It is difficult to find much coherence these days in the government’s management of relations with China. Despite the recent announcement of greater emphasis on trade diversification, the market that represents the world’s second largest economy no longer seems to be a priority for Canada.
Efforts to launch negotiations of a possible free-trade agreement with China died late last year despite indications that it had been the main purpose for Prime Minister Justin Trudeau’s visit. Various opinions have been proffered about why this initiative failed to get off the ground, one being that the government’s emphasis on its progressive trade agenda – gender equity, diversity, Indigenous issues, etc. – did not sit well in Beijing. (More fundamental concerns about China’s dismal human rights record were comparatively muted during the high level meetings.)
Trade negotiations can be complex enough when they deal with unfair trade practices and raw power inequities without including value propositions intended more for the home audience.
Whether because of poor planning or inept messaging, the Prime Minister left Beijing somewhat embarrassed by the last-minute reversal. It was a sobering lesson on realpolitik from a rapidly ascending China where nostalgia and aspirational nostrums carry little currency. Not much has happened since on trade.
No one should suggest that an opening on trade with China can substitute for Canada’s heavy reliance on the United States. In fact, that argument is used facetiously as a straw man by those opposed to any broader economic agreement with China. But negotiations on trade could actually provide some timely leverage for Canada vis-à-vis the United States, along with access to a market where we have already lost ground to natural competitors such as Australia and New Zealand. If Canada, too, were to gain any preferential access to the Chinese market, that would certainly attract attention from U.S. firms, especially those with operations in Canada.
Constructive engagement with China will not be easy to achieve given the discriminatory manner by which the Chinese often protect their own economic interests. There are lessons to be learned – good and bad – on this aspect from countries such as Australia and New Zealand, both of whom have established broadly successful trade and investment agreements with China.
Establishing better, more certain rules on trade and investment should have some tempering effect on concerns about unconventional Chinese trade practices. Otherwise, there would be little point in any negotiation. But non-engagement is not productive. Neither is irrelevance.
On the investment front, Canadian decision-making affecting China has been erratic. Soon after taking office, the Trudeau government reversed the Harper government’s rejection of a bid to acquire Norsat in Vancouver, thereby giving China’s Hytera Communications Corp. control of what some regarded as sensitive military technology. Similarly, in 2016, the government approved the acquisition of Montreal-based ITF – a fibre laser technology leader – by Onet of China despite concerns expressed by Canadian security officials. Earlier this year, however, the government rejected the proposed acquisition of Aecon, a construction company, by CCCI ostensibly for national security reasons, sending a confused signal about the receptiveness in Canada to investments by China.
The investment relationship and the prospect for closer economic ties with China are being blurred further by more recent concerns about activities in Canada by Huawei – one of China’s major telecom enterprises. News of the government’s concern surprised several Canadian universities who are recipients of research funding from the company. None had been advised of any national security threat posed by these grants. Given that the government itself is a significant customer of Huawei products, this sudden concern may be difficult to reconcile with reality. It is conceivable, of course, that questions are being raised now as a result of firm nudges by U.S. national security officials who have deep-seeded reservations about the disruptive capabilities of Chinese telecom firms.
The net result of all these events is a lack of coherence in what the government’s intentions or objectives are on trade and investment relations with China. Absent greater clarity, the drift away from any potential promise of engagement will persist. We can choose to negotiate up front to see whether worthwhile market access can be negotiated with rules that provide greater assurance to exporters and investors alike and without sacrificing values that are central to our system of government. Or we can leave the field to others. Trade diversification by Canada will have to find different channels, but with CETA’s approval sputtering in Europe and the mini Trans-Pacific Partnership not yet ratified, attractive alternatives are not readily apparent.