Canada-China Relations Committee on Oct. 4th, 2022

[Gordon Houlden]

That's a very important question.

My assumption would be that the effect of restrictions on Chinese exports to Canada would be more disruptive, at least in the short term. Tariffs would be bearable, and obviously prices would increase, but if we're saying an absolute stoppage of flow, that would be very difficult. Definitely, I believe, the economic impact would take some time to get around.

Even with the difficulties in the U.S.-China relationship under the current president and the previous president, very few American companies actually moved their production out of China. Some did, but they haven't moved it back and reshored it in the United States. Some has gone to Mexico. Some has gone to Vietnam. But are there enough skilled workers available? Are the skills there or the infrastructure? Even in the case of India, it's a real challenge. You can't expect that to happen overnight.

On the export side, I note that on the canola side what happened, to my surprise, was—whoops—we sold our canola somewhere else, and other countries supplied canola to Canada. In some cases, actually, Canadian canola went somewhere else and then was transferred back to China after a perfunctory stop in another port. Both could be problematic.

The greatest would be, in my view, the stoppage of the normal flow of imports. Over time, that could be overcome, but that would take time and I think the economic impact would be quite severe. How severe, I don't know, but I would argue that the need is there for government to at least do a careful study on where the impact would be the greatest, how strategic it would be, which sectors we could cushion and what we could do to lessen that impact, given that it's an unlikely but not impossible series of events.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

If that's the case, Dr. Houlden, then wouldn't the biggest impact be on the grand consumer belt of the Quebec City-Windsor corridor, where some two-thirds of Canadian consumers live who use those imports? There's some $70 billion in imports that we bring in from China every year, rather than the exports of some $30 billion, predominantly from the prairie provinces. Wouldn't it seem to make sense that the bigger economic impact would perhaps be felt in central Canada as opposed to western Canada?

[Gordon Houlden]

In that sense you're correct, in the sense that exports of pulp and paper, let's say, go to India, let's say. India might divert some of their trade to Canada that they would have taken elsewhere, but you're right. If you have an automobile being assembled in Ontario, let's say, in Oshawa, and there are pieces of that—auto parts—that are coming from China, that can't be changed quickly. Over time, it can, but there would be at least a short-term to medium-term disruption.

The net effect overall I think would make the energy problems for Europe look small. It would basically take China out of the equation in both ways, imports and exports.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

I have a very quick question.

As you know, China banned imports of Canadian canola and pork—and I believe beef—several years ago on spurious grounds.

When China lifted those bans, should the Canadian government have indicated that they weren't prepared to grant whatever permits were necessary for those exports as a signal to China not to try to pull that stunt again?

[The Chair, Liberal, Ken Hardie]

Please give a very brief answer, Professor Houlden.

[Gordon Houlden]

You can do that. My worry sometimes is that you get into a tit-for-tat on trade issues. The Chinese can out “tat” you in some sense. They have many levers, and their government can pull those levers so easily.

[The Chair, Liberal, Ken Hardie]

For our final questioning, we'll go to Mr. Oliphant.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you, Mr. Chair.

To all three of you, thank you for sharing your time, your wisdom and your experience.

Professor Ong, I want to start with you.

I loved your opening statement, which I found very insightful, and also your comment about the only certainty being uncertainty.

In the very near future, looking at October 16 and the gathering that will happen in the Great Hall of the People, the National Congress of the Communist Party of China, what should we be looking for? You talked about the consolidation of power, which we have seen in the last two congresses, and it's getting to be complete. We can feel that the challenges to President Xi's power are limited and have been limited.

Other than the drama—and there's always some big pageantry and drama—and the consolidation of power, what should we be looking for? What insights might we gather from there? Are there any signs that you think we should be watching for or listening for?

[Dr. Lynette Ong]

I would be looking for the composition of people in the Politburo standing committee. Right now, it's a seven-member committee, which largely consists of people who are followers of President Xi, but there are also two people who are not. I think most people predicted that you were going to have two semi-independent people so that President Xi wouldn't have a clean sweep.

In a sense, that is only symbolic, because we know that power has also been centralized, in effective terms, but I think the coming months, the months after the party congress, are actually more important. After the pageantry, after the big show, what are the policies that are going to be formulated on Xinjiang, on trade and from politics to economy to society?

I think that once the president becomes more confident of his power, of his grip on elite politics, he will be more confident in putting out the rest of the policies that he actually wants to implement. The next three months after the party congress I think are a very critical period.

[Rob Oliphant, Liberal, Don Valley West, ON]

Do you think those will be mostly domestic policies around the economy or foreign policies related to, say, the belt and road initiative or African investment? Where do you think his emphasis will be—domestic or foreign?

[Dr. Lynette Ong]

I think mostly domestic. The big question is what President Xi is going to do about Taiwan, or is he going to do anything about Taiwan? I think that will come in the next five years, whether or not.... People have been debating forever whether China is going take Taiwan back by force. I think that remains an open question, and we will see increasing signs of that in the next five years, I believe.

[Rob Oliphant, Liberal, Don Valley West, ON]

Very good. Thank you.

Professor Houlden, I'm going back to you. You were talking about the U.S. and how relations with China are often triangulated with the United States. I'm wondering if you could briefly talk about the risks and the potential of either aligning closely with the U.S. or diverging far from it. I know that it's kind of a big question, but I just wonder what you might offer us in advice on that. We'll have to do more work on Canada-U.S.-China triangulation, but do you have any thoughts on that?

[Gordon Houlden]

That's a super important question.

Of course, that relationship has been negative, and it's getting worse. We're about to enter—it seems to be always the case—more intensive political campaigning in the United States. It won't end until 2024. I think you'll see both parties campaigning on anti-China stances; however, the trade continues. The vast majority of Fortune 500 companies are actively engaged in the China market. They do more trade now in China than they do with Canada, and our trade with the U.S. is huge.

Just to swivel back to your question on elite politics, my own view is that those answers we're going to see very soon are precooked in consultations. When you have a one-party system, the factions within the party become important. Those factions will not be vanquished completely by Xi. I compare Chinese elite politics to water polo. On the surface, it looks like people are passing the ball back and forth very nicely, but underneath the water there's a lot of kicking going on, and we just don't see that.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you very much.

Thanks, Mr. Chair.

[The Chair, Liberal, Ken Hardie]

Thank you all, Ms. Ong, Ms. Calverley and Professor Houlden. It was fascinating input into the questions that you had tonight. Thank you for joining us and sharing your time with us.

I also want thank our clerk, the analysts, the translators, support staff and especially the technicians as we were proceeding with our business today, they were doing 12 rounds with technology back here. It wasn't easy.

I want to thank you very much for navigating through all of that.

We trust you have a very good week back home with your constituents. We will see you back here on October 18.

Meeting adjourned.