U.S.-China accord could sideline Canadian firms: CEO

B.C. companies urged to persevere in Chinese market despite diplomatic friction

Web Presence in China president Joseph Cooke, left, and CEO Jacob Cooke founded their company in 2005 | Submitted

The CEO of a tech company with Metro Vancouver roots is urging B.C. businesses to pursue opportunities in China despite continuing friction between Ottawa and Beijing.

Jacob Cooke, who helped his brother Joseph found Beijing-based Web Presence in China (WPIC) in 2009, said there was a short period of uncertainty last year when North American businesses waited to see if the mounting tariff battle between U.S. President Donald Trump and Chinese leader Xi Jinping would dramatically slow down China’s economy.

But the inquiries from western businesses to set up e-commerce websites and supporting logistics networks in China resumed a few months afterwards, and the current interest in North American businesses coming to China has not subsided.

What has been more on the minds of western e-commerce executives in the Chinese market like Cooke has been the possible deluge of inbound investment and trade from the United States to China if or when Washington and Beijing reach a trade deal. Cooke noted that both governments have essentially agreed to a US$200 billion reduction in the United States’ trade deficit with China.

Cooke said that could be achieved in one of two ways: the U.S. buys less from China or China buys a lot more from the United States.

“To give you an idea of how big US$200 billion is, right now, China only imports US$192 billion from the U.S. So if the short-term goal is to reduce the trade deficit by US$200 billion, that’s going to be more than doubling the U.S. import into China, which is an unbelievably large tsunami that’s coming in.”

Cooke, who has been in China for more than a decade, is getting ready for an influx of U.S. companies. WPIC specializes in helping western firms set up websites and other online operations behind China’s Great Firewall. The company’s client list of 350 brands now includes multinational corporations like the Ford Motor Co. (NYSE:F) and Levi Strauss & Co. (NYSE:LEVI) as well as Lower Mainland stalwarts like Lululemon Athletica Inc. (Nasdaq:LULU), the Vancouver International Airport and Tourism Vancouver.

But Cooke is worried that many Canadian firms and government organizations have not considered the effect that a flood of U.S. goods into China will have, given that the US$200 billion in purchases will have to come from somewhere.

“It’s not going to come from new demand; in most cases, it’s going to come from existing exports from other markets,” he said. “The U.S. does hold all the cards in that case, and from the people we talk to in various government organizations in Canada, they are really not prepared for what the U.S. is doing right now. So I would be alarmed by that.”

Several Canadian observers have noted similar concerns that a new U.S.-China accord would leave Canada on the outside looking in. Canada’s trade relationship with China – its second-largest trade partner – has been in a deep chill since the arrest of Huawei Technologies Co. Ltd. CFO Meng Wanzhou last December. The most recent round of trade actions came in March when Beijing abruptly pulled the import permits of two major Canadian canola exporters. Chinese officials cited pests as the reason for the ban, but observers widely tie the move to a string of actions targeting Canada after Meng’s arrest.

Canada exported about $4 billion in oilseeds to China last year, and analysts had been predicting record exports again this year prior to the Chinese ban. But Cooke downplayed Beijing’s decision, noting Chinese officials have often quibbled about the quality of Canadian canola over the last decade.

Instead, Cooke is asking Canadian businesses to look at successes like WPIC, which has a Vancouver office in addition to the company founders’ B.C. links. The company is slated to reach a head count of 200 employees by the end of the year, compared with less than 50 in 2015, and the profits in China have allowed the company to set up four offices in Japan – prompting a planned rebranding as WPIC Marketing Technologies.

In the meantime, the company is set to roll out new software that can track the inventory, sales and web promotional activities of companies in China from a single dashboard. This is in addition to WPIC’s Chinalytics Solutions, a service that is similar to Google Analytics in assessing website traffic demographics, but is functional within Chinese borders.

Cooke said the software can help B.C. companies make inroads in China.