Trudeau’s real achievement in China more than optics
The recent Trudeau yoga/tai-chi dance in Shanghai, as usual, was great optics. But his real achievement was his decision — long and unjustifiably delayed by the Harper government — to join the China-sponsored Asia Infrastructure Investment Bank.
Let’s look at the context in which this decision was made.
China is now, in nominal terms, the world’s second largest economy, with a GDP two-thirds that of the U.S. Measured in terms of purchasing power parity, it is now the world’s largest. And its 1.4 billion people constitute 20 per cent of the global population.
Chinese President Xi Jinping assumed office in March 2013, succeeding the formidable Hu Jintao. None of his predecessors have presided over as active a program of global economic and trade initiatives as Xi during the last three years.
Collectively these programs, summarized below, represent an unprecedented global development thrust. Initially focused on Asia but now expanded to the Middle East, Africa and Europe, they are literally worldwide in scope.
The Nobel Prize-winning economist Joseph Stiglitz says the program represents a “fundamental change in global and economic power.” Some commentators contend these initiatives have been prompted, in part, because existing institutions — the World Bank, the Asian Development Bank and the IMF — have lacked both sufficient development resources, have been too risk-averse and in general have taken an overly passive approach to development potential.
The key issue for the West, including Canada, is — or should be — how these enormous innovative and aggressive global economic measures are to be assessed in determining whether, how and to what extent they provide opportunities for our involvement.
Some have suggested that collaboration is essential. The Brookings Institute has indicated that otherwise, especially in the absence of U.S./China co-operation, there is a risk of establishing restrictive regional development blocs with a consequent disintegration of trade. What are the major programs? The Asia Infrastructure Investment Bank (AIIB), proposed by China opened this June. It is headquartered in Beijing and supported by 37 Asian and 20 Western countries, with a capital of $100 billion. The U.S. and Canada were the only G7 countries that failed to join at the outset.
The U.S.’s purported objections have related to concerns about environmental, labour and human rights requirements for loan applicants. And will the AIIB favour China over other members in funding developers on specific projects? With almost 60 countries now signed up as contributors, it would be difficult for China to use the AIIB for political or economic ends.
Even larger is the One Belt, One Road Initiative proposed in 2013 by President Xi. This vast initiative involves economic coordination between China and the rest of Eurasia. Its objective is to promote massive trade along several enormous geographic routes: a land route starting in western China and splitting into several connected links — a southern maritime route through Southeast Asia and the Indian Ocean, the Suez Canal and up to Italy; two land routes, one along the Silk Road through Central Asia to the Middle East and another through Russia and Central Europe, ending in Spain.
There are other initiatives, whose impact is tough to measure. The BRIC (Brazil, Russia, India, China and South Africa) Bank, proposed by India and activated in July, is headquartered in Shanghai.
A group of 14 Asian countries, led by China and joined by Australia and New Zealand, are about to conclude a new trade agreement, the Regional Comprehensive Economic Partnership, covering three billion people, 45 per cent of the world’s population and 40 per cent of world trade.
Trudeau’s achievement in maintaining our substantial canola exports to China should not be underestimated. But in the longer term, unless western economies, including Canada, come to grips with steadily increasing Chinese-led expansionist global development activities of the sort described above, we are at serious risk of slipping into economic decline.
The prime minister’s decision to join the AIIB was a commendable first step.
The U.S.’s purported objections have related to concerns about environmental, labour and human rights requirements for loan applicants