Ahead of the conference “Canada in the Pacific Century,” organized by the Canadian Council of Chief Executives, its president and CEO John Manley sat for a wideranging interview with Policy Options Editor L. Ian MacDonald on the challenges and opportunities for Canada in the fast-growing Asia-Pacific market.
POLICY OPTIONS: Mr. Manley, thanks for doing this.
JOHN MANLEY: My pleasure.
PO: In the decade since you left public office, smart phones, social networks, Facebook, Twitter, YouTube and other forms of communications technology have changed our world. How has the business world changed in the last 10 years?
JOHN MANLEY: Ten years ago it felt as though the pace had accelerated rapidly, but things were standing still then compared to where they are today. You’ve got a lot of data flowing at you, and you have very few filters to determine accuracy or reliability.
PO: How do you build brands and manage messages in that kind of environment?
JOHN MANLEY: I think we are still at the beginning of a revolution. Remember AltaVista? It was a very good search engine, but we never had a verb “to AltaVista.” We now have a verb “to Google.” What comes next? Who replaces whom? Of course, some of the principles remain the same. It’s easier to destroy a reputation than it is to build one. You have to build your brand on the basis of quality, reliability, dependability — the things that matter to those who use your product or service. But you have no way to forecast where your competition is going to come from.
PO: That leads us to this conference “Canada in the Pacific Century.” Why now?
JOHN MANLEY: Our goal was to work with our members to gain an appreciation for some of the really big changes that are happening in the world, many of which originate in Asia. That includes the very rapid pace of urbanization and the explosive growth of a new global middle class. The emerging economies of Asia — and also in Latin America, the Middle East and Africa — are growing much faster than Western Europe and North America. So for a CEO looking at where the world is going to be in 20 or 30 years, it’s vital to understand the impact of the Pacific Century on their markets, their suppliers and their customers.
PO: Canada has been criticized for being slow to seize the opportunities in the Asia-Pacific region. Do you agree? And is it too late?
JOHN MANLEY: We just talked about how quickly the world changes. So, no, it’s never too late, as long as you are nimble and you’re smart about what you do. In the old paradigm, we thought about trade as a bilateral thing, where I make something and sell it to you. Now we live in a world in which supply chains are multilateral and multinational. The World Trade Organization talks about products that are “made in the world” as opposed to being made in this or that country. Components come from many different places around the world, and where the final assembly takes place is in some respects a secondary matter. So for Canadian companies — in the natural resource sectors, in the food sector, in professional services and so on — there are huge opportunities in Asia. Canada has a good brand. A lot of Canadian businesses are doing extremely well, and more will do so as they become more aware of the opportunities.
PO: China obviously gets a lot of attention as the world’s second-largest economy, and projected to be the world’s largest economy by 2030. How do you view the opportunities and challenges in China?
JOHN MANLEY: China’s a difficult place to do business. It takes time, patience and investment. You have to find the right partners who understand the language, culture and business environment. Power Corporation is probably the best example of a Canadian enterprise that has invested time and effort in China over decades.
PO: The Desmarais family has been going there for 30 years.
JOHN MANLEY: In the early days, I’m sure a lot of their business colleagues thought they were wasting their time. But they have proven that long-term investment in relationships in Asia pays off. For Canadian businesses that have global aspirations — and more and more of them do, as the United States becomes less and less a market where you can foresee much growth — it’s going to be important that they make the investments and take the time to build the relationships.
Canada is involved in a lot of bilateral discussions, and I do worry about the capacity of our international trade officials to deal with that many sets of negotiations concurrently. Right now we are looking at the European Union, Japan, India, potentially the Trans-Pacific Partnership (TPP), not to mention finishing off the talks with Korea and Singapore.
PO: What about India and the bilateral trade talks we have going on with them?
JOHN MANLEY: Actually, Canada is involved in a lot of bilateral discussions, and I do worry about the capacity of our international trade officials to deal with that many sets of negotiations concurrently. Right now we are looking at the European Union, Japan, India, potentially the Trans-Pacific Partnership (TPP), not to mention finishing off the talks with Korea and Singapore. Any one of those could be quite major.
PO: You referred to the TPP. How do you feel about that opportunity? Is it important that Canada be invited into that club?
JOHN MANLEY: Well, first of all, since the Doha Round doesn’t seem to be going anywhere very quickly, everybody is looking for an alternative strategy. It’s possible the TPP will fizzle or will produce a low-grade agreement, in which case it doesn’t matter. But it’s also possible that it will succeed as a state-of-the-art agreement. And if the United States is part of that, Canada and Mexico need to be there as well. We’ve spent almost 20 years building North American supply chains, so it makes no sense at all for the United States to be part of a high-grade, multilateral Pacific agreement without the other two NAFTA parties. What are our prospects for getting in? That’s hard to say. The [federal] government has expended a lot of effort to build support for Canada’s inclusion, and I think they largely have that support, with the exception of Australia, New Zealand and the United States. I quite frankly believe that Canada is going to have to show a clear willingness to begin the process of phasing out agricultural supply management in order to get to the table.
PO: It’s clear, though, that there’s no big deal without American leadership, isn’t it?
JOHN MANLEY: I think that’s right. Canada rightly demurred when asked to be part of the P4, which was the forerunner to the TPP, because it included only four countries and there just wasn’t enough there for us. With the United States there, and with the prospect of it being a high-level agreement, the picture is very different.
PO: But it’s not clear that President Obama is a free trader. We have issues with the Americans over the Keystone XL pipeline, we always have agricultural issues, and they lecture us about supply management, but they’ve got this thing called sugar.
JOHN MANLEY: The last US president you could really say was a free trader was Bill Clinton, and his predecessor George H.W. Bush certainly was a free trader. But you begin with the assumption that despite our history, our ties and our economic integration, there is no US politician who cares one whit for the impact of anything on Canada. Canada does not have a single vote in any congressional district. So we need to make our case better — the fact that so many American jobs rely on us.
PO: Canada is the largest trading partner of 38 states.
JOHN MANLEY: And yet they still think we’re a competitor. As they say, if you want a friend, get a dog. Nations don’t have friends, they have interests.
PO: On supply management, politicians perhaps remember Eugene Whelan having a can of milk poured over his head back in 1976. No one seems to have been able to find the political courage to have this conversation.
JOHN MANLEY: I can understand the government not wanting to give anything up before Canada joins the TPP negotiations. But I do think they need to show a little good faith about the fact that they are willing to, even if they do it privately. In any case, New Zealand dismantled similar structures unilaterally, and today New Zealand, a country with the population of Toronto, has 30 percent of the global export market in dairy products. At a time when there is a rapidly growing global middle class that is looking to consume more of the kinds of protein we produce, Canada is shutting itself off from enormous opportunities because we prefer to stay in our own little domestic market. Furthermore, Canadian consumers are paying too much for what they buy. So even apart from the European Union talks or the TPP or some other trade negotiation, it’s in our interests to begin to wind down supply management. This is an area where all logic, all reason, the interests of other industries and the interests of consumers all point in one direction. Therefore I’m hoping that the unthinkable becomes inevitable.
PO: How have your members evolved in their perspective on the Asia-Pacific region as a potential market? What do you hear from them?
JOHN MANLEY: About a year and a half ago, I went around our board of directors’ table — more than 20 CEOs — and asked them for their top three priorities. Almost to a person, one of the top three was Asia. That’s not what my predecessor in this job led me to expect. He told me that my time would be spent largely on domestic issues, with some Canada-US issues thrown in, and maybe at most 10 percent of my time would be spent on the rest of the world. But that’s not where the members are now. They have shifted their focus. And I think that increasingly you’ll see a Canadian business presence in China and Asia.
PO: We export 99 percent of our oil and gas to the United States, and we sell our oil at a significant discount. What are the trans-Pacific opportunities, in terms of markets, for our resources?
JOHN MANLEY: One thing [the US rejection of the Keystone XL pipeline proposal] clearly underlined for the Canadian government was that we need a diversity of customers. The gap that has opened up in the oil sector and gas sectors between prices in North America and elsewhere means it is absolutely fundamental for us to find a way to sell into other markets.
PO: In other words, we have to find a way to build projects such as the Northern Gateway pipeline in partnership with the First Nations and in ways that respect the environment.
JOHN MANLEY: I think we have to. Certainly there are other ways of getting the oil out, whether we move it east across Canada, or whether we use rail. So there are other options, but they are less efficient and more expensive. PO: On China, what’s your sense of the relationship between trade and democracy?
JOHN MANLEY: In my time as foreign minister and on other visits to China, Chinese leaders have expected Canada to raise issues of human rights. We have contributed in various ways to improving education for judges and providing other training. We have been engaged in these issues in China for decades.
And we do it, generally speaking, without being overtly moralistic or preachy. We make a contribution based on values. I also think though that we need to be realistic. The fastest-growing city in China, Chongqing, will soon have the population of Canada.
PO: That’s a stunning statement.
JOHN MANLEY: As Jean Chrétien used to be fond of saying, “I can’t tell the premier of Saskatchewan what to do. How am I supposed to tell the premier of China what to do?” So we need to be pragmatic. We need to be engaged with China. It is too big, too important and too valuable economically for us to somehow ride a high horse and say we don’t approve of this or that practice.
Chinese leaders have expected Canada to raise issues of human rights. We have contributed in various ways to improving education for judges and providing other training. We have been engaged in these issues in China for decades. And we do it, generally speaking, without being overtly moralistic or preachy. We make a contribution based on values.
PO: What’s your sense of the Prime Minister’s approach to this issue?
JOHN MANLEY: Prime Minister Harper’s reception of President Hu Jintao in Canada in 2010, followed by his own visit to China more recently, represented big progress for us. Any Canadian business can sell in Germany without any particular government help. But in China, if you don’t have some kind of imprimatur from the Canadian government, they wonder what’s wrong with you. So we need the Prime Minister and other ministers to be engaged with China and to be supporting our enterprises.
PO: The US, as you know, has concerns about China from a security standpoint. Does Canada share them?
JOHN MANLEY: I think if you go to the Department of Defence or any of our security or intelligence agencies you would find that they are somewhat concerned about China as a possible threat. Not necessarily as a sovereign threat, but as a source of cyber-attack, and other risks that could be problematic for us. And I think that’s appropriate. That’s what we pay these people to do — to protect us. But China is not the only country from which some of these threats emerge.
PO: How do your members feel about China buying into the oil patch? In the US a few years ago when a Chinese company tried to buy a California oil company, Congress shut the thing down in about a week.
JOHN MANLEY: There’s been quite a lot of Chinese investment in the oil sands and most of our members would say we need the capital. It would raise eyebrows if a Chinese company were to bid to acquire Suncor, for example, which is our largest independent. But I think if they keep the scale reasonable, they’ll be welcome participants.
PO: Hypothetically, what if a Chinese company made a friendly takeover bid for Research In Motion: What would Investment Canada say?
JOHN MANLEY: It’s an interesting question. Historically, RIM has been able to differentiate itself — others are still trying to catch up, and maybe they will — but they’ve been very strong in the enterprise sector because of their security. I think there would be concerns — not just in Canada but in the US as well, where RIM is still the device of choice for the White House — in having that apparatus controlled by a Chinese enterprise.
PO: It’s a pretty good endorsement when the President of the United States walks around with his BlackBerry strapped to his belt.
JOHN MANLEY: It is. But RIM should not think that Apple is not going to solve the security problem.
PO: Coming back to your conference, the fact that you’re holding it in Ottawa rather than Vancouver is, in a way, a statement of the importance of thinking about Asia — the fact that here in the nation’s capital we’re looking west.
JOHN MANLEY: If the United States can execute a so-called pivot toward Asia, surely we can too. Ottawa is the centre of our national political thought, so this is where it needs to be initiated. This is a huge opportunity, not just for our members but for the broader community — policy-makers, academics and others who we’re inviting to the conference — to engage with one another in considering the implications for Canada in the Pacific Century. What do we need to do to prepare ourselves, to adapt and to take advantage? It’s a chance for us to have a conversation at a very high level that is probably overdue in this country.