Is Canada Ready To Pay a “National Security Premium”?

Europeans have proven willing to pay for greater independence from an authoritarian trading partner. Canada may one day face a similar test with China.

By: /
13 February, 2023
BRUSSELS, BELGIUM - JULY 20: President of the European Commission Ursula von der Leyen is talking to media about: 'Commission proposes gas demand reduction plan to prepare EU for supply cuts' in the Berlaymont, the EU Commission headquarter on July 20, 2022 in Brussels, Belgium. The European Union faces the risk of further gas supply cuts from Russia, due to the Kremlins weaponisation of gas exports, with almost half of our Member States already affected by reduced deliveries. Taking action now can reduce both the risk and the costs for Europe in case of further or full disruption, strengthening European energy resilience. (Photo by Thierry Monasse/Getty Images)
By: Aaron Gasch Burnett
Aaron Gasch Burnett is a German-Canadian policy analyst based in Berlin. Follow him on Twitter @AaronGBurnett .    

Freedom isn’t free. The liberal democratic world—Canada included—is getting a painful reminder of that. Yet even as inflation eats into Canadian household budgets due to Russia’s war against Ukraine, the true test of how durable Canada’s commitment to liberal democratic values internationally is just starting.

Just how hard will it get? Start by asking Europeans, who find themselves in the epicentre of the systemic struggle of our time—that between liberal democracy and authoritarianism.

Ukraine continues to pay in blood on the frontline. Estonia is spending over a percent of its GDP on military aid for Ukraine. Finland is joining NATO and putting up a border fence with Russia. Germany has opened liquefied natural gas (LNG) terminals in record time and completely weaned itself off Russian gas—which once made up 55 percent of its gas supply.

Inflation aside, the costs for Canada have not been nearly that steep. Canada is sending just four of the 178 Leopard tanks greenlit for Ukraine. Even before trade sanctions, Canada-Russia trade was miniscule. In 2021, just 0.10 percent of Canadian exports went to Russia, and Russian goods made up just 0.35 percent of Canadian imports.

If we really want to know just how serious Canada is about supporting freedom, China offers the real litmus test.

Paying more for our values

In stark contrast to the trickle of Canada-Russia trade, China is Canada’s third-largest trading partner after the United States and European Union. If we separate the EU into its individual countries, China comes second on that list. It’s also an unsurprisingly lopsided relationship, with Canada importing a lot more from China than it exports there—and the negative trade balance increasing. Canadian exports to China saw a decline of just under 20 percent last year. At the same time, Canada imported almost 22 percent more from China in 2022 than the year before.

China also has economic leverage over countries like Canada extending far beyond what these numbers suggest. To use just one example, China controls over 80 percent of all worldwide solar panel production—a critical technology for the world’s transition to cleaner energy.

That’s a dangerous level of dependence on an authoritarian rival—something Canada’s European allies can well warn it of.

“We were greedy,” EU Competition Commissioner Margrethe Vestager told German business newspaper Handelsblatt last year. “Being dependent on Russia was a risk, but the price was attractive. Now the risk has become reality and we have to deal with it.”

Vestager went on to argue that Europeans now needed to be ready to pay a “national security premium,” to buy less from aggressive, authoritarian countries and more from allies and friends sharing liberal democratic values—even if it’s more expensive.

“Canada has almost all the raw materials we need. But the companies there need a long-term perspective from us in order to invest,” she said.

US Treasury Secretary Janet Yellen coined a different word for the concept—“friendshoring,” indicating that the US wants to source more critical materials from its liberal democratic partners.

Calling China “an increasingly disruptive global power,” Canadian Foreign Minister Melanie Joly’s new Indo-Pacific Strategy finally communicates a tougher vision, declaring an intention to challenge China “when we ought to.” Friendshoring, or doing more business with India and other East Asian nations, features prominently.

But Canada’s current trade numbers speak for themselves, as does history. Prime Minister Justin Trudeau spoke of his admiration for China’s “basic dictatorship” shortly after becoming Liberal leader. Canada was the last Five Eyes intelligence alliance country to ban Huawei from its 5G networks, following repeated warnings about the security risks the Chinese state-owned telecom had for critical infrastructure. Years of foot-dragging on pipelines have left Canada’s energy sector with fewer alternatives to the Chinese market, instead of being able to ship LNG east directly to an allied continent looking for alternatives to Russian oil and gas.

“We’ve been incredibly naïve, short-sighted and solipsistic—implicitly hoping things would ‘go back to normal’ when all evidence indicates they won’t,” says former Citizenship and Immigration Minister Chris Alexander, an Open Canada contributor. “We have been a laggard in screening Chinese investments in Canada, reducing CCP political influence in Canada, or finding alternatives to Chinese supply chains.”

For the moment anyway, Canada’s Indo-Pacific Strategy remains an aspirational piece of paper, with a lot of work urgently needed to implement it and far from guaranteed in its results.

Communicating the China threat to Canadians

Overdue as it may be, the Indo-Pacific Strategy does at least mark a more clear-eyed assessment of China as a threat to Canadian interests and values. But that hasn’t necessarily filtered down to the Canadian public.

According to 2022 Pew Research figures, 74 percent of Canadians have an unfavourable view of China. Over half consider Chinese human rights violations, like the Uyghur genocide, to be very serious. Yet, only around a third are seriously concerned about China’s increasingly aggressive military posture, economic competition, or with Chinese involved in Canadian domestic politics.

Given the seriousness of allegations that China built up a clandestine network of pro-China candidates in the 2019 and 2021 elections, it remains odd that we still don’t know who these candidates were—or that Canadian media hasn’t dug deeper into the issue. The missing urgency is almost certainly part of why most average Canadians still don’t appreciate China as a serious threat—even if they don’t like it much.

The government may have a new strategy, but a lot still has to be done to get Canadians to buy into it. Given what a national security premium might cost the average Canadian as well, it’s an earnest discussion that needs to happen now.

Ben Tallis, a Research Fellow at the German Council on Foreign Relations, encourages Canadians to think of friendshoring as an investment rather than a cost.

“A national security premium is a big part of the new ‘neo-idealism,’ which asks: ‘how much are you willing to pay to stand up for your values?’” he says. “But then there’s a cost to not standing up for your values, as we see with Europe, Russia, and Ukraine […] The alternative is far more expensive in terms of what it would cost us to lose our freedom, to lose the possibility of democratic action, to lose the possibility of a viable future.”

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