Canada must outgrow its juvenile relationship with China

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Canada must outgrow its juvenile relationship with China
Pragmatic calculation of mutual self-interest should be the driver, not the mood swings of any given day
Canadians often shy away from asserting or acting upon their hard foreign policy interests. We tend on occasion to confuse sentiment with substance and fret that we may "need" other countries more than they need us. Conversely, we sometimes imagine that Canada is more important or has more influence than our interests and capacity warrant. Attitudes toward China suffer from all these proclivities.

The focus of Canada's China policy has tended to concentrate somewhat erratically on the two bookends of trade and human-rights issues with not much productive dialogue on either, and with a large gap between the two. The focus of China's Canada policy seems to be access to Canadian resources and to the Canadian market, combined with hair-trigger sensitivities about perceived insults or slights by Canada over visits by the Dalai Lama or Prime Minister Stephen Harper's non-attendance at the Beijing Olympics. Symbolism is an element of diplomacy, but it should not displace calculations of how interests are best served.

While there is clearly potential for a more broadly gauged foundation for the relationship, there are also practical limitations to the scope of the partnership and influence that Canada can achieve with China. For one thing, any decision to engage in a more mature manner must be shared by both countries and guided systematically from the top level of both governments. The Chinese are known for taking a long view on world affairs. Canada's long view on China should start with a more precise definition of what we wish to achieve and how.

A good place to start would be on a more substantial economic partnership. While there has been growth in two-way trade in the past decade, it has not matched the pace of China's economic growth and has shifted dramatically in China's favour, despite a steady stream of Team Canada, provincial and even municipal junkets to China (notably under the previous government), and this week, the visit of Stockwell Day, the Minister of International Trade, to announce the opening of five trade offices in China.

Canadian exports to China rose from $4.2-billion in 2001 to $9.5-billion in 2007, whereas Chinese exports to Canada have more than tripled in the same period, from $12.7-billion to $38.3-billion in 2007. Still, the relative percentage is tiny for both countries: roughly 2 per cent of Canada's total exports, 3 per cent of China's. (Over the same years, Australia's exports to China soared from $5.2-billion to $16.4-billion. Since it does not have the luxury of the world's largest economic power on its border, Australia is obliged to behave more strategically with its neighbours.) Governments in Canada cannot will or direct increases in trade or investment. They can, however, encourage more diversity and better use of supply chains and, more generally, they can help create an environment in which producers and entrepreneurs will thrive.

A GAP, A TREATY

A comprehensive Canada-China investment treaty would fill a serious gap in the economic relationship. Notwithstanding the pivotal role of investment in economic performance, there is no bilateral or multilateral treaty to govern Canada-China investment relations. A bilateral treaty has the potential of transforming the relationship from a neutral to a dynamic future. It would establish international standards of investment protection for Canadian investors in China. It would grant Chinese investors the right to invest in Canada, including in the resource sector, subject to the proviso that Chinese firms operate these investments on normal commercial terms. Such a treaty would encourage Canadian firms to invest in China and integrate Chinese production into their supply chains. It would give Canada new markets for resource exports.

Never forget that, because of its system of government, China can pick and choose partners for political, as well as economic, reasons. Unlike in Canada, the government in China controls all the levers of choice and makes virtually all the decisions. A Canada-China investment treaty would tell Canadian investors that the economic relationship is backed by a solid political relationship, immune from episodic frictions arising, for example, from nettlesome consular cases. As part of its plan to reduce barriers to foreign investment, the government should make a conscious effort to attract more investment from China.

There are also global economic and political interests that factor into a rejuvenated Canada-China calculus. At the top of the list is the rise of China as a major global economy and the third-largest global trader (after the European Union and the United States and ahead of Japan). Powerful economic growth in China drove global resource demand and prices relentlessly upward until a few months ago. The precipitous decline in Chinese exports to recession-stricken Western economies has driven demand and prices rapidly downward. An early resumption of rapid growth in China is critical to Canada and the global economy.

That is one reason why Canada should robustly support the full integration of China into the global institutions of economic governance. It is very much in Canada's interest that China be accorded the status and voting power in institutions such as the IMF and the World Bank that are warranted by its economic importance and potential. We should be working pragmatically with other countries to achieve this goal.

Geopolitically, it is vitally important that China become a more active global player. More often than not, China's foreign policy reflects a single-minded pursuit of its national interest, whether it's access to resources in Africa or Latin America or broader relations with neighbouring Asian nations, including notably Myanmar and North Korea, ostensibly to ensure greater stability in its own region.

But its neutrality on sensitive issues such as Darfur and Iran's nuclear ambitions limits its capacity to become a more effective player in global affairs. To some extent, China has played such a role in the six-power talks over North Korea's nuclear ambitions, although the progress so far has been marginal. A real resolution, especially after last Sunday's missile launch, hinges on decisive actions by China. China should be encouraged to play a more significant role in settling conflicts in Africa and the Middle East. Even though China borders on Afghanistan, it has been essentially detached from events in that beleaguered nation and from the threat posed more generally by extremist Islamic terrorism.

OUR PLACE IN THE GAME

China's military expenditures are estimated to be increasing by at least 40 per cent a year, reflecting, among other things, aspirations for a full-fledged blue-water navy. India's and Japan's military expenditures are increasing at a slower yet still substantial pace. Inevitably, the military balance of power in Asia will shift. How the U.S. reacts and whether this trend enhances or decreases stability in the region is certain to be a more pressing foreign-policy issue for the next decade. Australia has moved to conclude a security arrangement with Japan. Japan, in turn, is forging new security links with India. The Shanghai group linking Russia, China, Kazakhstan, Tajikistan, Kyrgyzstan and Uzbekistan adds a different dimension to the equation.

Where does Canada see itself in this evolving chess game? Standing aloof may give us the privilege of neutrality but would more likely confirm a position of continuing irrelevance. In order to make prudent choices, we need, first, a clear formulation of how our national and global interests can best be served and of the extent to which we are prepared to contribute responsibly in the region that is likely to dominate in the decades ahead. A more mature partnership with China would be a key element in that equation.

Canada has different values on human rights and a different system of government from China's. These differences cannot be ignored but they should not hobble broader engagement in areas of mutual interest. We do not have to camouflage our differences. Nor do we have to "go along or kowtow to get along." That is a juvenile concept that has nothing to do with fundamental foreign policy analysis. A more adult approach to the relationship by both countries would allow for honest disagreements on issues such as human rights. There may also be differences on global issues of common concern, but these should not displace the opportunity for a broader, more substantive economic and global partnership.

What is critically important, and not just to Canada, is how an increasingly powerful China responds to challenges affecting global commerce, the environment and security. Equally certain is the plain fact that Canada, among others, has critical long-term stakes in a politically stable and economically prosperous China, particularly as both would bolster China's ability to become what Robert Zoellick, the president of the World Bank, once described as a "more responsible stakeholder" in world affairs. That in itself would be a commendable foreign-policy objective for Canada. Above all, a pragmatic calculation of mutual self-interest should be the major driver, and not the mood swings of any given day.

Derek Burney is a former Canadian ambassador to the United States. He is a senior strategic adviser to Ogilvy Renault and senior research fellow for the Canadian Defence and Foreign Affairs Institute.