Recently, five American Senators met with Prime Minister Mark Carney and left impressed and, apparently, with the impression that Carney understood that “China is the number one threat to North America.”
However, the reality is that the major threat to North America is the United States. And if Carney is serious about Canada diversifying its economy, then Canada needs China. If Canada joins the US efforts to cripple China’s development and makes an enemy of China, then Canada will be doing itself irreparable damage.
Carney recently spoke to Chinese Premier Li Qiang. The two agreed to re-open regular lines of communication and Carney has said that his government is working to remove Chinese tariffs on Canadian agricultural and seafood products.
This is a necessary first step, but it can only be the start.
The US and Canada are preparing to renegotiate the Canada-US-Mexico free trade agreement (CUSMA), but there is nothing to discuss. The US cannot be trusted to honour any agreement. Any future CUSMA must reduce Canada’s economic dependence on the US, not increase it.
If the US were a stable hegemonic power, Canada might have had no choice but to enter a disadvantageous arrangement with it. However, the United States is in precipitous decline. The Trump administration is illiberal, overtly racist, and on a fast-track to fascism, as evidenced by its provocative and violent actions towards demonstrators in Los Angeles. It is undermining American laws and institutions. The administration is openly corrupt. Trump’s social and economic policies will make most Americans poorer and more desperate, further fueling domestic instability. Trump’s attacks on universities and education threaten American soft power. The administration’s attacks on basic science threaten the technological prowess supporting American hegemony.
The evident economic incompetence of the Trump administration has severely damaged global confidence in the US government’s management of its economy. The bond markets are sending out warning signals that the days of cheap American debt may be ending. Trump’s policies may well cause an American -and global- recession.
Trump is a symptom of American decay, not the cause. These fundamental problems will not go away, no matter who is President.
By comparison to the US, China is a stable international actor with a vested interest in maintaining the global economy. Many Canadians may not like China’s political system, but China is not trying to force its system on other states.
China has been facing an economic slowdown, but this is easing. China is in the process of moving to a high-tech economy.
A contest between China and the US favours China. China has the world’s largest industrial base and most innovative technological ecosystem. It leads the world in 57 of 64 cutting edge technologies. China produces more engineers than the rest of the world and has the world’s best engineering universities. Facing American sanctions, it developed an advanced domestic computer chip industry practically overnight. China is using robots, artificial intelligence and other advanced technologies far more effectively than any other country. It is rapidly adopting renewable energy as its major source of power. China is 15 years ahead of the US in nuclear technology. It is planning to build an orbital solar array that may provide virtually unlimited solar energy.
Canada runs the risk of shutting China out of Canada to placate the US and then paying the price by losing access to technological and economic opportunities. As the rest of the world races ahead, Canada risks falling behind.
An example of how Canada can damage itself by failing to accept Chinese goods is electric vehicles (EVs.)
The Trudeau government levied 100% tariffs against Chinese EVs, ostensibly to protect the Canadian automobile industry and demonstrate Canadian loyalty to American hegemony, sacrificing Canada’s farmers to Chinese retaliation.
However, Trump wants the entire auto industry moved to the US, leaving little for Canada. More importantly, the North American/Western auto industry will have great difficulty competing against Chinese EVs, which are vastly superior vehicles. Chinese automakers are rapidly expanding their market share all around the world. Canada is forcing Canadians to buy needlessly expensive, sub-standard cars when they could be driving inexpensive, technologically-superior, environmentally-friendly Chinese EVs.
It is possible to bring Chinese EVs to Canada in ways that improve Canada’s technology and provide good jobs to workers. Julian Karaguesian, an economist at McGill University, has suggested quotas on EVs and agreements with Chinese EV makers to manufacture a certain number of cars in Canada.
Chinese Premier Li Qiang has emphasized China’s willingness to work with Canada on clean energy and technological innovation, areas essential to Carney’s desire to make Canada an “energy superpower.”
The US is coercing other countries to isolate China. The recent US-United Kingdom trade memorandum gives the US extraordinary influence over Chinese investment in parts of the British economy. Article 32.10 of the CUSMA allows the US to veto trade agreements between Canada and Mexico and “non-market economies.”
By purchasing power parity (PPP), China’s GDP may already be 54% larger than the US and may be 81% larger by 2030. This gap may increase even more, given the economic and technological damage the Trump administration is doing to the US.
The locus of the world economy is moving to Asia. Asia and other regions of the world are forming new economic, political and technological links. If the US pushes the world to choose between itself and China, many countries will choose China, rather than face perpetual extortion from an unstable and unreliable US.
Canada does not need to participate in an American “Golden Dome.” The only real security threat Canada faces is the United States.
Canada needs to approach China very carefully. If the US feels threatened by a Canada-China relationship, it will attack Canada politically, economically and maybe militarily. But if Canada does not find a way to break away from the US and work with China, it will follow the US into a long and dismal decline.
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