China taking serious risks in its trade fight with Canada, expert says

Farmers should be compensated with funds now spent on the Asia investment bank.

Ottawa—Canada has to reject the economic coercion behind China’s blocking of its agricultural products and source goods now coming from China in other countries, says Duanjie Chen, a Munk Senior Fellow at the Macdonald-Laurier Institute.

Canadians need to realize that the arrest of a Chinese hi-tech executive in Vancouver last year on a U.S. extradition request didn’t cause “a historical turn in Canada’s otherwise highly positive relationship with China,” Chen said in a commentary publishing by the Institute.

“To the contrary, Canada’s bilateral relationship has long operated under the shadow of Chinese bullying,” she said. The arrest “drew much-needed attention to the abnormality of our existing relationship with China.”

Freeing the executive to end the trade spate “would represent a wholesale capitulation to China,” Chen said.

“Canadians must also reject the view that China has all the economic power and Canada has none,” she said. “Canada has some significant advantages and China is taking some serious risks.”

China needs the food commodities it has banned from Canada while “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.”

While many countries have bowed to economic pressure from China, South Korea, Japan and Taiwan haven’t co-operated with Beijing’s demands, she said. Canada should partner with them and other like-minded countries.

“The long-term prospects for our farmers facing China’s ban on our agriproducts do not seem dire. For example, even with the ban on canola, Canadian canola area planted is expected to climb, canola seed exports will be still higher than in the past, and canola oil production will increase over the longer term.”

Chen said the federal government should support canola, pork and beef production “in the near term due to political disruptions beyond their control.

“China’s bans of Canadian agriproducts will not change the global demand for those products, but only cause a disruptive shuffle between buyers and sellers,” she said.

“Indeed, China’s disruptive play will only cause growing distrust among its trading partners, which in turn will adversely affect China’s long-term security in food supply.

“A Chinese ban on all our agriproducts would total about $10 billion for the coming year – and that potential loss would increase to $16.4 billion if China ever decides to bar its tourists from Canada and recall its students studying in Canada. That is not a likely outcome, but it does show the limits of China’s ability to apply economic coercion against Canada.”

China is also “suffering from severe shortages of arable land, persistent income disparity, an aging population and a growing popular desire for the benefits of foreign competition. Importantly for Canada, its need for agriproducts imports will only continue to grow.”

Chen says the government could support farmers from China’s ban on their products by expanding “existing insurance programs to help Canadian farmers cope with China’s economic coercion, with some of the funds potentially coming from the diversion of our capital share in the China-led Asian Infrastructure Investment Bank (AIIB).”

She also recommends Canada block the Chinese company “Huawei from any involvement in Canada’s 5G wireless network, given that it poses a direct threat to our national security.”

Canada should also register and scrutinize all the R&D funding sources from China and sever the ones that aim to steal our intellectual as well as withdraw from the AIIB, which serves as an important institutional representation of China’s global power.

Canada’s message to Beijing should be to drop its harassment of Canada. “What we want from China is for it to behave like an equal member of the international community, which is how we see ourselves and how we treat the United States. The world will be a better place when China sees itself as an equal member of the international community and respects international norms.”