When Prime Minister Stephen Harper lands in Beijing Tuesday on his second visit to China, it won’t be to patch up dents in the relationship from his early days in office. In little steps, he’s launching the rewiring of Canada for Asia, and especially China.
In Kitimat, B.C., industry and government sketch lines on the map that will point Canada’s biggest export – energy – toward Asia for the first time. In Kanata, on the outskirts of Ottawa, Huawei engineers research new technology for the Chinese company even as it wires its current equipment into Canadian phone lines.
Perhaps the plainest sign that Mr. Harper has embraced that kind of trans-Pacific integration is his new push for a pipeline to pump Alberta oil to the West Coast and ship it by tanker to Asia – a redrawing of Canada’s energy infrastructure. But Canada is also organizing in other ways, marketing to Chinese students and tourists, approving Chinese corporate takeovers, speeding visas for visitors, and contemplating easing rules for exporting nuclear fuel.
In a closed-door speech last September, Canada’s ambassador to China, David Mulroney, told an audience packed with executives at the Montreal Council on Foreign Relations that China’s rise means more than a little more trade.
“This change is happening for us,” he said, “almost ahead of the ability of Canadians to understand it.”
It goes beyond oil. Mr. Mulroney noted the two top tour operators bringing visitors to Niagara Falls’ Skylon Tower are now from China. This week, Mr. Harper will bring University of Western Ontario President Amitabha Chakma to China to further Canadian university plans to expand research links and recruit more Chinese students.
And it goes beyond this week’s deals. Mr. Harper faces pressure to seal a long-awaited investment agreement to allow arbitration for Canadian companies which fear arbitrary Chinese decisions. Also likely is an energy co-operation agreement, reviving under Mr. Harper a framework prior Liberal governments had signed with Beijing for ongoing talks on a key sector.
Energy is serving as the accelerator of ties. Mr. Harper now calls shipping oil and gas to Asia “a national priority.” At least one pipeline is slated to pump natural gas to Kitimat by 2015 for transformation into liquid gas for Asia. Mr. Harper wants an oil pipeline to follow.
That new circuitry means directing a massive industry that now exports only to the United States toward Asia. Chinese state-owned companies are deepening investments in Alberta’s oil sands and B.C. shale gas. Mr. Harper’s government has recently approved its first full multi-billion-dollar takeovers of whole companies.
China is seeking energy security, but also wants acceptance – assurances Chinese projects won’t be viewed with suspicion. For Canada, the trade-off is access to growth markets.
Saskatchewan’s Cameco, for example, struck two major deals in 2010 to sell uranium concentrate for Chinese reactors. But so far, it has shipped uranium to China that comes not from Canada, but from Namibia and Kazakhstan. There’s no bilateral deal that allows Canadian uranium to be exported to China, because Canada, like most uranium exporters, insists on a detailed accounting of how it is used.
In 2008, Australia eased those rules for China, sparking criticism from other countries. Now Canada is considering following suit.
And beyond energy, Canada’s exports are beset by a problem: medium-sized companies, often geared to selling services or parts to U.S. firms, haven’t cracked similar supply chains in China.
That’s why the unremarkable cubicles of Huawei’s Kanata research facility, in a black glass building overlooking a golf course, have sparked interest from federal officials.
Huwaei’s ambitions have been thwarted in the United States, where security services have raised suspicions it could imbed spyware on American telephone networks, and the company has been blocked from buying U.S. firms and obstructed in bids to supply phone carriers. In Canada, it has had a warmer welcome, building big chunks of Bell and Telus wireless networks.
It also set up a research facility in Kanata, where 120 engineers research next-generation technology for Huawei, as renovations prepare for a doubling of the staff.
U.S. security officials might frown, but Canadian trade officials are intrigued: it could be a route to Chinese supply chains if researchers here team up with Canadian firms who later become suppliers for products sold in China or around the world.
Mr. Mulroney, in his speech last year, said Canadians will find their interests are touched by China, in “sector after sector” and not just economically. “Certainly internationally,” he said, “but also domestically.”
Harper's hit list
Energy: Expect Mr. Harper to highlight his push to build pipelines that allow oil and gas to be shipped to China, which is obsessed with energy security, and likely agree on regular talks on energy matters.
Investment: Canada wants Chinese money to develop Canadian business projects, and China wants assurances that its state-owned companies will be able to buy in, or take over, even bigger Canadian companies. And Mr. Harper is under pressure to finally seal a deal to protect Canadian companies from shifting Chinese government and court decisions.
Trade: Canada wants to sell more than energy: Mr. Harper’s delegation will be looking for ways to prod deals in other sectors, and try to create momentum toward broader trade negotiations.
People-to-people: The government sees business in recruiting foreign students and China as a big “market.” Mr. Harper plans to discuss ways to further boost tourism after a deal he signed in 2009 increased visits by 25 per cent.
Growth: China is a major engine for a shaky world economy, but the world fears a sudden braking as its export market weakens. Mr. Harper will be looking for signals China will be trying to boost its domestic consumption and keep its banking system stable.
Middle East: China just blocked a UN Security Council resolution on Syria, and buys a lot of oil from Iran. Mr. Harper, a hawk on Iran, will want to encourage China to help pressure Iran on its nuclear program, and provide less comfort to Syrian President Bashar al-Assad.