Canada-China Brief: Billions promised for reshoring, Tories spar over Huawei & more

This week's edition covers the release and reaction to Ottawa's promise of investing billions to turn Canada into a critical minerals alternative to China and the Conservative leadership race's spotlight on Huawei. This brief will take into account both Canadian and Chinese perspectives on the state of the bilateral relationship.

First, here's the latest from IPD's experts:

From Our Experts

On Canada’s billion-dollar strategy to be Chinese alternative on minerals:

As geopolitical tensions rise around the world in tandem with demand for renewable energy, it makes sense for Canada to take advantage of its natural resources endowments and to become more globally competitive in industries such as lithium mining. Canada's critical minerals strategy is an important step in this direction, and has the potential to put Canada in a good position to take advantage of growing global demand for lithium and other metals that comprise the upstream segment of electric vehicle component supply chains.

I would, however, caution Canada's government against making this as part of a larger decoupling strategy from China, as cutting ourselves off from downstream clients—market leaders such as Chinese lithium-ion battery maker CATL, as well as Chinese electric vehicle brands like Nio, Geely, and BYD—would be a strategic mistake.

— Anton Malkin, Associate Fellow, Institute for Peace & Diplomacy

On middle powers' response to the end of a unipolar world order:

Unlike in 2001, the international system is now multipolar, with China rising as a great power and a civilizational state able to capitalize on America’s hubris and strategic overreach. Already, Beijing is arranging a new, parallel financial system that could benefit Russia and undermine the U.S.-led sanctions regime.

These developments will boost China’s economy and global clout; middle powers frustrated with the United States would also benefit from a financial pivot to Beijing and will be more tempted to do so the more the Washington establishment insists on weaponizing the dollar—possibly even sacrificing dollar’s status as the world’s reserve currency long-term.

— Arta Moeini, Research Director, Institute for Peace & Diplomacy

Top Stories

Ottawa vows billions to become critical minerals alternative to China

As the federal government's 2022 budget sinks in, domestic industry has begun reacting to billions in funding to be made available for developing a critical minerals base to wean off dependency on China.

A strategy in detail — The framework injects money into a US-Canada Joint Action Plan on Critical Minerals Collaboration signed in 2020:

• The Trump-era agreement underlined that "Canada and the United States share a mutual interest in improving critical mineral security and ensuring the future competitiveness."
• Washington has singled out the plan and Canada as a part of its flagship legislation to "identify key policy points of convergence... in managing relations with the People’s Republic of China," particularly to "secure supply chains and critical minerals."
• A 2021 parliamentary report that informed Canada's Critical Minerals Strategy went at length to underline the PRC's dominance in the sector with the President of the Mining Association of Canada then reporting that Beijing had "monopoly?like control" over the supply chain.

By the numbers — Ottawa's latest budget mobilizes as much as $3.8 billion over the coming decade to implement the Strategy, including:

• $1.5 billion to develop infrastructure for "priority deposits" in Canada as well as tax credits for rare earth element exploration in order to "secure Canada’s place in important supply chains with our allies."
• Another $1 billion for strategic innovation investments and hundreds of millions more for technology deployment and efforts to "advance Canada’s global leadership on critical minerals."

What commentators think — Opposition members and industry experts have seized on the funding promises:

• MP Greg McLean, the Conservatives' Natural Resources Critic, warned that Ottawa must "learn from other market-oriented liberal democracies" to ensure its resources "are not exploitable by hostile, foreign state-owned entities."
• David Billedeau, a director at the Canadian Chamber of Commerce, said "other countries are more advanced in this space than Canada, and we need to catch up" amid a sector "currently set to benefit China."
• President Pierrre Gratton of the Mining Association of Canada praised the budget as a "real strategy" to support the goods and materials that undergird the global electric vehicle industry.

Washington comes to town — US Trade Representative Katherine Tai recently met with trade minister Mary Ng and took questions in Ottawa:

• Tai revealed the two "are placing a real focus on risk, and how we address risk in global supply chains" and that "with respect to autocracies, there is a particular risk that we are realizing."
• In a later interview, Minister Ng said Tai's visit was an important signal that Canada stood with "like-minded" economies in building dependable supply chains.

Conservative leadership hopefuls spar over Huawei

The leading candidates in the Conservative party's leadership race have renewed scrutiny of Huawei as Jean Charest's past with the company has become the subject of criticism from Pierre Poilievre.

Charest on record — The ex-Deputy Prime Minister's law firm previously held the Chinese telecom giant as a client over the course of the two Michaels affair:

• Charest has told the CBC that he would ban the company from the country's 5G networks and that he had worked "on helping free the two Michaels," referencing the support of Vina Nadjibulla, Michael Kovrig's wife.
• Charest recently met with the Chair of the Council of Canadian Innovators Jim Balsillie to discuss Huawei's national security implications, with the Blackberry founder saying he would "trust his commitment to follow Five Eyes' leadership."
• His leadership camp also vowed to "conduct a review of all strategic projects… to protect Canada's national interests and security" should he enter the PM's office.

Threats of disqualification — Poilievre has zeroed in on the former Quebec premier's work with Huawei as a campaign talking point:

• In a statement to the media, he said "Jean Charest should be excluded from becoming prime minister after he sold out Canada’s security for a quick buck by working to get Huawei technology on Canada’s communications networks."
• Other Tories in the Poilievre camp have piled on with his campaign co-chair Senator Leo Housakos having said Charest would "absolutely" have to file as a foreign agent if Canada established a foreign influence registry.

On China policy — Charest has shared his views on the Canada-China relationship at multiple junctures before his entry into the leadership race.

• On Meng Wanzhou, the candidate has previously said "our policy toward China has been hijacked by Donald Trump" and that "we should not be kowtowing to another government with regard to our relationship with China."
• He has also stated that Canada has entered a "Cold War" with Beijing and that "the Chinese will behave like a superpower. The sooner we are realistic about this, the better we will be able to manage our relationship with China effectively."

What They're Saying

I wouldn’t use the word balance [for Beijing's position on Ukraine], because balance to me implies equality or trying to be equal in treating each side. And I would argue that... even with this language, China is more closely aligned with Russia, and there’s several reasons for that. They have ready access to Russian oil and gas... and some of the language that Russia uses about Ukraine has some resonance to Chinese ears about Taiwan.

— Gordon Houlden, former Director-General, East Asia, Global Affairs Canada

Through mounting US pressure on trade, tech, human rights and strategic competition (particularly last year’s [AUKUS] defence pact), China sees a US posture that is increasingly hardening. Thus, it deems closer relations with Russia to be a strategic counter. China may also expect the Ukraine war to draw attention and resources to Europe. The ensuing entanglement will weaken America, according to this line of thinking, providing China with strategic space and time to solidify its place in a new international order.

— Xingqiang (Alex) He, Research Fellow, Centre for International Governance Innovation

The honest truth is I don't know whether the world would defend a democracy in Taiwan if it were really under threat and part of that is because of the ambiguous nature of Taiwan's international status. But, I would say that I would hope the world would defend it.

— Stephen Harper, 22nd Prime Minister of Canada

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