Check Against Delivery

Summary: Surprisingly, there is some debate over whether China will “rise.” The fact is, China has “risen,” economically, militarily, and to a lesser extent, politically. A richer and more confident China is the context in which Canada’s interests in Asia need to be considered.
I will briefly discuss some of the possible implications of China’s economic and military growth of the last two decades. I am focussing on China because this growth has vaulted it into the place of Asia’s largest population, economy, and military, and much of the region’s politics either revolve around appealing to Beijing, or worryingly, containing China. I will largely focus on the downsides – unpleasant things that could happen in Asia – because I think the upsides of a richer and more capable China are fairly evident. By discussing the downsides, I hope to put the risks in proper perspective, and avoid painting too sanguine a portrait, and too gloomy a one.   

Lots has been said and written about China’s “rise”. Typically, in the popular media, and some academic circles, this focus on China’s rise is about estimating the size of China’s economy at some point in the future, or about the future size and capabilities of its armed forces. The future of China is certainly an interesting question, but debating about predictions is often fruitless. Some of this analysis also emphasizes that important gaps between the United States and China – such as in per capita income or innovation in technology and scientific research – will persist long into the future. This has led to some commentators suggesting that China’s “rise” is an illusion, and it will always lag behind the United States, and will never rival it in terms of political influence and military might.

Some of this is true. The US is going to remain the predominant global power for the foreseeable future. But the gap between China and the US 30 years ago and today - whether you measure it in terms of wealth, military spending, or political influence - has shrunken considerably. This is the fact that is going to shape much of the political activity along Asia’s Pacific coast for the next decade.

So we need to grapple with the fact that China has already “risen,” in a number of ways. China accounts for around 10% of global economic activity, and around 8% of global military spending. China has also become more willing to use its veto in the UN Security Council in recent years. China’s state owned enterprises are famous for their aggressive pursuit of natural resource assets, particularly in Africa, and aid dollars and closer diplomatic ties have followed those resource acquisitions.

Now, much of China’s “rise” happened from the mid-1990s to the late 2000s. In this time period its share of global wealth doubled, and its military budget grew around six-fold. Now it’s also worth noting that China’s rise has happened alongside a number of other positive growth stories, but generally on smaller scales.

The rest of Asia took some time to react to this power shift, but we’re now seeing some serious debate about what it means. Japan, South Korea, and Australia have all debated whether China has become a potential threat to their national security and economic interests. Interestingly, in Australia, they’ve matched their apprehension about China’s military growth with a strong commitment to making China a pre-eminent trade partner. In other countries – Vietnam and Indonesia in particular – the data shows that military budgets, after years of neglect, are now growing at a very rapid pace, and faster than Chinese military budgets. The US, of course, has also taken note of growing military budgets in the region, and has acted to restrain and reassure its friends and allies there, and to make it clear to Beijing that the US armed forces will remain in the region via the “Pacific Pivot” announcement of January 2011.

These latent tensions are compounded by the fact that there are some genuine unresolved conflicts between a number of Asian countries, including China. These are too numerous to discuss in detail, but many of them revolve around territory and access to natural resources (particularly natural gas, oil, and fisheries). These various disputes are not necessarily going to lead to armed conflict, but they are real conflicts over who owns what and who rules where, not matters of misunderstanding or misperception.

None of this means that hot war or even a cold war is going to happen between China and the US. The important point is that we’ve just seen a very large country make tremendous economic and military progress in a short period of time, and so far it has happened peacefully. But it has also alarmed and concerned neighbours, and has attracted the attention of the world’s last superpower. Combined with very real disagreements between several Asian countries, the ingredients for renewed political competition are there.

So what does this mean for Canada? I will emphasize a few points here:

First, as many people live in the Indo-Pacific (that is India, south east Asia, China, and the rest of north east Asia) as in the rest of the world. Living standards are growing in most of these economies. Global demand for new consumer products, technological innovation, and demand for basic commodities (i.e. energy and agricultural goods) is increasingly going to come from the Indo-Pacific region. Canada’s government has to make sure that Canadian laws and regulations do not impede Canadian firms from doing business with these economies, and should create an environment in Canada that makes business as easy as possible. Canada’s material interest in Asia is economic.

That being said, Canada may not be well-positioned to benefit from future Asian growth. Canada has done well selling raw materials and primary commodities to China as the country has gone through a prolonged real estate and infrastructure boom. However, that boom is fading, and Beijing wants more of China’s economic activity to be fueled by consumer consumption, rather than greenfield construction. This will mean healthy demand for some agricultural goods and energy, but declining demand for commodities like copper, iron ore, and other metals. Demand for high value-added consumer goods will – if Chinese rebalancing efforts are successful – increase instead. The Canadian economy, with its heavy weighting in primary goods, is not ideally positioned to sell to middle-class Chinese. The same applies to India’s economy, though India still has a significant infrastructure debt to work off.

Second, Canadian-Asian relations are not necessarily done by the government. Official diplomacy will always be important. However, increasingly, the greatest exchanges between Canada and China are done by private citizens, whether their interests are business, tourism, study, economic migration, or families that call two countries home. The important thing to remember here is that official policy should try to draw from the energy of these natural exchanges, and try, where possible and in the national interest, to be compatible with what is happening anyways.

Finally, to return to my original discussion about China’s rise, I see the big strategic challenge for Canada as determining how to protect our economic interests in the region against a backdrop of political tensions. Canada, as noted, has an interest in cordial, predictable intra-Asian relations. However, should tensions escalate (short of armed conflict) between India and China, for example, one or both countries may enact policies that have downsides for Canada (such as trade restrictions, quiet lobbying for political support, challenges to the free navigation of certain sea lanes, etc.). So, Canada may have to make some implicit or explicit political choices in the future. Of course, not getting involved in intra-Asian politics is always one option. Whereas the US has formal commitments to defend a number of countries in the region, Canada does not. However, the Canadian government may prefer a more active policy. If so, I believe that any such policy would have to include tangible deliverables. Whether earned or unearned, Canada has a reputation for lacking political commitment in the region. If Canada wanted to convey its serious concern and interest for the safety and free navigation of sea lanes in east Asia, for example, simply playing the role of “honest broker” and rendering good offices probably would not cut it. Canada would need to be seen to put up a stake in the issue. As my colleague James Manicom has suggested, that might look something like not just participating in naval exercises with our allies, but engaging in naval diplomacy with China too: this might look like small joint exercises, helping build coast guard (or other non-combat capacity), or increased personnel exchanges. The exact form is not so important as much as any effort to shape politics in Asia is going to require a real commitment of resources, not simply because Canada is small and limited in what we can do, but in order for any Canadian overtures to be seen as anything other than a fair-weather, unserious overture.  

To conclude, Canada needs to seriously consider whether the sea-change we’ve seen in Asia in the last two decades holds any important consequences for Canadian national interests.

For the record, I believe it does. In particular, the tremendous growth in China’s wealth and armed forces has rewritten the region’s rules and means that the US is no longer the only player in the Pacific. So Canada’s chief political challenge is figuring out how to benefit from a richer Asia while this soft competition for influence and security goes on in the backdrop. The probability of severe conflict in the Pacific is very low, but the potential consequences are large enough to be worth planning for.