Inside the China-Canada trade deal

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OPINION

By Nnanda Kizito Sseruwagi

Mark Carney, the Prime Minister of Canada, is currently one of my favourite leaders in the West.

His speech at the recently concluded World Economic Forum was a breath of fresh air, rarely breathed from a Western leader. The essence of his message was that “middle powers” should unite against economic coercion by great powers. Profound!

Without mincing words, he called out American hegemony, denounced the weaponisation of economic integration, and the exploitation of the vulnerabilities of supply chains. Whereas these ideas were not new, they were unanticipated coming from a Western leader.

Carney had just visited China between January 13^th and 17^th where he met Chinese leaders, including President Xi Jinping, Premier Li Qiang, and Chairman Zhao Leji of the Standing Committee of the National People’s Congress. The last time a Canadian Prime Minister had been to Beijing was nine years ago in 2017.

Carney took the opportunity of the visit to commend the exemplary leadership of Xi, noting that the partnership between their two countries “sets us up well for the new world order.” His proposition to the Chinese leader had a list of key items for a strategic partnership. Carney sought to partner with China on energy, finance, agriculture, security, and multilateralism.

China is a major trade partner of Canada. It consumes $30 billion worth of Canadian exports annually. This translates into 400,000 jobs for Canadians.

The relations between the two countries had been strained in the past. The former Prime Minister Justin Trudeau had brushed China the wrong way on a number of occasions, including such incidents as the arrest of the Huawei executive, Meng Wanzhou, in 2018. These are the scratches that Carney now meant to mend.

Prime Minister Carney has a clear understanding of the world his country finds itself in today. Unlike most Western leaders, he seems undeluded by prejudices about China, which are centred on the ideological disparities between the East and West.

His narrative has been consistent about highlighting the fact that the world has changed, and China is now a key partner in setting up Canada for the new world order.

Unlike the US, China has a stable political leadership under the Chinese Communist Party, which has been in power since 1949 and is consistent about its principles, both domestically and abroad. Carney understands and notes that China offers a more predictable relationship with Canada as opposed to Donald Trump’s America. With China, what you see is what you get.

Canada has not had an easy time with its historical partner, the US, ever since Trump started his second term. Upon coming to office, Trump imposed tariffs on Canada’s key sectors like metals and automotives. He then moved to arbitrarily end a longstanding North American free trade agreement between Canada, the US and Mexico.

While Trump is rendering America’s trade agreements with Canada irrelevant and their future uncertain, China is moving to drastically reduce tariffs on Canadian goods, such as canola seed from 84% to around 15% by the beginning of March. It is also removing tariffs on Canadian lobsters, crabs and peas.

On the other hand, Canada is also removing tariffs from Chinese electric vehicles (EVs) from 100% to 6.1% for the first 49,000 vehicles imported each year.

Carney also promised that this quota could rise up to 70,000 in half a decade. This is a significant step for China, which is the world’s largest producer of EVs, accounting for 70% of global production.

It is obvious what these developments spell for the US, politically and economically. Whereas Trump had initially been indifferent towards the recalibration of the Canada-China relationship by Carney, in the wake of signing these trade deals, he has stood up and threatened to hit Canada with 100% levies on all goods and products going to the US.

This only confirms the case Carney has been making about the weaponisation of economic integration by the US and the need for middle powers to rise up against the hegemonic coercion they suffer from big powers. But it is latent to Carney that in order to build a stronger Canadian economy, he needs to diversify his trade partnerships throughout the world, and escape the hostage of Trump’s America.

With America threatening a trade war against multiple allies, Carney is spot on about the risks involved in relying highly on the US as a trade and security partner. Renewing and improving the China-Canada relationship is therefore important in guarding against unforeseen reactions from an unhinged Trump administration.

Carney understands well that, largely due to American hegemony, the rules-based world order is fading and the era of great power rivalry is here. The rules-based order was celebrated for its principles and predictability, neither of which can be spoken about today. It is a fiction that lost its power of collective faith, and now the world comes to a rupture from that order, instead of a transition.

The writer is a senior research fellow, Development Watch Centre