Canada’s Liberal government under Prime Minister Justin Trudeau appears to be breaking away from previous Liberal governments’ policies of engaging China.
His late father, Pierre Eliot Trudeau, defied US opposition by establishing diplomatic relations with Beijing in 1972. Subsequent Liberal governments under Jean Chretien and Paul Martin carried on PET’s improved relations with the dragon, culminating in making China Canada’s second-largest trade partner and major investor.
Justin Trudeau himself was “awed” by China’s remarkable achievements, rising from a poor and backward economy to become the world’s largest in purchasing power parity terms and second biggest in nominal exchange rate measurements in less than four decades. For example, he spent considerable economic and political capital trying to forge a free-trade agreement with Beijing in his first year as prime minister.
The feeling was mutual, in that the Communist Party of China (CPC) had significant goodwill for Canada, in large part because of Norman Bethune and Pierre Trudeau. Bethune was a Canadian doctor who provided medical services to the Communist leadership, including Mao Zedong, in the 1930s. He lost his life in his service to China.
As mentioned above, Pierre Trudeau was one of the first Western leaders to establish diplomatic relations with China in the early 1970s even at the risk of angering the US. He perhaps foresaw the economic and geopolitical potentials of that decision. The elder Trudeau was also one of the first Westerners to visit Communist China, in 1949.
It could be argued that the good China-Canada relationship under Liberal Party regimes served both China and Canada well. Canada was able to sell large quantities of resources to China. Indeed, it was China’s large purchases of Canadian commodities that prevented Canada from falling into “deep recession” caused by the US-initiated financial crisis in 2008.
China gained from having a friend in the West that did not always toe the US anti-Communist-China line. This friendship allowed China to expand its trade and investment opportunities in Canada.
However, the China-Canada relationship suddenly crashed when the Justin Trudeau government decided to arrest Meng Wanzhou, Huawei’s chief financial officer and daughter of the company’s founder, at the request of the US in 2018.
Since then, Canada has taken a tougher line against the dragon: instituting the Indo-Pacific Strategy; terminating Chinese investment in Canada; its foreign minister warning investors about the danger of doing business with China; and other “tough” policies.
Risks of being ‘tough’ on China
Canada’s Indo-Pacific Strategy was meant to join the US and its allies to counter China’s rise by beefing a military presence in the region. What exactly Canada can contribute to the anti-China alliance is unclear. Given its small military, any contribution that Canada can make would likely be more symbolic than substantive, unlikely to scare the dragon.
Or bluntly put, sending one or two warships to the Asia-Pacific region would be a waste of money, adding little to the fight against China.
Canada’s Indo-Pacific Strategy makes even less sense since no one wants a war with China, including Washington. The US only wants to sell arms to its allies and stifle China’s rise. The US forming alliances and accusing China of committing “evil” acts (such as committing genocide in Xinjiang) was done to gain domestic support for a overly bloated national defense budget.
It would be fair to ague that Canada instituting the policy could expose the country to greater national-security risks. In the event of a miscalculation at sea, a Canadian ship could be hit. Should that expand to a wider military conflict between China and the US and its allies, Canada could be a target of Chinese missiles.
It is beyond economic logic that the Canadian foreign minister, Mélanie Joly, has been discouraging Canadians from doing business with China. Canada is a nation where trade accounted for more than 60% of GDP in 2021, according to tradingeconomics.com.
And Canada needs to diversify from trading with the US, which buys more than three-quarters of Canadian exports. Being dependent on the US market has brought risks, including US protectionism.
Former US president Donald Trump slapped tariffs on Canadian steel and aluminum to protect American producers. Trump’s decision was not an isolated case. Before that, the US government imposed tariffs on Canadian softwood lumber, smoked salmon and other goods.
While it may be true that China does not share Canadian values, it is the second-largest economy in the world. Its increasingly affluent 1.4 billion population can buy a considerable amount of Canadian goods and services.
One does not need to like the customer to sell it products. Indeed, if one only sells to customers that one likes, it will not have too many customers to sell to. In that regard, Justin Trudeau should take a page out of his father’s playbook: basing the China-Canada relationship on economics rather than politics.
Besides, Joly’s allegation that doing business with China brings risks is more speculative than real. Indeed, it could be argued it is the other around. Chinese investors are more at risk because they could not easily take their assets back to China.
Yes, Ottawa does not really need China for trade or investment, in that the dragon’s foreign direct investment (FDI) in Canada was around US$16 billion in 2021, according to Statistics Canada. The statistical agency also listed Canada’s exports to China at around US$19 billion, or less than 5% of the total, in 2020.
But severing ties with China would not serve Ottawa’s economic interests, because the Asian country is Canada’s second-largest trade partner, suggesting that other than the US, very few nations could buy as much Canadian produce as China.
When one looks at the major world economies, few could match China in performance. According to the latest forecasts by the UK-based Economist magazine, China would realize 4.7% growth in 2023, marginally slower than India’s 5.1%.
But compared with the Group of Seven, China’s economic growth is outstanding. The economies of the UK, France, Germany and Italy are expected to be in negative territory. The Canadian, US and Japanese economies are expected to rise by a mere 2%, 0.5% and 0.9% respectively.
Put another way, decoupling from or picking a fight with China would be Canada’s biggest policy blunder. The European Union, Japan, the US, Australia and New Zealand have already found that out. These countries found it difficult if not economically impossible to decouple from China. And to go to war with the dragon could end up in self-destruction.
More important, there is no reason to decouple from or pick a fight with China. Despite what the anti-CPC crowd says, China has never threatened any country. China’s only crime is that it is in a position to challenge the US-inspired “universal world order.” But that order was meant to benefit the West and Japan at the expense of developing countries such as China.
So the Trudeau government joining the US to help it stifle China’s rise is unlikely to serve Canada’s national interests.
Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China’s Economic Rise and Its Global Impact in 2015. His second book, Developed Nations and the Economic Impact of Globalization, was published by Palgrave McMillan Springer.