Evidence of meeting #31 for Foreign Affairs and International Development in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was japan.
A recording is available from Parliament.
Full Professor, Department of International Business, HEC Montréal, As an Individual
Thank you, Mr. Brunelle‑Duceppe.
You're right that doing business with China comes with a lot of challenges.
First, as Mr. Guilbeault mentioned, doing business with China opens up opportunities. Yes, being able to import cheaper energy products benefits consumers and the green transition. Conversely, we have to be careful, because an overreliance on certain countries brings economic security risks.
On top of that, of course, we always have to be mindful of the fact that products imported from China, but also elsewhere, may result from supply chains that involve forced labour.
I don't think we should be naive in our relationship with China. We have to be careful. In fact, we already have legislation in place to ensure that Canadian businesses that do business in places like China are not importing products made from forced labour. We have to be careful that we're not creating more economic security risks, either.
Bloc
Alexis Brunelle-Duceppe Bloc Lac-Saint-Jean, QC
You mentioned forced labour legislation. I imagine you bring it up because you're familiar with the forced labour law in place in Canada. Nevertheless, as far as I know, only one ship has been detained since the legislation prohibiting the import of goods made from forced labour came into force, and that ship was ultimately allowed to leave and sell those goods here, in Canada. So far, Canada's forced labour legislation has not led to the seizure of any products, in contrast to the regime in the U.S.
Shouldn't respect for international human rights take precedence in international trade?
In your opening remarks, you talked about turning to trusted allies. When it comes to human rights, do you really think that China is a trusted ally and that Canada should continue down this path?
Shouldn't we instead amend Canada's law and replicate the regime in the U.S. in order to make a real difference when it comes to forced labour?
Full Professor, Department of International Business, HEC Montréal, As an Individual
Those are very good questions.
First, when I was talking about China as a potential ally, it was in reference to economic security. In many sectors, that doesn't present a major challenge, so continuing to do business with China isn't a bad thing.
However, it's important to be careful in certain sectors where China is very dominant and could use coercive tactics. Of course, Canada's legislation to prohibit the import of goods produced using forced labour is a first step, and it relies mainly on due diligence reporting. Europe is moving in that direction. I think Canada should continue working with Europe and other countries to develop a better joint understanding of how to implement due diligence processes in this area.
That said, not all products imported from China involve the use of forced labour, so we have to be very pragmatic in how we approach the issue.
Bloc
Alexis Brunelle-Duceppe Bloc Lac-Saint-Jean, QC
Sorry, Mr. Ostwald, I am going to come back to you, but this is a great discussion with Mr. Van Assche.
One of the things that came up was the recent agreement with China on electric vehicles, and we know that in China, private businesses aren't responsible for forced labour. Forced labour is basically state-sponsored. Sheffield University did an excellent study showing that China's electric vehicle supply chain involves forced labour. There is a reason why the vehicles cost $35,000, including the cost of shipping them from China to Canada.
Should Quebeckers and Canadians be encouraged to buy $35,000 EVs, because it's good for the environment and the pocketbook, to the detriment of those forced to work in concentration camps in Xinjiang?
I appreciate that it's difficult to say. It's not difficult for me, but for a lot of people, it seems to be. I'd like to hear your view on it.
Liberal
Full Professor, Department of International Business, HEC Montréal, As an Individual
It's up to Canada to work with other countries to make sure it has better legislation to keep forced labour out of global supply chains.
At the same time, we need to keep engaging with China in a balanced way, which is not to say that we should let goods made using forced labour into the country.
Liberal
The Chair Liberal Ahmed Hussen
Thank you very much.
We'll start the next round of questions with Madame Rood.
You have five minutes.
Conservative
Lianne Rood Conservative Middlesex—London, ON
Thank you very much.
Thank you, witnesses, for being here.
Mr. Ostwald, you have called for a rethinking of like-mindedness in the strategy and stressed ASEAN's preference for inclusive dialogue with China. Given Beijing's aggression in the South China Sea and toward Taiwan, in your opinion, has this approach left Canada weak and deferring to a body that refuses to confront coercion while our like-minded allies, such as Japan, Australia and the U.S., actually deliver results?
Associate Professor, Institute of Asian Research, University of British Columbia, As an Individual
I made the call to rethink like-mindedness in a particular sense. It is important for Canada to think of its interests and of countries that share particular interests, in a broad sense. This means looking for other countries that value sovereignty, agency and a predictable international framework and order, especially on trade. There are a number of partners in Southeast Asia that are not fully autocratic or fully democratic that share those values. I see a lot of opportunity to connect with those countries on those particular fronts.
On the China question, I take cues from Southeast Asia, which has a long history of and a lot of experience dealing with their regional giant. What we find consistently in a number of academic studies that assess elite preferences and perspectives in Southeast Asia on China is a recognition that China is a strategically vital country that deeply affects the interests of those countries, and that it has a substantial trust deficit vis-à-vis many other countries. There is very little trust that China will do the right thing on a number of fronts.
Of course, this has caused friction with virtually every country in Southeast Asia. The Philippines is the most obvious example with the South China Sea, but all other countries in the region have their versions of this. Where they differ is in the response. The Philippines has been very vocal and very public about its disagreements with China. Other countries have handled those disagreements in quieter ways without using a megaphone.
I am not sure it is as simple as saying that one country got it right and another country got it wrong. I think all countries are figuring out how to work with and respond to a rising China.
Conservative
Lianne Rood Conservative Middlesex—London, ON
Dr. Van Assche, Canadian supply chains remain dangerously exposed to China in critical areas like semiconductors, rare earths and pharmaceuticals. What concrete failures in the current Liberal strategy have prevented real de-risking and friendshoring with trusted partners like the U.S., Japan and India?
Full Professor, Department of International Business, HEC Montréal, As an Individual
The main issue has been that any kind of market economy can lead to specialization, which can sometimes go a little too far. We used to have a bit more of a stable international order, wherein most countries at most times were hesitant to take advantage of their dominance in a certain sector to pressure other countries geopolitically. This is no longer the case right now. We are seeing this from our southern neighbour. We are seeing this from China on occasion as well.
Ultimately, this was a reality that we felt was very comfortable before. Now, on occasion, you might find out that one country is responsible for 80% of vehicle battery assembly. Suddenly, it ends up being a bit more dangerous and a bit less comfortable. This is the reality we have right now. We cannot fall back on regular systems to prevent countries from doing this.
Conservative
Lianne Rood Conservative Middlesex—London, ON
In an era of geopolitical choke points and strategic interdependence, does the current approach adequately protect Canada from Beijing's weaponization of trade, or do we need far tougher investment screening and export controls and a sectoral decoupling from the CCP?
Full Professor, Department of International Business, HEC Montréal, As an Individual
That is a great question.
First of all, what we need to do is identify in which strategic sectors the choke points are. In reality, there are not thousands of choke points in the global trading system right now. It's much more limited, but we don't always know what they are. We have to identify them. Once we identify them, we can take actions to de-risk from them.
Right now, we're often acting very reactively. We see that in semiconductors and pharmaceuticals. There is a choke point and we try to de-risk against it afterwards. We can do more to identify them in advance.
Liberal
The Chair Liberal Ahmed Hussen
Thank you very much.
Next we go to MP Oliphant.
You have five minutes.
Liberal
Rob Oliphant Liberal Don Valley West, ON
Thank you, Chair.
Thank you to both witnesses for being here today.
I'm going to be asking three questions.
The first is on the degree to which you might believe or not believe that Canada's IPS has penetrated the consciousness of the areas you are interested in.
In line with the theme we've been on today, the second is on moving away from China and India and into ASEAN and other markets—into larger players in the southeast, including Malaysia, Indonesia, Thailand, Vietnam and the Philippines—as great economies. I would like to hear a little about that.
The third is on the role of government versus the entrepreneurial spirit of businesses and how they can work together—because government can set the table, but businesses have to eat.
The first question is with respect to the degree to which you think the IPS has penetrated the consciousness of anyone who is the object of our affection.
Maybe Professor Ostwald can go first.
Associate Professor, Institute of Asian Research, University of British Columbia, As an Individual
As I alluded to in the opening statement, I think Canada is a more present and active partner in the Indo-Pacific now than it was five years ago, and certainly more than it was 10 years ago. To the extent that the IPS—which I see as one component of a Canadian recognition of the importance of this region—is responsible for this, then it has.
I have not witnessed in the course of my career as much interest in having Canada at the table and having Canada as an engaged country in the Indo-Pacific as has been the case over the last year.
Liberal
Full Professor, Department of International Business, HEC Montréal, As an Individual
Yes. We're certainly more active in the Indo-Pacific region. That's a really good thing, but we're not the only country that is more active in the Indo-Pacific region. As a result of that, we might be fighting harder against other hard-fighting countries. We have to be cognizant of that. Nonetheless, being present is really good.
Liberal
Rob Oliphant Liberal Don Valley West, ON
The second area, which we've already been getting into, is that this is the Indo-Pacific strategy; it's not the China strategy. It's not the India strategy; it's Indo-Pacific. At times, it feels like we focus a lot on China and India. I want to pull us down to the southeast.
What would you perceive to be our best opportunities, both geopolitically and economically?
Perhaps you could answer first again, Professor Ostwald.
Associate Professor, Institute of Asian Research, University of British Columbia, As an Individual
The focus on Southeast Asia is vital. It is a region that often gets overshadowed by India and China. Southeast Asia, we should be reminded, is a region of 700 million people. It's not trivial, and I think it has the major advantage in some respects. The politics may be contentious, but they're not confrontational in the way that we have seen with China and India over the last number of years.
Canada has a long legacy in Southeast Asia. It's recognized as a middle power that shares many of the same geopolitical realities that countries in Southeast Asia do. The middle class is growing rapidly. As an economic partner, it's vital. Also, I think it's an area where a lot of Canadian expertise in navigating the type of geopolitical and geo-economic challenges that middle powers face is valued.
Liberal
Rob Oliphant Liberal Don Valley West, ON
It would be like a parent picking their favourite child. However, in your work, are there countries that you think would be the easiest for Canada to be targeting at this time?
Associate Professor, Institute of Asian Research, University of British Columbia, As an Individual
That needs to be broken down by sector. In terms of trade, obviously the larger economies or the larger markets, like Indonesia, the Philippines and Vietnam, all matter. Thailand is a large economy as well. In terms of a lot of Canadian expertise in tech, Singapore is a key partner. On AI, Malaysia is emerging as one of the chief hosts of farms. It should be noted that it is the second leading producer of chips behind Taiwan...on a number of key technologies. On naval and maritime issues, obviously the Philippines has been a very valuable partner on DVD.
It really depends on the issue area we're talking about.
Liberal
Rob Oliphant Liberal Don Valley West, ON
I want to go to Professor Van Assche for a moment.
Do you have any comments on what encouragements or enticements we get for diversifying our trade at the business level? Big companies like bigger countries, and maybe small companies do well in small countries. Do you have any advice for us on that?