On Canada Day, 2013, Prime Minister Stephen Harper described this country as a “land of hope in a sea of uncertainty.” Indeed, there is much in the world that prompts deep concern: a sluggish jobless recovery following the fiscal crisis that paralyzed many Western economies; the Arab Spring and unpredictable risks posed by Islamic extremists; the spectacular rise of China economically and potentially politically as well; new instabilities on the borders of Europe as Vladimir Putin’s “New Russia” flexes its military muscles and challenges the territorial status quo; the spectre of a nuclear Iran even as arms-control talks continue; the unravelling of Afghanistan and Iraq after huge military engagements in each; and the daunting challenge of attacks on liberty from cyberspace. America’s capacity and inclination for global leadership are waning. Sharp political divides on the home-front undermine consensus on domestic and foreign policy. U.S. military prowess remains in a class of its own, but 21st-century security threats, whether from terrorists on the ground or from cyberspace, cannot be stopped by massive military assaults.
Global institutions are not responding effectively to the need for greater certainty and stability. It is a multi-polar world at best, but increasingly a G-zero world, in which self-interest is the prime motivator. Noble concepts of multilateralism — the traditional lynchpin for middle powers like Canada — need to be recalibrated for this new world.
In this environment, Canada is one of the few countries for which the opportunities are more apparent than the risks, and we cannot afford to lag behind. We need to adapt nimbly to reap the benefits of the global transformation, using our comparative advantages as leverage to enhance a broader network of global relationships.
We need to move beyond craving a “special relationship” with the United States — an objective with a long queue of aspirants — and adjust our diplomatic priorities on a more balanced and selective basis. Most of all, as we confront the major challenges of this new world, we cannot afford as a nation to be timid or meek. We must yank ourselves out of our complacent cocoon and be brave. To quote Iachimo in Shakespeare’s Cymbeline, “Boldness be my friend! Arm me, audacity, from head to foot!”
The time has come to counterbalance our vital relationship with the United States with a strategic focus on Europe, while focusing on the dynamic emerging markets that are capturing an increasing share of global growth. This would represent a mature response by Canada to an increasingly turbulent world. Having weathered the economic recession better than most, Canadians have a more confident sense of self.
This is not the first time that Canada has attempted to diversify its trade and investment linkages. More than 40 years ago, in 1971, in response to a balance-of-payments crisis, U.S. President Richard Nixon surprised the world with a 10% levy on all U.S. imports. That hit Canada harder than most at the time, even though Nixon was somewhat oblivious. He and many Americans seemed to think, incorrectly, that Japan, not Canada, was America’s largest trading partner; and Japan had certainly been the prime target for the sudden tariff. Nixon’s action prompted our then-PM, Pierre Trudeau, to seek to recalibrate relations with Washington.
Trudeau advocated what he called a “Third Option,” which would see Canada reduce its vulnerability to U.S. “shocks” by diversifying and developing complementary, political, and economic links with Europe and Asia. The idea became the topic for many press releases, visits, and consultations about “frameworks” for “co-operation,” and so forth, but yielded little in terms of substance because the trade winds were blowing the other way — toward deeper economic integration with the United States, especially after its economy recovered from the recession brought on by the Arab oil embargo of 1973. As Stephen Clarkson and Abdi Aidid have noted, “there were many slips between cup and lip. The private sector was not interested in coping with the linguistic, political, and cultural challenges presented by overseas markets given that businesses could so easily deal with customers and suppliers in the United States to whose market they had geographically privileged access.”
Two decades earlier, Prime Minister John Diefenbaker had also tried his own version of reducing ties to the United States, when he announced that Canada would divert 15% of its exports to the UK. He learned abruptly that governments cannot dictate flows of trade. Patterns of commerce follow their own path.
In the late 1980s, Prime Minister Mulroney reverted to closer relations with the United States — negotiating the FTA, NAFTA, an extension of NORAD, environmental agreements on acid rain and the Great Lakes, and an understanding on the Northwest Passage, all of which produced real dividends for Canada and also gave us a unique voice and status in Washington at a time of dramatic changes in the world: the collapse of the Soviet Union, the end of Apartheid, the unification of Germany, the First Gulf War and the creation of the WTO.
Prime Minister Mulroney put a premium on good relations with the United States. Despite the customary wariness of many Canadians about getting too close, he chose more often than not to give the Americans the benefit of the doubt. As a Quebecer, Mulroney did not share much of the angst about excessive American influence on Canada — the frequent topic for debate among the cultural literati, notably in Toronto.
The Chrétien–Martin decade that followed had spasmodic moments of moving away from the U.S. relationship, and adopting positions of differentiation, notably on Iraq and ballistic missile defence. These commanded instinctive popular support in Canada, but the fundamental character of our economic dependence on the United States remained constant.
What did, of course, change at the beginning of this century was the “thickening” of the Canada-U.S. border in the decade that followed the 9/11 terrorist attacks, as the United States imposed a whole new series of measures to control the movement of peoples and goods across its borders. Growing protectionism in the United States as recessionary pressures followed the financial crisis of 2008–09, which took a huge bite out of jobs and growth, have not helped matters.
With Barack Obama’s election in 2008, the moment seemed propitious for another attempt to improve our trade relations. However, despite a flurry of initiatives, very little of real substance has materialized on the bilateral agenda. Moreover, as the personal commitment to remove barriers at the top has faded, the institutions involved in managing relations have become even more noticeably deficient. The prolonged wrangling over the Keystone XL pipeline also is a harsh reminder of just how vulnerable Canada is to excessive reliance on the U.S. market, even for a vital commodity such as oil.
As Jack Mintz observed late last year in the National Post, “Canada, fed up with Obama shifts over Keystone, is looking at ‘market diversification,’ not only for energy but also for other products and services. With Buy-American policies, beef restrictions and other irritants, the United States is not a reliable friend these days.”
Geography may well determine much of our destiny, but geography and sentiment should not limit our outlook or our ambition. One way or other, we need to break out of the North American cocoon. Two-thirds of the global economic growth in the past five years has been in emerging markets, mostly in Asia and notably in China. By 2020, emerging markets’ share of global growth is expected to rise to 75%, as more than 1-billion new middle-class consumers enter the global market.
Many of these markets, and especially several in Asia, need not just energy, mineral and agricultural commodities, but also education facilities, banking, insurance and IT services, all of which are Canadian strengths. At a time when countries such as China, India, Indonesia and Brazil are in the ascendant, Canada has many of the resources and skills that these markets want and need. While our economy remains prominently linked to the United States, and management of relations with the United States will continue to be the overriding priority for any government in Ottawa, it is time to recalibrate and seek complementary ties beyond North America. It is a matter of enlightened self-interest.
The Comprehensive Economic and Trade Agreement (CETA) negotiations with the European Union took twice as long as the Free Trade Agreement with the United States. Nonetheless, its success adds real substance to the Third Option approach. Better still, Canada can now concentrate its trade-negotiating energy and resources on markets in Asia with, potentially, even larger dividends. Paradoxically, as our global profile and engagement grows, so too will our influence with Washington, as the bonds of dependence weaken.
It was the late Nelson Mandela who said, “I like friends who have independent minds because they tend to make you see problems from all angles.” Well, that is also true of Americans and their leaders. While we must always be attentive to bilateral issues, we are far more credible when we are deeply engaged with the world, and not, as some would prefer, acting as a detached unbiased “honest broker” or “peacekeeper” with no real interests of our own.