Canada-China Relations Committee on Feb. 24th, 2020

[The Chair, Liberal, Geoff Regan]

I call the committee back to order.

We have our second session now.

With us we have Jeremy Paltiel, professor in the department of political science at Carleton University. By video conference from Vancouver, British Columbia, we have Yves Tiberghien, professor, department of political science and faculty association, school of public policy and global affairs, University of British Columbia. From the Canada West Foundation, we have Carlo Dade, director, trade and investment centre, along with Sharon Zhengyang Sun, trade policy economist in the trade and investment centre.

Thank you very much.

We'll begin with Mr. Paltiel.

[Dr. Jeremy Paltiel, Professor, Department of Political Science, Carleton University, As an Individual]

Thank you very much.

Members of the Commons Special Committee on Canada-China Relations, I thank you for the honour of testifying before you today.

I am very grateful for the opportunity to testify before you, and I will be happy to answer your questions in English or French.

This year marks the 50th anniversary of the establishment of bilateral relations between the People's Republic of China and Canada. It also marks the 50th anniversary of my starting to learn Chinese. I see this as a particularly opportune moment from which to examine our bilateral relationship. My presentation is in three parts. In the first part I review the pattern of our relationship. In the second, I offer my perspective on the nature of the Chinese regime and the constraints this imposes on our bilateral relations and our alliance relations. In the third, I offer some perspective on the current state of our relations and how we may move forward.

We negotiated the establishment of bilateral relations beginning in 1968, a time when the People's Republic of China was largely isolated diplomatically during the unprecedented turmoil known as the Cultural Revolution. The premise of our initiative was not to endorse the Chinese regime, nor was it that China would transform itself into Canada. The human rights situation was then much worse than it is today. Underlying our establishment of diplomatic relations—and I defer to Professor Paul Evans on this question, since he literally wrote the book—was to bring China into the community of nations for the sake of global peace and security, as well as to diversify our foreign relations and trade and to show ourselves to be an independent global actor.

Our effort was eventually rewarded beyond our initial hopes. The People's Republic of China took its seat as a permanent member of the UN Security Council within months of the establishment of diplomatic relations in October 1970. Within 10 years, China began the process of reform and opening up, which led to China's spectacular rise. Canada played a role as a partner in China's reform and opening through our CIDA program, which began in 1981. China's reform and opening turned into a hope that China's reform would lead it to being a full participant in the liberal international order.

This initial hope was contradicted by the events of Tiananmen in 1989. When China's economic reforms resumed in 1991-92, our CIDA programs also continued, and hope was reignited, albeit on a more cautious and more long-term trajectory. China's efforts to join the World Trade Organization were symbolic of this renewed effort, and it was in this context in 1998 that then Chinese premier Zhu Rongji called Canada “China's best friend in the world.” Canadian efforts facilitated the adaptations of China's legal system and its institutions to the demands of an open trading system when China entered the WTO in January 2001.

In the 21st century, China no longer needs Canada to tutor it, nor to open doors for it. Just as China's success grew apparent, our relationship lost its overall strategic rationale. The spectacular growth of the Chinese economy became the new justification for our relationship, but we were disappointed that our previous history granted us no special privileges in the Chinese market. Even the team Canada approach failed to arrest the decline in our market share of the Chinese economy, and our trade fell into persistent deficits that see us buying basically two dollars of goods for every dollar we sell. We have not been able to establish a strategic focus in our relations under both Liberal and Conservative governments. Over the past decade and a half, as China's power has grown, our disappointed hopes have become increasingly tinged with fear.

In terms of the nature of the Chinese regime, since Xi Jinping rose to power at the 18th party congress in 2012, China has moved from a defence of China's difference as an exception to the universality of liberal values to celebration of its governance based on its own cultural traditions and achievements of the Communist regime.

Xi has been careful not to broadcast that the Chinese model should be copied or imposed, but nonetheless offers his country's experience as a model for developing countries to learn from. However, it is worth remembering that at the time when Canada recognized China, in October 1970, Chairman Mao and the Chinese Communist Party still espoused global revolution and the overthrow of capitalism. That is not the case today. Beijing's concerns about liberal democracy largely stem from its fears about the domestic security of its own regime. lt does not seek to aggressively undermine regimes abroad. It’s not Russia. As the world's greatest exporter, China is inherently committed to an open, rules-based international trading order. China is trying to cement its status through initiatives like the belt and road initiative and the Asian Infrastructure Investment Bank.

These efforts to increase prosperity and connectivity through the BRI and the AIIB are not in themselves a threat to Canada. Investment in public goods, like infrastructure, will pay dividends even if we are not direct beneficiaries or participants. Moreover, closer engagement will allow us to exercise some influence, such as our membership in the AIIB, over the direction and management of these programs. We confront China as a successful competitor that has adapted market methods to achieve state-led goals. This is a challenge, but it is not a threat to the rules-based order in itself.

China's Leninist regime is designed to insulate the political leadership from outside influence, domestic or international, so its entire outlook is based on insulating itself from the outside internally and externally. However, the continued survival of the Chinese Communist Party—the People's Republic of China has now survived longer than the Soviet Union did—requires it to adapt and learn. China is sensitive, in the best and worst sense of the term, to outside opinion and to criticism from below.

The Chinese dream of China's great rejuvenation represents joining the world, not isolating China from it. One concrete expression of this is the hundreds of thousands of Chinese students in Canada. Our strategy must allow for different representations of the will of the Chinese people, while recognizing that the Chinese government we are dealing with is the government that is empowered to make commitments by the Chinese state. We have no control or say on how it may change or when.

Canadian prosperity and global influence depend on having a workable relationship with China. Right now we have the worst relationship with China of any of the G7 countries, but there are signs that our relationship is thawing. This provides hope for improvement, but I share with other Canadians the conviction that there can be no fundamental improvement in the relationship until the two Michaels go free.

The Chinese have an expression they employ often in their diplomacy called qiutong cunyi, which means emphasize points of agreement while reserving differences. We must craft a strategy that allows us to do that even though we have serious, ongoing human rights concerns, particularly as regards Xinjiang. We cannot disentangle China from the fate of the globe, and any hope of isolating or containing China is doomed to fail. There is a whole agenda of issues, including climate change and global health, where we have no choice but to work with China. Our prosperity, like China's, depends on an open, rules-based trading system. We cannot safeguard that system and a healthy environment for global innovation without China.

[The Chair, Liberal, Geoff Regan]

Mr. Paltiel, you have 35 seconds. You can wrap up, please, if you don't mind.

[Dr. Jeremy Paltiel]

Okay.

I have a few more comments, but basically the premise of our engagement is not to remake China in our own image, but to co-operate in areas of common interest and to reserve a space where critical concerns will be listened to on the basis of reciprocity. We have to obviously move to one where we have to emphasize reciprocity more and more. Apart from the fact that China no longer needs us to open doors, we have too many pressing concerns to ignore.

I will submit my other comments and let the other commentators go forward.

[The Chair, Liberal, Geoff Regan]

That's 10 minutes, bang on. Thank you very much for your co-operation.

Mr. Tiberghien.

[Prof. Yves Tiberghien, Professor, Department of Political Science, and Faculty Associate, School of Public Policy and Global Affairs, University of British Columbia, As an Individual]

Thank you, Mr. Chair and members of the committee.

I am honoured to contribute to your deliberations today by sharing with you some of the fruits of my research and observations on Canada-China relations.

I commend the important work of your committee, and I recognize the urgency of assessing this relationship, given the situation of our fellow citizens incarcerated in China, specifically, Michael Kovrig and Michael Spavor. We all recognize the bad turning point in the Canada-China relationship since the arrest of Ms. Meng Wanzhou on December 1, 2018, and the arrest of the two Michaels on December 10, 2018.

I also acknowledge that we are talking here in the middle of a public health crisis wherein we have many diplomats in China, including the ambassador, and where the biggest lockdown of cities in the modern age has taken place, with terrible suffering.

I also will take this chance to thank the clerk of the committee and the staff for making a difference every day, including the pages, Hansard, translators and clerks. I have a student now who served as a page last year, and it was a fantastic training ground.

I'd like to start with two key points. Then I'll focus on some key aspects of the international system as it relates to Canada-China and offer some points on China and some implications for Canada. First, the Canada-China downturn is part of a larger period of great disruption in global politics. Every country today is adjusting its posture in international affairs and is responding to the moves of others. Second, in this context, Canada's priorities are to be robust in defence of the national interest and in finding actionable pathways to defend the rules-based international order with key partners. Effective multilateralism must underpin Canada's action in the international arena.

Now I'll offer some points on the international context and how it impacts upon the Canada-China relation.

I call this the age of disruptions. To a large extent, the Canada-China crisis is part of the larger U.S.-China crisis and is a prism for the challenges to the rules-based order.

Let me elaborate on five key drivers and their impact.

First, we're living through a crisis of globalization. We see peaking trade flows, a move toward the regionalization and deglobalization of global supply chains. Globally induced inequalities have led to great polarization and tensions in most advanced democracies. This is an age of anxiety and anger in countries such as the U.S., the U.K., France, Italy, Greece, Poland and many others.

Second, we're facing systemic shifts in our economic system due to the combination of climate change and the fourth industrial revolution. These two forces are creating heightened competition.

Third, we have just lived through one of the greatest shifts in economic power in modern history. Between 2000 and 2018, more than 20% of global GDP in nominal dollars shifted hands from OECD countries to emerging economies. Of this shift, 60%—that is, 12 points—went to China. The rest went to India, Southeast Asia, central Asia and Africa. The IMF estimates that Asia represents 60% of world growth today and for the next decade. The open economy facilitated that shift, yet it's also important to note that China and India are essentially returning to where they were for 2,000 years until 1820, that is, before the industrial revolution and colonization. As part of this change we see a more assertive China but also a more assertive India, Russia, Indonesia and Africa.

Fourth, China today represents 16% of world GDP nominal dollars and 19% in PPP terms. That's 2018 data. From 2012 to 2020, China has represented one-third of global growth. China is a giant in every domain, from health to renewable energy to AI, big data, international students and UN peacekeeping soldiers. We cannot work on any global issue in the world today without working with China. We also observe a recoupling of Asian sub-regions, such as South Asia, Southeast Asia, central Asia and China. Those regions had been disconnected since colonial times—for more than 200 years, and in fact since the fall of Tamerlane, the last Mongol ruler, in 1405.

Fifth, we're currently witnessing a shock in the international order as the U.S., the leader that created the liberal order, is, under the Trump administration, turning against many of the multilateral institutions that the U.S. created and has nurtured since World War II. We don't know yet whether it's a bargaining readjustment or a longer-term disruption to the 100-year search for order, going back to Woodrow Wilson following World War I.

The consequence of those five disruptions and systemic changes is a period of growing geopolitical rivalry. I see tremendous dynamism. I also see tremendous misperceptions, since every power is reading the actions of the others through its own historical frame and narratives. For example, the arrest of Madam Meng Wanzhou in December 2018 led to extremely powerful reactions among the Chinese public and within the government, revealing great misunderstanding about Canada's true intentions. Of course, the same is true on the Canadian side. You may unlock such misunderstandings by looking for clues in Europe.

I'm also struck that the Internet has not narrowed perceptions among groups or nations, but increased them due to echo chamber effects and overload. In this context, it's essential to start by understanding what drives and motivates other players, so as to find actual pathways to get things done. It's crucial to avoid emotional tit-for-tat cycles that lead to everybody being worse off.

As a case in point, see the EU's wake-up call with the last op-ed written by Josep Borrell, the current High Representative of the EU, on February 8, 2020, in Project Syndicate. He urged Europe to wake up to a world where big players don't play according to rules but practise issue linkage and power politics. He urged the EU to have strategic thinking, to build leverage and coalitions. We hear similar views from our key ally in Asia, Japan.

Now I will say a few things about China and Chinese governance and Chinese perceptions.

China is complex and paradoxical. It has gained great international power yet faces more domestic and global uncertainties today than at any time since the end of the Mao era. Here are a few of the challenges.

First, about Chinese governance, if you've talked to members of the Chinese middle class in recent years, you get a sense of great hope and emergence from great trauma. China was a wealthy and peaceful country in 1820, representing 30% of the world's economy. After 1820, China lived through two opium wars and the loss of trade and foreign autonomy to western powers and Japan, and there were great peasant rebellions that killed upward of 50 million people in the late 1800s. The great hope of the 1911 revolution with Sun Yat-Sen was followed immediately by fragmentation into warlord-held regions, civil war for decades, invasion by Japan that killed another 20 million, more civil war and the Korean war. China did have a few good years from 1952 to 1957, followed by the madness of the anti-rightist campaign, the Great Leap Forward with a famine that killed 50 million more, followed in turn by Mao's cultural revolution. No wonder the middle class supports stability and sees the current decades as the best time in China in 150 years, an age of prosperity and possibility.

There is, of course, broad support for the regime. Many Chinese feel a sense of great progress, growing wealth and prosperity, greater freedom—except for political freedom, particularly the ability to criticize the party.

There is also, of course, increasing desire for information and voice, especially on social media. At the same time, given that the middle class is only 25% of the population, it's not yet in its interest to hand power to the other 75%, the rest of the population. Think of Thailand and the yellow vest push-back against democratically elected Thaksin. What I hear, however, are aspirations for evolution over time that would yield better political freedom and governance without the trauma of national fragmentation or past dynastic change.

Second, given a long and sophisticated political history over thousands of years and China representing a big share of humanity's collective experience, the Chinese people and government alike expect recognition for that heritage. The current government may be Leninist in structure, but it often behaves like a government that inherited practices and norms from past dynasties.

Third, while China does not buy in to the political pillar of the liberal order, governance is nonetheless fragmented and pluralistic. Despite Xi Jinping's very strong accumulation of power and crackdowns on many fields like media, the structure of power remains collective leadership. When Xi doesn't get the support of the 25-strong politburo or the seven-strong standing committee, he cannot move forward. In fact, to stay on for a third mandate after 2022—

[The Chair, Liberal, Geoff Regan]

Excuse me, Mr. Tiberghien, you have 30 seconds left. Could you conclude your presentation, please?

[Prof. Yves Tiberghien]

Okay.

China's policy output has zones of darkness and zones of light and progress. The more insecure China is, the more it tightens control. We need to find effective ways to deal with this.

The implications for Canada are as follows. We cannot wish China would go away. We have to deal with the China we have. We need a differentiated approach with China, with certain practices and national interests. We have to protect our security, but the longer term of Canada is to buttress the rules-based international order and to make sure China gets integrated into it. We must focus on outcomes.

[The Chair, Liberal, Geoff Regan]

Thank you very much.

We now have the Canada West Foundation.

I understand that Mr. Dade and Ms. Sun will be sharing the 10 minutes.

Thank you.

[Carlo Dade, Director, Trade and Investment Centre, Canada West Foundation]

Yes, that's correct.

Before we begin, and as always, we would like to thank the committee, the chair and the clerk for their assistance.

Thank you for the invitation to be here. This makes two times in two weeks for the Canada West Foundation to be in Ottawa testifying before Parliament on issues of great importance, obviously to Canada, but also to the west.

This is where our testimony will focus today. If we had 30 minutes to go it alone, we would stay with the high-level discussions, but we'd like to bring the testimony down to some concrete elements about our engagement.

I trust too, Mr. Chair, that since we're the only institutional speaker today we can get an extra 15 to 20 seconds to describe our institution.

[The Chair, Liberal, Geoff Regan]

No, I'm sorry.

[Carlo Dade]

Once again, then, the west is shut out.

[Some hon. members]

Oh, oh!

[The Chair, Liberal, Geoff Regan]

Everyone gets equal time.

[Carlo Dade]

All kidding aside, the Canada West Foundation was created 50 years ago for moments much like today to ensure that the west has a voice in affairs that shape the country, but more to assure that the west can contribute to creating a strong and prosperous Canada. A strong west is a strong Canada, and nowhere is that more evident than in our relations with Asia.

We've been through some difficult times, the west and the country. We are in some now, but we continue to work towards that vision of a strong west in a strong Canada. Given what's happened today, we just hope that the rest of the country will continue to respond and to reach out to us.

On Asia and engagement, we have three points today for the committee.

Asia and Canada's engagement has been a focus for the Canada West Foundation. We carried out modelling—economic impact assessments—that members in another committee asked that the government do, so that Parliament could actually have data, intelligence and information to understand trade agreements. We did it for the CPTPP in advance of the government's doing it.

That information was critical for the committee to understand. It was critical for the country to have the data, to understand and to keep the country and the government from making the calamitous mistake of walking away from the TPP agreement. Given the way our relations with the U.S. and our relations with China have gone, it's easy to see not just how prescient but how important that sort of information was.

We have three points for the committee, and we hope these will guide your thinking going forward and guide your questioning of other witnesses.

The first is that Canada's relation with China flows through the west. The west is the centre and the focus of our engagement with China. Yes, other parts of the country are involved, but it is in the west that the rubber meets the road. It is the west that is implicated immediately, in ways that other parts of the country aren't.

Second, agriculture is a key part of this relationship. The data that you have before you, which my colleague will walk you through, shows this.

Third, agriculture may offer an idea of what the solution is or how we begin to build on re-engagement.

It may facilitate the renewal of this relationship at the appropriate time.

It is how we can potentially re-engage when the time is right.

I will now turn it over to my colleague, our trade policy economist, to walk us through some of the data.

[Sharon Zhengyang Sun, Trade Policy Economist, Trade and Investment Centre, Canada West Foundation]

Thank you, Mr. Dade.

Thank you, Mr. Chair.

I'll start with some numbers. Even though the U.S. is and will continue to be our largest trading partner, the average growth of two-way trade with China over the last 10 years has been 12%—that compares with 4% with the U.S.—and 65% of this two-way trade with China comes from the four western provinces. China has become an important trading partner for Canada and for western Canada.

Our engagement with our second largest trading partner will continue to grow.

Trade with China is particularly important for agriculture. If you look at diagram six in the testimony I've shared with you, you see that more than $10 billion, or 37% of Canada's total export to China, is agricultural and that 75% of this agricultural export to China comes from the four western provinces of Canada.

This is why a poor relationship with China is detrimental to Canadian trade, particularly in the west.

We've observed evidence of this in our recent issues with China on canola, on pork, on beef and on soy.

Canada, therefore, needs market access certainty with China, which means reducing or mitigating arbitrary actions that have harmed farmers and diminished Canadian exports. This means addressing non-tariff barriers in the long term for Canadian agriculture.

While trade in agriculture is important for Canada—it's important for western Canada—agriculture or food security specifically is very important for China. We've seen clear indications of this in their five-year plans. We see evidence of it in “made in China 2025”, their industrial policy that aims for self-sustainability in agriculture as one area by focusing on smart agricultural technology. We see evidence of it in the belt and road initiative that focuses on transportation and infrastructure connectivity by land and by sea as an indication for longer-term agricultural supply certainty.

OECD also has projections on agricultural consumption by 2028. China comes first for many of the agricultural sectors that are important for Canadian export, such as pork, oilseeds, protein meal, soybean and cereal.

So China's interest is agri-food security and Canada's interest is certainty of access to the Chinese market. Agriculture is therefore a key interest shared by both countries, but this interest is driven by different needs.

[Carlo Dade]

Indeed, if you look at the interests of agriculture, on the one hand China needs food security—access to certainty on access to supply. Even though China is moving to become self-sufficient in certain commodities, the overall demand means that they will always need foreign inputs, not simply as a backstop but to feed the population.

On the other hand, Canada needs market access certainty. If we are going to have producers risk farms, risk investments, risk things that have been in their families for generations, we need certainty about access to markets. That certainty has just been redefined by the U.S.-China phase one trade agreement.

At Canada West, we're engaged on a project to examine how other countries are dealing with non-tariff barrier issues with China. We've looked at Australia and New Zealand, obviously, but also Brazil. I would suggest that at the committee you always hear Australia, New Zealand and the United States, but Brazil has some interesting insights.

Looking at the phase one agreement, what the U.S. has done is redefine what market access certainty is. There are, give or take, 121 specific concessions that the U.S. got from China in that agreement; 51 of them are what I would call hyper-specific commitments and concessions. They're such things as that, within 20 days of receipt of any monthly updates to the list of U.S. pet food and non-ruminant-derived animal feed facilities that the U.S. has determined to be eligible for export, China shall register the facilities, publish the updates to the list on the Chinese GACC—the Chinese customs website—and allow imports of food derived from animal feed from U.S. facilities on that list.

You have the same thing for pork. You have the same thing for beef.

These types of market access certainty are the bar. This will essentially have us out of the Chinese market.

If you think about access and what we need to get from China, agriculture offers a possible solution. If we were to engage China and guarantee access to Canadian supply—not that we'll send a certain amount, but that we will not impose political restrictions on China's access to food, on China's access to agricultural technology, on China's ability to invest in or to access agricultural biotechnology, on China's ability to invest in agricultural production, on China's ability to invest in agricultural processing—we'd have the makings, potentially, of an agreement.

This distinguishes us from the Americans, who used food as a political weapon throughout their history. Even just two months ago, a former U.S. undersecretary was threatening to cut off food to North Korea. We distinguish ourselves from the Americans, we establish why we are different and we have the basis for re-engaging China to reset the relation. Obviously, China will want more, but this is a start.

For the committee—

[The Chair, Liberal, Geoff Regan]

I'm sure there will be chances to speak some more during the answers to questions.

Before I go to questions, we had Mr. Fragiskatos's motion that I probably should have come to after the break. Is it agreed?

(Motion agreed to)

Thank you very much.

Now we have a six-minute round, Mr. Genuis.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Thank you.

Mr. Tiberghien, I wanted to ask my questions to you. You said some things about the Canada-China relationship that are different from things I've read in other sources, so I thought I would dig in a little bit.

Your colleague, Mr. Evans, suggested that we talk a bit about the relationship between Canadian universities and the Canada-China relationship. When it comes to the Canada-China relationship and the Canada-Huawei relationship, do you have a sense of UBC's financial exposure and how much your institution would stand to lose financially in terms of partnerships if certain things happened that made those partnerships less possible?

[Prof. Yves Tiberghien]

I don't have a sense. I don't manage the overall budget of UBC. What I do know is that when I was director of the institute of Asian research, we had no funding from Chinese sources. We had other endowments that came from Japan, Taiwan and so on, but none from China. The main exposure of UBC is primarily through students—student flows—but students are not just agents of the Chinese state. They are independent members of the middle class, by and large, and they're very hard to control.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

I appreciate that, and I agree about the important role there, but I've read—and I don't know if you can confirm these figures or not—that at the beginning of 2019, UBC and Huawei alone had partnerships worth $7.6 million over three years, that the exposure on the Vancouver summer program, which was for summer students coming for a month-long period, was about $10 million. Maybe you don't have those numbers offhand. I researched them beforehand, and the level of exposure that UBC has is interesting.

In the context of that partnership with Huawei, has CSIS ever issued warnings to you or the university, that you know of, about the risks of collaboration with Huawei?

[Prof. Yves Tiberghien]

Not to me, no.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Are you aware of CSIS issuing warnings to other officials at the university?

[Prof. Yves Tiberghien]

Mainly from my colleague Paul Evans. He has more contact with CSIS.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

All right.

You mentioned not managing the university's overall budget. Are you still the executive director of the UBC China council?