Tags: China | china | canada | trade | relations

Quickly Cooling Relations Are Stalling China-Canada Trade

Quickly Cooling Relations Are Stalling China-Canada Trade
(Florin Seitan | Dreamstime.com)

Friday, 08 November 2019 11:39 AM Current | Bio | Archive

Despite China’s vast influence across the globe — influence recently laid bare after several PR incidents where corporations turned on consumers and stakeholders to appease the Chinese government — its position in global politics has been seemingly less powerful in recent years.

After decades of warm and stable trade relations, the U.S. has shown open hostility during Donald Trump’s presidency, and other nations have also spoken out against China’s human rights violations.

Even with Trump’s usual fire-and-fury approach to international rhetoric, the anti-China charge in North America has been led not by the U.S., but, surprisingly, by Canada. Although the two nations have never had as close a relationship as the U.S. and China, Canada had until recently held favorable economic and political ties with the Asian superpower.

This quickly changed in December 2018 after Canadian authorities arrested a senior Huawei executive and China publicly condemned the action as a human rights violation. What has followed has been an accelerated deterioration of relations, and one that may be starting to severely impact economic ties.

A Sharp Downward Spiral

The political stand-off between China and Canada started when Canada arrested Meng Wanzhou, who was wanted for questioning by U.S. authorities for potentially violating sanctions against Iran. China claimed the move was politically motivated, and seemingly responded by arresting two Canadian expatriates under suspicious circumstances, as well as re-trying and sentencing a Canadian accused of drug smuggling to death.

This initial rift has only widened since then, with neither side willing to budge and relations frosting over significantly in the ensuing ten months. Both nations have engaged in negotiations, with Canada even calling on its fellow G7 nations to intervene. However, progress has been painfully slow, and China has used every play in its playbook — from exerting political pressure to suggesting that cross-country finances could be significantly affected—but so far it has been unable to gain leverage.

Despite the pressure, Canada has stood firm, claiming that its arrest of Meng was not politically motivated, but rather in line with diplomatic agreements it has with the U.S. Because Meng was wanted for questioning and potential charges in the U.S., Canada had to grant the extradition request. However, the Trudeau Administration claims that the arrests made by China of the Canadians on espionage charges are completely arbitrary and that no evidence has been put forth against them.

Although some steps have been made, the situation is far from being resolved.

Bleeding Into Trade

Perhaps China’s biggest chip in any political negotiation is its centralized economy, which remains fertile ground for nearly every industry and opens a market of billions to foreign businesses.

The Chinese government has never been afraid to wield its economic power for political gain, and the Wanzhou case is no exception. Early in 2019, China banned canola products (the country represents 40% of Canada’s exports in the sector) made in Canada over concerns of bacteria and harmful pesticides. In June, China followed up with a ban on all meat products from Canada over “issues” with forged certificates — China is Canada’s third-largest export market for pork products.

China is also experiencing setbacks because of ongoing tensions. The force with which the country has reacted to Wanzhou's arrest has validated speculation that Huawei has much deeper ties to the Chinese Communist Party than publicly acknowledged and could represent significant barriers to the company’s access to the West.

Huawei is already facing trouble in the U.S. market following pressure from the Trump administration and Google’s ban on Huawei using Android OS. Canada is also taking steps against the company and is considering barring them from participating in its developing 5G infrastructure. The ban has significant momentum and public support behind it, and while China has threatened consequences, it seems the Trudeau administration will stand firm on the ban.

These are just a few examples of the quickly escalating tensions between the two countries, and the situation looks to get worse before it gets any better. Trudeau has been criticized over his handling of the case, and regardless of who succeeds him in the upcoming elections, public opinion has shifted sharply on China as an ally, leading to a much tougher stance in the future.

Additionally, Canada’s recent position on China’s human rights record adds a layer of complication to any reconciliation and resolution.

Rough Tides Ahead

There seems to be no easy way out of the current quagmire for Canada-China relations. Although both nations stand to gain more than lose from compromising, it seems battle lines have been drawn in preparation for an unknown and still-developing status quo.

Unfortunately, trade between the two countries seems to be the hardest hit in the escalating conflict.

At this point, it's unlikely that Canada will back down, and China’s strong-arming and heavy-handed techniques are making it appear much less friendly than its public relations ministry would care to admit. Canada too faces an ongoing struggle for key economic sectors, and it must find a way to compensate or lose footing on the international stage.

Raphael Badani is a geopolitical risk consultant and interactive simulation designer in the private sector.

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Despite China’s vast influence across the globe — influence recently laid bare after several PR incidents where corporations turned on consumers and stakeholders to appease the Chinese government — its position in global politics has been seemingly less powerful in recent years.
china, canada, trade, relations
Friday, 08 November 2019 11:39 AM
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