Canada is America's neighbour in a world where global power is shifting.

The views expressed in this publication are provided here to stimulate discussion and learning. They do not reflect the views of Canada’s World staff, reviewers, funders, collaborators, or the SFU Centre for Dialogue.

You've seen it in the news: India and China, the Elephant and the Dragon, are rising. And signs of their rise have never been clearer. Look in any closet across North America and you're bound to find a "Made in China" tag. Call a customer service number and there's a good chance you'll speak with someone on the Indian subcontinent. In just a few short decades, rapid economic growth and industrialization have reshaped global manufacturing, trade, and investment in the world's two most populated countries. Add the growing economic and political influence of Russia and Brazil - and an already-powerful European Union - to the Asian might, and what emerges is a challenge to America's post-Cold War dominance over the world's economic and political affairs.

What does this mean for Canada, given our close political, military, and social relationship with the US and our economic reliance on its market? Canada is directly affected by the growth in Asian economic influence. Chinese demand is spurring development in Canada's energy and natural resource sectors, and Canadians have benefited from Asia's consumer exports and investments. The flip side of this globalization for Canada, and others, is economic restructuring, "outsourcing" of production to India, China, and elsewhere, resulting in both the loss or weakening of industries and the emergence of new ones. This is the new reality of deep globalization: to remain competitive, national economies must integrate into an increasingly complex, globe-spanning production chain - with products designed in one place, manufactured in another, and sold yet somewhere else .

Canada's close but complex (and sometimes contentious) relationship with the United States cannot escape the consequences of worsening or improving US-China relations over such issues as Taiwan, access to energy and other natural resources, and the growing US-China trade imbalance. Canada and the US share the world's longest unprotected border, the largest bilateral trading partnership in the world, and the largest free trade agreement in the world, a closely-integrated manufacturing sector (e.g. the automotive industry), and a deep continental defence relationship. North-south trade has overtaken inter-provincial trade. More than three-quarters of Canada's exports go to the US, and we are each other's largest trading partner. As Premier Charest put it: "Through pipelines, data, and communications networks, shared electrical networks, intra-firm trade, and just-in-time distribution systems, our two countries have a common infrastructure that is increasingly integrated. An attack on one would be devastating to the other." These ties are also political, cultural and personal: colonial experience, democratic values, legal systems, language, and histories of immigration unite us.

Of course, this close relationship is not without its political disagreements and tensions. Refusal to participate in the Iraq invasion, rejection of the continental missile defence strategy, trade conflicts under the North American Free Trade Agreement (NAFTA), criticism of US sanctions against Cuba and other US foreign policy positions (e.g., International Criminal Court, the Land Mines Treaty), and more recently, disagreement on the environment, illustrate some deep-rooted differences. Another factor cannot be understated:

→  Canada's population of 31.6 million is about one-tenth of the US's 303 million . The US economy, at almost US$14 trillion, is the world's largest, and ours, at US$1.2 trillion, pales in comparison; and

→  While the US-Canada trade relationship represents a huge portion of Canada's overall trade -- 69% in 2007 -- Canadian trade with the US represents only 18% of the US's total global trade.

Future changes in Canada-US relations, particularly those that affect our integrated economies, will likely have a larger impact on Canada than on the US.

Canada faces tough choices about how to best manage relations (on all levels) with its most important partner -- the United States -- in the face of mounting pressures and challenges to US economic and political dominance, coming in part from Asian competitors. Canada must also contend with China as a competitor. China has replaced Canada as the US's number one source of imports and will overtake Canada as the US's top trading partner if trends continue. Chinese diplomacy is increasingly sophisticated and both China and India now participate in every important multilateral institution apart from the G8. As rising powers take on larger roles in the international community, Canada's own role will face new challenges. How can Canada best position itself in a decentralizing, globalizing world that is hungry for resources on one hand and fiercely competitive in knowledge-based industries on the other? The choices that Canada makes should be based on a careful reflection about Canadian values, interests, and assets.

This discussion guide provides information to set the stage for your discussions and to help you think about the values, interests, and assets that you think need to underlie the decisions and actions that Canada takes. It summarizes key elements of Canada's economic and political relations with the US and the rising powers in Asia, focusing mostly on China, Canada's second-largest trading partner. Supplying a brief historical context, the discussion guide sketches the rise of Asian powers and positions Canada within the context of that rise. The last section includes some approaches to stimulate your thinking about the questions you think Canadians should be asking.

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