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Has Canada missed the trade boat to China, or is it mindful of the reefs? October 19, 2011

Posted by Dominique Millette in Asia, China, exports, foreign investment, international trade, trade issues, world economy.
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China will soon lead the world in economic output, yet Canada’s exports to it in 2010 only totalled $13.2 billion. The U.S. remains our largest trading partner, absorbing 74.9 per cent of all our exports, for a total of $299.1 billion. By way of comparison, in 2009, total merchandise exports from Australia to China were valued at A$42.4 billion, an increase of 31.2 per cent over the previous year. Australia’s population is 22,546,300 and the Australian dollar is worth about $1.05 CAD.

So: why does Canadian industry seem such a reluctant bride, or bridegroom?

On the one hand, as of this year, China’s economy is second only to that of the U.S., and appears poised to overtake it within 20 years at the most. Its billion-plus population makes it the biggest consumer market in the world for cars and energy, as it opens up to every other good available in the West. China also consumes enormous amounts of natural resources for its industries; it’s now the world’s biggest consumer of iron ore, steel, cement and copper. As a result of its newfound clout, China now leads in the G20 and is gaining influence in resource-rich Africa, observes Huhua Cao, an urban geography expert at the University of Ottawa.

On the other hand, the lack of formal, independent legal protection for investors and the fusion of the judiciary with the political branch of government create a lack of impartial recourse in case of dubious dealings, whether for trade or investment. And disputes there have been, observes Charles Burton, a Brock University Associate Professor specializing in Canada-China relations. Amongst other problems, he cites the potential for fraud, lack of regulatory enforcement and of intellectual property rights, and corruption. “Canadians don’t feel their contracts will be honoured,” Professor Burton proffers as an explanation for the still-low level of Canadian investment in China despite its booming growth. There have been ongoing negotiations between Canada and China since 1994, he states, but “there’s little incentive for China to implement such changes.” The slow approach to China on the part of Canadians may be a reflection of prudence.

Then, of course, there is the human rights question and Canada’s response to Tiananmen Square and other abuses, which echoed that of every other Western country. Economic, cultural and political relations between the two countries were abruptly suspended. Since then, Chinese officials have made no secret of their irritation at Canadian attempts to lecture them on rights issues. The Consul General in Toronto, Chen Ligang, compares relations to “a bird”. The head is “political trust” and the wings, trade and cultural exchange. “Political trust is essential,” he asserts. What this trust can bring, or take away, is not difficult to extrapolate.

Another roadblock to trade, and to any negotiations surrounding it, is the language barrier. In this respect, the immigrant population has a key role to play in bridging the differences between the two economies, argues labour and industry specialist Tony Fang, a York University Associate Professor.

Professor Fang disagrees with the blanket condemnation of Chinese business practices, calling it “an overemphasis on isolated cases.” He further points out that China has only integrated itself into the global economy since 1978, the year Chairman Mao died and Deng Xiaoping announced the end of economic socialism.

Professors Cao, Burton and Fang were three of the four panelists invited as part of the launch of The China Challenge: Sino-Canadian Relations in the 21st Century. Senator Vivienne Poy and Professor Cao coedited this collection of essays from Canadian scholars, policy-makers and industry spokespersons. Held at the University of Toronto’s Richard Charles Lee Canada-Hong Kong Library, the launch additionally featured Professor Louis Pauly, a scholar of international and comparative political economy, as a panelist. The Consul General in Toronto was also an invited speaker. Sponsors included the University of Toronto Libraries, the York Centre for Asian Research and the Asian Institute.

Missed opportunities or not, one thing Canada and China have in common is their emergence from the financial crisis relatively unscathed. Yuen Pau Woo’s essay, “Canada and China after the Global Financial Crisis,” notes that Chinese relative power on the global stage has grown as a result of the American meltdown. However, it states “Canada’s relative resilience during the economic crisis has not gone unnoticed in China. For a change, we are seen by the Chinese as a bastion of financial stability and not just as a vast source of natural resources.”