Canadian business leaders are issuing a call for Ottawa to make hard choices now and chart a long-term strategy for Asia, warning that the country's long-term prospects will suffer unless companies can penetrate deeper into the next generation's "global centre of economic gravity."
Among the most pointed choices it presses for is a politically-sensitive move to dismantle the protectionist supply-management system for poultry and dairy that has blocked Canada from talks over the Trans-Pacific Partnership, which could emerge as an Asia-Pacific trade regime including both Asian nations and countries like Australia and the U.S. – but not Canada.
But the call, in a report commissioned by the Canadian Council of Chief Executives and the Canada China Business Council, goes beyond trade blocs to a broader push for Canada to come to grips with Asia's rise. Canada, it says, needs a long-term political and economic strategy that crosses party lines, like that set by Australia, which among other things is aiming for 12 per cent of school graduates to speak an Asian language by 2020.
Canadian trade in Asia is driven by natural resources now, but that won't keep up long-term growth, the paper argues. Canada should open those markets wider for other sectors now, before competitive advantages shrink.
The paper, Canada, China, and Rising Asia: A Strategic Proposal, authored by prominent Rotman School of Management academic Wendy Dobson, finds Canada doesn't have an Asia strategy. Once seen as more involved, Ottawa has for years dipped in and out of the region's affairs, hurting Canada's reputation, and trade deals have been obstructed by short-term political calculations, she writes.
It's a high priority now, said Council of Chief Executives president John Manley – not because Asia will dwarf economic ties with the U.S. but because it will drive growth.
"What we're seeing among our companies is that their U.S. strategy is no longer a growth strategy," Mr. Manley said. "The real growth strategies are found in emerging markets, and that's especially true in Asia."
Since the May election, Stephen Harper's government has emphasized Asian ties, sending ministers to visit, and stepping up trade talks with Japan and Thailand. Mr. Harper is set to visit China in November. "But with Asia, you've got to persist," Mr. Manley said.
Canada has no free-trade deal with any Asian country, the report notes – and timing matters.
High-growth Asian economies like China export low-cost manufactured goods now, but will depend more on internal consumption in future, and they are working aggressively to move up the value chain to higher-tech goods. That means Canada could gain from getting firms into Asian supply chains before demand shifts, and access growth markets for technology, for urban services like transit and water treatment, and services like finance and education.
Bilateral trade agreements with countries are a fallback path, but the Trans-Pacific partnership is a promising regional scheme that could also upgrade trade rules with the U.S. – if Canada dismantles supply management. "How long can Canada's archaic system hold the national interest hostage? Ms. Dobson asks.
The Conservative government has pledged not to alter the supply management system that distributes production quotas to dairy and poultry farmers, which could cost votes in rural ridings in Quebec and Ontario. Mr. Manley argues that countries like New Zealand have gained exports from reforms: "It's time."
In China, the paper argues, it might not be feasible to strike a broad free-trade deal – but the government should create a "road map" for a series of narrower arrangements, on intellectual property, government procurement and investment. Canadian firms want investment safeguards – and Canadians should prepare for a "torrent" of Chinese investment, the report argues.
Politics matters: Asian countries care about involvement in the region, but Ottawa has paid scant attention to increasingly important regional organizations like the Association of Southeast Asian Nations.
"We've built this reputation for coming but not coming back," Mr. Manley said. "With Asia becoming a much more important part of the global economy, you really can't get away with that."