Northern Exposure

Canadian Prime Minister Stephen Harper’s latest visit to China occurs at a time when bilateral relationship is attracting attention in some unusual quarters By Fred Edwards

Northern Exposure

Canadian Prime Minister Stephen Harper’s latest visit to China occurs at a time when bilateral relationship is attracting attention in some unusual quarters By Fred Edwards

For American politicians, especially those campaigning for the presidency, Canada usually is an afterthought. But Canada’s emerging status as, in Prime Minister Harper’s words, “an energy superpower,” and its desire to find new markets such as China for its large oil reserves has suddenly attracted attention south of the border.

In January, U.S. President Barack Obama delayed approval of a pipeline that would have carried Canadian bitumen from the northern Alberta oil sands to American refineries in Texas. For Republicans seeking their party’s presidential nomination, that was bad enough, but then the Canadian Government and Enbridge Inc., a major Canadian energy company, announced plans to build another pipeline, this one from the oil sands across the Rockies to the Pacific coast, from where it could be exported to Asia, specifically China.

In a recent interview with the Canadian Broadcasting Corp., Harper said, “It is in our interests for all kinds of reasons that we diversify our exports, particularly our energy exports. I think the industry will tell you we already pay a bit of a...we get a bit of a discount because we’re a captive supplier to the United States. So I think it’s in our interests that we sell our energy exports to Asia, just as it is in our interests that we diversify our trade generally.”

This was too much for Republican Newt Gingrich, who said his first act if he was elected president would be to overturn Obama’s decision and approve the Alberta-Texas pipeline, known as the Keystone XL.

“My message to the Canadian people is don’t build a pipeline to China, help is on the way,” he said after the Florida primary.

For Canadian China expert Wenran Jiang, Harper’s China visit carried an explicit warning to the United States.

“It’s not a subtle warning. It’s an open warning,” Jiang said in an Associated Press report.

The author is an editor at the Toronto Star and a former editor at Beijing Review

“Harper has said Keystone was a wake-up call.”

Revival

For Canadians, the sight of Harper trying to play China off against the United States takes some getting used to.

For the first three years after winning power early in 2006, Harper relegated Canada’s previously warm relationship with China to the deep freeze. He positioned Canada closer to its traditional allies—the United States and NATO—and he and some of his senior ministers made a number of provocative statements on Tibet, Taiwan, human rights and other sensitive issues. When asked about the potentially damaging impact of all this on Canada’s relationship with Beijing, an unrepentant Harper said, “I think Canadians don’t want us to sell out important Canadian values. They don’t want us to sell that out to the almighty dollar.”

China, predictably, was unhappy. Harper could live with that—for a time he even seemed to welcome criticism from Beijing—but there was another unhappy group he could not afford to ignore: the Canadian business community. Although Sino-Canadian trade continued to increase, its expansion lagged behind the rapid growth of the Chinese economy. Canada’s share of Chinese trade has deteriorated to just over 1 percent from a high of nearly 2 percent. By comparison, Australia—a smaller country that actually is farther away from China—accounts for 4.3 percent of Chinese imports.

The first sign that criticism of the prime minister’s belligerence was getting through was the gradual muting of his government’s outspoken criticism of China. Then came the symbolic turning point. In May 2008, Harper appointed David Emerson, a former Liberal with strong business connections, as foreign minister. Emerson, whose wife was born in Hong Kong, was known to be friendly toward China. He led the Canadian delegation to the Beijing Olympics and made no secret of his belief that it was essential for Canada to revive its relationship with China.

So the great change began. Harper finally made his first visit to Beijing in December 2009, and Chinese President Hu Jintao visited Canada the following year. Another factor that lent urgency to the revival of the Sino-Canadian relationship was the international financial crisis that so badly damaged Canada’s traditional economic partners. With Europe and America in recession, even Harper could not afford to ignore China, one of the few bright spots in the world economy.

Canada provides a stable source of supply, unlike some of China’s current oil providers located in the troubled Middle East

Expectations

So he made his second visit in just over two years and tweaked the United States in the process, something likely even he would have thought impossible a couple of years ago.

OIL WOES: Protesters against the construction of the Keystone XL oil pipeline demonstrate in San Francisco on October 25, 2011. U.S. President Barack Obama has put the project on hold due to environmental concerns

The primary focus of the trip was economic. Sino-Canadian trade has tripled in the past decade, but is weighted 4 to 1 in China’s favor. The simplest way for Canada to redress that imbalance is through oil exports, so Harper’s main objective was to gauge Chinese interest in the Pacific pipeline proposal. Expectations were that Beijing would be supportive, especially given the heavy Chinese investment in the Canadian energy sector over the past two years—more than $16 billion. Canada also provides a stable source of supply, unlike some of China’s current oil providers located in the troubled Middle East.

Another problem for Canada is its lack of penetration of the Chinese market. In part this reflects a lingering conservatism in the Canadian business community, which remains more comfortable operating in the familiar markets of North America and Europe. But another issue is concern over the lack of transparency in the Chinese legal system: Can Chinese courts be counted on to protect proprietary industrial processes, enforce contracts, and settle disputes between Chinese and foreign parties in a nondiscriminatory way?

One remedy would be a Canada-China Foreign Investment Promotion and Protection Agreement (FIPA). Negotiations have been going on intermittently for more than a decade, and the signing a “declaration of intent”on the FIPA was one of the most important achievements of Harper’s visit.

As for the issues that were so high on Harper’s agenda until the recent thaw in relations—human rights, Tibet, democratization, it is unclear how strong a line the prime minister will take. He could resort to the practice of Canada’s former Liberal governments and raise Canada’s concerns in private discussions with China’s leaders rather than engage in vocal public criticism. Or he could leave it to lower ranking officials, such as Foreign Minister John Baird, to wield the human rights stick.

Given the strong economic focus of Harper’s trip, however, it seems unlikely such disagreements will be allowed to tarnish the prime minister’s late-blooming romance with China, whether the Americans like it or not.