10 Special reportCanada The EconomistJuly 27th 2019
1O
n december 1stlast year the Royal Canadian Mounted Police
arrested Meng Wanzhou, the chief financial officer of Huawei,
a Chinese telecoms firm, as she prepared to change planes at Van-
couver’s international airport. Ms Meng is wanted in America on
charges stemming from allegations that Huawei had tried to evade
sanctions on Iran. She is under house arrest in Vancouver while
Canada works out whether to honour America’s extradition re-
quest. China is furious. It has detained two Canadians, a former
diplomat and a businessman, in retaliation; Chinese courts have
sentenced two others to death on drugs charges. China, which
buys C$2.7bn-worth of canola seed from Canada, blocked imports
from two of Canada’s biggest producers and has stopped buying
Canadian pork and beef.
This clash with the world’s second-biggest economy, on top of
tensions with the biggest, has made Canada feel even more isolat-
ed. For decades its umbilical attachment to America has given it
security and economic sustenance while allowing it to express its
distinct diplomatic personality. The embodiment of that idea was
Lester Pearson, a prime minister who won the Nobel peace prize
for organising a unforce to help end the Suez crisis in 1956, the first
such peacekeeping operation. Where the stars and stripes were
feared or hated, the maple leaf was often welcome.
Now Canada’s touchy relations with the two superpowers are
echoed in a strained relationship with India, where a visit by Justin
Trudeau last year was marred by diplomatic gaffes. Chrystia Free-
land, a vocal critic of Vladimir Putin before she became Canadian
foreign-affairs minister, is banned from Russia. “For the first time
we don’t have good relations with four major world powers,” la-
ments Jocelyn Coulon, a former adviser to Mr Trudeau. In addi-
tion, Saudi Arabia expelled Canada’s ambassador last August after
Ms Freeland criticised it for jailing human-rights activists.
Even more dismaying for Canada is the weakening of America’s
commitment to the institutions that have sustained global peace
and commerce, such as the unand the World Trade Organisation
(wto). Some of the “foundational principles of the post-war order
are being questioned and threatened more seriously than at any
other time”, says Ms Freeland. Canada’s mission, she says, is to de-
fend liberal democracy and the rules-based international order.Global reach
Canada feels embattled, but it is not alone. Although politics is
making the country’s relations with the world more difficult, geog-
raphy and economic logic work in its favour. Trade deals, includ-
ing new agreements with the euand with ten Pacific countries,
give it preferential access to economies that account for nearly half
of world gdp. Relations with America and China are more resilient
than the headlines imply. Conflict is brewing in the melting Arctic,
but so is opportunity. In its defence of the international order,
Canada still has friends in Europe, Australasia and beyond.
Its trade in goods with China increased from C$78bn in 2014 to
C$103bn in 2018. The potential seems vast. China will remain hun-
gry for Canadian minerals, grains and fuels and eager to sell its
manufactures. PetroChina owns a 15% stake in a huge new project
to ship liquefied natural gas from British Columbia to China and
other Asian countries, starting in 2023. Some 74,000 Chinese stu-dents attended Canadian universities in 2017.
Mr Trudeau had hoped to start talks on a free-trade agreement
with China. That was before the detention of Ms Meng, after which
there can be no such prospect. But commerce is still in better shape
than diplomacy. A survey earlier this year of 250 Canadian and Chi-
nese companies by the Canada China Business Council found that,
although 20% had been hurt by the dispute, 65% had not. The gov-
ernment thinks a trade deal will eventually be done. “I can’t imag-
ine a world in the medium term that does not have enhanced trade
in Canada and China,” says Jim Carr, the trade minister.
The Arctic may soon figure in Canada’s trading relationships.
Because of climate change, Canada’s third coast could become a vi-
able outlet for exporting resources. Rail service to Churchill, the
country’s only deepwater port in the Arctic, recently reopened
after an 18-month interruption caused by flooding. “The northern
passage will become a reality one day,” says Murad Al-Katib, the
boss of agt, a food-processing company involved in a venture that
bought the railway and is upgrading the port.
But Canada is being directly menaced in the region for the first
time since the cold war. Russia threatens to become “a local hege-
mon”, says Rob Huebert of the Arctic Institute of North America at
the University of Calgary. It is conducting bomber and submarine
patrols in the region and has reopened at least ten military bases,
which were closed after the cold war.
China has declared itself a “near-Arctic state” and aims to create
a “polar silk road” to Europe through the Arctic Ocean. It is a ques-
tion of time before Chinese submarines appear in the region, Mr
Huebert believes. An unexpected challenge comes from Mike
Pompeo’s swipe at Canada’s claim on the Northwest Passage. If that
is followed by a “freedom-of-navigation operation”, that is, a navy
or coastguard trip that Canada does not authorise, a new crisis in
relations with America could erupt.
Canada reckons that the best way to deal with novel threats is toA nice country in
a nasty world
Canada is feeling lonely, but its global position is better
than it looksForeign policyComing to a conflict near you