It’s All About Trade and Investment
Last week, journalist Terry Gavin of the Ottawa Citizen broadsided the Harper government for entwining Canada’s economic future with the Chinese economic juggernaut. Resorting to crass China name-calling, he said the Canadian foreign policy establishment has been “wholly unencumbered by scruple in its intimacies with Beijing”.
He took jabs at the Department of Foreign Affairs and International Trade (DFAIT) and former key mandarins, the Canada-China Business Council (CCBC), and the Asia-Pacific Foundation of Canada, not to mention Canadian investment and law firms that do business in China and Chinese conglomerates in Canada.
He also asked why the 2009 Investment Canada Act regulations had omitted a proposed definition of ‘national security’ and distinctions between state-owned companies (SOEs) and ordinary foreign investors in connection with attempted acquisitions of Noranda and Falconbridge by Chinese companies.
He basically questioned whether “hitching the horses of Chinese capital and Chinese markets to the harnesses of Harper’s plans for the supercharged development of Canada’s oil, gas and coal reserves” jived with Canadian political values.
Meanwhile, on the side of the country, Yuen Pau Woo, President and CEO of the Asia-Pacific Foundation, writing in the Vancouver Sun, called for even closer ties between Canada and Asia, a major component of which is Canada-China relations. He remarked that Canada’s market share in Asia is below potential and the Harper government is playing catch-up (after languishing for years due to its ideological proclivities). He urged the government to go farther and develop a ‘leap-frog’ strategy for Canada to become the most Asia-engaged country in the Western world.
Leap-frogging would entail a huge commitment from all levels of government to educate and train Canadians to be effective in an increasingly Asia-centric world, he said. In terms of human ties, Canada is already the most Asia-connected country but the federal government’s Asia Pacific Gateway and Corridors Initiative (APGCI) sets the stage for Vancouver to become the premier hub for Asian shipping to North America as well as the center for trans-Pacific business, governmental and cultural linkages. The current game-changer is energy exports that could lead to the creation of a trans-Pacific energy market, Mr Woo emphasized.
Last year, according to a survey by Industry Canada, Canada-China bilateral trade reached a record $65 billion. China vaulted past Japan into third place behind the US and the UK, taking in $16.8 billion in Canadian exports. The US remains by far the biggest importer of Canada products but its share has shrunken from over 87% a decade ago to 73.7% today. China’s share of Canadian exports is still a fraction of the US’s at 3.7% but exports going there have more than tripled. While Canada’s trade deficit with China remains large, it has leveled off and in fact dipped slightly in 2011.
British Columbia lumber exports have surged from virtually nothing in 2002 to near 28% of the total in 2011, exceeding $1 billion from a paltry $33 million. Exports south of the border dropped precipitously from $4.84 billion to $1.66 billion, due largely to the depressed US housing market. Canadian trade economists believe that China will continue to have a large appetite for Canadian natural resources, especially coal, potash, and grain along with oil and gas in the coming years.
China’s foreign direct investment (FDI) in Canada currently stands at $14.1 billion, with the lion’s share in natural resources. Last January, PetroChina became the first Chinese company to take a stake in Alberta’s oilsands, buying up Athabasca Oil Sands Corp.’s remaining stake in the MacKay River project, one of the newest developments in northern Alberta.
A Canadian Press-Harris Decima poll released during Prime Minister Harper’s visit to China back in February indicated that 9 out of 10 Canadians felt Canada-China relations is important. In terms of Chinese investment in Canada, a majority (51%) of Canadians welcome it but at the same time, many (71%) were wary of Chinese companies controlling Canadian-owned or operated companies.
Increased trade and investment flows are essential for both countries. China’s GDP is expected to grow by over 8% this year and hover around that figure for the foreseeable future, ensuring continued hikes in Canadian exports. Chinese investment abroad helps to address global imbalances that Western governments and economist have been calling for.
So, Mr Gavin, it’s all about trade and investment.