Canada-China Brief: MPs promise Taiwan visit, trade forecast uncertainty & more

This week's edition covers a parliamentary group's?promise?to visit Taiwan, a forecast of?Canada-China trade?amid global economic uncertainty, and more.??

First, here's the latest from IPD:

IPD's?Roundup

China–Canada relations come full circle

Senior Fellow Jeremy Paltiel writes on Sino-Canadian relations for East Asia Forum under the backdrop of Ottawa's forthcoming Indo-Pacific strategy. He suggests that "while the ‘4Cs’ strategy (coexist, compete, cooperate and challenge) leaves room for collaboration, there is no interest in pursuing it bilaterally and no initiatives to kick-start it multilaterally."

When it comes to Canada-China trade, keep one eye on the Americans

Revisit our China Strategy Project through analysis from Carlo Dade,?Director of the?Canada West Foundation's Trade &?Investment Center. He suggests that the "best means to survive the inevitable need to cooperate with the Americans on their 'America First' Indo-Pacific strategy is going into those negotiations with a strong 'Canada First' policy."

Expert Analysis

This week, the Brief highlights commentary?from external experts exclusively provided to IPD.

On?rethinking Canada's foreign policy amid great power competition:

I think that it is useless to be able to play a central role on the international scene if we cannot analyze the interests that we would have to have... I think we need to develop an international relations policy that is pragmatic, that is much more based on Canada's security, economic, and political interests than on a policy based on values or principles.?I think it had its time. It had a certain effect in one era, but today I think it will be much more complicated. That's not to mention the?big cold war that's going on right now on the international scene, which is much more with China than with Russia today.?

—?Louise Blais , Former Canadian Ambassador & Deputy Permanent Representative to the UN

On?emerging?developing?geo-economic initiatives in the Asia Pacific:

Canada should keep track of the progress of BBBW and IPEF, as well as the players involved. Canada should join when the offer is made. However, IPEF is intended to be a precursor for later negotiations and does not include a uniform lowering of tariff or non-tariff barriers that are enforceable by members to benefit trade. Neither BBBW nor IPEF are comparable to the CPTPP —?which is the most comprehensive trade agreement in the Asia-Pacific region that Canada is a part of. Canada should continue to promote the rules-based order of the CPTPP and encourage/facilitate new members to join.

—?Sharon Sun , Trade Policy Economist,?Canada West Foundation

Top Stories

China launches diplomatic?offensive as Canadian MPs plan Taiwan trip

The aftermath of Nancy Pelosi's visit continues to unfold as China upgraded patrols in the Taiwan Strait and issued a white paper on reunification with Taiwan as Canadian MPs announced plans to visit Taipei.

The latest from Beijing?— U.S.?and Lithuanian delegations have proceeded with further?Taiwan?visits as China issued?policy statements on reunification:

• Concluding?military drills surrounding Taiwan, Senior Colonel Shi Yi of?the Eastern Theater Command of the People's Liberation Army?announced ?"normalized combat-readiness security patrols" and further "military training for war preparedness" in the Strait.
• In a new white paper, the Taiwan Affairs Office of the State Council and the State Council Information Office?stated ?that "peaceful reunification and?One Country, Two Systems are our basic principles for resolving the Taiwan question and the best approach to realizing national reunification."

Public diplomacy offensive —?Chinese ambassadors including in Ottawa have taken to?media channels?to defend China's position on?Taiwan:

• Cong Peiwu, China's?Ambassador to Canada, took on an?interview ?in?the Hill Times, emphasizing that the one-China policy?is the "political foundation" for Canada-China relations and serves as a "red line" where Ottawa should "come to realize the sensitivity of the issue."
• He also "urge[d] the Canadian side to draw the lessons from the past,"?adding?that "it provide[s] something for you to observe" regarding potential Chinese responses?in the event that red line was crossed.
• In an op-ed for Business in Vancouver, Cong?stated ?that U.S. actions "continually distort and hollow out the one-China principle, stepping up official exchanges with Taiwan" that have?"changed the one-China policy status quo."

Following suit??—?Eight?MPs and Senators of the Canada Taiwan Parliamentary Friendship Group announced?plans?to?visit Taiwan?in October:

• Judy Sgro, the Liberal chair of the Friendship Group,?stated ?that the House trade committee will "see what opportunities there are for deeper trade," adding?that the trip was "necessary" and that "pushback is very important."
• MP John McKay, Liberal chair of the defence committee,?said ?that "it is in our best interest to aid and encourage Taiwan in any way which we can," echoing Tory MP Michael Cooper who stated that?it was time to "take steps to strengthen Canada-Taiwan relations."
• Ambassador Cong Peiwu responded to the developments,?stating that China opposes any "official visit or interaction" and "certainly firmly reject[s] that kind of action."

PM shies from endorsement?—?In public?remarks , Justin Trudeau refrained from giving official government backing for the visit:

• "There are significant reflections going on right now. Canada has a long-standing position around China and Taiwan that we will ensure to respect... we will ensure that the parliamentarians making the decision to travel, or not, will be done with all the reflections of the consequences.”
• Sgro said that?the delegation would be paid for by the Taipei Economic and Cultural Office rather than the parliamentary budget, a practice that has followed the Taiwanese foreign ministry's funding of past MP visits.

What commentators think?— Canadian experts have expressed various views on the future of Canada's relations with Taiwan vis-à-vis China:

• Margaret McCuaig-Johnston, Senior Fellow at the University of Ottawa’s Graduate School of Public and International Affairs,?said ?Canada should "describe how we’re going to work with and support Taiwan" as an Indo-Pacific strategy "is going to shape how we relate to China and Taiwan."
• Jordan Reeves, outgoing Executive Director of the Canadian Trade Office in Taipei,?warned ?that "we cannot have a shared prosperity in the Indo-Pacific if we have a conflict here in the Taiwan Strait," adding he was "relieved" to learn of parliamentarians' forthcoming visit this year.
• Jacob Kovalio, Associate Professor?at Carleton University,?suggested ?that Canada should "constantly be engaging China, but not on China’s conditions, and make sure that we defend our national, economic, technological, and of course, trade interests."
• Gordon Houlden, Director Emeritus of the China Institute,?said ?that "our narrower relationship with Taiwan may benefit in the short-term" from more visible Canadian visits to Taiwan?"but it may undermine our broader interests in East Asia" amid destabilizing U.S.-China relations.

New figures project uncertain future?for Canada-China trade

Statistics Canada?reported ?that?Canada-China trade improved slightly over the last two quarters?with?imports growing 4.7% and exports by 1.9%. Despite the rebound, exports to China?remain weak compared to?last year. From Q1:2021 to Q1:2022, the Canadian export value to China plummeted 15.7%. Similarly, Q2:2022?export numbers were also 11.7% lower than Q2:2021.

The causes?—?Canada is not the only trade partner experiencing similar patterns. Shaoyan Sun of the China Institute?assessed ?that "disappointing figures should not be over-interpreted as a deteriorating trade relationship between Canada and China."

• Weak Chinese consumer demand: Sun cited China's zero-Covid policy as?"lockdowns in major cities, shutdowns of factories and stores, and disrupted shipping and logistics resulted in a dramatic decline in demand for imported goods and services."
• Rising global prices:?Price hikes from the war in Ukraine "inevitably affected" Canada's export slowdown?as "the two countries are key players in global supply chains" and as commodity markups?"may be a crucial driver of the decline in China’s purchase of Canadian goods."
• Stepping on the brakes: Sun identified tightening monetary policy across the globe as well as its effect on exchange rates and trade as "the Chinese yuan continued to tumble as the Canadian dollar strengthened, given Canada’s aggressive interest rate hike."

Uncertainty ahead?—?Looking back, Canada and China?have moved past the political obstacles to bring trade back to full speed. The performance of Q3:2022 numbers will?be more indicative of short-term trade performance but many factors may continue to disrupt trade?in the?long-term.?

• U.S.-China competition:?Sun notes it is becoming increasingly difficult for middle powers like Canada to navigate intensifying?competition as "the effectiveness of Canada’s attempt to maintain a balance between the US and China remains to be seen."
• Geo-economic initiatives:?New trade frameworks?such as IPEF, CPTPP, and Build Back Better World?may negatively impact?Canada-China trade as Sun states "disengagement will likely hinder economic growth, increase manufacturing costs, and eventually raise prices for everyone."

What They're Saying

The real China connection to the CHIPS Act is actually all about Taiwan, and specifically TSMC. Washington realized in 2019 and 2020 that TSMC was responsible for over 90% of advanced chip manufacturing and over 50% of global foundry capacity. In addition, Washington national security hawks were convinced that Xí Jìnpíng?intended to act on Taiwan by 2027 or 2030, despite no evidence that Xi or China had, or have, a timetable for reunification. The need to replicate some of the capacity that TSMC commands on U.S. soil before an escalation between China and Taiwan could potentially remove that capacity from the global market, became the real driving issue behind the new legislation.

—?Paul Triolo ,?Senior Vice President for China & Tech Policy Lead, Albright Stonebridge Group

The dangerous provocations of China over Taiwan — not just Nancy Pelosi’s visit this month — point to how the U.S. compulsion for power has reached global and unreasonable extremes. Miscalculations or errors could inadvertently make things worse. “Western values” certainly encompass Canada, but this isn’t the Cold War. It is important to realize our values are not existentially threatened... Canada and other western small powers are being taken along for the ride, arguably for the added legitimacy and credibility that collective action so often appears to represent.

—?Grant Dawson , Assistant Professor, University of Nottingham Ningbo China

Competition cannot become an end in itself. So long as outcompeting China defines the United States’ sense of purpose, Washington will continue to measure success on terms other than on its own. Rankings are a symbolic construct, not an objective condition. If the pursuit of human progress, peace, and prosperity is the ultimate objective, as Blinken has stated, then the United States does not need to beat China in order to win.

—?Jessica Chen Weiss , Michael J. Zak Professor of China & Asia-Pacific Studies,?Cornell University

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IMAGE CREDIT:?TAIPEI ECONOMIC AND CULTURAL OFFICE IN CANADA