Harper aims to strengthen Chinese ties

Prime Minister Stephen Harper’s recent trip to China has attracted a lot of national attention, raising numerous questions as to the future connections with this major world power. Talk of a free trade agreement, economic gain and diversified trade have been filling newspapers and generating heated discussion as to whether or not this new partnership is entirely profitable for Canada as a nation.

“I’ll start by saying the Prime Minister’s mission to China last week was a resounding success,” said Conservative Kitchener-Waterloo member of parliament Peter Braid. “And I think it takes our economic and diplomatic relationship with China to a whole new level.”

China has been the fastest growing economy worldwide, but its trade has even grown faster, such that China is basically the largest export economy in the world today, which, according to Wilfrid Laurier University associate professor of economics Azim Essaji, was not a position that it had many years ago.

“China is just a really important trading partner,” Essaji said. “In fact, … China constitutes about 11.5 per cent of the world’s exports, which means that it is larger than Germany and the United States — both of which were previously probably the most important trading companies in the world. So it’s a really important market.”

Braid commented on the importance of the partnership by saying that, “The reason trade with China has become so much more critically important is for two reasons. One is that, by 2020, China will be the world’s largest economy.”

“Secondly, the key to economic success for Canada is to have diversified trading relationships. Because China is such an important emerging, growing world economy, we need to be well-positioned to take advantage of the growth of the Chinese economy and to diversify trading relationships around the world,” added Braid.

The Chinese economy has been growing rapidly since 1978, when China began to open up to the rest of the world — with their exports growing tremendously.
“In fact,” said Essaji, “China has been the fastest growing economy in the world, but its trade has even grown faster.”

Though there are still many steps that need to be taken before reaching a free trade agreement with China, Harper does plan on expanding the trade of natural resources to China. Some of the resources that they will need are petroleum, petroleum products as well as pulp and paper, mining products and a host of other resources Canada already exports to other countries.

“I think an enhanced partnership between Canada and China is critical to Canada because it allows us to diversify our trading relationships and strengthen and grow our economy,” said Braid. “And it can create jobs in Canada — which is our government’s number one priority.”

However, though the partnership does have many positive possibilities such as economic growth and potential employment increase, professor Essaji warns that there could be possible drawbacks to this plan.

“I think that there is a danger,” he said. “And this is something we have to confront as Canadians in terms of our long-term transformation into an even more resource based economy than we already are.

“That’s not just due to China, it’s due to a variety of sources that exist in the world that are driving but a major one of which is the demand for natural resources, which has increased dramatically over the last ten — 15 years.”

Essaji expanded to describe the possibility that Canada might be placing one too many eggs in the same basket, to make a more simple description to this partnership. There has been an obvious expansion of Canada’s resource-based sector, however it comes at the expense of our manufacturing base.

The question is “whether [or not] this is a strategy that is in the long term interest of Canada,” Essaji said. “Which is to say, we’d become much more of a resourced-based economy relative to what we were 20 years ago, which is debatable. There are questions to whether this is a long term sustainable path for us to adopt.”

A major concern by focusing on this sector is that many of the natural resources Canada exports are exhaustible.

“It ends up being an issue of what kind of standard of living we hope to enjoy going into the future,” Essaji said. “And whether really we are starving industries that have the potential to make us more productive, more intelligent in the future in return for some short term gains in the resource sector where clearly there are large gains to be made at present.”

The question then becomes, what happens when resources dry up and Canada didn’t back up other sectors or put in enough capital?

Putting money into other industries, such as manufacturing, as Essaji mentioned, won’t necessarily make profit immediately but possibly long-term. With Canada just coming out of a recession and in a deficit, the partnership could potentially be a quick fix rather than a long term plan.

“This has been an ongoing process for the last number of years,” Braid said.
“The Prime Minister’s visit last week takes it to a whole new level.

Last week there were over 20 commercial agreements signed, representing a value of over $3 million, with an emphasis in areas including clean technology, agriculture and an important area for Waterloo Region education. What did he mean by this? It will be beneficial across the board.”