The Re-Engagement Imperative
Media has been paying attention to China this month, for several reasons. On February 1st, I shared a link from my interview on CBC’s The Current, and here is my recent interview on CBC’s The House (starting at the 30-minute mark) on January 22nd. It’s a complicated subject, with many actions by China that Canada rightfully wants to see changed. In this interview I argue that Canada needs to make a conscious choice to engage and use the relationship with China to build Canada’s prosperity. A bilateral relationship with such a large country needs to encompass multiple tracks, including channels that allow us to share with China why Canada sees things differently.
As Executive Director of the CCBC, I spend my time thinking about the economic track. China comprises one-third of global growth, meaning that each year it creates demand equivalent to a Saudi Arabia or two Malaysias (or a new Canada every three years). Growth in China outstrips that anywhere else in the world, so while companies are diversifying, they also know that finding demand equivalent to China’s is not easy. Our exports to China, at 4.5% of Canadian exports, are 7x our exports to India. And they are only half of the 9% of its total that the US exports to China. The ranks of middle-class Chinese are growing, consuming, and interested in Canadian products and services, and while products like seafood, meat, and grains are top of mind, let’s not forget that educational services are Canada’s #1 export to China, and one that helps ~140,000 young Chinese citizens each year better understand how we do things here in Canada. Education is a great example of diversification, with Chinese students making up only 26% of international students in Canada.
The US can fight with China and still export double the percentage that we do. President Biden recently spent three hours talking to President Xi, and Secretary of State Blinken met with Minister WANG Yi in late January. You can bet that commercial issues will get resolved faster with such dialogue in place. You can also bet that the US is not looking out for Canada’s interests. The recent buy-American policies on EVs are a good indicator of that. Canada needs to forge its own path.
Canada’s prosperity depends on us engaging with as many countries as possible, including (and especially) China. We often hear that Canada is a trading nation, and our 66% trade-to-GDP ratio puts Canada behind only Germany among G7 economies. That ratio in the US is only 25% — we are much more dependent on trade with the world, so it’s incumbent on us to be competitive everywhere we do business, including China.
And that’s the problem — Canada’s competitiveness lags like-minded Western countries when it comes to China. While our exports to China are still rising, for many industries, business with China is not going well, as shown by CCBC’s recent business survey. Canadian companies are less profitable and optimistic than those in the US, Europe and the UK. Companies in those countries are being granted market access and are breaking down barriers, while Canadian companies have little hope of catching up as long as bilateral channels remain frozen. Resumption of bilateral discussions is the only way Canada can hope to catch up. We can fight for what we think is right, while also fighting for our own position. If we’re falling behind our competitors in profitability and market access in China, it will impact our competitiveness everywhere in the world.
How can Canada do this? First, resume some of the frozen bilateral dialogues that existed in 2018. Many allow us to voice concerns on security, interference, and other issues. One of the easiest – and for the business community, the most important – is the resumption of the Canada-China Economic and Financial Strategic Dialogue, which will help both governments address a growing list of commercial challenges, many of which can easily be crossed off the list if such dialogue takes place.
Speaking out on issues is important, but even more important is speaking with China on these issues. While returning to business as usual may not be possible, reopening channels of communication and engaging in productive dialogue needs to happen.