Thank you for your question.
Earlier I heard finance department officials answer your question. You had asked whether the current convention between Canada and Hong Kong was fully functional and legal. I know that the Canada Revenue Agency has given its interpretation of this. It said that the convention could apply to transactions between Canada and Hong Kong.
We should question, however, whether the convention in force really complies with international law. International law uses words such as “state” and “country” whereas these words are not mentioned in the current model of the convention.
So we should ask this question since we want to be clear on what we are talking about right now. Is it a minimal technical amendment or something that allows for the full operation of the convention with Hong Kong?
If that is the case, having seen how China can react to certain recent decisions in the United States, we have to consider how China will react to this. Would Canada be simultaneously approving two tax agreements, that is, an arrangement and an agreement with Hong Kong and Taiwan?
I know we are being careful not to offend China by being mindful of the wording of the agreement with Taiwan. We are being careful not to suggest that Taiwan is a country. I understand all that, except that Hong Kong and Taiwan are fiscally competitive with China, so much so that in trading with China it is standard practice to go through Hong Kong.
So I think we have to understand the conventions so we can agree and legislate on the tax treatment between Canada, Taiwan and Hong Kong, which are fiscally competitive with China. It is as though a Canadian province or a U.S. state decided to separate and became a major fiscal competitor.
Today we are talking about agreements that other countries would conclude given that those governments had just separated. So we have to be mindful of these issues. As I said in my remarks, I know relations with China are very important to Canada. From what my colleagues said, I understood that people are quite comfortable with China's reaction, but your question was worth asking. It is important.