How often have we heard over the past few years that Canada could not afford to harm its growing trade relationship with China because the country would miss out on its share of the biggest economic bonanza of the 21st century?
Seduced by potential lucre at the end of this rainbow, Justin Trudeau’s Liberal government has zealously pursued trade with Beijing. The prime minister appointed two ambassadors, John McCallum and Dominic Barton, who were as ardent admirers of China as he and Liberal grandees such as Jean Chretien and John Manley.
As just about every Canadian knows, that intention has been ill-starred since Huawei heiress Meng Wanzhou was detained in Vancouver 19 months ago where she has become a reluctant participant in extradition proceedings that will decide whether she should face serious fraud charges in the U.S. and China responded by kidnapping Canadians Michael Kovrig and Michael Spavor. Relations between the two countries are now at their lowest ebb by far since Pierre Trudeau established diplomatic relations with China half a century ago this October with no hint that they might get better any time soon.
For reasons known only to themselves, while most of the developed world began distancing itself from China a couple of years ago, Prime Minister Trudeau and Ambassador Barton seem to have remained convinced that things with China would still work out somehow. Or they thought so until a few months ago. Since then they’ve been rather quiet about the future of Ottawa’s moribund relationship with Beijing.
With Canada’s China policy effectively a dead letter, what’s next?
For starters, there will still be some trade (mostly raw resources and agricultural products) with China. It will not be anything like the many hundreds of billions of dollars a year in potential spoils that once dazzled the Canadian government and many Canadian business leaders, but it is still likely to be substantial.
When assessing the economic fallout from the Meng/Two Michaels confusion, a more global perspective is required. Canada is hardly the only developed country whose trade and diplomatic ties with China have become frayed. The U.S., Japan, Australia, the United Kingdom and a few of the most important players in the European Union are equally ill-disposed towards President Xi Jinping’s dictatorship today.
It is also a fact that despite all the noise about China being the golden egg, only 12.4 per cent of its imports and 3.9 per cent of its exports went to and came from China. Those are impressive numbers, to be sure, but they are not so large as to be economy killers.
Seldom discussed is that Canada did more than seven and a half times more trade with the U.S. than China last year and 30 per cent more trade with the European Union. Even Canada’s trade with Mexico was a surprisingly robust 50 per cent of what it was with China.
As for areas of potential growth, senior officials from Japan, India and Vietnam, which all have territorial disputes and complicated relationships with China, have emphatically told me over the past year that they wish to greatly grow their countries’ trade relations with Canada and have been baffled by Ottawa’s lack of interest. As it is, taken together, these three countries do about half as much trade with Canada today as China does.
Similarly, there is room for lots of growth in trade with Taiwan, South Korea, Thailand, Indonesia, Malaysia, the Philippines, Australia and New Zealand.
Canada must look beyond Asia for new opportunities and as part of western efforts to prevent China from dominating many distant markets. There should, for example, be more trade with Latin America, where Chinese business interests have been super busy.
Ottawa should encourage Canadian banks to return to the crucial role they played in the Caribbean until a few years ago. With Canada largely absent, China has filled the vacuum there, building airports and cricket grounds.
During several fairly recent visits to Africa, I got an earful in the streets and the countryside about China’s big and growing business presence and the boorish behaviour of many of the Chinese working on infrastructure projects that they’ve met there. There is also anger and exasperation with their own political leaders for having become so friendly with Beijing’s bankers and leaders and for having sold them large tracts of farmland.
Canada does not have the resources to change much in Africa. But targeted opportunities and development in conjunction with close allies could pay dividends.
To give actual meaning to the slogan, “Canada’s back,” the Trudeau government should for the first time assume a major global leadership role by pressing the U.S. hard to join the 11 country Trans-Pacific Partnership (TPP). Achieving this will be a very tough sell as long as President Donald Trump resides on Pennsylvania Avenue, but there is a growing likelihood that Democrat Joe Biden will unseat the incumbent in November’s election.
Democrats tend to be protectionist, but they are as strongly opposed to China’s ambitions in Asia and elsewhere as Trump is. It is also a given that if the Democrats control the presidency, the Senate and the Congress, they will be keen to repair the wreckage that Trump has created in American relations with most of its allies and potential allies.
As the Tories have repeatedly demanded, Canada should immediately quit the Beijing-based Asia Infrastructure Investment Bank. As Canadian diplomats told the government earlier this year, the AIIB burnishes China’s reputation, though not Canada’s, and spreads China’s influence and authoritarian political model across the developing world. Being part of the AIIB has turned out to be a cock-eyed way of spending about $360 million.
Withdrawing from the AIIB might make it easier to convince American legislators to join the four-year-old TPP and reinvigorate the much older, Japanese-led Asian Development Bank, of which Canada and the U.S. are both members.
Putting all these parts together could make up for what has been lost as relations with China have soured badly. However, to get there from here will require a new mindset in Ottawa and far more complex, trenchant and original strategic thinking than Global Affairs Canada and Canadian trade officials have yet demonstrated.
If well-executed, such a reboot could make up for most or all of the trade with China that Canada is likely to lose out on. Such a scheme would make Canada stronger, too, because it would end up with a much broader web of trading partners and strategic alliances, especially in the Indo-Pacific.
As important, it would restore some of the self-respect and lustre that Canada lost when it decided to invest so much time and political capital in its misbegotten effort to be China’s best pal.
Matthew Fisher is an international affairs columnist and foreign correspondent who has worked abroad for 35 years. You can follow him on Twitter at @mfisheroverseas