s a possibility of a deal. I know they were reported to be close on the rules of origin in automobiles. But there’s some negotiations between the U.S. and Mexico at this point; Canada’s not involved directly.

Again, because of our Pacific orientation, we are less dependent on the United States. We don’t have an auto sector here…. I’m optimistic that there will be a deal at some point.

A recent UBC survey showed that Canadians are conflicted about China: on the one hand, they fear and mistrust it, but on the other hand, they want closer economic ties. How concerned should British Columbians be, and what’s the best way to engage with this superpower?
GC: I would think we would try to engage China. The federal government is embarking on seeing if we can get some kind of bilateral trade agreement, but that’s further down the road. I think what we need to do is basically what we do now: promoting trade in the Asia-Pacific, maybe even including India, not just those big three countries other than the U.S.—China, Japan and Korea.

With the coming of the Trans-Pacific trade agreement, I think there’s an opportunity as well. It’s something that’s important for us. China is now the No. 2 trading partner for B.C.

As B.C. becomes party to international deals such as CETA and the Comprehensive and Progressive Trans-Pacific Partnership, how confident are you that it can protect its labour and environmental standards?
BR: On CETA, the environmental and labour standards in Europe are probably comparable, so I don’t think there’s the same anxiety about it. That’s one of the reasons for having a deal with European countries, notwithstanding that there is some tension inside the EU countries relative to each other. But for British Columbia and Canada, the opportunities are there. I don’t think that’s a concern.

After the Americans left the TPP and dropped out, the renegotiated deal dropped a number of the areas where there was real concern on intellectual property. There was a delay on some of the application, but application of ultimate labour standards to Vietnam, for example. So I think most of the objections that people had to the TPP were addressed.

If you look at the bilateral deal that Canada has with Korea, it’s led to [opportunities] for B.C. businesses in seafood, agri-food—in a lot of sectors, a dramatic growth in business.

So I think we’re generally optimistic about the prospects of what would happen there. For British Columbia to have access to that trading bloc and to have access to Europe is a real advantage to businesses here and to our citizens.

What steps is your government taking to promote interprovincial trade?
BR: The external barriers that are sometimes listed, relative to other issues they’re not as significant. There was a recent decision by the Supreme Court of Canada on liquor, that case that came out of New Brunswick, which strikes a middle path where there is some ability of provinces to run their own liquor distribution systems, providing there’s justification and some history there. Some people decried it as being too cautious, but I think it is something that the provinces are more comfortable with and can live with.

The previous government signed agreements, whether it’s the New West Partnership or whether it was the Trade, Investment Labour and Mobility Agreement [TILMA] with Alberta. The key thing for most people is labour mobility, and I think there’s an ongoing effort to regularize standards for admissions and recognition of qualifications and professions, and in trades as well.

What are a few ways that B.C. would benefit from stronger trade ties with the other provinces?
B.R. It depends on your theory of trade. If you’re Donald Trump, you want to have an autarchy and complete self-reliance. But generally, most theories of trade are that the bigger the market your individual industry has competitive access to, the better it is for the businesses in your jurisdiction.

So on that theory, which is one I tend to support, that’s why we pursue trade so vigorously internationally. A small subnational jurisdiction with four-and-a-half million people in a globally competitive world needs access to markets other than our own if we’re going to be successful in any number of areas. That’s the basic reason why it’s better to have access to other parts of Canada, and I think we do.

How big a stumbling block is B.C.’s current standoff with Alberta, which has weaponized interprovincial trade as part of its efforts to get the Trans Mountain pipeline expansion built?
B.R. The wine [boycott] thing disappeared. Obviously the Alberta government is doing what they feel they have to do electorally. They’re facing a very concerted challenge by [United Conservative Party leader] Jason Kenney and his group. And so that’s the political environment they’re operating in, but generally, other than that issue, I don’t sense any enduring antagonism.

It is, in my view, very situational. They’re facing an election in a year. The people of Alberta will decide whether they want to give the current government another term or whether Mr. Kenney will step in and take over.

This interview has been edited.