Has Canada picked the wrong horse?
Some are asking that question in the wake of a NAFTA renegotiation that left this country with a slightly worse deal – after months of brinkmanship and diplomatic abuse from the Americans – that could limit Canada’s ability to strike a free-trade deal with China in the near term.
Of the two countries, China’s rising economic fortunes and relative domestic calm can strike an appealing contrast with the United States, which has become an unreliable ally and an economic bully.
Canadians would not be alone in wondering whether a pivot east is the wise course. Governments from Prague to Pretoria have made the same calculation.
But there are worries that Canada has made itself an economic vassal of the United States with a clause in the new United States-Mexico-Canada Agreement (USMCA) that gives the two other partner states the right to inspect free-trade deals with any “non-market country” – a section clearly written by U.S. trade negotiators with China in mind.
Beijing now suggests that Ottawa had better immediately start bilateral trade talks with China, or kiss its sovereignty goodbye.
The Trudeau government should ignore this loose geopolitical fretting. China’s rise is a wonderful thing for its people and provides other countries with a vast and growing market. But free trade with China is not a sound bet for the future of the Canadian economy.
It might be useful to start by clarifying terms. Plain old trade, outside of a binding free-trade deal, is just fine.
China is already our second-biggest trading partner. The economic relationship between our countries is increasingly mature and even-keeled. They’re buying our cars and sawmills, we’re buying their computers and phones, albeit with tariffs imposed on some goods.
There’s room for growth, too. As the think tank Public Policy Forum recently suggested, Canada could focus on boosting trade in particular sectors, such as energy and natural resources. It’s one of the reasons the liquefied natural gas project in British Columbia is so encouraging: China will be a big export market for the new LNG terminal in Kitimat.
Still, the unfettered flow of capital and high-level communications technology between our countries remains too risky to contemplate.
The fact remains that China’s trade agenda is part of a broader campaign to buy political influence and secure intelligence. Every large Chinese firm is implicated in this mission in one way or another.
Setting aside the question of whether Canada wants to abet China’s geopolitical rise, there are real risks for countries that open themselves to close economic integration with Beijing. National security is one. China is alleged to have bugged the African Union building it built in Ethiopia half a decade ago. Such brazen spying was likely one of the reasons Canada blocked the sale of construction giant Aecon to a state-owned Chinese firm earlier this year.
Now U.S. senators are urging Ottawa to block the involvement of Chinese telecom powerhouse Huawei in Canada’s future 5G wireless networks, as the United States and Australia have done, citing similar spying fears.
Under a binding trade deal, screening and blocking such investments in Canada would inevitably be more difficult.
An influx of investment by state-backed Chinese firms has also had a tendency to compromise the independence of government policy and civil-society groups in some countries. A recent Globe and Mail report on China’s influence in Africa suggests that Beijing has been able to buy everything from sway at local newspapers to discretion over the granting of visas, largely with the goal of dampening criticism of itself.
The pattern extends to Europe, where countries such as Greece that benefit from massive Chinese investment have held up European Union condemnations of Chinese human-rights abuses.
Maybe Canada’s rich economy and strong state would keep us immune from such meddling. And Beijing isn’t entirely off-base when it casts skepticism of its trade agenda as “Cold War” thinking – a trap Canada should avoid. More trade between our countries is welcome.
But if sovereignty is the concern, as some critics of the USMCA believe, free trade with China may well be a bigger risk than temporarily curtailing our right to it.