Canada torn between two trade bullies with the U.S. and China

Best approach: stay standing and don't cry

Canada is torn between two bullies, feeling like a fool.

Dealing with both of them is breaking all our hopes.

With our belligerent erstwhile friend to the south having recently finished savaging us in the NAFTA2 negotiations, and China presently raging at us and locking up unlucky Canadians, it’s a very, very, very uncomfortable time to be trying to boost trade in either direction.

With the Donald Trump administration following “America First” economic nationalism and China trying to flex its muscles and save face, Canada has become a handy victim for the two bullies. Trump knew Canada couldn’t fight back too violently, so he let us have it. The best Canada could do was stay standing and avoid hitting the pavement or crying until the bully got tired of pummelling us. With China that’s probably our best hope too: stay standing, avoid falling and refuse to cry. Eventually bullies get tired and look for less vexing targets.

The China situation today is actually our third such trade scrap of the year. Saudi Arabia pulled a similar hissy fit earlier this year when Foreign Minister Chrystia Freeland tweeted out an innocuous encouragement to the Saudis to treat some jailed female activists fairly. Rather than jailing Canucks, the Saudi government flipped out and threatened to ban imports from Canada, to prevent Saudi investment in Canada, and to pull thousands of university students from Canadian campuses.

Apparently Canada is seen as the easy target amongst G7 countries for foreign autocrats to make an example of. That’s why there has been such an overreaction from both Saudi Arabia and China to relatively minor things Canada has done. The Saudi tantrum seems to be dissipating and the kingdom is keen to keep receiving the armoured vehicles we’re building for them in London, Ont. They haven’t divested G3, the burgeoning new grain company with major Saudi investment that is pouring lots of money into Western Canada. It’s mostly hot desert air the regime has been exhaling in our direction.

With China it’s much more worrisome. The country is a gigantic market for Canadian crops and meat, and is where most of our future export growth hopes are pinned. The outrage in China over the arrest of a Huawei executive – on a U.S. warrant – isn’t likely to disappear as quickly as Saudi Arabia’s. Meng Wanzhou will be stuck in an extended extradition process for months, providing ample fuel for the Chinese outrage fire. The fact that Canada simply followed international rules for extradition requests isn’t providing much relief, because China seems afraid to rage at the U.S., with whom it is desperately trying to patch things up on trade, but wants to act out against somebody. So it’s Canada.

Canadian farmers need access to China’s markets. That’s why four Canadian cabinet ministers were over there a month ago, trying to boost trade. It’s why Canada’s industry organizations are often over there, holding meetings and making friends. A month ago there were big hopes for Canada to expand trade deals with China and lower the reliance of Canada on the U.S. market. Now those hopes are in the deep freeze. It’s stunning how things have turned around.

The Chinese response has been unintelligent, emotional rather than wise. It isn’t in China’s interests to push Canada closer to the U.S., especially when the two are caught in a growing geopolitical struggle. China needs more sources of food products and resources, as the present pain inflicted upon China by U.S. tariffs has been demonstrating. China wants Canada as a market for its goods.

But it’s the way a bully acts when frustrated by somebody bigger than them. They beat down on the little guy in the playground. And the little guy can’t really fight back effectively.

So the right response, it seems to me, is to avoid any unnecessary provocations, say little, seem saddened but unperturbed, and wait for the bully to grow tired. He’ll probably move on to somebody who will cry rather than just stand there and take it.

In the end, China needs Canada more than Canada needs China. That won’t resolve the present furore, but it should provide  the basis for an eventual lifting of the outrage and a resumption of managed trade.

At least we’ve learned a few things: China is not a friend; China does not respect the rule of law; true “free trade” with communist China will never happen. We can be hopeful, but we need to have more limited hopes.

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