THE CHINA QUESTION AND ADA A N N CANADIAN INTERESTS A D Colin Robertson C T

H D st The China question is the challenge for the 21 century. The West, including Canada, L has teeter-tottered between two conflicting approaches, one stemming from the E R missionary experience and the other from the realist school of interest and power. Our W O geography and demography give us cards to play, and with skillful Canada can play a constructive role, drawing on our history and our Chinese-Canadian network. We should focus our efforts first on building trust through people-to-people connections as the basis for our commercial relationship. Useful policy initiatives on energy, education, diversity and the Arctic will also serve Canadian interests.

La Chine constitue le principal défi du 21e siècle. Un défi face auquel l’Occident, le Canada y compris, oscille entre deux approches divergentes, la première émanant de l’expérience missionnaire, la seconde de l’école pragmatique des intérêts et du pouvoir. Or, du double point de vue géographique et démographique, le Canada a d’excellentes cartes en main et pourrait jouer un rôle constructif en s’appuyant à la fois sur une diplomatie avisée, son histoire et son réseau sino-canadien. Mais il nous faut d’abord installer la confiance entre nos deux pays en misant sur des liens personnalisés qui serviront de base à nos relations commerciales, sans oublier d’utiles initiatives stratégiques axées sur les enjeux de l’énergie, de l’éducation, de la diversité et de l’Arctique.

istory may not repeat itself but sometimes it major economic institutions, arguably opening its economy rhymes. A hundred years ago, Britain was contend- more than Japan and India. It has resolved many of its bor- H ing with the rising new powers — Russia, United der disputes with its 14 neighbours, including the perennial States, Japan and, especially, the new contender, Germany. problem of an arms race across the Taiwan Strait. We know how that worked out. The World Bank reckons the Chinese “miracle” has It would be the bloodiest century in the history of pulled 400 million from poverty and on almost every scale: mankind. Graveyards in Europe and Asia are a reminder meat consumption, living space, education. China that Canadians do not live in a fireproof house and under- leapfrogged Britain, Germany and then Japan to become the line why Canadian foreign policy since the Second World world’s second-largest economy. Hosting the Olympics in War has been characterized by a commitment to collective 2008 was a demonstration that China had arrived. Last year security and an active, global internationalism. it was the site for the Shanghai World Expo. While I was Today, the US is contending with the rising new powers there this past summer, it hosted the Universiade in — Brazil, a renascent Russia, India and, especially, the new Shenzhen. contender, China. Managing the China relationship for the 21st century will be as important as the German question he miracle is not without warts. Chinese treatment of was for the last century. T dissidence can border on the paranoid — witness its By 2030 China is expected to have the largest economy ongoing demonization of the Dalai Lama and clumsy treat- in the world, generating twice as much trade as the US. Since ment of Nobel Peace Prize winner, Liu Xiaobo. Social unrest Deng Xiaoping moved away from central planning to is an abiding preoccupation with the fear, as Mao put it, “reform and opening up” in the late 1970s, China has con- that “a single spark can start a prairie fire.” Its 35 different sistently demonstrated a willingness to be a responsible play- minorities number over 100 million people, or about 8.3 er and play according to “Western” rules, in stark contrast to percent of the 1.3 billion population. Chinese nations and an earlier era when China systematically tried to destabilize the autonomous regions of Tibet, Inner Mongolia and its neighbours and spread communism. It has joined all the Xinjiang make up over 40 percent of Chinese territory.

POLICY OPTIONS 65 NOVEMBER 2011 Colin Robertson

For the Chinese leadership, China is now the alternate eco- national system responds to the chang- domestic stability is fundamental to nomic centre to the United States. It ing concert of powers and that China, progress, and this has led to celebrated is also America’s biggest creditor. It in particular, is accorded place, stand- confrontations, especially with regard has surpassed Germany as the world’s ing and respect in a new order built on to freedom of information. Examples biggest manufacturer. It is becoming peaceful, competitive dynamism. are those with Rupert Murdoch’s the alternate military pole to the Gamed out in thrillers like SkyTV (which led to the withdrawal of United States, and while far behind in Matthew Glass’s or Alex Berenson’s The Ghost War, Graveyards in Europe and Asia are a reminder that Canadians the alternative scenarios do not live in a fireproof house and underline why Canadian will harm Canada: Sino- foreign policy since the Second World War has been American divisions on cur- characterized by a commitment to collective security and an rency, climate change and trade leading to the collapse active, global internationalism. of globalization, a reversion their distribution of BBC News) and sophistication and technology, it is to protectionism and isolationism in more recently with Google over coming up fast, especially on the the US, the stagnation of reform initia- Internet freedom. The poet and per- employment of cyber-intrusion. Any tives in China and, ultimately, military formance artist Ai Weiwei, incarcerat- effort to deal with climate change will confrontation over the Straits of ed earlier this year, has observed that have to involve China. It is the Taiwan. “China is like a runner sprinting very world’s biggest carbon emitter, Our geography and demography fast but it has a heart condition.” The although the United States, Australia, give us cards to play and through skill- recent smash-up of its high-speed Europe and ourselves emit far more ful diplomacy Canada can play a con- train is a reminder of a sometimes too per head, but it is also embracing structive role in keeping the reckless pursuit in attaining techno- alternative sources, and as I witnessed Sino-American relationship on track. logical milestones. But generally, during a trip to China this summer, But first we have to develop a “smart” Chinese leadership has demonstrated solar energy is already in application relationship with China. It is never courage in their domestic economic even in Lhasa. easy dealing with the Middle reform and behaved with restraint on Canadians have an interest and Kingdom, but by focusing on people- the international stage. role to play in ensuring that the inter- to-people connections, we will build

FIGURE 1. TOP THREE COUNTRIES BY ECONOMIC DOMINANCE (% SHARE* OF GLOBAL ECONOMIC POWER), 1870 TO 2030

Great Britain United States United States China

Germany Japan China United States

France Germany Japan India

* Weighted by share of world GDP, trade and net capital exports Source: Arvind Subramanian.

66 OPTIONS POLITIQUES NOVEMBRE 2011 The China question and Canadian interests trust that will both serve our commer- told Prime Minister Harper during the political-level contacts during the fed- cial interests and advance our ability November 2009 visit to Beijing, “This is eral-level hiatus. to play constructive internationalism. the first meeting between the Chinese Canadian companies, notably premier and the Canadian prime min- Bombardier, have found success in the anada starts with a couple of ister in almost five years…Five years is Chinese market, supplying several of C advantages. too long a time.” China’s national key projects, includ- First, our history. Still a staple in It was an error in judgment. It had ing the Automated People Mover at Chinese liturgy on Canada is the lega- put in the deep freeze the comprehen- Beijing Airport, the high-speed link cy of Dr. Norman Bethune and the sive partnership launched in 1997 after between the capital and Beijing remembrance that Pierre Trudeau a series of successful Team Canada mis- Airport, the Shanghai Metro and the defied conventional wisdom and the sions led by Prime Minister Jean Wu-Guang rail line. US when Canada recognized China in Chrétien. The hiatus after 2006 reflect- The Harper 2009 visit produced a 1970. Our recognition led a procession ed the lingering effect of Reform Party series of agreements, involving climate of some 30 other countries to apply roots on the new Conservative Party change, cultural exchange and travel. what came to be known as the and the former’s alignment with the China’s granting Canada “approved Canadian formula. Subsequent prime Taiwan lobby, a legitimate concern destination status” is a concession that ministers, especially Brian Mulroney about human rights abuses in China, a will allow travel agents to vigorously and Jean Chrétien, also recog- promote travel to Canada and nized the importance of the China is now the alternate economic boost tourism. Chinese relationship. Without During the past two years, kowtowing on human rights, centre to the United States. It is also there has been a steady flow of they got their message across in America’s biggest creditor. It has senior political visits, including a manner that preserved “face.” surpassed Germany as the world’s the of President Hu Second, our existing peo- biggest manufacturer. It is becoming Jintao to Canada in June 2010 ple-to-people ties. While the US where the leaders committed to has always been the main desti- the alternate military pole to the raise the bilateral trade volume nation for Chinese migrants, United States, and while far behind to US$60 billion by 2015. on a per capita basis, Canada is in sophistication and technology, it China is not yet an “ally,” the most popular country for is coming up fast, especially on the as John Baird resettlement. Chinese migrants termed it during his July 2011 made a contribution to build- employment of cyber-intrusion. visit to Beijing but the tone is ing our country since Chinese now right. As Harper prepares shipwrights built the first ship on the preoccupation with the domestic agen- for his next visit to China, his first West Coast. Since 2000, China has da and the exigencies of minority gov- objective should be on improving peo- supplied 15 percent of our immigrants, ernment that made long trips difficult. ple-to-people relationships with a making it the largest source country, focus on tourism, education and averaging well over 30,000 immigrants good relationship between the top immigration. each year, with a high of 42,000 in A players is essential, particularly in 2005. Include immigrants from Hong the case of China, where so much com- ith greater disposable income Kong and Taiwan and the total rises to mercial activity is directed by state- W and wanderlust, the Chinese closer to 33,500 annually. owned enterprises or sovereign wealth government reckons that by 2015 there Nearly 1.4 million Canadians funds. Through their own post-govern- will be 100 million outbound travellers claim Chinese ancestry, with most liv- ment business visits, former prime a year from China. A 2010 study con- ing in our major metropolitan areas - ministers Chrétien and Mulroney pre- ducted in Beijing, Shanghai and half a million in Toronto, 400,000 in served their “old friend” status, recog- Guangzhou and sponsored in part by Vancouver, more than 80,000 in nizing that astute management of our the Asia Pacific Foundation found that Montreal, 75,000 in Calgary and relationship with China offers divi- Canada was ranked third, after Australia 45,000 in Edmonton. Business-to-busi- dends, especially in Washington. and Singapore, as a favoured destina- ness relationships are actively promot- Beginning with the appointment tion because of our natural beauty, ski- ed through the Canada-China Business of Ralph Collins in 1971, we have been ing and wine. Approved Destination Council and the Hong Kong-Canada well-served by our successive ambassa- Status makes a difference: in 2008 total Business Association. dors and our expanding network of visits were 159,000; for the first half of China was largely ignored during . Our provincial premiers, 2011 there were 160,000 visits. the early years of the Harper govern- especially those in the West, Ontario Earlier this year the Canadian ment. As Premier Wen Jiabao bluntly and Quebec, have usefully sustained Tourism Commission began direct-to-

POLICY OPTIONS 67 NOVEMBER 2011 Colin Robertson

consumer advertising in China, aiming 2007 increased by 22 percent in North With regard to Chinese direct to position Canada as a destination of America, 74 percent in Europe, 144 per- investment, we’ve got a long way to go. choice for high-spending Chinese trav- cent in Latin America and 203 percent The Department of Foreign Affairs and ellers. Daily direct flights to Shanghai, in Asia. As the Canadian CEO of International Trade (DFAIT) put Chinese Beijing and Hong Kong are essential, McKinsey, Dominic Barton, observed foreign direct investment (FDI), or what and we should also begin exploring sec- earlier this year at a Brookings they define as an investment involving ondary hubs like Chengdu, Hangzhou Institution symposium, we start with a long-term relationship, a lasting inter- and Guangzhou. an advantage because “demand for est and a significant influence on the Tourism, of course, is a lure for education in the US and Canada management of the company — at both investment and study, and in among Asian post-graduate, post- $14.5 billion in 2010. marketing their universities, colleges secondary students is roughly 5 to 6 As we’ve seen with China Investment Corporation’s Canadian companies, notably Bombardier, have found success investment in TECK, it can be in the Chinese market, supplying several of China’s national a win-win proposition for key projects, including the Automated People Mover at Beijing both sides. But it hasn’t always worked out as well. Airport, the high-speed link between the capital and Beijing China Minmetals’ effort to Airport, the Shanghai Metro and the Wu-Guang rail line. purchase Noranda in 2005-06 was aborted in the face of Canadian and schools Australia again sets the bar. million people.” As China opens for concerns about human rights, resources We once enjoyed the lead in educating investment, we are also situated at the scarcity and a sovereign-owned entity Asians studying abroad but we let our crossroads of the world’s two main of a foreign government buying a advantage slide. Closing the Canadian legal traditions, the civil law and com- Canadian “crown jewel.” It left the Education Centres, a useful and practi- mon-law systems. Chinese (and others) wondering how cal child of the Asia Pacific Foundation, We should start by vesting the open we were for investment, and the in 2009 was short-sighted. Trade Service with BHP/Potash experience has underlined Today, there are over 130,000 Chi- responsibility for education marketing, the requirement for greater clarity in nese studying in Australia, almost working in cooperation with our our foreign investment regime. We twice the 70,000 studying in Canada. provinces, universities, colleges and should act on the Competition Policy As I learned first-hand during my five boards of education. For inspiration Review Panel recommendations (2008) years in Hong Kong, the ties created look to the successful Maple Bear ele- to increase the thresholds for the size of through education not only bring a mentary schools. Now in 80 locations review of foreign acquisitions and shift lifetime of dividends to the host insti- globally, they attest to the portability the onus from the investor having to tution of alumni endowments but also of Canadian education. prove “net benefit” to the minister hav- open doors at the highest level. At one Commerce is our second objective. ing to prove “net harm.” point, three-quarters of the Singapore- Since the Canadian Wheat Board The Chinese government puts an cabinet had done some schooling signed its first contract with the PRC in Canadian direct investment at $7.7 bil- in Canada. 1961, Canadian companies that have lion (in comparison US FDI in Canada is It’s not just a long-term investment. been willing to invest time and effort $306 billion and Canadian FDI in the In 2008, Foreign Affairs estimated that are making money in China, subway US is $249 billion). Scotiabank recently the 178,000 international students in cars, potash and uranium. The grain made a $700-million investment in the Canada spent over $6.5 billion, a figure trade continues to be significant. Bank of Guangzhou. Negotiations for a greater than the value of our exports of During the past half century, China has foreign investment protection agree- coal and lumber. Education services are imported more than 120 million ment began in 1994 and a deal is over- Canada’s number one export to China tonnes of western Canadian wheat and due. and the second-largest export to South barley — enough to make 279 billion The Chinese government’s 12th Korea. Research also revealed that serv- loaves of bread and 55 billion bottles of Five Year Plan, released last March, icing international students generated beer. The world’s largest brewer, China identifies seven strategic emerging more than $291 million in taxes and is the largest importer of western industries, including life sciences, provided employment for over 83,000 Canadian malting barley. Canada is the energy and the environment, IT, man- Canadians. largest softwood lumber supplier to ufacturing and “clean energy” vehicles China and, during the first six months in which they are prepared to invest. ccording to the Chronicle of Higher of 2011, the value of BC’s softwood Each of these presents opportunities A Education, the number of students lumber exports to China surpassed, for but be prepared to spend considerable going to university between 1990 and the first time ever, those to the US. time and effort developing “guanxi” or

68 OPTIONS POLITIQUES NOVEMBRE 2011 The China question and Canadian interests trust with Chinese CEOs and govern- flights each week from Vancouver and an CEOs with their Chinese coun- ment officials as a precondition to Toronto to Chek Lap Kok Airport. terparts. Recent investments by progress. Transparency International As we prepare for the next prime CNOOC Ltd. (2005), Sinopec ranks China 78th on its 2010 Corruption ministerial visit to China, consider (2009-10) and PetroChina (2009) in Perception Index (Canada ranks 6th), and four initiatives that combine mutual the oil sands illustrate their interest. insider trading is a problem. interests with opportunity: Building on our historical advan- Hectoring doesn’t work. Instead, ● Market our educational institu- tages and then drawing on these new what is required is cultural empathy, tions. Why not a Team Canada initiatives will give us insights and finesse and patience and a mindful- education mission led by the prime understanding that we can leverage ness of the 3 Ts — Taiwan, Tibet and minister accompanied by the lead- with the rest of the world, but especial- the June 1989 events in Tiananmen ers of our universities? Aim to dou- ly in Washington where the debate in Square — and the one F — the Falun ble within five years the number of managing China is ongoing. Smart Gong sect. This does not mean that we Chinese students in Canada with people-to-people policies is key. Our need to “leave our values at the door technology partnerships, built Chinese diaspora and their ties when we talk to China’s leaders, nor to around university “smart” parks as throughout Greater China give us a go into every discussion on one knee,” a cornerstone to fraternal institu- head start in developing a “smart” as Chris Patten, the last governor of tional arrangements. relationship with China. Hong Kong, has observed. Instead we ● The Canadian experience with The China question is the chal- should strive for a cooperative management of diversity, includ- lenge for the 21st century. The West, approach, what Henry Kissinger ing official languages, is a major including Canada, has teeter-tottered describes in On China as a “co-evolu- asset and, as the Aga Khan between two conflicting approaches, tion,” and recall the Chinese proverb observes, “shareable.” Let’s offer one stemming from the missionary “Deal with the faults of others as gen- our Official Languages Commis- experience and the other from the tly as with your own.” sioner and his predecessors to realist school of interest and power. For Canadians, Hong Kong remains share their experience in address- Too often, China is either damned or the best entry point to Greater China. ing the needs of minorities in sup- romanticized, but these passions are Hong Kong is Canada’s fourth-largest port of China’s internal evolution. not the basis on which to make policy. market in the world for seafood, beef ● Sponsor China for membership in Henry Kissinger relates in The White and meat products and a market for a the Arctic Council. Much of the House Years that it took 18 months of wide variety of goods and services cargo that will eventually be carried behind-the-scenes negotiations before such as telecommunications devices, train signaling sys- The grain trade continues to be significant. During the past tems, educational and finan- half century, China has imported more than 120 million cial services. After Tokyo, tonnes of western Canadian wheat and barley — enough to Hong Kong is the largest make 279 billion loaves of bread and 55 billion bottles of financial market in Asia and the most popular destination beer. The world’s largest brewer, China is the largest importer in Asia for Canadian FDI at of western Canadian malting barley. $6.2 billion, almost 50 per- cent higher than for Mainland China, through the northern routes will be he secretly visited Beijing, and another and close to that invested in Japan ($7.3 stamped “Made in China.” Western seven months of tough discussion billion) and significantly more than that strategy over the past half century before Nixon went to China. Dealing in India ($492 million. has been to integrate the outliers with China will be a long game requir- Our reports that 15 into the legal governance framework ing patience, perseverance and hard Canadian companies have established that has been carefully constructed bargaining. We need to get it right, their regional headquarters in Hong to provide security and stability. The because the alternative is too grim to Kong, with a further 33 maintaining Chinese want in and have a plan for contemplate. regional offices and 44 more with local polar exploration. We should put offices. The Canadian Chamber of out the welcome mat. Colin Robertson was Canadian in Commerce in Hong Kong numbers ● Launch a “clean energy and miner- Hong Kong, with accreditation to China, over 1,100 members. The territory is al resources” dialogue, building on from 1987 to 1992. Vice-president of the home to over 150,000 alumni of the 2009 commitments to widen Canadian Defence and Foreign Affairs Canadian schools, another great cooperation on climate change and Institute, he is a senior adviser to entrée to doing business. Getting there mineral resources. Establish an McKenna, Long and Aldridge LLP. is also easy, with 76 direct scheduled ongoing dialogue between Canadi- [email protected]

POLICY OPTIONS 69 NOVEMBER 2011