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

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January 10, 2018

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

Written by Robin V. Sears for Policy Magazine. Click here to read the original.

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.

A soft 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 wide-ranging 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 decision-making 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.