Are Andrew Scheer and the Good, Grey Globe right about China?

In an editorial, the Globe and Mail says that “After Canada arrested Huawei executive Meng Wanzhou in December, pursuant to an extradition request from the United States, China started hitting back. First came the arrest of two Canadians on trumped-up charges. And then, two months ago, Beijing began taking aim at Canada’s top export … [first] … Chinese officials began blocking shipments, claiming to have discovered pests in the product. Canada has sought to send a scientific delegation to China to assess the issue; China has not responded. The silence speaks volumes … [then] … Last week, China also suspended imports from two Canadian pork-processing plants. The alleged issue is incorrect labelling of import certificates … [and] … The United States has been of little help. The Trump administration is in heated trade talks with China and has reportedly rejected China’s request to link discussion of Huawei and Ms. Meng’s case. Meanwhile, Ms. Meng remains under luxurious house arrest in Vancouver as the extradition process advances, slowly. Canada is on its own … [and that] …  leaves canola farmers in the lurch. Ottawa last week expanded a loan program, but has chosen not to pursue a more aggressive tack, such as a World Trade Organization complaint. Canola farmers bet big on China, riding a long wave of growth. Now they’ve hit the shoals. Finding a landing spot for so much displaced canola will not be easy. China accounts for half of Canadian canola-seed exports and buys as much as the next four biggest markets combined.

The Globe and Mail‘s editorial board says, and I agree, 100% that “There is a lesson for Canada in this. The promise of China profits entranced many, and the canola business seized upon the opportunity better than most. The risk of becoming the target for a capricious trading partner was understandably not uppermost in many minds. The canola business could not have foreseen the Meng affair. But the probability of some sort of costly contretemps with China was always high … [while] … Bay Street and Parliament Hill have both eagerly courted China for more than two decadestrade with China comes with costs and risks that are different from doing business with countries where the rule of law is less malleable. The canola case is an opportunity to reassess our country’s priorities, including the trade relationship with China.” This, of course, is exactly what Andrew Scheer said last week, and he’s been saying it for some time.

The Globe and Mail explains a bit about the economics of our trade with China. “It’s true Canadian exports to China have grown rapidly … [the editorial writes say] … But that growth has to be put in perspective … [because, while it’s true that] … In the four years from 2015 through 2018, merchandise exports to China grew by 43 per cent, or some $8.4-billion in dollar terms, that was no greater than the combined increase in exports to the European Union and Mexico. In percentage terms, exports to Mexico even grew slightly faster than those to China. But trade missions to Berlin and Mexico City aren’t in the headlines.

Further, the Globe says, tagging one of my bases, “while diversification of trade is important, there will be no replacing Canada’s No. 1 customer. Over the past four years, exports to the United States rose by “only” 8 per cent – but because that growth builds on a much larger base, it meant an extra $33.7-billion in new trade,” compared to only $8.4 billion in new trade with China.

But, the editorialists say, “Canada now finds itself stuck in a fight with China. It’s a fight Canada never asked for, but China’s nature as a totalitarian state made it inevitable. It was a matter of when, not whether … [and] … in this fight, Canada is at a clear disadvantage. But Ottawa can’t simply roll over. If it does, China will know that when it pushes, we will cave in.

While I remain suspicious of the motivations for the sudden national security concerns about Huawei, I share the Globe and Mail‘s view that it is a useful target and the editorial is right to conclude that “Until recently, the name of the game in Ottawa was avoiding giving offence to Beijing, in the hope that corporate Canada would be rewarded. After Meng and canola, the game has changed,” and Huawei might be a good target for a Canadian counterattack even though, I believe, at least a couple of major Canadian telecom companies might find that costly.

Is the Globe and Mail right? Is Andrew Scheer right? Is China now an enemy such an obviously unfair and untrustworthy trading partner that Canada needs to take action in the WTO and even more directly by banning Huawei‘s from Canada’s telecom networks? The latter is not as easy as it seems because Huawei is one of the global leaders in 5G technology. But it is not the only horse in that race, and big telcos like Bell and Telus have choices, too.

I believe Andrew Scheer is correct in wanting to expand our trade with Asia, but focusing more on India and Japan and less on China, and I would add, South Korea (the other global leader in 5G), Malaysia, Viet Nam and so on and so forth to that mix. That does not mean, however, that we should ignore or, worse, boycott China, and while Andrew Scheer’s prescriptions are largely symbolic, for now, and do not promise fast relief for Canadian exporters, he is correct and so is the Globe and Mail, to say that Canada must do something.

49828C1500000578-5427641-image-a-37_1519405082952 (1)But that means, first, mending relations with India, and with Australia and the Philippines and Japan, too, something that Justin Trudeau has made that more difficult than it should be. Louis St Laurent and Lester Pearson established extraordinarily good relations with India in the 1950s and successive Canadian leaders, including John Diefenbaker, Pierre Trudeau, Brian Mulroney, Jean Chrétien and Stephen Harper maintained good relations with India for decades. Team Trudeau, led by Justin Trudeau and his celebrity (but inept) foreign minister, Chrystia Freeland, put them into the dumpster in just three years.

Getting Canada’s trade with Asia back on a sound footing requires, above all else, replacing the current man-child prime minister with an adult ~ replacing Justin Trudeau with Andrew Scheer, in other words. But some commentators are not sure that Mr Scheer is proposing much beyond fairly traditional platitudes. While I am, broadly and generally, in favour of what Andrew Scheer has proposed, I too, worry about how he will manage to follow through, but that’s something for his cabinet, his team to help manage. The first, important step, is to have made some good, sound proposals with which many Canadians will agree; the second step is to do what Justin Trudeau could never manage: to keep the promises made in the campaign.

 

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