Canada is Playing Catch-Up In Asia, But We Can Leap Ahead

Canada is back in the game in Asia. With two recent visits by Prime Minister Stephen Harper (to China, Thailand, Korea, and Japan) and a path-breaking trip to Burma by Foreign Minister John Baird, the government has begun a serious policy tilt toward Asia.

The recent federal budget underscores this leaning toward Asia, with its focus on trade and investment negotiations across the region. Canada is now in various stages of bilateral free-trade talks with five Asian countries, and is making the case for entry into the Trans Pacific Partnership (TPP), a grouping of nine Asia Pacific economies.

If the government seems to be in a bit of hurry on Asia, there is good reason. Canada’s market share in Asia is below potential, we have no full trade agreements with Asian countries, and Ottawa has not been invited to regional clubs such as the East Asian Summit.

Entry into the TPP is by no means assured. Ironically, one of the main obstacles is our closest ally and trading partner, as was evident in the remarks by U.S. President Barack Obama at the recent Canada-U.S.-Mexico Summit. Obama suggested that Canada’s supply management system for dairy and poultry products could be a deal breaker. This issue was known to be problematic, but it is telling that the U.S. President would draw attention to it rather than to the importance of bilateral economic ties and the proven success of NAFTA. Even though the U.S. has clearly made a policy “pivot” towards Asia, there is little indication to date that Washington D.C. considers Canada as playing a useful supporting role for American objectives in the region.

Canada is playing catch-up in Asia, which explains the frenetic pace that this government has set for itself on trade agreements. In my paper for Canada 2020, I outlined the elements of a “catch-up” strategy on Asia and am pleased to see that many of these ideas are now being implemented. If the current policy tilt to Asia is sustained, there is every reason to believe that we can indeed catch up.

But there are no prizes for simply entering the race. To recognize that China and India are global powers and that Asia is vital for Canada’s future prosperity is simply to be on the same page as every other major industrialized country.

In addition to a catch-up strategy, Canada needs a leapfrog strategy. The goal should be no less than for Canada to be the most Asia-engaged country in the western world.

Leapfrogging our competitors will require a commitment at the federal and provincial levels, as well as by business and civil society, to make sure that Canadians have the knowledge and skills to be effective in an increasingly Asia-centric world. If future generations of Canadian leaders are to become more Asia-engaged, there will have to be substantially more teaching about Asia and Asian languages in the education system, including at the elementary and high-school levels.

In one key area, Canada can already lay claim to be the most Asia-connected country in the industrialized world. In relative terms, human ties between China and Canada are longer and deeper than for any western country, and in Vancouver we have arguably the most Asian city outside of Asia. These are assets in the Canada-Asia relationship that are grossly underutilized; they offer the potential to leverage diplomatic, commercial and civil-society ties with Asian countries that other western countries can only regard with envy.

The federal government’s Asia Pacific Gateway and Corridors Initiative (APGCI), for example, has set the stage for Vancouver to become not simply the preferred entry point for Asian shipments to North America, but the premier hub for government, business, cultural, and research linkages connecting the two sides of the Pacific. A gateway is valuable in part because of what passes through it, but more so because of the value-added activity that happens within and around it. The next phase of the APGCI should therefore focus on the “gateway economy,” which would include activities such as the development of business and professional services for global Asian firms and the attraction of Asian head offices for their North American operations.

In the near-term, the most important game-changer in the Canada-Asia relationship is energy exports. Current debate around oilsands and shale gas development in Western Canada, and the construction of the Northern Gateway pipeline to the coast, focuses largely on the impact on Canadians, especially First Nations. The bigger story, however, is that the coming energy glut in North America could lead to the creation of a trans-Pacific energy market. In addition to significant economic benefits for Canada, energy trade across the Pacific could lead to increased energy security in Asia, superior environmental outcomes in the region, a more balanced trade relationship, and stronger diplomatic ties with Asian countries.

As global economic and political weight continues to shift toward Asia, Canada has to work harder just to be noticed. Our ability to put in place the infrastructure and regulatory framework for energy exports - and to foster co-operation on energy issues more broadly, including on renewables - will be watched closely in Asia.

It is in some ways a major test for Canada-Asia relations: success will mean a significant new platform for trans-Pacific ties in an area that matters hugely to Asia. Failure, on the other hand, will signal that Canada cannot muster the political will to diversify its economy, even where the opportunity and potential is so clearly evident.

This, in turn, raises a scenario that I would rather not contemplate: that we neither catch-up, nor leapfrog, but instead fall further behind in our ties with the most economically dynamic region in the world.

This piece was first published in the Ottawa Citizen on April 11, 2012. It draws on a longer paper written for Canada 2020’s project ‘The Canada We Want in 2020: Towards a strategic policy roadmap for the federal government.’