What's edging Canada and China close? | Inside Story

Key Concepts

• US-China Trade War: The imposition of tariffs by the US under Donald Trump, impacting global trade relationships.
• Canada-China Relations: A historically complex relationship recently strained by diplomatic incidents (Meng Wanzhou arrest, detention of Canadians) but now undergoing a potential thaw.
• Strategic Partnership: The newly declared relationship between Canada and China, aiming for economic cooperation and adaptation to a changing global order.
• Diversification of Trade: Canada’s effort to reduce economic dependence on the United States.
• USMCA (United States-Mexico-Canada Agreement): The existing trade agreement between North American nations, and potential renegotiations.
• Geopolitical Security: Concerns regarding China’s growing influence and potential threats to national security.
• Pragmatism vs. Values: The tension between pursuing economic benefits and upholding principles like human rights and the rule of law in international relations.

Canada-China Reset: Navigating a New Partnership in a Shifting Global Landscape

Introduction

The recent visit by Canadian Prime Minister Mark Carney to Beijing marks a significant shift in Canada-China relations, previously characterized by acrimony. This visit resulted in the signing of trade deals aimed at easing tariffs imposed during the US-China trade war, with Carney framing the new relationship as a “strategic partnership” adapted to a “new world order.” This development is largely attributed to the disruptive trade policies of former US President Donald Trump, prompting Canada to seek alternative economic partnerships.

The Shift in Relations: From Hostility to Pragmatism

For years, Canada-China relations were deeply strained. The 2018 arrest of Huawei executive Meng Wanzhou, following a US extradition request, triggered retaliatory measures by Beijing, including the detention of two Canadian citizens for over two and a half years. Previously, Carney had described China as Canada’s “biggest geopolitical security threat.” However, the current administration now emphasizes pragmatism, citing the perceived unreliability of the US as a partner. This shift is driven by the economic pressures created by US tariffs and a desire to diversify Canada’s trade portfolio.

Trade Deal Details & Economic Implications

The core of the new agreement involves significant tariff reductions. Chinese electric vehicles (EVs) previously faced a 100% tariff, which will be reduced to 6.1% for nearly 50,000 cars annually. Canadian farmers will gain increased access to the Chinese market, with canola seed tariffs dropping from 84% to approximately 15%. This is seen as a direct response to the tariffs imposed by the US, which have created barriers to both Canadian and Chinese access to the US market. William Lee, Chief Economist at Global Economic Advisors, highlighted that the deal allows Canada to import EVs at potentially lower prices and provides a market for Canadian agricultural products. Canola, a key Canadian export (representing half of Canada’s agro-food exports), is particularly poised to benefit.

US Reaction & Concerns about Dependence

The US reaction to the deal has been mixed. While Donald Trump expressed a somewhat positive view, stating that Canada “should” pursue deals with China, his former Transportation Secretary expressed concern that Canada would regret the agreement. However, the overall response from the US has been relatively muted. A key concern raised is Canada’s increasing economic dependence on China, given its already strong integration with the US economy. The USMCA (United States-Mexico-Canada Agreement) is currently under review, with potential renegotiations looming, adding to the uncertainty.

Historical Context & Diplomatic Standoff

The current thaw in relations represents a dramatic reversal from the recent past. The detention of Meng Wanzhou and the subsequent arrest of two Canadians were central to the diplomatic crisis. AA Tangan, a Senior Fellow at the Center for International Governance Innovation, pointed to allegations that the detained Canadians were used as “assets” in intelligence operations, with one receiving a substantial settlement. Jean Shereé, former Canadian Deputy Prime Minister, acknowledged her advisory role to Huawei during the crisis. The incident underscored the complexities of navigating relations between Canada, the US, and China.

Geopolitical Considerations & Concerns about China’s Conduct

Despite the economic benefits, concerns remain regarding China’s geopolitical ambitions and its adherence to international norms. William Lee cautioned that China’s history of not fully fulfilling trade agreements (as seen with the US’s “Phase One” trade deal) necessitates careful monitoring. Jean Shereé emphasized the need to balance economic cooperation with upholding Canadian values, particularly regarding human rights and political interference. Recent Canadian inquiries have revealed evidence of Chinese interference in Canadian elections, raising further concerns.

The Role of Donald Trump & Shifting Global Dynamics

The consensus among the panelists is that Donald Trump’s trade policies were the primary catalyst for this shift in Canada-China relations. His unpredictable behavior and imposition of tariffs created a climate of uncertainty, prompting Canada to seek alternative economic partners. AA Tangan argued that Trump’s actions have fundamentally altered the global landscape, making the US a less reliable partner. This sentiment reflects a broader trend of countries diversifying their trade relationships in response to US protectionism.

Notable Quotes

• Mark Carney: “Together, we can build on the best of what this relationship has been in the past to create a new one adapted to new global realities that will deliver stability, security, and prosperity to our peoples on both sides of the Pacific.”
• Xi Jinping: “A healthy and stable China-Canada relationship serves the common interests of our two countries. It is also good for the peace, stability, and prosperity of the world.”
• Donald Trump: “That’s okay. That’s what he should be doing. I mean, it's a good thing for him to sign a trade deal. If you can get a deal with China, you should do that.”

Conclusion

The renewed partnership between Canada and China represents a pragmatic response to a changing global order, largely shaped by the disruptive trade policies of the US. While the economic benefits of the deal are significant, particularly for Canadian farmers and the EV market, concerns remain regarding China’s geopolitical ambitions and its adherence to international norms. The success of this new relationship will depend on Canada’s ability to balance economic interests with its core values and to carefully monitor China’s fulfillment of its commitments. The situation underscores the increasing complexity of international relations and the need for countries to diversify their economic partnerships in a volatile global environment.