The last 25 years has been a relatively comfortable time for Canada. We have benefited from the North American Free Trade Agreement economically and from the broader security guarantees made possible by our North American partnership. At the same time, globalization and the associated robust energy and natural resource prices have delivered massive cash infusions into our resource-based economy. Combined with fiscal and regulatory rectitude, this boost has delivered a strong Canadian economic and fiscal performance and relative financial stability, despite lagging productivity and innovation.
But we are in a world of rapid and massive geopolitical and economic change, where a moment of lassitude, complacency or lapse in judgment can be crippling. We face that danger now.
The North American partnership continues to be strained by repeated bouts of protectionism and isolationist thinking. Post-9/11 security and border issues continue to plague the relationship. The Keystone pipeline remains in limbo, with inward-looking political calculations thus far trumping an opportunity to contribute to continental energy security. Protectionist procurement, the discriminatory effects of the US International Traffic in Arms Regulations and country-of-origin labelling are a small sample of initiatives that leave Canada vulnerable to the political whims of a bigger partner in a relationship that is crying out for better and more reliable connective tissue.
Recognizing our exposure to wild-card developments in the United States, Ottawa has initiated talks to broaden and diversify trade linkages. A Canada-European Union agreement is hopefully imminent. But our relationships and trade frameworks with Asia, the most dynamic part of the world, are developing at a glacial pace. We do not yet have a single free trade agreement with an Asian country.
Making matters worse, critical investments in infrastructure necessary for competitive trade have become victims of tensions that threaten to balkanize Canada. How pathetic it is that pipeline tensions between Alberta and British Columbia could force western product to cross Canada to the east coast just so it can reach tidewater and go on to international markets. How pathetic it is that project reviews become forums for trashing and discrediting badly needed developments and infrastructure, rather than challenging Canadian technological and industrial ingenuity to get the job done.
Canada is shooting itself in the foot. Committed, persuasive leadership will be essential if we are to establish the basis for the prosperity of our next generation.
Among the seismic shifts associated with globalization is a subtle fault line involving international security. China’s rise globally has recently been accompanied by its greater assertiveness in the Asian neighbourhood. Border disputes have warmed up, along with nationalist sentiment and a stepping up of military posturing. The list of countries with territorial conflicts with China includes Japan, the Philippines, Vietnam, India, Indonesia, Malaysia, Brunei and Taiwan. North Korea becomes ever more enigmatic, malevolent and threatening to its neighbours and the United States. Nuclear-armed India and Pakistan continue to stumble in attempts to normalize their relations. And Japan has adopted a more nationalist tone in its dealings with China under its new, more hawkish prime minister, Shinzo Abe.
Meanwhile a stream of security issues flows from cyberspace, as governments and other actors hack into governmental, industrial and other networks to steal information. These virtual intrusions have the potential to wreak havoc on critically important systems, including the military, power generation, food and drug safety, hospitals and financial systems. Washington is increasingly willing to finger China as the source of many of these intrusions, though the recent revelations from National Security Agency whistle-blower Edward Snowden show that cyber-spying is a two-way street.
These smouldering concerns about security, economic domination and geopolitical positioning cast dark shadows across the Asia-Pacific region. China remains suspicious of Washington’s push to strengthen existing regional organizations for managing economic and security rivalries or develop new ones. The ambitious plans for a Trans-Pacific Partnership of 11 countries — but not China — is viewed by many as a thinly veiled attempt to isolate Beijing. Meanwhile, Canada finds itself scrambling to join the Asian clubs in which it is currently not a member.
Canada’s deep security partnership with the United States creates complications for our economic future. North American perimeter security leaves us dependent upon the United States umbrella, but it also comes with trade implications. Technologies and products that are deemed ”dual-use” (in other words, have civilian or military purposes) are subject to restrictions on export to proscribed countries, including China. A wide swath of products, technologies and services with particular relevance to space and aerospace industries are included in the dual-use category. Uranium and a number of rare earth minerals can also get caught in a net of trade restrictions. The result can be seen in the opposition — ostensibly on security grounds — in both Canada and the United States to attempts by Chinese enterprises like telecom giant Huawei to acquire North American assets. In times of military tension, it is not a stretch to imagine oil, steel, coal and other products taking on a similar hue of strategic importance.
Just as worrisome is the right of countries to claim exemptions from the provisions of multilateral trade agreements on the basis of national security concerns. These exemptions essentially legitimize a complex array of protectionist measures, such as the US government’s International Traffic in Arms Regulations, that severely restrict who (including which employees) can produce security-sensitive products, where they can do it and how.
As Canada is a small trading economy, our economic future depends on our ability to participate in global commerce through highly integrated supply chains and value networks. Prosperity requires more than low tariff barriers. We need to negotiate intricate arrangements around regulation, product standards, border facilitation, intellectual property and, where possible, security. Making progress on these issues is a messy, detailed undertaking that requires intensive engagement on bilateral and multilateral fronts.
Resolving the tensions between security concerns and deepening economic integration in Asia will require intermediaries of good faith. It is a role well suited to Canada, which has a reputation for being fair, balanced and reliable. Canada carries no hegemonic baggage in Asia. We are a threat to no one, and have clear interests in not being caught in the middle of a Washington-Beijing vise.
Canada cannot show up to reap the benefits of trade without committing to the deep relationships that Asian countries expect.
To fulfill this role, the Canadian government will have to take risks. It will have to encourage the development of a regional architecture that includes and broadly engages Asian countries, including China. To be effective, Canada’s presence in Asia would need significant bolstering and should include a stronger military and security presence; a stronger foreign aid profile; heightened proactive involvement in disaster response and environmental projects; a quantum increase in resources devoted to research and development collaboration; and support for constructive approaches to building the supporting soft infrastructure underpinning the evolution of human rights, democracy and rule of law.
This level of engagement in Asia will not come cheaply. Canada cannot hedge its bets or believe it can show up to reap the benefits of trade without committing to the deep relationships that Asian countries and people expect.
But few countries have as much to gain or lose from strong mechanisms for international governance as Canada. Our prosperity and standard of living demand it. And as Asia rises, we have an obligation to make the investment that allows future generations of Canadians to participate in and shape a peaceful future.