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The Progressive Economics Forum

The China Syndrome

The following, from today’s Toronto Star, includes some commentary from yours truly:

The China syndrome:

A new condition characterized by the apparent reluctance of a certain national government to embrace an emerging, global economic power

May 05, 2007


Ottawa Bureau
OTTAWA–For five months, the ceremonial Olympic torch will be carried around the world – from Greece to Asia and then to Europe and North America and back to China – to herald the opening of next year’s games in Beijing. But Vancouver, the site of the 2010 Winter Olympics, will not be on the itinerary.Is that snub just an oversight or is it a reflection of the deep freeze that has set in between China and Canada since Prime Minister Stephen Harper’s government came to power?“There’s a large suspicion – an anxiety – that this is a signal of the deteriorated state of Canada-China relations,” says Paul Evans of the Asia Pacific Foundation of Canada.Many view the decision by Beijing as payback for what authorities there see as the Harper government’s negative attitude toward China, says Evans, co-CEO of the Vancouver-based think-tank.“It’s probably the coolest moment in Canada-China relations since we established diplomatic relations in 1970, with the exception of the period around Tiananmen Square,” he says, referring to the violent suppression of pro-democracy demonstrations in Beijing in 1989.Canadians won lasting appreciation in China when then-prime minister Pierre Trudeau led the way in formally recognizing Mao Zedong’s communist regime 37 years ago. But that era seems long forgotten as Canada struggles to keep its ties with the world’s fastest-growing economy on a constructive, mutually beneficial footing.With its 1.3 billion population, China’s vistas for business and trade seem almost limitless, and it offers tremendous opportunities for a country like Canada, which of all the Group of Eight industrialized nations is most dependent on exports to survive.“We’re a small country and we have benefited enormously from our ability to penetrate the market of that country with the largest middle-class in the world – the United States,” former prime minister Paul Martin says.Within a generation, China will have a middle class every bit as large, if not larger, than the U.S., he notes.“Our standard of living is going to be dependent on our ability to penetrate that market. And whether we have taken full advantage of that in 20 years is going to be decided by the steps we take now.”But dancing with a giant, as Canadians have learned over the years in dealing with the U.S., is seldom easy.While China presents huge commercial opportunities, it has raised international concerns over human rights, environmental degradation, working conditions in its factories and copyright infringement – not to mention the troubling long-term implications of Beijing’s political, military and economic muscle-flexing.

And in particular, China’s export bonanza has broadsided countries like Canada that are watching their manufacturing industries – and the thousands of well-paying jobs they create – decline in the face of fierce global competition.

For more than a decade, Martin and Liberal predecessor Jean Chrétien made bolstering relations with China a high priority, trying to balance the need to press Beijing on human rights with the goal of strengthening trade and investment ties to keep Canada from missing out on the Asian boom.

But the Harper government has taken a different, cooler approach, including keeping China’s diplomats at arm’s length in Ottawa, courting the Dalai Lama and elevating human rights to the top of the bilateral agenda. The Chinese government has also been angered by assertions in Ottawa that nearly half of the foreign spies in Canada work for Beijing.

Peter MacKay, who last weekend made his first visit to China as foreign affairs minister in 15 months, suggests he used his four-hour meeting with Chinese counterpart Yang Jiechi to establish a better understanding of Ottawa’s concerns about Huseyin Celil, the Canadian citizen recently sentenced to life imprisonment on terrorism charges. But after MacKay’s departure, the Chinese government – through the state-owned media – flatly dismissed what it saw as Canada’s interference in a domestic matter.

The Conservatives’ critics view this tougher stand with China as a natural result of a U.S.-oriented foreign policy from a party with a long history of right-wing opposition to the People’s Republic.

“I think this is the Reform and (Canadian) Alliance perspective that is still very well and alive in the Conservative party,” says Liberal foreign affairs critic Ujjal Dosanjh (Vancouver South). He pointed out that Stockwell Day, now the public safety minister, had once spearheaded a move to have Canada support a bid by Taiwan, which China views as part of its territory, to obtain observer status at the United Nations’ World Health Organization. “They knew that would poke China in the eye,” Dosanjh says.

He adds a frequently heard criticism that the Harper government has failed to craft a comprehensive foreign policy beyond Canada’s involvement with Washington and the military mission to Afghanistan.

“Their total focus in international relations has been U.S., U.S., U.S. They’ve ignored the rest of the world, and, hence, we’re suffering.”

But the Prime Minister has shown no signs of changing course, arguing that previous Liberal governments played down human rights concerns in hopes of boosting commercial opportunities in China.

“I think Canadians want us to promote our trade relations worldwide – we do that,” Harper said last fall after he was snubbed by Chinese President Hu Jintao during an economic summit in Vietnam.

“But I don’t think Canadians want us to sell out our values, our beliefs in democracy, freedom and human rights. They don’t want us to sell that out to the almighty dollar.”

And he may be right. In the wake of Celil’s sentencing in China, a national survey of 1,016 adults by Angus Reid Strategies found that 76 per cent of Canadians want human rights, not trade, to be the main priority in Ottawa’s dealings with China.

But, popular as that approach might be, there are many Canadians who believe emphasizing human rights above all else with China is too simplistic and risks damaging a relationship with the world’s second-largest economy that is vital to this country’s future well-being.

Instead of haranguing the Hu government, Ottawa needs to bring forward its human rights concerns as part of an overall strategy to build constructive, effective ties with the Chinese, many observers say.

“China may not be perfect. Canada, for that matter, is not perfect,” says Canadian Chamber of Commerce president Nancy Hughes Anthony.

There are many organizations and settings where “Canada and China can dialogue about consular issues and human rights and things like that,” she says.

“But in the meantime, let’s build up the well of goodwill there so that when Canadian businesses are trying to get business in China, they are well received.”

Getting the Canada-China relationship onto a solid footing is all the more important because of the complexities presented by the historic rise of China as an economic and political power, say Canadians who follow the situation closely.

For Canada’s businesses, China offers opportunities to expand and increase their profits through low-cost manufacturing, expanded export markets, cheaper materials and other factors. But many Canadian firms, which have traditionally focused on the handy U.S. market to the exclusion of others, have been slow to exploit the Chinese opening.

“There are concerns that Canada is not keeping pace with other countries in both two-way trade and investment with China,” the Chamber of Commerce said in its recent report, China and Canada: The Way Ahead.

And the nature of the current trade flows is also raising alarms. While consumers enjoy less expensive Chinese-made sporting equipment, footwear, clothes and consumer electronics, the avalanche of imported goods into North America from China is undercutting domestic manufacturers here – both in their domestic sales and in their exports to the U.S.

At the moment, China has a large – $26.9 billion – and growing trade surplus with Canada. And on top of that, Canadian exports to the Chinese market are dominated by ore, wood pulp and other resource commodities, while imports from China are made up largely of consumer and industrial manufactured goods.

So, despite all the talk about economic benefits from exporting to China, it’s really not doing much to help Canada, says Canadian Labour Congress (CLC) economist Erin Weir.

“We are more or less in balance (in trade) with China on the resource side, and then we’ve got this huge deficit on the manufacturing side, which is causing the loss of so many jobs.

“So far anyway, the proposed gains from investing in China haven’t been there,” Weir says. “They might have been there for particular corporations that have set up operations in China. Those operations might be very profitable, but the gains for Canada’s economy more broadly haven’t been there.”

The onslaught of low-cost Chinese goods is partly responsible for the loss of 250,000 manufacturing jobs in Canada, according to the CLC, which argues that the federal Conservatives have paid little attention to the decline in one of the country’s most important sectors.

The CLC says that, like China, Canada needs to develop a co-ordinated, government-backed strategy to aggressively build up manufacturing to protect valuable jobs as companies adjust to the globalized economy. Unions will bring this message to Parliament Hill in a series of meetings and rallies in late May.

For the complete article, click here.

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Comments

Comment from <![CDATA[John Murney]]>
Time: May 6, 2007, 7:54 pm

Hi Erin! This is a great blog! I am going to link to it in the very near future!

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