Dear Prime Minister Harper – A Good Time for an Asia Strategy, Part II

It should be said that there has been progress in Canada’s relations with Asia. 

Even without major government support, trade and investment between Canada and China has been growing fast over the past decade – just ask Western Canada.

The new attention on economic ties with India is progress, as well as with Indonesia.  It is less positive that Japan, Korea and ASEAN have fallen off the radar.

It is promising that the government has come to realize that, in terms of Canadian statecraft – just like for other liberal democracies – economic ties have proven as important in relations with China as values.

It is a positive trend that senior Canadian government representatives, including the Prime Minister, have been making more regular visits to China and India, to shore up relations.

However, a qualitative upgrading is needed. Beyond a succession of planned visits, what is needed is a longer-term strategy.

The Asia strategy should be built on five features.

First, it should be anchored on China. The key strategic question is what should we be “pushing for” with China? And with Asia more broadly?

One of the aims must surely be to ensure that Canada secures longer-term access for the key sectors to what is, and will likely remain, the world’s fastest-growing market for the foreseeable future.

We would want to identify which are the key sectors, strategically, from a longer-term perspective.  Debra Steger has called this, “making sure we do our homework” – to think about not only what we want in these negotiations, but also where we’d want to be as a society and economy, 15 to 20 years down the road. Rather than extrapolating simply from where are we today, and moving the yard sticks forward three to five years. This would open up the discussions on energy and the environment with the Chinese to not only what is available immediately, but also shared hedging options in alternative energy solutions.

For Canada, it would be crucial to gain agreement from the highest levels of the Chinese state on the terms and conditions under which Canada and China will further expand economies ties, while Canada also promotes its values.

A key Canadian value – and one that has been passed over in our dealings with China to date in our rights promotion – is “values and ethics in government.” This central feature of Canada’s good governance model is of great interest to reformers in China, under the label of “anti-corruption”. Any advances in this area would bring immediate transparency and public sector accountability benefits to citizens and economic stakeholders alike.

Gregory Chin shows that Canada needs to commit to strengthening relations with China – as the U.S. has –  in Part I of his call for an Asia Strategy. 

John Hancock points to tensions between the U.S. and China and asks, “Whose side – if any – is Canada on?“

Second, the economic goal should be gaining preferential access to the Chinese economy.

While ensuring that China adheres to WTO rules will continue to be important, more important for Canada is that the economic playing field for the Canadian side can never really be level in its relations with China, given the inherently asymmetrical nature of the Canada-China relationship.

Achieving a level playing field for Canadian interests, i.e. free access, actually means securing preferential access for Canada in China, especially if the stakeholders are small- and medium-sized Canadian companies. This means going beyond the WTO, and the protection of the multilateral trading system, when dealing with China.

Devising new Chinese procurement and investment rules that are based on transparency and reciprocity is part of the story. Making sure that intellectual property is adequately protected is vital. However, so is gaining preferential access for investment and trade in some sectors that are currently closed or restricted to foreign participants.

Equal access is useful. Preferential access is even better.

However, in order to gain such access, Canadians would probably need to consider whether we would be willing or able to offer any type of preferential access to China. If access to provincial procurement contracts or fed contracts (including defence) has proved to be contentious in negotiations with the EU, with China it would be more so. It would, therefore, be more feasible to think in terms of bargaining over access to Canadian energy, minerals or other raw materials. The Australians have already been pondering such calculations.

At the same time,Canada would want to provide all investors, including Chinese, with a clear set of investment rules so that they could have fair access to some sectors where they currently face restrictions.

Canada should, third, take the lead in promoting changes in the global investment environment that supports growth and stability in the world economy.

Canada would want to backstop its bilateral efforts regarding inward foreign investment with multilateral tools. One step that Canada could take to lead would be to champion a new multilateral (G7?) agreement on investment from sovereign wealth funds and state companies. This would be a useful function that the G7 allies could play for the global public good.

Fourth, Canada should reconsider how its development assistance programs could be restructured and reoriented in relation to Asia’s rising donors, as part of our tool kit of foreign policy.

It is time for Canada to discuss the end of traditional donor-recipient aid relations with China, and to reallocate most of the aid budget to developing new programming where we work with China (and perhaps India) as co-donors, in third countries, to ensure more effective world development. The goal, here, would be building new consensus with the emerging economies, on how to work to reduce income inequality both within each of our countries and regions, and to ensure sustainable economic growth and jobs in this decade and beyond. 

It is also time to reallocate some of the China-related aid resources to those branches of the Canadian government which are more directly responsible for promoting Canadian values and interests in China, in order to strengthen these efforts.

In an article in International Journal (Autumn 2009), I suggested that a fundamental reassessment of Canada’s foreign aid strategy for Asia is needed, and that the reassessment needs to be led by the political leadership and the central bodies of the Canadian government – that a Prime Ministerial Task Force should be struck, to formulate a plan for building a strategic partnership with Asia’s rising donors. This suggestion still holds.

Fifth, effective execution of the longer-term strategy will require that we establish, as the operational norm, that the representatives of Canada’s core leadership will engage directly with the Offices of the most senior levels of the Chinese State. This means at the level of the government Executive – at the Offices of the Chinese Prime Minister and Vice Premiers – and at the senior levels of Party decision-making in China. Without access to these strategic channels, we are left in the Chinese bureaucratic morass.

The overarching foreign policy goal for Canada should be to foster mutual respect and trust in relations with China, as both countries face an increasingly complex and decentralized international system.

Is now a good time to push China? 

Considering the upcoming leadership transition in Beijing, we can expect that there will not be dramatic moves before the new leadership team takes over. 

At the same time, we can expect a high degree of continuity in the aftermath of the transition.

So this would be a good time to start planning – to put in place a new plan and make sure that we’re ready when the new Chinese leadership team takes over.

China would only be the first piece for a new Asia strategy.

Photo courtesy of Reuters.