Canada, Meet Global China

Canadian International Council Canada, Meet Global China Author(s): Paul Evans Reviewed work(s): Source: International Journal, Vol. 61, No. 2, Global China (Spring, 2006), pp. 283-297 Published by: Canadian International Council Stable URL: http://www.jstor.org/stable/40204157 . Accessed: 16/01/2012 08:25 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. Canadian International Council is collaborating with JSTOR to digitize, preserve and extend access to International Journal. http://www.jstor.org Paul Evans "Canada, meet global China" Atlases in any Canadian home invariably display a vast expanse of blue sep- arating the land masses of Asia and North America. The two continents comfortably occupy different pages, usually in separate sections. We need a new kind of map. Globalization has increased Canada's con- nections around the world through the multiple bands of diplomacy, com- merce, migration, culture, and communication. That new map will shrink oceans, especially the Pacific, and show that human interactions are expanding in remarkable ways. What Wang Gungwu has called the fourth rise of China has in the course of a decade shrunk the map even further and with unprecedented speed.1 Responding voraciously to global opportunities, deepening inter- connections with Asia, and connecting positively to North America and Paul Evans is co-CEO of the Asia Pacific Foundation of Canada on secondment from the University of British Columbia. This article draws on the author's essay, u Canada and Global China: Engagement recalibrated," in Andrew Cooper and Dane Rowlands, eds., Split Images: Canada Among Nations 2005 (Montreal: McGill-Queens University Press). The views expressed are the author's own. 1 Wang Gungwu, "The fourth rise of China: Cultural implications," China: An International Journal! (September 2004). International Journal Spring 2006 283 Paul Evans other parts of the world, China has been transformed from being a place out there to a daily reality for Canadians. In part this reflects the changes in Canada's demography resulting from large numbers of immigrants from greater China over the past two decades and the increase in Chinese tourists in the past three years. But even more tellingly, a trip to the shop- ping centre reveals how China's manufacturers have reduced the price of consumer goods; a trip to the gas station reveals how China's demand for energy is increasing prices for energy and natural resources; and a trip to the bank reveals how mortgage and interest rates are tied to China's pur- chase of US securities. The new map will not present Canada as being closer to China than to the United States, Britain, France, or Mexico. But it will need to reflect that China's impact is growing dramatically in ways that will affect our domes- tic affairs as well as our relations with all of these countries. What follows is a brief and generally optimistic assessment of the forces behind China's expanded presence, Canadian reactions, and the pol- icy choices that lie ahead for a new Canadian government. China has mat- tered deeply for Canadians going back to the era of railroad building at home and missionary activities across the Pacific. Since the establishment of diplomatic relations with Communist China in 1970, it has been a diplo- matic priority of successive governments. What is changing is that the chal- lenges posed by China are now as much for domestic arrangements within Canada as for our foreign relations. What we consume, what we produce, and how we produce it have all entered a globalized world in which China is suddenly a cutting edge. GLOBAL CHINA Contemporary China is portrayed in a variety of ways, including as a rising power, an emerging superpower, a potential hegemon, a peer competitor to the United States, and a failing authoritarian government. The term glob- al China is preferable for several reasons. It underscores China's new grav- ity without implying an inevitable power struggle with the extant super- power. It signals that China has grabbed the world's attention by opening its door to the forces of globalization, looking outward, and connecting to supply chains, production networks, and foreign investment that have both regional and global reach. China is both the product and beneficiary of a period of intensive globalization. It has not just opened its own door but serves as a model that other developing economies are scrambling to repli- I 284 I International Journal I Spring 2006 I "Canada, meet global China" | cate or follow. If Japan once led a formation of flying geese in eastern Asia, China is provoking a buffalo charge that extends across Asia and into emerging markets around the world. China has become part of the global economy at the same time that it is changing it. In the course of a generation, it has emerged as the shop floor of the world by crafting a production system that fuses high-end tech- nology with low-wage, labour-intensive activity; cut-throat domestic compe- tition; a reliable, docile, and capable industrial workforce; utilization of huge sums of foreign investment and technology; and the new appetites of a billion domestic consumers. The historical parallel that best captures the scale and implications of this economic transformation is the emergence of American industrial capacity a century ago. Many of the factoids about global China, and its importance to Canada, are part of national discussions. China has achieved average annu- al growth rates of more than nine percent over 25 years. Currently it is Canada's second largest trading partner; is poised to overtake Mexico to be the United States' second largest trading partner and may well surpass Canada as the largest by the end of this decade; generates 13 percent of world economic output in purchasing parity terms, second only to the US; is the world's largest consumer of commodities including steel, copper, coal, and cement and is the second biggest consumer of oil after the US; is the world's third largest trading country, accounting for six percent of the world's total; received in excess of $60 billion in FDI in 2005 and has accu- mulated a total of about $610 billion of inward FDI in the past 20 years; and holds about $710 billion US in foreign currency reserves and some $224 billion in US treasury bills, making it the second largest creditor to the United States. That China is the leading producer of household electronics, toys, clothing, and textiles is widely appreciated. Less so is that it is also becom- ing a key producer of component parts and intermediate goods that are essential to increasingly refined supply chains in which research and devel- opment, software development, physical production, and after-sales service are geographically dispersed but precisely integrated. And it is quickly moving into higher-end assembly and export including trucks, aircraft, ships, telecommunication equipment, and machinery. Paralleling its economic capacity, China has become more self-confi- dent, more sophisticated, more assertive, and frequently more constructive in international institutions dealing with a variety of issues ranging from I International Journal I Spring 2006 I 285 I I Paul Evans I economics and trade policy to nonproliferation, chemical and biological weapons, missile technology control, exports control and arms control and disarmament issues, pandemics, terrorism, and transnational crime. In a regional context, Beijing in the last decade has moved quickly from defen- sive presence to active participation and now leadership in groups includ- ing APEC, the ASEAN regional forum, the ASEAN-plus-three and the east Asia summit processes. It has played a key role in creating and hosting the Shanghai Cooperation Organization and the "six party talks" focusing on the North Korean nuclear issue. And it seems be developing a reputation for "soft power" that at once reassures its neighbours and increases its long- term influence. In the United Nations, it has become a more mature and responsible member of the security council and, while not always aligned with Canadian interest and perspectives, has demonstrated increasing commit- ment to the principles and activities of the organization. It is beginning to assert itself in multilateral economic forums such as the WTO and Doha round, sometimes aligning in a supporting role behind Brazil and India on G-20 trade issues, but more often behaving opportunistically with both developing and developed countries. By almost any indicator China is challenging Japan as the most impor- tant country in an increasingly dynamic and integrated Asia and a major player on the world scene. Through a combination of its sheer size, pro- duction system, integration into regional and global supply chains, and increasing diplomatic self-confidence and weight, it is contributing to trans- formative processes that are reshaping world affairs. Decisions made by its government - and by its consumers - have enormous impact beyond its borders, including in Canada. CANADIAN REACTIONS In Canada, as elsewhere, these new realities have excited various emotions including admiration and awe, anxiety and fear. An Ipsos-Reid poll in April 2005 found that about 60 percent of Canadians do not see China's emer- gence as a threat to world peace even though about 40 percent believe China "will soon dominate the world." Forty-five percent of Canadians indi- cated they were concerned about the level of Chinese investment in Canada and 51 percent that China is a serious threat to jobs in Canada, yet 61 per- cent see China's economic development as an opportunity and 68 percent see expanding trade relations with China as a good idea because it helps 286 International Journal Spring 2006 "Canada, meet global China" reduce trade dependence on the US.2 A poll by the Asia Pacific Foundation of Canada in May 2004 revealed that only 24 percent of respondents felt the Chinese economy was more of a threat than an opportunity.3 And a Pew poll in June 2005 puts this in comparative perspective by indicating that 58 percent of Canadians hold a favourable view of China, almost equal to the 59 percent who hold a favourable view of the US but below the 78 percent who hold a positive view of France.4 Corporate Canada is coming to understand that the challenge posed by China is much deeper than short-term trade and investment matters. Canadian manufacturers are caught in the pincers of competing with the dread "China price" at the same time the cost of their inputs are rising because of Chinese demand. Canada is losing manufacturing jobs. To survive, manufacturers need to compete with Chinese producers at the same time that they cooperate with them in benefiting from supply chain innovation. Businesses have been scrambling to devise strategies to take advan- tage of opportunities afforded by global China or to protect themselves against the competitive pressures it brings to bear. The Canadian media, symbolized by the now annual Globe and Mail feature edition on China, are abuzz with China-related stories.5 The CBC is opening a bureau in Shanghai. Canadian educational institutions are scrambling to recruit more Chinese students (there are now estimated to be 55,000 in the country) and create new kinds of programs to connect Canadian and Chinese universi- ties.6 Provincial and municipal leaders, like their federal counterparts, are travelling to China in unprecedented numbers. 2 "A public opinion survey of Canadians and Americans about China," Ipsos-Reid, June 2005. Report prepared for the Canada Institute of the Woodrow Wilson International Center for Scholars and the Canada Institute on North American Issues, www.wilsoncenter.org. 3 Asia Pacific Foundation of Canada, "National opinion poll: Canadian views on Asia," May 2004, www.asiapacific.ca. 4 Pew global attitudes project 2005, "American character gets mixed reviews," 23 June 2005, 11, www.pewglobal.org. 5 23 October 2004 and 29 October 2005. 6 Carin Holroyd, "Canada missing opportunity in the booming China education market," Commentary #40, Asia Pacific Foundation of Canada, January 2006, www.asiapacific.ca. I International Journal I Spring 2006 I 287 I Paul Evans POLICY RESPONSES There is not yet a comprehensive Canadian strategy for dealing with a glob- al China, though the Chretien and Martin governments went some distance down the path in formulating one. The policy response has been emerging piece-meal in a series of federal and provincial initiatives. On the analytic side, the Martin government's international policy statement noted that China is "poised to become the most important national economy in the 21st century" and "is at the heart of regional and global supply chains that are vital to the Canadian and world economy." It correctly observed that China's rise will put new pressures on Canadian manufacturers, reduce the price of consumer goods, and increase the price of commodities, including oil. It outlined a commitment to doubling the volume of bilateral economic interaction by 2010 and acknowledges that achieving Canada's global objectives including the "responsibilities agen- da," forging a new multilateralism, and tapping into east Asian value chains bilaterally and as part of North American supply chains will depend upon deeper and better relations with China and other Asian countries.7 On the diplomatic side, both the Chretien and Martin governments pursued the same path of relationship-building via high-level visits and con- tacts initiated by Pierre Trudeau, sending and receiving senior politicians and officials on a frequent basis. While the team Canada concept for expanding trade has run its course, the size of the embassy has expanded dramatically, new offices are being opened in at least six new Chinese cities, and inter-governmental strategic working groups have been created on sev- eral topics including energy, multilateralism, and foreign investment. Bilateral negotiations continue on issues including "approved destination status" for Chinese tourists wishing to visit Canada and expanded air links. The "strategic partnership" with China announced unexpectedly dur- ing the visit of Chinese President Hu Jintao in September 2005 raised offi- cial relations another notch. The specifics included seven new agreements to deepen cooperation in the areas of transportation, food safety, health sci- ences, and nuclear energy, and a joint declaration on science and technolo- gy that includes a program of collaborative research on climate change and sustainable energy. 7 Canada's international policy statement: A role of pride and influence in the world, Department of Foreign Affairs and International Trade, 19 April 2005, www.dfait-maeci.gc.ca. 288 I International Journal I Spring 2006 "Canada, meet global China" | In some respects the strategic partnership is a logical extension of the generally warm and improving relations of Canada and China over three decades. Yet it had a special symbolic and practical meaning as well. Ottawa not only signalled an interest in a deeper commercial relationship, but a willingness to open Canadian energy markets to Chinese investment on a commercial basis. In October 2005 the Liberals tabled bill C68, the Pacific gateway strate- gy. While the bill did not pass before the government fell in November, it does indicate the direction of Liberal thinking. The federal program was to have built upon some of the transportation and infrastructure projects already being pushed ahead by the government of British Columbia. In addition to providing $590 million for additional infrastructure improve- ments to connect the ports of British Columbia to cross-Canadian and inter- continental transportation systems, it was intended to fund a wide range of additional activities related to innovation, tourism, education, and culture that would open doors to deeper contact with Asia. Surging Chinese trade with Canada and a west coast capacity crunch drove the strategy. It was embedded in the realization that China was a part of a much more integrat- ed Asian economy and that the federal and provincial aim was not just to do more trade with Asia but to connect economies and societies in deeper ways. The decision of the Liberal government to open free trade negotiations with Korea was part of the same approach for fostering deeper economic connections with Asia. And it reflected a calculation that the competitive challenge posed by Korea, and in broader terms by China, would not be handled through raising protectionist barriers but through restructuring domestic industries to more closely integrate with Asia. The same outlook has underpinned Canadian resolve to move toward a comprehensive eco- nomic framework with Japan. TOWARDS A CHINA STRATEGY These activities amount to a new chapter in expanding Canadian bilateral connections with China and across the Pacific. However, they do not con- stitute a comprehensive strategy. In part this is because at a policy level the degree of integration of Asian economies has been underestimated. Rethinking China entails rethinking relations across Asia that Ottawa has not yet addressed. More fundamentally, it is because these initiatives were not carefully connected to priorities and activities within continental North America and I International journal I Spring 2006 I 289 I I Paul Evans I especially Canada's relations with the United States. One can wander through policy debates in eastern Canada for days without encountering any substantial views on China or Asia. And the drum beaters for deeper relations with Asia rarely confront the constraints imposed by our aspira- tions for a closer embrace of the US or some form of continental integra- tion. Can Chinese dumplings and apple pie appear on the same menu?8 Whatever the virtues of trade diversification, it is illusory to think that China is an alternative to the American market. It is equally illusory to proj- ect that Canadian and Chinese values are likely to converge in any signifi- cant way. Phrases like "strategic partnership" do not imply that the two countries can forge the kind of alliances and deep integration that Canada enjoys with the United States and some of our Commonwealth partners, including the UK and Australia. And for reasons of history and values, there are limits on the depth and range of Sino-Canadian cooperation. This is made clear by simply invoking words like human rights, Falun Gong, Tiananmen, Tibet, or Taiwan. But it is equally dangerous to think that our commercial and political relations will be unaffected by - or in fact can be insulated from - our inter- actions with a global China. The American market and cross-border trans- fers are our geographic destiny. But the content of the goods and services, the ways they are produced, their connection to global supply chains, and their value to Canadians increasingly will be influenced by China and Asia. Putting China and North American on the same page in Canadian thinking will have at least three dimensions. The first is the competitive challenge raised by Chin