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Chinese President Xi Jinping shakes hands with Canadian Prime Minister Justin Trudeau during the 2016 Group of 20 Summit in China.Damir Sagolj/Reuters

Margaret McCuaig-Johnston is a senior fellow at the Graduate School of Public and International Affairs at the University of Ottawa and a former senior official in Canada’s Department of Finance.

One would have thought that Zhao Wei, a Chinese diplomat and suspected intelligence officer, would have been sent home by the evening the news broke that he was part of an effort by Beijing to target MP Michael Chong’s family – or better still, two years ago when CSIS first learned about this.

But the expulsion came a week after The Globe and Mail brought the matter to the public’s attention. Foreign Minister Mélanie Joly had said the government was considering what economic, consular and diplomatic retaliation might be visited upon Canada if it went through with the move.

Why did our government seemingly hold back on expelling a Chinese agent for an offence against a sitting member of Parliament on Canadian soil? And why did it do so only when its hand was forced by public blowback?

The answer lies in the highly asymmetric trading relationship between the two countries – an asymmetry that makes Canada economically dependent upon China.

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It has been every nation’s experience that China demonstrates erratic and belligerent behaviour when it is criticized, always starting with denial. Chinese embassy officials are well known in Ottawa for making both veiled and explicit threats to Canadian officials behind closed doors.

No doubt they were doing so last week. But to telegraph publicly that the government is assessing the implications of an anticipated Chinese overreaction, as Ms. Joly did, is an acknowledgment of China’s excessive leverage over us. Ordinarily, a country would respond to the expulsion of a diplomat simply by expelling a diplomat in turn.

Ms. Joly talked about a range of potential Chinese retaliation. China could use its leverage in consular cases. We saw that with Michael Spavor and Michael Kovrig, whom China detained after Canada arrested Huawei chief financial officer Meng Wanzhou in 2018. Then there is diplomatic retaliation – the tit-for-tat expulsion of one or several Canadian diplomats. But at the heart of everything is a bigger issue.

Over years, Canada has developed a highly dependent trade relationship with China. Every year, bilateral merchandise trade between the two countries totals more than $100-billion. But while that makes China Canada’s largest trading partner after the United States, this country is only China’s 18th-largest trading partner.

That means this trade relationship is far more valuable to Canada than it is to China. If all bilateral trade were to stop, it would be a bruise for China but a debilitating blow for Canada. And while Canada is a country of independent institutions and rule of law, China is one where everything is subservient to the party state.

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It is this trade relationship from which all other forms of retaliation flow. When a once-cloistered China opened itself up in the late 20th century, the world came with trade and the country’s vast market in mind.

Why are there Canadians in China for Beijing to detain in the first place? It is largely because of the two countries’ economic relationship. Mr. Spavor lived in China because his business was based there. There are hundreds of thousands of Canadians in the country.

The same goes for diplomatic retaliation. Why would it matter to Canada that Beijing might expel its diplomats in retaliation? Canada does not have embassies or high commissions in many countries – for example, Madagascar. Why is having diplomatic representation in China so important? Because, unlike with Madagascar, the relationship with China has value that we can quantify in dollars and cents.

Diplomatic relations are primarily a matter of trade. Over the years our economy has benefited greatly from the vast Chinese market. But it also leaves us in our current sticky situation.

Our government must not weigh the safety of an MP, or indeed any Canadian, against economic losses we may incur. We need to make difficult choices. Some may see this as decoupling from China, but it is China that has been targeting foreign companies and blocking foreign access to Chinese data. Canada must reduce the leverage Beijing has over our companies – and, indirectly, our public policy.

It is, to be sure, impossible to disengage completely from China, or even achieve anything meaningful in that respect in the near term. Managing our risk in China more effectively will not happen overnight. But it must happen.

Fortunately, Canada has developed an Indo-Pacific strategy that supports our companies in reducing their risk in China. It does this by encouraging the development of new markets in other countries across the region – countries that respect the rule of law. There will be future diplomatic disagreements with China, and we should begin working now to reduce the impact of economic, consular and diplomatic blowback.

This new China crisis we find ourselves in would be aided immeasurably if Prime Minister Justin Trudeau were to create and chair a cabinet-level national security body to make clear and swift decisions. Perhaps David Johnston, whom Mr. Trudeau has named special rapporteur on foreign interference, will include this in his recommendations to the government.

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