In recent years it has become increasingly apparent that China makes its own rules when it comes to trade.
Its 2002 membership in the World Trade Organization is an excellent example. The rest of the world agreed to give China open access to markets, ostensibly in exchange for similar access to China’s.
One can hardly blame the global business class for salivating over some pretty compelling mathematics. If every citizen of China could just consume one serving of french fries, one piece of pork, or one more widget of any type, the argument goes, the growth potential is nearly endless.
However, those opportunities have demonstrably failed to materialize. Instead of free trade, what China gives the rest of the world is mercantilist trade barriers, according to Robert D. Atkinson, president of the Information Technology and Innovation Foundation (ITIF), a U.S. science and technology policy think-tank, speaking to the magazine Global Trade on the 15th anniversary of China’s WTO membership.
“In 2001, the pundits were nearly unanimous in saying that joining the WTO could change China as it bought into the same rules of the game for market-based trade that everyone else plays by. Now we know that what China really bought from Geneva was a get-out-of-jail-free card,” Atkinson told the magazine.
That has translated into a lot of trade deficits with this global behemoth that is suddenly the globe’s second-largest economy, according to OECD data. That organization says that in 2016 China was our second-largest trading partner, and a big part of the Canadian trade pie, coming in at nearly $64 billion. Of that, $15.4 billion was exports and $48.6 was imports, for a trade deficit of $33.2 billion.
While individual sectors such as agriculture and food have flourished as China has grown, it’s a bit more difficult to see just how the national economy as a whole has flourished in this exchange.
And recently the question that’s come into sharp focus is the cost of becoming overly reliant on this single, and at times capricious, trading partner.
Canadian farmers have felt the sting as canola imports have fallen sharply due to import bans on Canada’s two largest grain companies. Beijing insists the issue is due to disease and weed seeds in shipments, but most observers insist it’s really a political wrangle aimed at pressuring Canada into releasing a telecomm executive arrested in Vancouver under a U.S. arrest warrant.
In a fit of frustration recently, Prime Minister Justin Trudeau was reported to have remarked that it’s a fundamental misalignment of the two societies.
“Canada has an independent judicial system that functions without interference or override by politicians… China doesn’t work quite the same way and doesn’t seem to understand that we do have an independent judiciary from political interference,” he told reporters during a daily media briefing.
Other trading partners are now discovering that China is willing to use trade to make a political point, as our Allan Dawson reports in our May 28 issue. There he details the recent pronouncement that Australian barley is going to be the target of a whopping 80.5 per cent tariff for the next five years.
Ostensibly it’s because China views an environmental plan that purchases irrigation rights in the Murray-Darling basin to protect the water supply there as an indirect subsidy. But again most observers strongly suspect it is in retaliation for Australian Prime Minister Scott Morrison’s call for an independent inquiry into the origins of the COVID-19 pandemic, which is believed to have originated in China.
And while Australian farmers might be fierce friendly competitors, in this case there’s no mistaking that their interests and those of Canadian growers are aligned. There might be a short-term benefit to Canadian barley growers, but in the long term, both groups will be injured if this behaviour is accepted.
As Cereals Canada head Cam Dahl puts it: “… moving to a system in the world where trade is based on politics and might is right, that is not good for Canadian agriculture across the board.”
For many years the Canadian public has been unconcerned by China, viewing it largely as a potential market, if they considered it at all. But that could be changing.
A recent Angus Reid poll last week found four in five Canadians want Huawei banned from any role in building Canada’s 5G network, 76 per cent said Canada should pay more attention to human rights than economic opportunity, and just 11 per cent feel Canada should focus its trade efforts on China.
If China finds the world less receptive to its overtures in the future, it will only have itself to blame.