Canada-China Brief: Trudeau talks with Xi at G20, Ottawa orders Chinese lithium divestment & more

This week's edition covers?Trudeau's clash with Xi?during the G20 summit in Indonesia, the federal government's order for three Chinese companies?to?divest from Canadian critical minerals?companies,?and more.??

First, here's the latest from IPD:

IPD's?Roundup

Why Canada Needs Dialogue With China, Especially When We Disagree

For IPD's project on Canada's National Interests in a Shifting Order, Sarah Kutulakos from Canada China Business Council writes: "this month’s G20 summit in Bali may have featured an uncomfortable interaction between Prime Minister Trudeau and President Xi. But this does not affect the fact that Canadian leaders must meet with their Chinese counterparts at these sorts of multilateral gatherings as a first step toward restarting dialogue." Read Sarah's article?here.

EASF 2022: Watch Video Recordings

The video recordings of the second annual East Asia Strategy Forum (EASF 2022) co-hosted by IPD and the Asia Pacific Foundation of Canada in Ottawa are now available through the following link:?https://easf2022.org/recordings/

Sinica: EASF 2022 Keynote on the U.S. in the Indo-Pacific by Evan Feigenbaum

The Sinica Podcast from the China Project transcribed and republished EASF 2022's keynote session from Evan Feigenbaum, Vice President for Studies at the Carnegie Endowment for International Peace, on Washington's strategy towards the Indo-Pacific and the clash between economics and security. Watch the session?here.

Toronto Star: China looms large as Canada contemplates renewed relationships in Indo-Pacific region

EASF 2022's keynote session from Paul Thoppil, Assistant Deputy Minister for the Asia Pacific at Global Affairs Canada, received coverage in The Star. The coming foreign policy blueprint for Canada’s dealings in the Indo-Pacific region will include a financial commitment to show to regional partners that Canada is serious about engagement. Watch the session?here.

Canadian Press: Trudeau puts cash behind Indo-Pacific pledges during visit to Southeast Asia summit

EASF 2022's panel session featuring Jonathan Fried, Paul Evans, Stéphanie Martel, and Jeffrey Reeves on Canada's forthcoming Indo-Pacific strategy received coverage?in The Canadian Press. Watch the session?here.

Expert Analysis

On how China will be defined and positioned for future Canadian policy:

In her recent speech at the Munk School, Minister Joly has made it explicitly?clear that Canada's approach?to China will be outlined in the forthcoming Indo-Pacific Strategy noting that the China we are dealing with today is not the China of the 1970s. Today, it's increasingly disruptive, assertive, and global, and as such, Canada will have to engage with China whether it be in bilateral or multilateral forums. Like many countries who are adopting a similar approach to Ottawa's 4Cs framework: cooperate, compete, challenge, and co-exist, the challenge for them will be to find ways to transform rhetoric?into reality on cooperation and co-existence.

Through their engagements at the ASEAN Summit in Cambodia and G20 in Indonesia, it must be clear to PM Trudeau and Minister Joly the sheer influence and connection China has to the Indo-Pacific region (cultivated over decades). Any regional engagements and partnerships will have to factor in China as well. As Minister Joly emphasized we need "to have frank, open and respectful dialogue" with China. Despite ongoing tensions between Washington and Beijing, President Xi and President Biden committed to keeping an open channel of dialogue at their bilateral meeting.?

—?Darren Touch, Member of the Indo-Pacific Advisory Committee

Top Stories

Trudeau and Xi clash at the G20 summit in Indonesia

On the sidelines of the G20, Prime Minister Justin Trudeau briefly met President Xi Jinping for?an informal conversation. In an official?readout, Trudeau raised concerns over?Chinese interference in Canada's 2019 federal elections among other issues, which was followed by a tense?exchange on the second day.?

'Inappropriate'?—?In a widely circulated video, Xi?voiced?disapproval of the?'leaking' of their talks to the Canadian press:

• "Everything we have discussed has been leaked to the papers and that is not appropriate. And that is not the way the conversation was conducted... If?there's sincerity on Canada's part, then let's conduct dialogue on the basis of mutual respect. If otherwise, then the results cannot be predicted."
• In response, Prime Minister Trudeau?responded that Canada "believes in free and open and frank dialogue" and?"looks?to continue to work constructively with China" before highlighting that there are things where?Canada disagrees with Beijing.
• Dismissively, President Xi Jinping ended the exchange by stressing the need to "create conditions first."

The fallout?—?Both sides have issued follow-up responses commenting on the heated interaction:

• In a press conference, Trudeau?stated?that not every conversation with foreign leaders is easy, "but it is extremely important we continue to stand up for things that are important to Canadians."
• In response to the incident, Chinese foreign ministry spokesperson Mao Ning?reinforced?Xi's position and said Canada should "create conditions with concrete actions" to improve ties with Beijing.
• She added that "China has no problem with candid conversations, but we would like these conversations to be carried out equally and with mutual respect," and that on?difficult bilateral relations, "it is clear that the responsibilities lie not with China."

What commentators think?— Several experts have?expressed their opinions about the incident.

• David Mulroney, former Canadian Ambassador to China,?observed?that "the incident was designed to be a rebuke and a public rebuke."
• Stephanie Carvin, a professor?at Carleton University,?commented?that "at the end of the day, Canada isn’t Europe or the United States and Xi knows he can take a more aggressive stance publicly. Moreover, he can use Canada as an example to other states without much in the way of consequences."
• Ian Bremmer, President of the Eurasia Group,?stated?that Xi's remarks served as a threat where?"there can be direct implications, economic, diplomatic... Canada needs China a lot, frankly a lot more than the Chinese needs the Canadians."

Chinese companies ordered to divest from Canadian lithium mines

In early November, Industry Minister Fran?ois-Phillipe Champagne ordered three Chinese firms to immediately sell their holdings in Canadian lithium mining companies.

National security?—?In a statement?released?by the Government of Canada, Minister Champagne offered?further reasoning behind the decision:?

• "While?Canada?continues to welcome foreign direct investment, we will act decisively when investments threaten our national security and our critical minerals supply chains, both at home and abroad."
• "We reviewed a number of investments in Canadian companies engaged in the critical minerals sector, including lithium. These companies were reviewed via the multi-step national security review process, which involves rigorous scrutiny by?Canada's?national security and intelligence community."
• "The government's decisions are based on facts and evidence and on the advice of critical minerals subject matter experts,?Canada's?security and intelligence community, and other government partners."

Beijing opposed?—?Chinese foreign ministry spokesperson Zhao Lijian?protested?the decision:

• "The Canadian side has overstretched the concept of national security and placed arbitrary curbs on normal trade and investment cooperation between China and Canadian companies."
• "This [decision] is against the principle of market economy and international economic and trading rules the Canadian side has been talking about. It does no good to the development of the target sectors, and hurts the stability of global industrial and supply chains."
• "China urges the Canadian side to stop suppressing Chinese companies. We call for a fair, just and non-discriminatory environment for Chinese companies doing business in Canada. The Chinese government will continue to protect the legitimate rights and interests of Chinese companies."

Greater scrutiny?—?In a?speech?on Canada's upcoming Indo-Pacific strategy, Foreign Minister Mélanie Joly?warned?firms of the risk of doing business with China:

• “To Canadians doing business in and with China: you need to be clear-eyed. The decision you take as business people are your own. As Canada's top diplomat, my job is to tell you that there are geopolitical risks linked to doing business with the country."
• "We will... help you diversify and mitigate risks across the region. We'll also be adding a new national economic security lens on foreign investments in Canada.”
• "As India becomes the most populous country in the world, its leadership and influence will only continue to grow both in the region and globally — so will the opportunity for Canada including the economic opportunity for Canadian businesses."

Agree to disagree?— Joly's speech was welcomed by?the Canadian business community as China?pushed back:

• In a?press?release, the Business Council of Canada stated that?the policy outlined by Joly “combines a realistic assessment of risks and regional tensions with a candid recognition Canada must continue to work with China on global priorities such as emissions reductions."
• Canadian Chamber of Commerce?CEO Perrin Beatty concurred,?stating?“this region holds great potential for Canada, including for Canadian businesses, and we look forward to working with the government in both diversifying and strengthening our economic activities in the Indo-Pacific."
• The Chinese Embassy in Ottawa?expressed?deep concern, noting that "Joly's speech contained a lot of negative contents related to China that distorted the truth, exaggerated the so-called 'China threat'?and discredited China's image."
• The statement added that "Canada should respond to public opinion and adopt policies that are truly beneficial?to the interests of Canada and the countries in the region, rather than following the example of a certain country, creating division and fomenting confrontation."

What commentators think?— Numerous experts have expressed their thoughts regarding Canada's?forced divestitures?and overall?change in its posture towards China.

• Richard Fadden,?former Canadian Security Intelligence Service Director,?praised?the decision as "a very?encouraging move," saying "the government’s general view on national security is becoming slightly more robust and this is one manifestation of it.”
• Guy Saint-Jacques, former Canadian ambassador to China, also welcomed the shift, calling it "a major change in the approach with China, one that I welcome... I think that will be also a very important signal for our partners in Asia."
• Roland Paris, a foreign policy expert at the University of Ottawa,?stated?that the moves "represent a significant shift in Canadian policy and a recognition that we and our allies will need to secure sources of critical minerals now and in the future."
• Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing,?said?that?Canada's decision "obviously has a negative impact on its credibility"?which will make companies from China and elsewhere that had planned to invest in Canada think twice.

What They're Saying

[The lithium divestiture announcement]?was a really well-read and I think appreciated signal in the U.S., that Canada is willing to be tough, and that it understands that there’s nothing to gain by trying to play nice with the Chinese if you lose the Americans...?Canada may have acted, I think, in its own interest, but also knew that if China continues to own those companies, those resources could not help build the electric vehicles we want... Canada is foursquare a reliable ally on this, and most Canadian companies don’t want to be on the wrong side of this either. The Americans are quite serious.?

—?Christopher Sands, Director, Canada Institute,?Wilson Center

The new [Chinese] Politburo is not a war cabinet. Although there is no question that China’s leadership has grown more prickly and assertive, predictions in the wake of the congress that Beijing could soon launch a military provocation or that Xi will dramatically rein in free-market capitalism in favor of a return to statism are wrong. For all their loyalty to Xi, the party’s new leaders are mostly measured technocrats. Xi has certainly added many close allies, but they also have strong connections to China’s private economy and are unlikely to be pure sycophants.

—?Christopher K. Johnson, President & CEO,?China Strategies Group

Did the engagement strategy’s mistake lie in expecting meaningful change within two decades, rather than a half-century or more? It is worth remembering that when it comes to generations of CPC leadership, Xi is only the?fifth. And as the China expert?Orville Schell?argues, it is “patronizing to assume that Chinese citizens will prove content to gain wealth and power alone without those aspects of life that other societies commonly consider fundamental to being human. Unfortunately, policymakers are always under time pressure and must formulate strategic objectives for the here and now. Biden has properly done that.?

—?Joseph Nye, Professor, Harvard University

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IMAGE CREDIT: OFFICE OF THE PRIME MINISTER | OFFICE OF THE PRIME MINISTER | G20 INDONESIA | FRAN?OIS-PHILIPPE CHAMPAGNE