China Brief: China, the Indo-Pacific and Canada’s West
Issue 99 | November 2023

In this issue: EU countries not aligned on China policies,  no surprise – the U.S. is split on IPEF, and more.

EU’s China policies not uniform

Getting China ‘right’ in Europe was subject of Politico’s ChinaWatcher newsletter this month, which had an interesting quote from Belgian Prime Minister Alexander De Croo on how closely Belgium should align its strategy with the U.S. “As a European country and as Belgium, we have to conduct our own policy and not the policy of our American friends — with whom we have very good relations but who sometimes, in their relations with China, have other objectives than us.”

But are Europe and the U.S. that far apart?  It depends on the quotes one cherry picks. But there does seem to be an emerging trend where the U.S. and EU might be converging. For example, compare the recent public policy statement masquerading as an op-ed by U.S. Treasury Secretary Janet Yellen on her recent trip to China with EU president Ursula von der Leyen’s address to EU ambassadors:

EU President Ursula von der Leyen

We must get China right. We must recognize that there is an explicit element of rivalry in our relationship. The Chinese Communist Party’s clear goal is a systemic change of the international order, of course with China at its centre. We have seen it with China’s positions in multilateral bodies, which show its determination to promote an alternative vision of the world order. But this rivalry can be constructive, not hostile. And this is why we need functioning channels of communication and high-level diplomacy. This is what I have called de-risking through diplomacy.

U.S. Treasury Secretary Janet Yellen

As a foundation, our two nations have an obligation to establish resilient lines of open communication and to prevent our disagreements from spiraling into conflict. But we also know that our relationship cannot be circumscribed to crisis management…A constructive economic relationship can not only serve as a stabilizing force for the overall relationship but also benefit workers and families in both countries and beyond.

Then there’s the U.K. where former British Prime Minister David Cameron has returned to cabinet as foreign secretary, a portfolio that will have some influence on the UK’s China policy. The significance here is conveyed by the snark from Politico’s headline “Lord ‘Golden Era’ Cameron returneth.”  For those that miss the reference, the story explains the “Golden Era” refers to a period of time when former PM Cameron and his government oversaw a ‘golden era’ in China-UK relations.” But that was a decade ago, or a lifetime in the China events world. We’ll have to see what happens, no quotes here.

And Canada? We also need to ‘get China right.’ But unlike the E.U. we do not have as much room to move given our higher level of economic integration with the U.S. (77 per cent of all of Canada’s exports last year, 82 per cent of prairie exports) and the upcoming U.S. federal elections, which could pose a greater ‘clear and present danger’ to our economy (see e.g., Trump, immediate 10% tariff threat). We’ll wait to see what Prime Minister Trudeau says at the upcoming APEC leaders’ meeting in San Francisco this week. Also, what Ministers Jolie and Ng, who are accompanying, say. In the meantime, there is the federal government’s Indo-Pacific Strategy which states:

Our approach to China is shaped by a realistic and clear-eyed assessment of today’s China. In areas of profound disagreement, we will challenge China, including when it engages in coercive behaviour—economic or otherwise—ignores human rights obligations or undermines our national security interests and those of partners in the region…We will work together with regional partners. We will cooperate with China to find solutions to global issues such as climate change, biodiversity loss, global health and nuclear proliferation.

Why improving U.S.-China relations matters to the West? Follow the wheat. Chinese grain purchases through August are almost equal to average annual amounts purchased over the past two years, according to a report by Bloomberg titled, China Is Hungry for Crops as Bad Weather Heightens Food Fears. More to the point, Illinois-based Farm Policy News gives a rundown of several grain purchase agreements signed by China with U.S. grain companies in Illinois. Reuters has a more extensive dissection of what was signed at the China-U.S. Sustainable Agricultural Trade Forum on soybeans, corn, sorghum and wheat. The agreements with large U.S. grain multinationals were “frame contracts” which, according to Reuters, are typically non-binding letters of intent to buy at a later date without formal sales terms.

More on the Belt and Road. Last issue we took a long drive on China’s Belt and Road Initiative including potential impacts on Western Canada’s trade exposed economy. A new, in-depth, data driven analysis by the AidData project at William and Mary University in Virginia, Belt and Road bounces back, provides further essential reading. Being data driven and drawing from one of the largest datasets on the BRI, it also cuts through a lot of the hype and hysteria. The key finding, unsurprisingly, is that “China is refocusing time and money on troubled projects, distressed borrowers, and sources of public backlash in effort to de-risk its portfolio and out-maneuver G7 competitors.” The AidData folks are betting that China will pull off these reforms and stay ahead of the west’s efforts to catch up.

The domestic trade infrastructure challenge. We do a lot of work at CWF on Canada’s trade infrastructure challenges which includes following our competitors’ actions. An article by Phoenix New Media (ifeng.com) (you’ll need Google translate) gives a good snapshot of a specific example of what China is doing in the key logistics hub city, Huaian, of a different challenge that China poses for Canada – coordinated, integrated comprehensive trade infrastructure. In addition to everything else China does (insert list of unfair trade practices, coercion, etc.) it also does something else we don’t do – builds infrastructure to stay competitive.

China’s shift from coal to renewables: A global energy game changer is reported by BNN, the Breaking News Network (a new source we’re watching, so not 100 per cent sure of its editorial stance). The piece is mainly a recap of China’s shift in BRI funding out of coal, but the piece points out something we have seen in recent home heating oil news: “Challenges (sic to move from coal) are further compounded by intricate political and economic circumstances in recipient countries, such as Pakistan and Vietnam, where vested interests in the energy sector, particularly in coal power and mining industries, pose obstacles to the acceleration of green energy transition. At the HS4 level, coal is a top 15 export for the prairies, the top export for British Columbia and the territories, and for Canada it is the ninth largest export by value at the HS4 level.

Aussies out of the China doghouse. An article and a couple of interesting charts from Quartz on how the China trade picture has improved for Australia. The headline and lead are reason enough to read this piece: China-Australia trade ties are warming up as Beijing-Brussels relations cool. So far this year, Chinese imports from Australia are up 8.4 per cent from a year earlier.

CWF’s Indo-Pacific Monitor

U.S. to Canada on IPEF: Locked door doesn’t mean we don’t want you in. Or perhaps more accurately, we’d be happy to have you join, we’re just not going to do anything. But a kinder spin comes from InsideTrade’s Canada remains committed to IPEF — and still outside looking in. Looking in at an agreement that is not really an agreement, that will not lower tariffs or have binding commitments, and where the few close-to-meaningful areas of negotiation, like digital trade, have been dropped? And of course, a framework that may not last the time it takes a new U.S. administration to walk into the Oval Office. CPTPP = bird in hand, IPEF = two in the bush. Still, to allow the U.S. to save face, something has to be signed or agreed to in San Francisco at the APEC summit. Though it is interesting to think of federal trade officials doing what their provincial counterparts are often forced to do –  sit outside the meeting room scrounging for news.

Though maybe not so fast on being dismissive. Thinking ahead to the coming NAFTA review, more important for Canada is the letter by the New Democratic Coalition of 11 house democrats to President Biden calling for things like tariff cuts. The letter goes into the new NAFTA agreement and we’ll cover that in the next North America brief, but it’s worth quoting the letter on IPEF:

Frameworks are not substitutes for trade agreements approved by Congress that open markets for U.S. products. New Dems believe we must pursue a more robust trade agenda in the critically important Indo-Pacific region and urge the Biden Administration to finalize a deal that bolsters U.S. global leadership and meaningfully delivers for American workers, farmers, and businesses…
and also
…Include tariff reductions or tariff-based market access in the agreement to make meaningful progress on our priorities.

But then again, for every reaction there is an equal and opposite reaction. Here that would be the letter from Senator Sherrod Brown (D-OH) demanding that the entire trade pillar of the IPEF framework be dropped. We think the military term for this is fragging? Whatever, it won’t help the U.S. at the APEC summit.

Neither will a letter signed by 12 progressive members of the U.S. House (the term ‘progressive’ obviating the need to mention from which party) thanking the Biden administration “for suspending negotiations on aspects of the IPEF digital text.” So, unless the administration can work miracles, there won’t be signings at any IPEF side meetings at the APEC summit in San Francisco – one of the key, most highly-touted pillars of the IPEF.

Other News

  • According to Bloomberg something that would have been unimaginable this past summer when U.S. armed forces were shooting down Chinese spy balloons is taking place in the margins of the APEC leaders’ summit in San Francisco: “Chinese President Xi Jinping is set to be the guest of honor at a dinner with top U.S. business executives.” And not just a handful of leaders; Bloomberg puts the number in the hundreds. This is an important data point for Canadian business with respect to Canada-India relations. It took only 11 months from the U.S. shooting down Chinese spy balloons for the fervor to die down and the feting of the Chinese President by hundreds of U.S. CEOs on U.S. soil (not to mention visits by other U.S. CEOs to China).
  • The Chinese foreign ministry, and Reuters among others reported that China and Columbia upgraded their relationship to “strategic partners” during Columbia President Petro’s recent visit to China for the BRI summit. The upgrade still leaves Columbia short of the “comprehensive” strategic partner status of many of its Latin American neighbours. Most analysts see marginal gains for both sides from this move, but one area of interest to Western Canada is the potential for increased agricultural sales from Columbia to China, noted by China-Latin America analyst Margaret Myers.
  • Also according to Bloomberg (hey, they do good journalism) Xi also has dinner plans with the “Muscatines,” residents of the Iowa town where a much younger Xi spent two weeks staying in local residents homes while on a farm tour of Iowa.

– Carlo Dade, Director of the Centre for Trade and Investment 

The China Brief is a compilation of stories and links related to China, the Indo-Pacific and relationships with Canada’s West. The opinions expressed in the links are those of the articles’ authors and don’t necessarily reflect the views of the Canada West Foundation and our affiliates.