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Post-COVID-19 Possibilities: the Beginning of a New Relationship

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Post-COVID-19 Possibilities: the Beginning of a New Relationship 3RVW&29Ζ'3RVVLELOLWLHV7KH%HJLQQLQJRI D1HZ5HODWLRQVKLSZLWK$VLD" )HOLFLD&OHPHQW9DUNSHK*RQRZROR$QLVND*UDYHUDQG7HVIDOGHW0HKUHWHDE Issue • China has arrested and detained two Canadian citizens, former Canadian diplomat Michael Kovrig The COVID-19 pandemic has challenged the robustness and businessman Michael Spavor, and in 2019 China’s of Canada’s international supply chains. Despite the courts announced the conviction and death sentence of current struggles, the pandemic provides Canada with Canadian citizen Robert Schellenberg (Abedi 2019). an opportunity to renew and strengthen its partnerships with Asia, to diversify its trade portfolio and to build more • China is blocking the imports of Canadian meat stable, robust international supply chains. products and agricultural goods such as canola products, soybeans and peas, stating concerns with Background pesticides and bacteria (ibid.). Canada and China have maintained a bilateral relationship • Currently, canola seed shipments from Richardson since the 1970s. However, the arrest of Huawei CFO International and Viterra Inc remain blocked from Meng Wanzhou in Vancouver in late 2018, put a strain on export to China ( Johnson and Gu 2020). Canola this relationship. This arrest has contributed to political seed shipments from other Canadian companies tensions that have impacted trade, investment and have continued despite the expiration of their quota diplomacy. These issues have also challenged Canada’s agreement on March 31, 2020 (Johnson and Gu relationship with the United States. Overall, Canada 2020). These restrictions are unlikely to be resolved continues to improve and expand its bilateral relations due to China’s long-term agricultural policy goal to with China, but some crucial challenges remain. These reduce its dependency on specific country suppliers include but are not limited to: (Wang and Leblond 2019). • Canada is unable to negotiate a free trade agreement These diplomatic events have presented minimal options with China due to differing views on issues such as for resolving the conflict. They are unlikely to improve human rights and market access. until the end of Wanzhou’s extradition proceedings and the release of the Canadian detainees. However, the • Wanzhou’s detainment and potential extradition current COVID-19 pandemic presents opportunities to request from the United States have led to a repair and strengthen Canada’s relations with China. diplomatic feud that has exacerbated Canada and China’s bilateral relationship (Labrecque 2019). 35 Pandemic COVID-19 and the Breakdown of dependent on a single supplier (Cochrane and Harris 2020). Previously, Asian countries played a smaller role International Supply Chains in supplying medical equipment (see Figure 2), but as of The disruption of international supply chains is among the 2020, they have become central to providing Canadians most evident economic outcomes of the current pandemic. with protective supplies (Valdez Bettcher 2020). Canada COVID-19 has shown that cooperation is essential in leaning toward Asia for support during this difficult time order to protect the global community, yet countries are could represent the beginning of this re-balance toward turning inward and causing disruptions in supply chains to diversified, modern and inclusive trade. procure essential supplies for themselves (Schwanen and Figure 2: Asian Countries as a Source of Hodgson 2020). These disruptions are severely impacting Medical Supplies to Canada, 2019 economies and trade relations between nations. Medical Supply % share of Canada’s Several countries are implementing export restrictions, Imports, 2019 which limits the distribution of essential supplies outside Thermometers and of their borders (International Trade Centre [ITC] 2020). China - 21% Pyrometers These export restrictions have highlighted the vast Gloves of Vulcanized China - 15% inequalities between countries, where wealthier nations Rubber compete with each other to obtain supplies, and the small Specific Hand Sanitizers China - 13% to medium economies are unable to pay the inflated prices and Components (Cochrane and Harris 2020). Spectacles and Goggles China - 9% Canada has been hit particularly hard by the pandemic, Ultrasonic Scanning China - 8%, South Korea as their perceived allies are placing trade restrictions that Apparatus - 8% and Japan - 8% limit supplies it can import (Valdez Bettcher 2020). In Medical Electro-Diagnostic China - 5% and Japan response to these new regulations, Canada is looking for and Patient Monitoring 14% new avenues to build up their supply chains. Apparatus More Robust International Source: Valdez Bettcher 2020. Supply Chains Canada’s Supply Chain and The supply chain disruptions comprise shortages in medical Patent Ownership supplies such as personal protective equipment (PPE), gloves, facemasks, hand sanitizer and pharmaceutical There is a growing gap between intangible assets created products (ITC 2020). These shortages are pandemic in Canada and those owned by Canadians (Gallini and contingent and will recover over time. However, this crisis Hollis 2019). This gap manifests in the disproportionate highlights the need for countries to find a balance between assignment of intellectual property rights to foreign firms emergency preparedness and business as usual. for technology invented and commercialized in Canada. For instance, in terms of pharmaceutical innovation, For Canada, the pandemic demonstrates that it should Canada holds sixth place in the global ranking, but when it not only build up its domestic infrastructure, but also comes to ownership, it falls to eighth place (ibid.). build up supply chains with Asia. Internationally, many Asian countries are slowly starting to recover from the This limits potential economic benefits that accrue to the pandemic and now present an opportunity for Canada to Canadian economy from scaling up and commercializing establish renewed ties. South Korea, Taiwan and China technology owned by foreign firms. Considering Canada’s have sent millions of masks and thousands of test kits current initiative of emphasizing the Patent Act as part to Canada (Valdez Bettcher 2020). China and Canada of its emergency response to the pandemic, foreign firms’ 36 have also established a network to import PPE. Canada ownership and control of access to patents may pose is buying from multiple Chinese factories to limit being particular challenges to finding a quicker, cheaper and %DOVLOOLH6FKRRORIΖQWHUQDWLRQDO$΍DLUV 3RVW&29Ζ'3RVVLELOLWLHV 7KH%HJLQQLQJRID1HZ5HODWLRQVKLSZLWK$VLD" universally accessible solution to the ongoing supply chain collaborate and trade to limit global supply chain problem (Clavette and de Beer 2020). disruptions (Government of Canada 2020) provides Canada with an opportunity to establish more robust In Canada, generic pharmaceutical products are and diverse trade relations. commonplace due to their lower price points. Recently the United States has expressed concerns with Canada’s 3. Canada should seize the opportunity to de-escalate plan to overhaul its drug pricing system (McCarten 2020). tensions and begin repairing its relationship with This plan threatens IP rights, as Canada will stop using China. Currently, Canada has established new supply the United States’ and Switzerland’s pricing mechanism chains with China, mainly focusing on importing to determine prices for Canadian consumers (ibid.). These medical equipment. Canada can build on this tensions remain pronounced as pharmaceutical firms and COVID-19 partnership to expand trade in other areas governments race to ascertain future ownership rights over and potentially promote Canadian values. a potential COVID-19 vaccine or treatment. 4. Canada should collaborate with China to combat The high degree of integration among the economies of the global pandemic, to conduct scientific research the United States and Canada, with all its benefits, still and disseminate information on global health issues. presents risks and uncertainties to Canada’s PPE supply As a result, the two countries could amalgamate chain during the current pandemic. It also poses challenges financial and technological resources in supporting to Canada’s promotion of generic pharmaceutical products their scientists to develop a COVID-19 vaccine. as the United States continues to push for stronger IP protection. This could potentially delay the entry of 5. Canada needs to capitalize on its innovative generic products into the market and increase costs within capacity by expanding a significant portion of its the healthcare system. These issues suggest the need trade engagement with Asia. By establishing strong for Canada to diversify its trade engagement with Asia; relations, especially with China, it may help mitigate more than 90 percent of China’s 4,300 pharmaceutical economic consequences caused by disruptions in manufacturers produce generic products (Palmer and critical supply chains and trade in general. Bermingham 2020). About the Authors Recommendations Felicia Clement is a student in the University of These recommendations are in alignment with Global Waterloo’s Master of Arts in Global Governance program, Affairs Canada’s priorities of strengthening Canada’s based at the BSIA. place in North America, pursuing diversified, modern Varkpeh Gonowolo is a student in Wilfrid Laurier and inclusive trade and revitalizing the rules-based University’s Master of International Public Policy program, international order. based at the BSIA. 1. Canada should
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