Countering China's Economic Coercion
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A Macdonald-Laurier Institute Publication COUNTERING CHINA’S ECONOMIC COERCION No fear but resolve, no illusion but diversification Duanjie Chen September 2019 Board of Directors Advisory Council Research Advisory Board CHAIR John Beck Pierre Casgrain President and CEO, Aecon Enterprises Inc., Janet Ajzenstat Director and Corporate Secretary, Toronto Professor Emeritus of Politics, Casgrain & Company Limited, Erin Chutter McMaster University Montreal Executive Chair, Global Energy Metals Brian Ferguson VICE-CHAIR Corporation, Vancouver Professor, Health Care Economics, Laura Jones Navjeet (Bob) Dhillon University of Guelph Executive Vice-President of President and CEO, Mainstreet Equity Jack Granatstein the Canadian Federation of Corp., Calgary Historian and former head of the Independent Business, Vancouver Canadian War Museum Jim Dinning MANAGING DIRECTOR Former Treasurer of Alberta, Calgary Patrick James Brian Lee Crowley, Ottawa Dornsife Dean’s Professor, David Emerson University of Southern California SECRETARY Corporate Director, Vancouver Vaughn MacLellan Rainer Knopff DLA Piper (Canada) LLP, Toronto Richard Fadden Professor Emeritus of Politics, Former National Security Advisor to the University of Calgary TREASURER Prime Minister, Ottawa Martin MacKinnon Larry Martin Co-Founder and CEO, B4checkin, Brian Flemming Principal, Dr. Larry Martin and Halifax International lawyer, writer, and policy Associates and Partner, advisor, Halifax Agri-Food Management Excellence, DIRECTORS Inc. Wayne Critchley Robert Fulford Senior Associate, Global Public Former Editor of Saturday Night magazine, Christopher Sands Affairs, Ottawa columnist with the National Post, Ottawa Senior Research Professor, Johns Hopkins University Blaine Favel Wayne Gudbranson Elliot Tepper CEO, Kanata Earth Inc., Cut Knife, CEO, Branham Group Inc., Ottawa Senior Fellow, Norman Paterson Saskatchewan Calvin Helin School of International Affairs, Colleen Mahoney Aboriginal author and entrepreneur, Carleton University Vancouver Sole Principal, Committee Digest, William Watson Toronto Peter John Nicholson Associate Professor of Economics, Jayson Myers Inaugural President, Council of Canadian McGill University CEO, Jayson Myers Public Affairs Academies, Annapolis Royal Inc., Aberfoyle Hon. Jim Peterson Dan Nowlan Former federal cabinet minister, Vice Chair, Investment Banking, Counsel at Fasken Martineau, Toronto National Bank Financial, Toronto Barry Sookman Gerry Protti Senior Partner, McCarthy Tétrault, Toronto Chairman, BlackSquare Inc. Jacquelyn Thayer Scott Calgary Past President and Professor, Cape Breton Vijay Sappani University, Sydney Co-Founder and Chief Strategy Rob Wildeboer Officer, TerrAscend, Mississauga Executive Chairman, Martinrea Veso Sobot International Inc., Vaughan Director of Corporate Affairs, IPEX Group of Companies, Toronto For more information visit: www.MacdonaldLaurier.ca Board of Directors Advisory Council Research Advisory Board CHAIR John Beck Pierre Casgrain President and CEO, Aecon Enterprises Inc., Janet Ajzenstat Director and Corporate Secretary, Toronto Professor Emeritus of Politics, Casgrain & Company Limited, Erin Chutter McMaster University Montreal Executive Chair, Global Energy Metals Brian Ferguson VICE-CHAIR Corporation, Vancouver Professor, Health Care Economics, Laura Jones Navjeet (Bob) Dhillon University of Guelph Executive Vice-President of President and CEO, Mainstreet Equity Jack Granatstein the Canadian Federation of Corp., Calgary Historian and former head of the Independent Business, Vancouver Canadian War Museum Jim Dinning MANAGING DIRECTOR Former Treasurer of Alberta, Calgary Patrick James Table of contents Brian Lee Crowley, Ottawa Dornsife Dean’s Professor, David Emerson University of Southern California SECRETARY Corporate Director, Vancouver Vaughn MacLellan Rainer Knopff DLA Piper (Canada) LLP, Toronto Richard Fadden Professor Emeritus of Politics, Former National Security Advisor to the University of Calgary TREASURER Prime Minister, Ottawa Martin MacKinnon Larry Martin Executive Summary ..................................................................................................................4 Co-Founder and CEO, B4checkin, Brian Flemming Principal, Dr. Larry Martin and Halifax International lawyer, writer, and policy Associates and Partner, Sommaire ..................................................................................................................................6 advisor, Halifax Agri-Food Management Excellence, DIRECTORS Inc. Wayne Critchley Robert Fulford Introduction ..............................................................................................................................9 Former Editor of Saturday Night magazine, Christopher Sands Senior Associate, Global Public China’s Economic Coercion around the Globe ......................................................................11 Affairs, Ottawa columnist with the National Post, Ottawa Senior Research Professor, Johns Hopkins University Blaine Favel Wayne Gudbranson Elliot Tepper The Bottom-Line Cost of China's Economic Coercion ...........................................................16 CEO, Kanata Earth Inc., Cut Knife, CEO, Branham Group Inc., Ottawa Senior Fellow, Norman Paterson Saskatchewan Options for Countering China’s Coercion ..............................................................................22 Calvin Helin School of International Affairs, Colleen Mahoney Aboriginal author and entrepreneur, Carleton University Vancouver Conclusion ..............................................................................................................................25 Sole Principal, Committee Digest, William Watson Toronto Peter John Nicholson Associate Professor of Economics, About the Author .....................................................................................................................26 Jayson Myers Inaugural President, Council of Canadian McGill University CEO, Jayson Myers Public Affairs Academies, Annapolis Royal References ...............................................................................................................................27 Inc., Aberfoyle Hon. Jim Peterson Dan Nowlan Former federal cabinet minister, Endnotes..................................................................................................................................33 Vice Chair, Investment Banking, Counsel at Fasken Martineau, Toronto National Bank Financial, Toronto Barry Sookman Gerry Protti Senior Partner, McCarthy Tétrault, Toronto Chairman, BlackSquare Inc. Jacquelyn Thayer Scott Calgary Past President and Professor, Cape Breton Vijay Sappani University, Sydney Co-Founder and Chief Strategy Rob Wildeboer Officer, TerrAscend, Mississauga Executive Chairman, Martinrea The author of this document has worked independently and is solely responsible Veso Sobot International Inc., Vaughan for the views presented here. The opinions are not necessarily those of Director of Corporate Affairs, IPEX the Macdonald-Laurier Institute, its Directors or Supporters. Group of Companies, Toronto Copyright © 2019 Macdonald-Laurier Institute. May be reproduced freely for non-profit and educational purposes. Executive Summary hina recently moved to ban key Canadian agriproducts, including canola, soybeans, and Cpork. These moves against Canadian agriproducts are closely tied to the growing ten- sions between the two countries that began in December 2018 when Canadian authorities arrested Huawei executive Meng Wanzhou in Vancouver, following an extradition request from the United States. Canadians need to reject the view that the arrest of Meng caused a historical turn in Cana- da’s otherwise highly positive relationship with China. To the contrary, Canada’s bilateral re- lationship has long operated under the shadow of Chinese bullying. Meng’s detention drew much-needed attention to the abnormality of our existing relationship with China. Were Cana- da to heed calls from retired politicians who have recommended returning Meng as a means to de-escalate the situation with Bei- jing, such action would represent a whole- sale capitulation to China. Canadians must also Canadians must also reject the view that China has all the economic power and Canada has reject the view that none. Some Canadian observers have been quick to point out the disparity in power be- China has all the tween Canada and China, commenting that “we need China – and China doesn’t need us” economic power and or that we were only “a flea sitting on China’s shoulder.” The suggestion is that there’s little Canada has none. the Canadian government can or should do in response to Chinese economic coercion. This paper demonstrates that nothing is fur- ther from the truth. Canada has some signif- icant advantages and China is taking some serious risks. It is important to remember that the majority of our exports to China are commodities for which the supply is constrained by natural resources that are either scarce or rapidly deplet- ing in China. Meanwhile, all our imports from China are manufactured goods that are easily replaceable from suppliers in other markets, despite possibly higher prices. Indeed, cultivating more reliable suppliers for such goods will benefit Canada economically in the long run. In its dealings with China, the Canadian government has much to learn from other govern- ments. The Philippines, Mongolia, France, Norway, South Korea, Japan and Taiwan have all suffered from Chinese economic coercion.