One of the first responsibilities of Canada’s new government on taking office will be to define a new global engagement strategy in a turbulent world that is threatened by the triple perils of populism, protectionism and authoritarianism.
The bedrock of Canada’s foreign policy and international engagement has been a strong economic and political relationship with the United States. That bedrock is now crumbling as the U.S. erects unilateral barriers to trade and investment and the new “normal” is a less open, more restrictive and increasingly volatile relationship with our southern neighbour.
Some years ago, well before Donald Trump emerged on the U.S. political scene, we presented new ideas about why Canada should diversify economic ties from excessive dependence on the United States in our book, Brave New Canada.
What was then desirable is now imperative. The new government must work assiduously to reduce Canada’s economic reliance on the United States by erecting new gateways to the markets of the Indo-Pacific region and deepening Canada’s economic ties with the rest of the world. At a time of growing geostrategic tensions and great power rivalries, Canada must also reinvigorate its longstanding political and security partnerships and make the requisite investments in its armed forces in order to defend Canadian interests and promote global stability.
In the course of renegotiating the North American Free Trade Agreement (NAFTA) with the Trump administration, the Trudeau government’s priority for Canada (and Mexico) was one of prudent defence. Operating against the imminent threat of abrogation, Canada and Mexico sought to ignore Trump’s verbal barbs and resist the worst of the U.S.’s one-sided demands. Ultimately, negotiators managed to preserve much of the original NAFTA agreement with some updates and modernization elements, along with concessions by Mexico (on autos) and Canada (on dairy) that enabled Trump to declare “total victory.” The Americans made no concessions, but did relent on some of their most egregious initial demands — revoking the Dispute Settlement mechanism, inserting a sunset clause and insisting on a completely one-sided Buy America segment. Given the options, the result was a respectable salvage operation, but little more than what some Mexicans cheekily describe as “NAFTA 0.8.” But we are still only halfway there and ratification of the deal by the U.S. Congress as Americans enter their own election season is by no means assured. The last thing that Democrats who control the U.S. House of Representatives want to give Trump is a political win that he can then wave in front of voters.
There are strong reasons for Canada and China to deepen trade and investment ties, especially as China is poised to become the world’s biggest economy. China needs much of what Canada has in abundance — agricultural products, energy and mining resources and selective high-tech and services expertise. China, in turn, has consumer goods and increasingly sophisticated technology to boost Canadian manufacturing and service and supply chain efficiencies.
However, Canada’s relations with China have gone from bad to worse. When Canada moved, at the U.S.’s request and in accordance with a formal agreement, to extradite Meng Wanzhou, the CFO of Huawei and the daughter of the company’s CEO, it quickly aroused the wrath and blunt bully tactics of Beijing. Two Canadians, including one former diplomat, were incarcerated under brutal conditions on dubious espionage charges. Two others already in prison for drug smuggling were suddenly given death sentences.
Adding insult to injury, China blocked imports of Canadian canola on spurious scientific grounds and then completely banned Canadian meat allegedly because of fraudulent certifications. Efforts at dialogue were spurned. China made it clear that relations would remain frozen until Meng was released from custody in Canada.
Attempts by the Canadian government to resolve matters with Beijing have gained little traction, but recalibrating relations with China should be a major priority for the new government. However, it will require deft diplomacy, a firm and steady hand and none of the virtue-signalling, especially on trade, that so roiled the Chinese when the Trudeau government first tried to initiate free-trade talks to put relations on a course that advances Canadian interests.
As the world’s biggest democracy, India, too, requires a new engagement strategy that puts behind the fiasco and lingering bad taste of Prime Minister Justin Trudeau’s ill-fated February 2018 fashion tour to India. As a rising economic powerhouse that will one day rival China, India is a more compatible player for Canada. The next government should give India pride of place and make it a greater priority for Canadian exports and investments. It should also sublimate domestic political antics directed at courting special political favour with groups, such as Canada’s Sikh community, that run counter to the national interest.
Concrete action is also required on other fronts.
First, the government’s priority must be to establish internal free trade. The International Monetary Fund estimates that genuine interprovincial free trade would lift Canada’s GDP by four per cent, far more, in fact, than the revised NAFTA, even if it is ratified. Free trade among Canadian provinces would strengthen our competitiveness and bolster plans for global diversification, but it can only be achieved if there is a firm lead from Ottawa, which has significant constitutional authority, and support from a few enlightened provincial premiers.
Second, the private sector must be more assertive and creative in exploiting preferential market-access opportunities provided in trade agreements with the European Union, South Korea and with member countries that have so far ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — Japan, Canada, Australia, Mexico, Singapore, New Zealand and Vietnam. Thus far, only our agricultural exporters have been noticeably active. Manufacturers and service providers need to move beyond the comfort zone of their North American cocoon.
Canada’s bilateral trade with its CPTPP partners totalled $71.3 billion in 2016, greater than total trade with Mexico, its third-largest bilateral trade partner. Canada’s exports to the EU totalled $66 billion in the third quarter of 2018, a 3.9-per-cent increase from the equivalent period in 2017 before CETA had come into force. And since CETA took effect, Canadian imports from the EU totalled $89.2 billion, a 10.8-per-cent increase. In 2017, two years after the Canada-Korea deal came into force, Canadian exports to Korea increased to $6.5 billion compared to $6 billion in 2014, the year before the deal was finalized. The CPTPP is still too new to have comparable statistics.
Third, on national security, we have to stop dithering and chart a more coherent focus on defence procurement to ensure that we are able to perform a realistic role in our own defence, specifically in the Arctic, which is rapidly becoming a region of interest for major global powers.
Fourth is cyber security, which many see as the most serious future threat to the globe. We need a more integrated and effective structure for operational surveillance as well as “Made in Canada” technologies that would give us the capability to monitor and counter threats from various sources, especially China. We should actively pursue global standards that would help constrain disruptive cyber-attacks on essential infrastructure.
Fifth, Canada should act in concert with others to re-invigorate multilateral institutions, such as the World Trade Organization (WTO) and the North Atlantic Treaty Organization (NATO) that are essential to our future prosperity and security. A rules-based regime for trade needs to be reinforced. NATO needs a mission refit that would, among other things, focus more on threats from cyberattacks and collectively stem abuses by dictators and despots who have forced millions of their citizens to seek refuge outside their own country. NATO member countries agreed to pay two per cent of GDP as their contribution. Canada’s estimated 2018 contribution was 1.23 per cent, down from 1.36 per cent in 2017 — well short of its commitment.
Canada should also be more selective in support for global institutions that have outlived their utility or are being poorly managed and are corrupt, such as the United Nations Relief and Works Agency. (Switzerland, Belgium and the Netherlands have frozen funding to the agency after a leaked internal report found senior officials were involved in “sexual misconduct, nepotism, retaliation, discrimination and other abuses of authority for personal gain, to suppress legitimate dissent, and to otherwise achieve their personal objectives.”)
Finally, since no G20 country is meeting its Paris Accord obligations and the U.S. has withdrawn from the accord, a major diplomatic initiative is needed to re-engage the U.S. and recalibrate more balanced and achievable commitments on climate change, primarily from the big emitters — China, the U.S. and India. Canada can best contribute, not with a checkerboard of tax and cap-and-trade schemes that are neither effective nor equitable, but with a realistic and broadly gauged regulatory and technological pledge to ensure that emissions reductions to the 1.6 per cent we contribute globally are matched by equivalent reductions by others.
Derek Burney is a former ambassador of Canada to the U.S. and a senior partner with the Burney Investment Group in Colorado. Fen Osler Hampson is Chancellor’s Professor at the Norman Paterson School of International Affairs, Carleton University. This article is adapted from an essay Burney contributed to San Francis Xavier University to commemorate the opening of the Mulroney Institute.
