Canada Reaches Out to China

August 30, 2016

Canadian Prime Minister Justin Trudeau left Ottawa on Monday for his first official visit to China. The trip is an important one for both governments, each eager for an improvement in bilateral relations. The United States, the largest economic and strategic partner for both, has an important stake in the outcome too.

On paper, China and Canada appear to be natural partners. Canada is a resource-rich, export dependent developed economy with a substantial Chinese population. China is resource poor, but with an enticing domestic market and a need for partners in the developed world.

This symmetry of interests led Trudeau’s father Pierre, who was Canada’s prime minister for all but ten months from 1968 to 1984, to open diplomatic relations with China in 1970, two years before the Nixon administration did so.

More recently, Trudeau’s immediate predecessor Stephen Harper had a testy relationship with Beijing that started when Harper criticized China’s human rights record. Harper’s foreign policy included a forthright emphasis on human rights generally, but speaking out about China’s record was popular with many Chinese Canadians, many of whom came to Canada following China’s revolution as followers of Sun Yat-sen, and after the British handover of Hong Kong.

Harper also established a foreign investment review process that included an opaque “national security” test that was invoked when the Chinese National Overseas Oil Company (CNOOC) sought to invest in Canadian oil sands producer Nexen. CNOOC’s investment won approval, but pre-existing environmental problems at Nexen’s Long Lake site have hurt CNOOC’s return on its investment.

Trudeau hopes the visit will reset the relationship, potentially leading to mutual investment, tourism, and trade. He will first travel to Beijing for meetings with Premier Li Keqiang and other officials on August 30. Trudeau and Li will review the track record of the 2012 bilateral Foreign Investment Protection and Promotion agreement and may agree to start negotiating a bilateral trade deal, which has been rumored since January. The Canadian leader then heads to Shanghai to meet with business representatives, including Alibaba Group Holding Ltd.’s Jack Ma.

After Shanghai, Trudeau will visit Hong Kong before joining other world leaders for the G20 summit in Hangzhou September 4-5. The visit to Hong Kong comes at a sensitive time, right before legislative council elections that have sparked protests. As the leader of a country that is home to thousands of Hong Kong expats, Trudeau will have to tread carefully where the politics of this former fellow British colony are concerned. On the economic front, Trudeau will meet with Hong Kong billionaire Li Ka-Shing, controlling shareholder in Calgary-based Husky Energy.

The Chinese government will want the Trudeau visit to be a success. China’s economy has been slowing, and the Xi Jinping government’s anticorruption campaign has roiled the Communist Party and the bureaucracy, as well as the business community and foreign firms operating in China. The result has been to make all sides cautious and risk averse, likely worsening the economic slowdown somewhat.

At the same time China has been increasingly isolated by its bellicose actions in the South China Sea and in a territorial conflict with Japan. Canada is an important diplomatic partner for Beijing not only as a G7 and G20 member, but also as a member of the Trans Pacific Partnership (TPP). Although the Trudeau government will not ratify the TPP agreement before the United States does, Trudeau has initiated public consultations and has expressed reservations about the deal.

One of the weak points in Chinese diplomacy has been their relations with middle power countries like Canada, as evidenced by occasional clashes with Vietnam, the Philippines, South Korea, and Australia. A better relationship with Canada, an archetypical middle power, would signal that China was mastering the type of relationship that is critical for a great power in the international system, a key concern for Washington.

President Obama heads to China for the G20 summit later in the week, and has met with Trudeau numerous times—most notably when Obama hosted a high-profile state visit for Trudeau in March, and visited Ottawa for a North American Leaders Summit and address to the Canadian Parliament in June. Obama and Trudeau have a good rapport, and on the sidelines of the G20 meeting Obama will have the opportunity to get Trudeau’s first-hand impressions of China’s leaders.

Closer China-Canada relations are beneficial to U.S. interests, promoting China’s engagement in the international system with a close ally of the United States. As China hosts Trudeau, the welcome for the young Canadian leader will send signals to markets and world capitals that will provide an indication of Xi’s foreign policy direction and the potential for the next U.S. president to engage with Beijing.

Christopher Sands is a senior associate of the Center for Strategic and International Studies and a senior research professor and director of the Center for Canadian Studies at the Johns Hopkins University School of Advanced International Studies.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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