Grow­ing Canada’s Fu­ture in China: It Takes Time to Get it Right

Policy - - In This Issue - Robin V. Sears

Dur­ing the lat­ter part of the 20th cen­tury, diplo­macy with China was new, ten­ta­tive and coloured by a com­pla­cency based on the be­lief that size mat­tered, but only up to a point. In the past 20 years, China has qui­etly har­nessed its global lever­age to­ward geopo­lit­i­cal in­flu­ence based on eco­nomic power. The new China re­quires a new kind of diplo­macy from Canada, one that com­bines prag­ma­tism and pa­tience.

Asoft fall mist falls as you pass fountains and streams, mar­vel at bam­boo forests and stun­ning mas­sive stone sculp­tures, and in­dulge in the seren­ity of the hun­dreds of acres of beau­ti­fully de­signed and main­tained green park set­ting. This is not a na­tional park, but the three-year-old head­quar­ters of the world’s largest e-com­merce em­pire, Alibaba. To the thou­sands of young men and women wan­der­ing, ped­alling and driv­ing by it is just the of­fice. To a vis­i­tor, the low-slung stone and glass fa­cades of th­ese mas­sive build­ings, their moder­nity crossed with el­e­gant Asian cul­tural ref­er­ences, are how­ever, deeply im­pres­sive.

But deeply trou­bling, too.

The ex­pe­ri­ence gen­er­ates a tight­en­ing knot of real anx­i­ety about what they im­ply for a non-Chi­nese vis­i­tor. You pon­der the world we have be­queathed to our chil­dren and grand­chil­dren if you and they are from an­other place, per­haps never to be a part of this ex­plo­sion of Chi­nese suc­cess. For this is surely the epi­cen­tre of a ris­ing 21st cen­tury em­pire, one that is less than 20 years old, whose growth is still ac­cel­er­at­ing. The youth, the am­bi­tion, and the de­ter­mi­na­tion are breath­tak­ing.

Th­ese gi­ant tech­nol­ogy cen­tres, scat­tered along the coastal cities from Tian­jin to Shenzhen, a span of nearly a thou­sand kilo­me­tres, em­ploy hun­dreds of thou­sands of young en­gi­neers. To­gether they gen­er­ate more patents than any coun­try on earth. They serve sev­eral hun­dred mil­lion more cus­tomers. They grow rev­enues in dou­ble-dig­its year over year. One hes­i­tates to de­clare that th­ese gi­ants have un­stop­pable mo­men­tum—re­mem­ber­ing when Ja­pan Inc. was about to take over the world—but the race for dom­i­nance in a dig­i­tal world ap­pears to be ac­cel­er­at­ing.

Com­peti­tors com­plain bit­terly that the Great Fire­wall of China and in­vest­ment re­stric­tions make this an un­fairly hand­i­capped race, one in which they are se­ri­ously hob­bled. They may be even more un­happy as th­ese gi­ants ramp up their global ex­pan­sion, be­gin­ning with North Amer­ica. Like Ja­pan and Korea be­fore them though, China has yet to con­vinc­ingly demon­strate it can com­pete glob­ally un­der its own brands.

But this we have never seen: a state cap­i­tal­ist econ­omy, grow­ing faster and achiev­ing scale that is rapidly ap­proach­ing num­ber one glob­ally. Non-lib­eral cap­i­tal­ist sys­tems—the Sovi­ets, Iran, and Venezuela—are sup­posed to be in­ef­fi­cient messes. China is a po­ten­tial mar­ket larger than Europe, North and South Amer­ica and Ja­pan com­bined grow­ing at an as­tound­ing pace. It al­ready pro­duces 90 per cent of our com­put­ers, and 70 per cent of our cell­phones—and they are a close sec­ond in artificial in­tel­li­gence and ma­chine learn­ing.

Some politi­cians re­spond to the knot of anx­i­ety with de­mands for a strat­egy of dis­tance, iso­la­tion, higher trade and se­cu­rity fences. But we know how that ends: the fence builder loses. When China burned Ad­mi­ral Zheng He’s fleet in 1433 and for­bade for­eign trade, it launched a 500 hun­dred-year de­cline. ‘Sakoku’ Ja­pan—a na­tion wrapped in pro­tec­tive chains—slid into pow­er­less­ness from 1633 un­til the ar­rival of con­quer­ing for­eign fleets more than two cen­turies later.

No, the an­swer must be en­gage­ment, care­fully ne­go­ti­ated part­ner­ships, and the in­te­gra­tion of China into the rules-based global econ­omy. It will be the work of decades, with fre­quent mis­steps and many in­evitable flare-ups.

There are many rea­sons for con­fi­dence about Cana­dian suc­cess,

though. Our con­nec­tions with the Chi­nese peo­ple through ed­u­ca­tion, im­mi­gra­tion and travel have deep grow­ing roots. We have the pow­er­ful legacy of be­ing a pi­o­neer in an early and re­spect­ful en­gage­ment with China. With the launch of this bold and risky jour­ney to­ward a com­pre­hen­sive free trade agree­ment we are on our way to be­com­ing the first G7 na­tion to es­tab­lish such an eco­nomic struc­ture.

So, one might shake off the anx­i­ety and rec­og­nize that Canada has al­ways fought suc­cess­fully for a place on a big­ger stage. Cana­di­ans have al­ways been con­fi­dent hosts to thou­sands of in­com­ing Ukrainian peas­ant farm­ers, Ital­ian labour­ers, Viet­namese refugees and now planeload af­ter planeload of about-to-be Chi­nese Cana­di­ans. De­spite our size, we are one of the world’s most suc­cess­ful open trad­ing economies.

We will fail to be­queath sus­tain­able pros­per­ity to our chil­dren and grand­chil­dren if we do not make China an in­te­grated eco­nomic part­ner. If we lose the con­fi­dence that made Man­ulife the first—and still one of the most suc­cess­ful—in­sur­ers in China. Or the am­bi­tion that made Cana­dian au­toparts gi­ant Magna one of the most suc­cess­ful play­ers there.

De­spite the whine­ing aimed at Justin Trudeau for his fail­ure to wrap up a free trade agree­ment agenda in Bei­jing, our ne­go­tia­tors and theirs un­der­stood this visit was a quiet suc­cess. We won new con­ces­sions im­me­di­ately on some food im­ports, new part­ner­ships in ed­u­ca­tion, re­search and tourism, and made slow but real progress in nar­row­ing the gaps between our visions of an eco­nomic agree­ment.

The Trudeau gov­ern­ment needs to do a bet­ter job of ed­u­cat­ing Cana­di­ans about what jour­neys like this in­volve. They are not a hockey game with most goals in the short­est time de­cid­ing the win­ner. They are a multi-year poker game, with win­ning hands, stale­mated rounds, and a slow in­crease in chips won over many hands.

The PMO did a poor job man­ag­ing ex­pec­ta­tions be­fore this trip. They al­lowed the spec­u­la­tion about its goals and the likely out­come to get out of hand. Now it’s time for a lit­tle more re­al­ism and can­dour. We are at­tempt­ing to launch the most widerang­ing and com­plex trade agree­ment ever between China and an ad­vanced econ­omy.

This is not a sim­ple tar­iffs and trade deal like the one that Aus­tralia signed. The agenda we are seek­ing touches the very heart of do­mes­tic de­ci­sion­mak­ing on is­sues as sen­si­tive as the treat­ment of work­ers, the en­vi­ron­ment and women. For China—feel­ing its power to­day at a peak not seen in more than a thou­sand years—this is not an easy agenda to un­der­stand the logic of or the need for.

The odds against suc­cess re­main daunt­ing. The Trudeau team de­serve credit for their am­bi­tion and their de­ter­mi­na­tion, nonethe­less. A nar­rower trade deal would not be ac­cept­able to Cana­di­ans. Forc­ing the Chi­nese to di­gest this unique set of goals too quickly will only end in cer­tain fail­ure.

Each round of ne­go­ti­a­tions Canada has com­pleted, from the Auto Pact with the United States in 1965, through the Free Trade Agree­ment and NAFTA have be­come more com­plex, more wide-reach­ing and there­fore longer and harder to achieve. Our ul­ti­mate suc­cess on the Com­pre­hen­sive Eco­nomic and Trade Agree­ment (CETA) with the Euro­pean Union—a group of economies and cul­tures with whom we have much more in com­mon than we do with China—took eight years to com­plete.

Hope­fully, this deal will not con­sume that amount of time and en­ergy, but it will not be fast. If done right, it will have been worth the strug­gle. One of the lega­cies it may gen­er­ate a gen­er­a­tion from now could be young Cana­dian en­gi­neers work­ing closely with their Chi­nese part­ners in cam­puses like the Hangzhou won­der cre­ated by Jack Ma and his team.

Adam Scotti photo

Prime Min­is­ter Trudeau meets with Pres­i­dent Xi at the Great Hall of the Peo­ple in Bei­jing. De­cem­ber 5, 2017.

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