Edward Greenspon is president and CEO of the Public Policy Forum. Kevin Lynch is co-chair of PPF’s Consultative Forum on China.
With exports over 30 per cent of GDP, Canada’s economy would be much smaller and its citizens considerably poorer if not for trade and investment with other countries. That three-quarters of that trade relies on ready access to the increasingly self-absorbed, aggressive and fickle United States is cause for serious deliberation, beyond indignation.
Canada’s special relationship with the United States has served us both well. It is always a risky proposition to have so many eggs in a single basket, but those risks were mitigated by Canada’s embrace of predictable rules to govern both bilateral trade, beginning with the Auto Pact, which morphed into the Canada-U.S. free-trade agreement (FTA) and NAFTA, and the international-trading system through the General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO).
Even in the best of times, there were breakdowns, such as the repeated U.S. attacks over softwood lumber or former president Barack Obama’s rejection of the Keystone pipeline. Unfortunately, we’ve now entered a world where it’s softwood lumber all the time. So, what are we to do?
Some answers are clear enough. The long-held and oft-ignored objective of diversifying our trade relations must be pursued with urgency and vigour. Canada has done well by its recent agreements with the European Union and with Japan and others in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Business leaders must now put commercial meat on the bones of these agreements.
Secondly, if a trading country such as Canada wants to grow, by definition it needs to trade with countries with both fast growth and with sufficient scale to make an appreciable difference to our export volumes. By and large, these are Asian – and you can’t speak of Asia without including China in the conversation. China’s annual growth is roughly two to three times that of Canada and the United States – off a base of 1.3 billion people. Any government seeking to represent the national interests of Canadians in the time of Donald Trump must be in possession of a long-term strategy that includes China, and not, as for more than a decade, a hodgepodge of inconsistent and reactive decisions.
Canadians don’t seem troubled by the proposition of an Asian diversification strategy with China at its core. Despite concerns about Chinese authoritarianism, human-rights violations and the perceived behaviour of some state-owned enterprises, polling shows support for a free-trade agreement trending up over the past few years. Qualtrics places the number at about 70 per cent and the Asia-Pacific Foundation about 10 points lower. No poll puts it below 50 per cent.
This shift in Canadian attitudes began even before Mr. Trump’s immodest arrival on the scene. His words and deeds have merely added impetus. Canadians get that American economic and geopolitical power is declining in relative terms and that China is an emerging force to reckon with. In the Asia Pacific Foundation’s recent annual survey, 59 per cent of respondents believe trade with Asia, led by China, will outweigh trade with the United States in the future. Canadians essentially are asking: “How can we not have a clear engagement strategy with a country that within the next 10 years will be the world’s biggest economy, largest exporter of capital, goods and services, largest emitter of [greenhouse gases] GHGs, a technology superpower and the world’s largest source of tourists and expatriate students?”
As co-chairs of the Public Policy Forum’s Consultative Forum on China, we have spent the past 14 months consulting on what a made-in-Canada strategy for future Canada-China relations should look like. Our blueprint will be released in the fall.
It is strikingly clear from our discussions that more value-added trade in sectors such as agri-food, forestry, resources, educational services, tourism and cleantech is unambiguously beneficial for Canadians. Selling lobsters and lumber raise no national security flags, real or imagined, but they do create lots of jobs all across Canada. A case in point today is the 180 fishing fleet jobs and 304 processing plant positions in Atlantic Canada directly flowing from Clearwater Foods’ seafood exports to China.
Interestingly, both Canada and China have diversification agendas – we seek greater security of demand for our exports while China wants greater security of supply through trade arrangements with a broader range of exporting countries. Canada appeals because it is a highly developed, rule-of-law based, G7 country that poses few geopolitical risks, unlike many other global exporters.
Meanwhile, China, having raised hundreds of millions from poverty to middle-class status since it embraced a market-based economy, is now learning this middle class comes with expanding expectations for a better life – starting with livable cities, healthy food, safe workplaces, reliable pensions and available eldercare. Beyond traditional exports, China knows it can benefit from Canada’s long experience designing policies and services for the middle class.
China elicits a wide spectrum of passionately held views, of that there is no doubt. Whatever one may think, however, the question is whether a balanced engagement strategy with an economically dynamic China serves our national interests at a time when the President of the United States is pursuing a beggar-thy-neighbour policy. Risk management and prudent diversification certainly suggest yes. Time to decide how best.