The emergence of China and India is of fundamental importance to Canada. These two leviathans have produced a step change in the global demand for energy, pushing up price of oil and other commodities, but at the same time added to concerns about climate change. When an ill wind blows pollution across the Pacific from China, Canada is often on the receiving end.
Monitoring stations are being set up to gauge the extent of this pollution threat, following an episode in April 2006 when a huge cloud of pollution from China found its way to the North-West of the United States and Western Canada. Can China co-exist in a sustainable way with the rest of the world? What about India, with its weak environmental standards. The energy these countries are hungry for is being burnt, and not in an environmentally-friendly way.
China and India’s rise is like that; for every benefit there is a potential cost. Every opportunity brings with it a threat. China and India present a competitive challenge to Canada in both manufacturing and services. The story is a familiar one; low-cost manufacturing in China and highly competitive IR outsourcing and other white-collar services in India. But it is also a developing story. Chinese and Indian companies are emerging as big global players.
Technological progress is occurring at a rapid rate. It is not longer possible to comfort ourselves with the idea that the threat these countries offer is mere cheapness. In the United States these threats have produced a political backlash and calls for protectionism yet to be reflected to any serious degree in Canada. But these new economic relationships will need to be carefully handled, particularly in times of economic adversity. There will also be diplomatic challenges.
How will the West embrace China and India in their quest for a place at the top table commensurate with their economic clout? Will Canada still be able to claim a place as part of the G8?
The challenges are many and varied, as the book will describe, but there are also a range of exciting opportunities. If the world economy is tilting to the east, to Asia, as this book suggests, Canada is well-placed to take advantage of it. Of course, in many respects, Canada has been integated with these economies more than most. There are more than a million Canadians of Chinese descent and more than 900,000 of Indian descent. These days we are talking about more than just the movement of people. There are significant trade and investment flows between both countries and Canada. Early in 2007 Jim Flaherty, the finance minister, described the synergies between China and Canada. ‘China is an economic giant whose reach and influence continue to expand around the globe,’ he said. ‘Canada, on the other hand, is an emerging energy superpower, is a centre of excellence in science and technology, and is a natural gateway to the largest market in the world. The mutual benefits are obvious.’ But there are also tensions. When China launched its “RedBerry†in 2006, the echoes of the BlackBerry, made by Ontario’s Research in Motion, were obvious. The Canadian intelligence services have been investigating economic espionage by Chinese agents. Canada has signed a science and technology agreement with India and is keen to tap into the fast-expanding Indian market, particularly construction, architecture, design, engineering, telecommunications and energy distribution. Canadian businesses will be looking with some enthusiasm to the economic rise of these two huge countries.
There is, however, also a sense in which Canada is not making the most of the opportunities China and India’s rise offer. In April 2007 the Canadian Chamber of Commerce set a target of quadrupling trade and investment in India in five years. The backdrop to this, according to Nancy Hughes Anthony, the Chamber’s president and CEO, was one of disappointment. ‘If the Canada-India economic partnership is to grow and prosper, the time for action is now,’ she said. ‘Canadian interests face stiff competition from those who already have a substantive presence there. Many other countries and their companies have a focus on India that greatly exceeds what Canada has done to date. We are falling behind.’ India does not necessarily need Canada, the Chamber said, there being no shortage of partners and investors anxious to get a piece of the action. But Canada, it said, does need India. While the trade relationship with the United States will remain the key one for Canada for the foreseeable future, Asia’s rise is an opportunity that cannot be spurned. Similar concerns apply to China. Here the target is more modest, to double trade and investment by 2010, but there are concerns it will not be met. You need sharp elbows and good contacts to succeed in the highly competitive Chinese market. Some will, but many will not. Even so, China is already Canada’s second largest trading partner, after the United States.
The rise of China is a big, spectacular change that comes along only once in our lifetimes. Many in Canada will be looking at it with some trepidation.This book, I hope, will succeed in putting these hopes and fears into context.