THERE’S A HIGH COST TO LANDING ON SAUDI ARABIA’S BAD SIDE
But what good is Canada, Kevin Carmichael points out, if we can’t defend equality?
News of Canada’s apparent ejection from the list of countries that stand to benefit from Saudi Crown Prince Mohammed Bin Salman’s largesse reminded me of something that Stephen Poloz, the Bank of Canada governor, said last month.
It was from his interview with the Financial Post. I had asked Poloz if he thought Canadian aluminum and steel exports might push through U.S. duties the same way lumber shipments had? He surprised me by saying the issue was bigger than that. “It could be that we’re putting too much energy into it,” he said, referring to the tit-for-tat response to the Trump administration’s tax on metal imports.
“But at the same time,” Poloz continued, “if we’re not going to spend energy on it, just because this is small, or that’s not going to have much effect, what good are we? There are principles involved.”
Principles now are driving relations between Canada and a country that had excellent potential to help Prime Minister Justin Trudeau with his quest to make Canadian companies less reliant on the United States.
Late last week, Foreign Affairs Minister Chrystia Freeland, and then her department, tweeted statements of disappointment over the imprisonment of advocates for women’s rights by Saudi authorities.
There was no reason to pay any attention to those tweets. Canada has little, if any, influence in the Middle East, and those are the sorts of comments democratic countries direct at their lessdemocratic trading partners all the time. Except countries such as Saudi Arabia are becoming more sensitive to scolding from abroad. The kingdom responded to Freeland’s tweet in shocking fashion, expelling the Canadian ambassador and freezing “all new business” with Canada.
“Any further step from the Canadian side in that direction will be considered as acknowledgment of our right to interfere in Canadian domestic affairs,” the Saudi foreign ministry said in a statement. “Canada and all other nations need to know that they can’t claim to be more concerned than the kingdom over its own citizens.”
All this should be a reminder that politics now represent one of the biggest threats to the global economy.
The trade wars get most of the attention, but the issue is bigger than that. Before the financial crisis, a democratic world order seemed possible. Now, emerging powers are looking to different role models. China’s brand of state-sponsored capitalism has a track record of generating wealth, and Beijing ’s see-no-evil approach to international investment offers an alternative to western money that comes with strings attached.
Authoritarian regimes in countries such as Turkey, Russia, and the Philippines feel emboldened to go their own way, putting pressure on France, Canada, and other winners of the Cold War to stand up for free trade, the rule of law and human rights. All of this makes geopolitics acutely unpredictable, especially since it’s difficult to know on any given day on which side of this divide U.S. President Donald Trump places himself.
Here’s an example of how quickly political conditions change. The first thing someone at Export Development Canada will need to do when the Ottawabased agency reopens after the holiday weekend is tweak its assessment of Saudi Arabia as an investment destination.
EDC, which, among other things, sells insurance for potential losses from arbitrary government decisions, currently rates Saudi as “open” for business, with a “low risk” of political interference.
The Crown lender, like many others around the world, had become excited by bin Salman’s plan to spend a fortune over the next couple of decades overhauling his country’s economy to make it less dependent on oil and a bloated public service. Bin Salman intends to finance at least some of his program by selling a stake in Saudi Aramco, the world’s biggest oil company, although it remains unclear when the sale will happen.
EDC spied opportunities for Canadian companies and investors in power generation, telecommunications, natural gas exploration, and the production of petrochemicals.
“The country’s efforts to diversify its economy is driving opportunities for Canadians in many sectors,” EDC says on its website. “Business opportunities exist across a wide range of sectors that match Canadian capabilities.”
That was true last week. Today, probably not. Saudi Arabia’s rulers are said to hold grudges.
Some will say this episode offers further evidence that the Trudeau government is unserious when it comes to international affairs. Bin Salman, the 30-something heir to throne, has started a war with Yemen, isolated Qatar, and picked fights with Sweden and Germany when those countries questioned his country’s commitment to human rights. Therefore, Freeland and her officials should have known that they would be courting a backlash.
“It would appear that Canada continues to view Saudi Arabia with an outdated ideological lens,” said Omar Allam, a former diplomat and chief executive officer of Allam Advisory Group, a trade consultancy. “The current Canadian trade playbook is clearly not working, and Ottawa’s foreign policy and engagement strategy in Saudi Arabia has backfired.”
The opportunity cost of ending up on bin Salman’s bad side is big. But so is the threat to the international system that Canada helped build. One of the reasons democracies are in trouble is too many of their leaders have put their national interests ahead of the principles they claim to defend. As Poloz might say, if a country such as Canada can’t express its opinion about the treatment of non-violent agitators for equality, what good are we?
The current Canadian trade playbook is clearly not working, and Ottawa’s foreign policy and engagement strategy in Saudi Arabia has backfired.