'Global Outlook' by David Bercuson

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Reality check: China Trade and Investment
by David Bercuson

Frontline Defence
April 3, 2017

Last week, Ottawa approved Hong Kong-based O-Net Communications’ bid to take over ITF technologies, a Montreal firm specializing in fibre-based technology. This reversed a decision the Harper government made in 2015 which rejected the same transaction on the basis of advice from Canadian security agencies. The Liberals set aside the Harper rejection soon after taking power and conducted a second review; the approval was based on this review.

The Trudeau government is pursuing a more open relationship with China than its predecessor. In May 2016 the Pierre Elliott Trudeau Foundation, which has opaque ties with the Liberal government, conducted a fundraiser featuring the prime minister attending a dinner with guests drawn from the upper crust of the Chinese-Canadian community, paying $1,500 a plate. There was nothing illegal about the affair, but it did reflect Ottawa’s desire to foster better relations with a community that could help Canada strengthen ties with Beijing.

About two weeks later, a Chinese diplomat attending a press conference in Ottawa tore a strip off a Canadian reporter for asking questions about China’s human rights record. The response from the Canadian government was tepid at best.

In addition, Ottawa is considering an extradition treaty with China that shows an unfounded faith in the fairness and legality of the Chinese judicial system. In the past weeks, Australia has abandoned efforts to do the same because it became clear that the Australian senate would never approve the arrangement.

Then, we come to free trade. The Trump administration’s foolish decision not to proceed with the Trans-Pacific Partnership is forcing Canada to look for a feasible Plan B to replace the TPP; Ottawa has already initiated preliminary free trade talks with China as part of that plan. The Chinese have declared that they will not tolerate human rights on any trade talk agenda and that they want unfettered access to “all key sectors” of the Canadian market for Chinese state-owned firms.

There is nothing inherently wrong with Canada seeking greater access to the China market and, of course, being willing to open Canada to more Chinese trade and investment. But in seeking those desirable goals, the government needs to keep a few facts uppermost in mind.

Although China is certainly no enemy of Canada, Chinese moves in the South China Sea and China’s obvious effort to exert control of that key body of water by extra-legal means are not in Canada’s best interests. China has constructed artificial islands containing airstrips that are capable of handling warplanes, defended by anti-aircraft missiles and harbouring Chinese patrol vessels. In a decision last summer, the International Court at The Hague ruled these “islands” to have no legal validity in a case brought by the Philippines. Yet the Chinese have ignored that decision and continue to bolster these military bases.

Last week, documents released under the Access to Information legislation revealed that a 2014 hack of the Canadian National Research Council’s computers, originating in China, had cost the NRC (and Canadian taxpayers) “hundreds of millions of dollars” (Globe and Mail, March 31, 2017).

In fact, Chinese hacking of both public departments and private corporations has allowed China to save billions of dollars in research and development costs, especially for dual-use (in both civilian and military areas) technologies. That is theft, pure and simple.

Finally, Chinese state-owned companies are not free market corporations pursuing profits in national and international markets. Many are owned outright by the Chinese military while others exist to do the Chinese government’s bidding and not to pursue free market objectives as Canadian companies do. Giving such entities complete access to Canadian markets and Canadian technologies is not in our national interests.

It is understandable that the election of U.S. President Donald Trump has created a deep sense of unease in Ottawa. After all, the U.S. is by far Canada’s largest trading partner. But China will never replace the U.S. as Canada’s most important trade and investment partner, and in the long run, rushing into China’s arms may do far more damage to Canadian national interests than a Trump presidency ever could.

Image: CHRIS WATTIE / REUTERS

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  • commented 2017-04-07 11:49:54 -0400
    A good cautionary article. Many of its key points tend to be overlooked in the rush to make money from the China market. China does not play by the same rules as we do and we must not lose sight of that.
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