Canada’s diplomatic tensions with China came to the forefront again this week in advance of Prime Minister Justin Trudeau’s attendance at key trade summits.
But while Opposition politicians are calling for a harder stance with Canada’s second-largest export buyer, a recent report by the Canada West Foundation (CWF) urges a more metered approach building on the two countries’ common interests rather than their differences.
While it’s hard to think long-term when there are two Canadians held hostage by the Chinese government among other issues, the CWF makes the point that refusing to engage with China will hurt Canada more than it will harm China.
"No matter where the relationship is, you have to prepare for the future, you have to prepare for what’s coming," CWF executive director Carlo Dade said in a briefing with reporters. "Sticking your head in the sand and refusing to think about it doesn’t advance Canadian interests and doesn’t protect Canadian interests, it only sets us further back."
Agricultural trade is perhaps the strongest thread binding the two countries, largely because of the importance of food security to political stability; China needs reliable suppliers and Canada needs reliable buyers.
"While recent trade tensions and political events have pushed this connection to the background, they have not changed the basic calculation of who has food and who needs food," the report says. "In the longer term, it remains in each country’s interest to find a way to work together on agricultural trade."
Despite the fact that Canadian canola seed exporters were targeted by Chinese sanctions over the past two years, agricultural exports to that country have been growing at an average rate of 15 per cent over the past two decades, well ahead of the 10 per cent growth in Canada’s trade overall with that country.
As well, China has been hit with natural disasters and livestock disease, setting back its efforts to achieve its goals of food self-sufficiency.
The other common interest Canada and China have is the United States, more specifically their dependency and therefore vulnerability as trading partners.
Dade noted the U.S.-China Phase 1 trade agreement negotiated last year marks a significant change in how trade issues between those two countries will be managed. While much of the attention focused on the magnitude of China’s promise of increased purchases from the U.S., the real change is how the two powers will engage about trade in the future.
"What the Americans did was take their decades-long list of problems with China, their frustrations they had in trying to get China to agree to things and said, ‘We’re going to correct these issues,’ and they set about creating an agreement that the U.S. Trade Representative now refers to as having enacted structural changes in the terms of trade with China," Dade said.
He noted the U.S. inked its bilateral deal with China shortly after forbidding Canada from pursuing a bilateral deal with China under the renegotiated NAFTA agreement.
It’s easy to suggest that Canada should diversify its marketing efforts away from China, but that’s tantamount to telling businesses to ignore market signals, the report says. The size of the market and the growth in its demand makes it as impossible for Canadian exporters to ignore as they could the U.S.
Even if Canada wanted to walk away from either of these markets, it would be difficult, if not impossible, for Canadian exporters to replace those sales with other buyers.
However, as Joe Biden appears poised to claim the U.S. presidency, it’s clear that Canada’s trade with the U.S. will continue to be complicated by ‘America-first’ rhetoric. It remains to be seen how that will play out in practice.
In that vein, the CWF’s advice to focus on common interests with China might also apply to how we deal our southern neighbour.
"The question is whether the two sides can bring themselves to a point where common interest overcomes the tensions of the moment," the report says.
Laura Rance is Vice President of Content at Glacier FarmMedia. She can be reached at firstname.lastname@example.org
Laura Rance is editorial director at Farm Business Communications.