The Harper government has adopted an ”œambitious, pro-trade plan in large, dynamic, and fast-growing priority markets.” It purports to complete what the government claims has been since 2006 ”œthe most ambitious pro-trade plan in Canada’s history.”
The initiative is urgently needed. But its success will take more than press releases claiming historic ambition. A successful plan has to go way beyond the promotion of trade alone. It needs to assess and improve the way Canada projects itself abroad.
The reality is that the Canadian brand is in trouble. It needs upgrading if foreign partners are to be persuaded to make the ”œCanadian choice.”
Composed of a lot more than ”œtrade,” the brand is a mix of international reputation, influence and political relationships, including relations at the top. It includes where Canada stands on issues of political principles. The long-standing debate over the place of values versus interests in foreign relationships comes to the fore today because the clamour for deepened emphasis on Asia and the Pacific in Canadian relationships, especially with China, prompts examination as to whether Canadian attitudes to other people’s democracies should have anything to do with how we do our business.
For his first few years, Prime Minister Stephen Harper’s exhibition of distaste for Chinese governance cooled that relationship. We are now trying to recover lost ground. What are the prospects of Canadian success? Can we reconcile values and interests?
How much do personal relations at the top count?
Pierre Trudeau said Canada had a global foreign policy because he saw Canada as having important bilateral relationships in every part of the world. He certainly did himself, including friendships with Julius Nyerere in Tanzania, Michael Manley in Jamaica, Olof Palme in Sweden, Helmut Schmidt in Germany, Shimon Peres in Israel, François Mitterrand, Jimmy Carter and, infamously, Fidel Castro. His relationship with Indira Gandhi was testy because of India’s Abomb built secretly from a CANDU aid project, but in China he won special status by his diplomatic recognition breakout in 1970.
Trudeau’s principal successors, Brian Mulroney and Jean Chrétien, had their own outstanding political and personal relationships. I saw Mulroney’s powerful connections up close in Washington and Moscow, and also his influence at Commonwealth Heads of Government meetings and in the G7. Chrétien had well-known privileged ties to Bill Clinton, Boris Yeltsin and Jacques Chirac, but he too went way beyond: I once asked him who his best ”œfriends” were out there, and he listed the leaders of Brazil, Italy and Mexico. His personal connection to Jiang Zemin kept Canada on China’s radar.
Leaders together strike the tone and intentions that officials then try to give life to in bilateral relationships. As our ambassador in Moscow, for example, my access to Russian ministers and the sincerity of their efforts to solve problems affecting Canadian investments were a direct function of their knowledge that their boss and my boss were buddies. A decade later in Brussels, Canada was identified by the EU Council as one of only six ”œstrategic partners” in the world (with China, India, Japan, Russia and the United States) in some good measure because of European Commission President Romano Prodi’s personal regard for and relationship with Chrétien, as well as European admiration for Canada’s activism in promoting the human security agenda Europeans supported.
Stephen Harper conducts business differently. His personality is what it is. Also, ”œconnecting” today has a different meaning. When Anne-Marie Slaughter wrote that in the 21st century power will go to the most-connected, she was thinking of citizens’, researchers’, entrepreneurs’ and government officials’ networks connecting through the Internet, not about top-down political relationships.
The Internet also measures a government’s international reputation, and much evidence indicates declining support for Canada these days. Harper disputes the claim there has been a decline in Canada’s reputation and influence abroad because of Canadian government choices. Maintaining that our reputation is actually at a high, he wears as a badge of honour our firsttime-ever defeat for a seat on the UN Security Council, attributing that loss to resentment of Canada’s principled stands from a host of less principled countries.
The reality is that Portugal trounced Canada in the runoff ballot for a ”œWestern seat” on the Security Council due to several factors: African perceptions we were dropping Africa as a priority of any kind; Arab conclusions we had gone overboard in all-out support for a hardline Israeli government; the expansion of the EU to a 27-member foreign-policy bloc less prone to support even an old-time outside ally; the active championship of Portugal’s candidacy by internationally very influential Brazil; plus, we were seen by China as being no longer a friend of theirs.
It has been argued that these are features of ”œinside baseball” at the UN rather than indicative of world public opinion. Seen from afar, according to Pew and other polls, our economic and social stability make Canada a place to be envied by others. We are seen to be taking very good care of ourselves. But whether that translates into trading success is another matter.
What is clear is a bell is that we are definitely losing traction as a trading economy. Total exports of goods and services have dropped from 46 percent of our GDP in 2000 to 31 percent in 2011.
That reflects the relative decline in Canada-US cross-border trade caused by a rising Canadian dollar, the thickening of the border in the aftermath of 9/11, and more recently by the US financial meltdown. A growing disillusion with NAFTA and worries about too many eggs in a declining US basket have deepened in bitter reaction to US political agitation over the suitability of importing more carbon-heavy Canadian oil sands energy.
It was inevitable the call would go out belatedly for Canada to diversify our trade relations to the most economically dynamic region of the world across the Pacific, and notably to China.
But ambition alone doesn’t make diversification happen. That was a lesson more than 40 years ago when Canada tried as part of its ”œThird Option” to reduce dependence on the US by reaching out toward the European Economic Community, newly expanded to include long-time Canadian trading partner, Britain. Initially, our overture was stymied by French hostility and British indifference. But over time, the bilateral trans-atlantic relationship became massive, not in trade in goods but in
inter-investment. Canadian corporations, forced into global scale by the competitive demands of NAFTA, generally no longer sell to the EU; they sell in the EU. If we measure the Canada-EU relationship by a combination of investment-generated sales and exports, the EU approximates over 30 percent of Canada’s economic activity with the US, not the 10 percent that is the benchmark for trade alone.
Could a similar phenomenon occur with China, India and other countries of Asia?
There are three features of the landscape that indicate it’s not going to be easy.
First, we have really lost ground. Canada’s share of Chinese imports has declined from 2.8 percent in 1990 to 1.1 percent in 2010; of India’s, from 1.3 percent to 0.6 percent.
Second, Canada’s international branding power has declined. Canadian exports are more than ever commodity-led. The decline and/or disappearance of internationally visible flagship Canadian producers of fabricated or semifabricated products such as Alcan, Nortel and Inco dim Canada’s positive projection abroad. Brand leaders remain such as Bombardier, Canadian banks in Mexico, Cirque du Soleil and our world-class and generally green mining and engineering companies (despite the negative impact of misbehaving SNC-Lavalin in Libya), but they are fewer and less visible in a more competitive international economic landscape.
To re-gear to prevail in key markets around the world we need strong government support for the Canadian brand, just when we are slashing the budgets of Canada’s foreign representation that has the job of doing it.
It was announced in May at the Chicago NATO Summit that Canada will continue to contribute to Afghanistan, post-2014, $110 million a year for three years. That is just about the size of the cuts to the Department of Foreign Affairs and Trade. Which vehicle " continued massive aid to Afghanistan or fully funded programs to promote Canada abroad " is more apt to deliver in direct support of Canadian interests? The opportunity costs of making Afghanistan the be-all and end-all of foreign policy have been vast. Our hope that our massive expenditure there would at least earn fungible international credit foundered on the fact that many other countries were consumed by their own need to pump up to their own publics their own overcommitments to a wobbly cause.
Third, we have baggage. Government spokesmen speak of our application to join the Trans-Pacific Partnership (TPP) as if our absurdist protectionism of supply management in dairy and poultry farming was somehow not a deal-breaking barrier to entry. It is also a national outrage. Just check out what California consumers pay at Trader Joe’s or Von’s for chicken breasts, yogurt or Parmesan cheese to see the extent to which 30 million Canadian consumers, not to mention foreign exporters, are taking a hit for the votes of 15,000 farmers. While you’re at it, glance at the prices on wine to savour the outrageous penalty consumers pay in Canada for rapacious provincial liquor monopolies. Yet Canada is in a world class of our own in complaining about foreign barriers to trade at the World Trade Organization. No wonder we are not welcomed in the TPP by efficient free traders such as New Zealand or Singapore.
So, taking all these factors into account, what’s a winning strategy for success in gaining a bigger place in the world economy?
First, we could do worse than pondering what the Third Option was primarily about. It was less of a trade diversification strategy than one meant to strengthen national economic development instruments at home and end Canada’s status as a ”œbranch-plant economy.” The techniques contemplated then in a statist ”œindustrial strategy” aren’t appropriate today but the need for structural renewal to make our manufacturing and services sectors competitive, and getting rid of throwback protectionism, is self-evident.
Second, it is axiomatic we should aim again at important relationships in different parts of the world and not just with China and India, both of whose economies are actually slowing down. To do so, we need a mix of regional strategies that we pursue with vigour simultaneously.
Right now, we don’t count for much in many places.
For example, Goldman Sachs recently projected the economies most likely to be in the top 10 in 2050. The only G7 economy included in their list is the United States.
We have noted the loss of market share in China and India. Other key economies on the Goldman list are Brazil and Russia. Our share of Brazil’s imports dropped from 2.1 percent in 1990 to 1.5 percent in 2010. In Russia, it went from 3.1 percent in 1992 to 0.6 percent in 2010. So much for the ”œmost ambitious pro-trade plan in Canada’s history.”
Paradoxically, our best asset for diversification is our North American home base. David Emerson, the outstanding former trade minister, has argued that Canada, the United States and Mexico together must strengthen North America’s competitiveness and infrastructure and thus position each of the three to perform better in Asia and the Pacific (and elsewhere). Taken together, the three countries can be a massive powerhouse again, not in opposition to the rest, but as a performance platform for global outreach.
Third, having major relationships and being world players across the board bolsters the Canadian image more than anything. We will count more in China if we count more with key countries elsewhere.
The underlying question is whether our values need to get in the way of our trade expansion ambitions. The biggest test case is indeed China.
There is a hubris to China’s world view that Foreign Minister Yang Jiechi summed up in unguarded but candid off-the-cuff remarks a couple of years ago: ”œChina is a big country and other countries are small countries and that is just a fact.”
Sensationalist authors find a market for demonizing Chinese pursuit of this ”œfact” to predict an eventual collision between an allegedly hostile China and a West in decline that seriously understates China’s domestic challenges and overstates the west’s status as potential ”œloser.” Uber-realist John J. Mearsheimer has said that ”œan increasingly powerful China is likely to try to push the US out of Asia, much the way the US pushed European powers out of the Western Hemisphere.”
It is another fact that China’s military buildup is vast. Having increased military spending from $17 billion in 2001 to $150 billion in 2009 (an average annual increase of 12 percent), China stands poised to indeed become a convincing military superpower, particularly through the exploitation of computer-driven high-technology armaments.
But there are no facts to support the view that China is an expansionist power. There is every argument behind making China a strategic partner of Canada.
It works for us that China now needs a predictable outside world. The Chinese have a stake in international peace and security, open sea lanes, cooperative economic relationships and progress toward global solutions for fundamental transnational problems.
It implies a responsibility and, above all, the need to work with the United States. As US Secretary of State Hillary Clinton has said, the two countries can’t solve all the world’s problems. But unless they cooperate, none are solvable.
Most of China’s buildup is seemingly meant to deter the United States from influence in any future crisis over Taiwan. It is part and parcel of China’s obsession over other countries meddling in its internal affairs, a legacy of Japan’s rape of China in the 1930s.
The obsession has deepened with a recent deterioration in domestic affairs. As veteran China-watcher James Fallows wrote May 27 in the New York Times, ”œThe news out of China this year has been relentlessly bad. The political system was embarrassed in front of its own people by the Bo Xilai scandal and in front of the world by the Chen Guangcheng incident. The Chinese economy has slowed and its stock indexes rocked while its neighbors have been strengthening their ties with the US.”
The Chinese Communist Party leadership is anxious to protect the survivability of its political monopoly inside China, which it claims is a safeguard against instability. They justify this monopoly as being essential to managing the continued transition to a dynamic open and even larger economy. They rightly point to the fact that since Deng Xiaoping’s reforms, no society has ever created wealth faster nor subdued massive poverty on such a scale. They claim credit for rewarding Chinese citizens with private lives along with prosperity. Chinese commentators point in contrast to financial and governance disarray in the United States and the European Union.
But such arguments are challenged by growing citizen pushback against the downside of top-down rule, which daily is contested over arbitrary officialdom’s mauling of the environment and widespread corruption.
The leadership is trying to show a crackdown is underway against corruption and excessive personal power, but Fallows asks a deeper, more existential question: ”œCan China make it as a fully modern economy and society?”
As Francis Fukuyama wrote in Foreign Affairs (January/February 2012),
The Chinese government argues its citizens are culturally different and will always prefer benevolent, growth-producing dictatorship to a messy democracy that threatens stability. But it is unlikely that a spreading middle class will behave all that differently in China from the way it has behaved in other parts of the world. Deng Xiaoping had confidence in the staying power of ”œmodernization with Chinese characteristics” (meaning without power-sharing by the Communist Party). But dissident physicist Fang Lizhi mocked such thinking as fraudulent, famously asking his adoring Tiananmen-era students if they believed in physics with Chinese characteristics.
The fact is that to move the economy to the next level, China has to become more open internally.
China is closer to the point where the five axioms of science that Fang Lizhi (who died in exile this spring) once identified as insuring that China will find its way to democracy become really tested, as reported by Perry Link (New York Review of Books, May 10, 2012):
Science begins with doubt, not Mao’s fixed beliefs
Science stresses independence of judgment, not conformity
Science is egalitarian " no one’s subjective ”œtruth” starts ahead of any other in pursuit of objective truth
Science needs a free flow of information
Scientific truths, like human rights, are universal: they do not change when they cross a border
Such thinking animates China’s activists and human rights defenders, who, like Nobel laureate Liu Xiaobo, face crackdowns and jail sentences. In circumstances where international civil society is increasingly interlinked, their treatment is not an issue on which democrats elsewhere can be indifferent. As Secretary Clinton remarked over the dilemma of dissident Chen Guangcheng, it is a matter of reconciling their choices with our values. The noninterfering projection of those values is the essence of public diplomacy.
The question is how to proceed. Canada is not going to influence China. Chinese choices will always be made in response to pressures inside China. But if we focus on developing a strategic relationship we shall have more of a hearing for communicating our concerns, probably in private rather than as electioneering communications at home. If we project values with skill, consistency and sensitivity to others’ realities, we can support democracy development and human rights defence at the same time as we pursue our economic interests. There is no reason to believe it would be bad for business or that China will make irrational and hostile choices regarding Canada if we communicate our concerns over persecution of human rights defenders in a way that is consistently reflective of our values.
The Chinese leadership is rattled. A spate of reporting out of China, such as in the New York Times on May 26, describes an ”œincreasingly palpable rush of anti-foreign hostility,” which it attributes precisely to ”œa sharply slowing domestic economy and political turmoil.” Shrill voices in the People’s Daily do describe Western efforts to support democracy development elsewhere and human rights abroad as a ”œnew form of colonialism.” But such talk is part of a propaganda line that is defensive at its core.
We should exhibit confidence that democracy development is a trend line almost everywhere, even in China, and stay ahead of the curve, not behind. The Western mistake in supporting dictators in Egypt and Tunisia was the belief that the status quo equated to stability. We didn’t see that their status quo was inherently unstable. The Chinese leadership will come to accept that the status quo will change, that young people to innovate must connect, and that controls have to come off.
That isn’t our argument, but it is our responsibility when human rights are violated to communicate our concern to the regime. Canada faces a lot of challenges in strengthening our economic ties in key locales abroad, including China. We need a number of upgrades to our performance inside and outside of Canada. It will help our cause if we can be seen to be living up to our role as an internationalist, economically successful, influential world player. One of the most authentic features of the Canadian personality is its commitment to human rights we and Chinese democrats themselves believe to be universal.