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Chinese President Xi Jinping shakes hands with Prime Minister Justin Trudeau ahead of their meeting at the Diaoyutai State Guesthouse in Beijing on in 2016.POOL New/Reuters

The federal government is designing its first strategy that encompasses the entire Indo-Pacific region, which will include the formidable challenge of dealing with an increasingly aggressive China.

The strategy is being crafted in the wake of the worst rupture in relations between Ottawa and Beijing in half a century and while memories are still fresh on how China reacted to the arrest of a Huawei executive at the Vancouver airport. The country arbitrarily jailed two Canadians for more than 1,000 days and put trade restrictions on Canadian exports.

Calling it an Indo-Pacific strategy instead of continuing to focus on just the Asia-Pacific region reflects a potential shift in how Ottawa approaches Asia and countries bordering the Indian Ocean, such as India, Pakistan, Bangladesh and Sri Lanka.

Jonathan Fried, a former ambassador to the World Trade Organization and Japan, is heading a special secretariat at Global Affairs on the strategy that includes Michael Danagher, a former ambassador to South Korea.

In recent months, Mr. Fried has been consulting business leaders, provinces, academics, and China and Asia-Pacific experts on an all-encompassing plan. This not only addresses superpower China but focuses on diversifying trade with Southeast Asian countries, such as Malaysia, Vietnam, Indonesia and Thailand.

Many of these countries have burgeoning middle-class populations and a shared interest in addressing China’s growing weight in the region, and fear Beijing’s militarization of the South China Sea and other ocean trade routes.

The Indo-Pacific strategy widens the circle of possible partners on which Canada and its allies can focus to counter China’s growing power, not only in the Asia Pacific but also the Indian Ocean and beyond.

The entire region is an important target for China’s US$1-trilllion Belt and Road Initiative, which is building railways, ports and pipelines there in what experts regard as a state-directed effort to bolster Chinese political influence and extend its military reach from Asia to Africa.

Like their Asian neighbours facing China’s militarization of the South China Sea, this Indian Ocean group has watched China build influence in the larger region, from a military base in Djibouti to the Gwadar port in Pakistan and Hambantota port in Sri Lanka.

Stephen Nagy, a senior associate professor of politics and international studies at Japan’s International Christian University, was consulted on the Indo-Pacific Strategy. He said the concern for the United States, Japan, Canada, South Korea, Australia and others is that China’s Communist Party leadership will reshape the broader Indo-Pacific region to reflect its own priorities.

“That means less transparency, less focus on rule of law, weakening of international institutions, strengthening the idea of non-interference in a country’s internal matters,” he said.

The Indo-Pacific review is unfolding at a time when the Biden administration is pressing Canada to make clear how it will approach the China of 2021. The United States, Britain and Australia are calling for common Western strategies to respond to Beijing’s use of trade sanctions and hostage diplomacy, as well as its quashing of political opposition in Hong Kong, military intimidation of Taiwan and repression of Muslim minorities including Uyghurs.

At his September confirmation hearings in Washington, David Cohen, the new U.S. ambassador to Canada, said the Biden administration has been “waiting for Canada to release its framework for its overall China policy.” He said his task in Ottawa would include making “sure that Canada’s policies reflect its words in terms of the treatment of China.”

Mr. Fried would not talk to The Globe and Mail about the review and Global Affairs declined to say when it would be completed.

But Syrine Khoury, press secretary for Foreign Affairs Minister Mélanie Joly, said Ottawa wants “a new integrated approach to the Indo-Pacific region with a view to diversifying Canada’s engagement and deepening its diplomatic, economic, security and sustainable development partnerships.” Part of the strategy also is to “uphold democratic values and human rights in the region,” she said.

Guy Saint-Jacques, former Canadian ambassador to Beijing, said calling this an “Indo-Pacific strategy” is likely in part “a message to Washington that we are aligned with you.”

Mr. Saint-Jacques, who is on the list of those to be consulted by Mr. Fried, said the centerpiece of any Indo-Pacific strategy still has to be China, especially in the aftermath of the release from Chinese prisons of Canadians Michael Spavor and Michael Kovrig.

“The message to China should be that we have no problem with you being a superpower, but you have to abide by international rules, and you have to stop acting as a bully,” Mr. Saint-Jacques said. “On trade, we have to do business with China but at the same time we will try to diversify our trade with other countries in the Asia-Pacific region.”

Goldy Hyder, president of the Business Council of Canada, said the new strategy is “critically important’ and one that Canadian companies have been pushing Ottawa to do.

He’s advised Mr. Fried that Canada needs to be encouraging companies to actively take advantage of its membership in the 11-country Pacific Rim trade bloc, known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The trade bloc, which was to include the United States before Donald Trump pulled out, is expected to expand one day to include South Korea, Indonesia and possibly India. China and Taiwan have also asked to join.

Mr. Hyder notes that Australia, South Korea and Japan have largely sided with Washington amid territorial and security conflicts with China but also pursued trade and economic co-operation with Beijing. All three countries, for example, banned Huawei from their 5G networks but also joined the Regional Comprehensive Economic Partnership (RCEP), an agreement that includes China but not the United States.

Australia has been a much more vocal critic of China than Canada. Canberra led calls for an international probe into the origins of COVID-19 that first emerged in China and denied numerous Chinese investment and acquisition proposals. It also suffered as Beijing in retaliation imposed trade restrictions on a multitude of Australian exports.

Jonathan Berkshire Miller, a director at the Council on International Policy, said he told Mr. Fried that Canada needs to “dilute the importance of China in our foreign-policy making.”

China is the destination for only about 4 to 5 per cent of Canada’s merchandise exports and ranks behind the U.S. and Britain in foreign direct investment here. Much of the trading relationship with China is Canadians purchasing goods from Chinese manufacturers.

Mr. Berkshire Miller said he believes Canada needs to diversify its approach in the Indo-Pacific region and “reject the idea that China is an exceptional country” that requires special attention.

There are many other markets in Asia that would offer Canada a stable trading relationship unlike China, which blocked imports of pork and beef in retaliation after Huawei executive Meng Wanzhou was arrested in Vancouver, he said.

“Enough of this obsessing over China as this ultrapowerful exceptional country. There are others in this region that matter a lot,” Mr. Berkshire Miller said.

Sarah Kutulakos, executive director of the Canada China Business Council, said no other Asian market offers the same economic opportunity as China. She said it’s vital for Canada to prepare a strategy for Asia because the lack of one puts Canadian business at a disadvantage.

“The risk is not China being diluted in an Indo-Pacific strategy; it is that there is no strategy.”

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