The time is right for Canada to embrace a ‘third option with legs,’ a strategic shift with real substance toward the Asia Pacific region. This would complement and balance, but certainly not displace, relations with the U.S. which, as a function of geography, will always remain a major priority for any Canadian government.
The reasons are obvious. The global economy is shifting dramatically. Two-thirds of the growth in the past five years has been in emerging markets, mostly in Asia and notably in China. By 2020, their share of global growth is expected to rise to 75 per cent as more than 1 billion new middle class consumers enter the global market.
That spells enormous opportunity for Canada as many of these markets, especially those in Asia, need what Canada has in abundance — not just energy, mineral and agricultural commodities, but also education facilities, banking, insurance and IT capabilities.
More than forty years ago and in response to a balance-of-payments crisis, President Richard Nixon surprised the world with a 10 per cent levy on all U.S. imports. That hit Canada harder than most. Nixon’s action prompted Prime Minister Pierre Trudeau to seek to recalibrate relations with the U.S.
In response, Trudeau advocated a “third option”, one that would see Canada reduce its vulnerability to U.S. trade shocks by diversifying and developing complementary political and economic links with Europe and Asia. But the policy fizzled.
Energy is, of course, a natural fit between Canada and Asia. As long as Canadian oil exports are held captive to U.S. interests, we not only sell at a sharply discounted price — $30 to $40 per barrel — but we’re also subject to the whims of an administration pre-occupied with domestic politics.
But it’s not just about oil. Significant investments in Canadian liquid natural gas are coming from Asia — China, Japan, Korea and Malaysia — because that is precisely where market demand is growing. That investment is generally welcome. We need foreign investment to develop our substantial resource base. Some of that investment will involve infrastructure, because we will need to upgrade our pipelines, port and refinery capabilities in order to serve markets beyond North America.
However, energy is simply one of many sectors where there is scope for growth. Bombardier, Power Corp, Manulife, Air Canada, CAE, CGI and RIM are other examples of global Canadian firms that recognize the value and the potential of Asia-Pacific markets and are actively pursuing expanded opportunities.
We have spent more than four years negotiating a new trade partnership with the European Union — more than twice the time it took to conclude a free trade deal with the U.S. Success in the EU talks, we are told, is always just around the corner. Better still, once the EU deal is concluded, Canada can concentrate its negotiating energies and resources on Asian markets that promise larger dividends.
However, Canada needs a coherent negotiating strategy with clear priorities: what we want from whom and what we’re prepared to give in order to achieve our objectives. We also need clearer signals of engagement from our Asian dance partners, some of whom seem more preoccupied with Washington than we are.
The Trans-Pacific Partnership (TPP) may well be part of the equation, especially if the Obama administration is actually able to obtain congressional approval. But well-planned bilateral initiatives can complement a regional approach — provided governments have the political courage and the stamina to produce results.
Nevertheless, a strategic shift by Canada to the Asia-Pacific region involves more than trade and investment. The recent bout of ‘March madness’ in Pyongyang, now extending into April, is a grim reminder of just how volatile the situation on the Korean peninsula still is.
It is no secret that the key foreign policy question for the world in the foreseeable future will be how the U.S. and the new leadership in China choose to manage their complex relationship. We all have an interest in ensuring that this relationship evolves in a manner that puts a premium on stability. Yet both China and the U.S. have huge — albeit very different — domestic challenges that undoubtedly will preoccupy decision-making and may distract attention from global issues, as well as from prudent management of their bilateral ties.
That is why there is a definite need in our shared Asia-Pacific region for fresh thinking and more strategic engagement, for imaginative diplomacy and for regional confidence-building measures of the kind that helped contain tensions between East and West during the Cold War, enabling a peaceful transition for the former Soviet Union. We need to make a similar effort to ensure that cooperative, institutional undertakings are implemented to manage the transformation underway and to ensure a more stable security environment.
We crave more than a one-dimensional foreign policy, but we need to do more than talk about it. The Asia-Pacific region gives us ample scope to adjust our global views and turn that desire into reality. The negotiations this week between Canada and Japan on an Economic Partnership Agreement (EPA) would be a promising start, provided both sides are committed politically to success.