Canada's Relations with Asia and the United States

Rising Powers

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


Canada's Relations with Asia and the United States

1. Background

Before further discussion of the current situation, it may be helpful to review Canada's history among the world's powers. At the end of World War II in 1945, Canada possessed one of the world's largest navies, had become industrialized, was endowed with natural resources, and was in good standing with the war's other victors. Its wartime contributions, robust economy, and growing immigration positioned it well to pursue its interests abroad. Canada played an early and respected role in international institution building, including formative memberships in:

the United Nations (UN) in 1945;

the North Atlantic Treaty Organization (NATO) in 1949;

the Treaty on the Non-proliferation of Nuclear Weapons (NPT) in 1968 and subsequent nonproliferation agreements; and

the North American Aerospace Defence Command (NORAD), which expanded defence cooperation with the US in 1958.

Throughout the Cold War era, Canada pursued deeper economic and diplomatic relations with other western industrialized democracies - especially the United States. It showed strong commitment to multilateralism and came to be seen as a "Middle Power." Under Prime Minister Lester B. Pearson, Canada took on a new role as a peacekeeping nation after it mediated the 1956 Suez Canal crisis.

Asia was not completely off the map for Canada during this period, and highlights of Canada's involvement with and on the continent included:

a peacekeeping mission in Kashmir (1950s), the disputed area located between India and Pakistan;

significant troop commitments in the Korean War;

participation in various small observer missions in Southeast Asia;

growing commercial interactions with China - particularly wheat sales - in the early 1960s;

official recognition of China in 1970, nine years before the US; and

civilian nuclear assistance to, and the development of a meaningful diplomatic relationship with, India (the relationship would later cool when India tested a nuclear device in 1974) .

The United States' strained relations with China in the 1970s did little to encourage greater Chinese-Canadian interactions, however. In addition, China's Cultural Revolution (late 1960s to early 1970s), which created tremendous economic and social dislocation, hindered western economic and political relations with Beijing.

In contrast, Japan had by then become a major economic power, and its foreign policies on nonproliferation, multilateral institutions, and global peace initiatives were well aligned with Canada's. Bilateral relations grew throughout the 1980s. Canada played a formative role in the creation of new regional multilateral institutions in Asia, including the Asia Pacific Economic Cooperation (APEC), created in 1989. Prime Minister Mulroney called for Japan to be given a permanent seat on the United Nations Security Council, up until then only occupied by the US, Britain, China, Russia, and France . In contrast, China's brutal 1989 crackdown on student protestors in the Tiananmen Square massacre further distanced the regime from western countries, particularly when a new era of liberal internationalism emerged with the collapse of the Soviet Union.

Despite Canada's increasing trade with Japan, at the end of the Cold War its foreign relations still centred on the Atlantic countries. While Canada had 13 diplomatic posts in the US, eight in the United Nations, five in Germany, and three in Australia, it had only two each in India, China, and Japan . The allocation of personnel on these missions similarly emphasized the transatlantic community. Canada's primary trading partner, by a significant margin, was the US, followed by other democratic countries: Japan, Western European nations, and Australia. In 1989, following an intense public debate and a fiercely-fought election, Canada signed the historic Canada-United States Free Trade Agreement (CUSTA), followed by the 1992 North American Free Trade Agreement (NAFTA) with the US and Mexico, the largest free trade agreement in the world to date.

Dating back to the 1960s and continuing on to the present, Canadian politicians, business leaders and the public have raised serious concerns about what was (and is) perceived to be an over-dependence on the US market and American control of Canadian assets. Several prime ministers (notably Prime Minister Trudeau and later Jean Chrétien) focused efforts on strengthening Canada's relationship with the Asia-Pacific region and China in particular. In the early 1970s, Trudeau launched a strategy to attract more trade and investment from non-US countries, mostly in Europe, but with some focus on Asia. Though this ‘Third Option' plan failed to reduce our trade dependency on the US, relations with Asia - especially China - improved.

2. Today 

In 2008 Canada's diplomatic relations with Asian countries still rank far below those with the US and Western Europe. Some analysts criticize the federal government for failing to formulate a clear, cohesive strategy toward China and the Asia Pacific region beyond strategic workings groups and mention in Canada's now-outdated 2005 International Policy Statement.

Nonetheless, trade with China and to a lesser extent other Asian countries (India for instance) has increased steadily over the last decade. As noted, today China is Canada's:

second-largest source of imports (behind the US);

fourth-largest export market (behind the US, the UK, and Japan); and

second-largest trading partner overall, with net trade totaling a record C$42-billion.

While economic relations are flourishing, political interactions are not so positive. Several Canadian diplomatic snarls in the past two years, most related to human rights issues, have cooled the Canada-China relationship (for example, Beijing and Ottawa disputed the handling of Huseyin Celil, a Uyghur Canadian and Chinese citizen who was extradited from Uzbekistan by Chinese authorities, accused of aiding Uyghur extremists, and jailed for life on charges of terrorism ).

On the US-Canada front, disagreements over (and sometimes outright rejection of) US military policy, going back to Diefenbaker, and continuing on with Pearson, Trudeau, Mulroney, Chrétien, and Martin, have not eroded Canada's economic relations with the US. As noted, the relationship involves much more than straight economics: social, cultural, political, and strategic linkages continue to be very important, and few contemporary alliances are as strong.

The Canada-US trade relationship reflects this deep partnership. The lion's share of Canadian (2006) exports goes south of the border:

C$359-billion, or just under 82 % of all exports, go to the US;

55% of imports into Canada are American, amounting to just under C$218-billion - down, however, from a decade ago when they were 66% of imports;

Canadian exports to China have steadily increased in the last decade while the US numbers have remained fairly constant - at about four-fifths of our exports.

Combining the imports and exports outlined above into trade totals further shows the dominance of the US-Canada relationship. Canada-US trade accounted for fully 69% (or more than two-thirds) of all of Canada's trade in 2006 - or $1.6-billion in cross-border trade per day. China, Canada's second largest trading partner, represented only 5% of total Canadian trade. Trade with Russia and India, the world's other rising powers, made up only 0.7 % combined in 2006.

While the economic benefits of the US-Canada relationship are not in dispute, there are ongoing concerns about the less positive consequences of economic integration, the depth and breadth of American direct investment, size differentials, and our vulnerability to US economic cycles, especially as fears of a US recession mount. This anxiety became particularly evident in the weeks after 9/11, when the US tightened the border and Canada had to contend with significant trade delays. While the two countries are actively collaborating on cross-border trade and security issues, the fact remains that Canada is the more vulnerable party.

It is within the context of our US trade "dependency" that some Canadian analysts have welcomed the rise of China and India, and to a lesser extent Russia and Latin America, while pointing to the importance of the European Union market. Rich in economic assets that rising, industrializing powers need - energy and natural resources, particularly oil, and the major Pacific port infrastructure needed to deliver them - Canada is well-positioned to expand its trade with Asia and others. Chinese state-owned firms and sovereign-wealth funds have shown serious interest in investing in Canadian resource sectors, including Alberta's oil sands. From a Chinese perspective, Canada can provide China with a safe, stable solution to its tremendous demand for resources .

Of course, Canadian energy and natural resource sectors are also very attractive to the US. American economic and political leaders are keen to solve resource-supply problems created by dwindling water reserves and a reliance on foreign oil. With predicted high global demand for resources, especially in Asia and the US, provincial and federal governments in Canada have serious choices to make about Canada's resource and trade management. Decisions made need to take into account a range of international policies, including international law, environmental policy, and, of course, future relationships with the US, Asia, and other countries.

How should Canada best position itself within the changing global landscape? In a world with rising powers, some of whom are undemocratic, how can Canada balance its economic and political priorities in a way that supports Canadian interests, values, and assets? Should Canada look to deeper economic and political integration in North America? Should Canada refocus priorities to look to other continents, especially Asia, as better prospects for future growth and influence, and if so, how? And how can we remain economically competitive as the world around us integrates?

Next section: Future directions

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