From The Economist - July 27th 2019
Special report Can
The Economist July 27th 201
A nice country in a nasty world
Canada is feeling lonely, but its global position is better than it looks
On December 1st last year the Royal Canadian Mounted Police arrested Meng Wanzhou, the chief financial officer of Huawei, a Chinese telecoms firm, as she prepared to change planes at Vancouver's international airport. Ms Meng is wanted in America on charges stemming from allegations that Huawei had tried to evade sanctions on Iran. She is under house arrest in Vancouver while Canada works out whether to honour America's extradition request. China is furious. It has detained two Canadians, a former diplomat and a businessman, in retaliation; Chinese courts have sentenced two others to death on drugs charges. China, which buys C$2.7bn-worth of canola seed from Canada, blocked imports from two of Canada's biggest producers and has stopped buying Canadian pork and beef.
This clash with the world's second-biggest economy, on top of tensions with the biggest, has made Canada feel even more isolated. For decades its umbilical attachment to America has given it security and economic sustenance while allowing it to express its distinct diplomatic personality. The embodiment of that idea was Lester Pearson, a prime minister who won the Nobel peace prize for organizing a UN force to help end the Suez crisis in 1956, the first such peacekeeping operation, where the stars and stripes were feared or hated, the maple leaf was often welcome.
Now Canada's touchy relations with the two superpowers are echoed in a strained relationship with India, where a visit by Justin Trudeau last year was marred by diplomatic gaffes. Chrystia Freeland, a vocal critic of Vladimir Putin before she became Canadian foreign-affairs minister, is banned from Russia. "For the first time we don't have good relations with four major world powers," laments Jocelyn Coulon, a former adviser to Mr Trudeau. In addition, Saudi Arabia expelled Canada's ambassador last August after Ms Freeland criticised it for jailing human-rights activists.
Even more dismaying for Canada is the weakening of America's commitment to the institutions that have sustained global peace and commerce, such as the UN and the World Trade Organization (WTO). Some of the "foundational principles of the post-war order are being questioned and threatened more seriously than at any other time", says Ms Freeland. Canada's mission, she says, is to defend liberal democracy and the rules-based international order.
Canada feels embattled, but it is not alone. Although politics is making the country's relations with the world more difficult, geography and economic logic work in its favour. Trade deals, including new agreements with the eu and with ten Pacific countries, give it preferential access to economies that account for nearly half of world GDP.
Relations with America and China are more resilient than the headlines imply. Conflict is brewing in the melting Arctic, but so is opportunity. In its defence of the international order, Canada still has friends in Europe, Australasia and beyond.
Its trade in goods with China increased from C$78bn in 2014 to C$103bn in 2018. The potential seems vast. China will remain hungry for Canadian minerals, grains and fuels and eager to sell its manufactures. PetroChina owns a 15% stake in a huge new project to ship liquefied natural gas from British Columbia to China and other Asian countries, starting in 2023. Some 74,000 Chinese students attended Canadian universities in 2017.
Mr Trudeau had hoped to start talks on a free-trade agreement with China. That was before the detention of Ms Meng, after which there can be no such prospect. But commerce is still in better shape than diplomacy. A survey earlier this year of 250 Canadian and Chinese companies by the Canada China Business Council found that, although 20% had been hurt by the dispute, 65% had not. The government thinks a trade deal will eventually be done. "I can't imagine a world in the medium term that does not have enhanced trade in Canada and China," says Jim Carr, the trade minister.
The Arctic may soon figure in Canada's trading relationships. Because of climate change, Canada's third coast could become a viable outlet for exporting resources. Rail service to Churchill, the country's only deepwater port in the Arctic, recently reopened after an 18-month interruption caused by flooding. "The northern passage will become a reality one day," says Murad Al-Katib, the boss of AGT, a food-processing company involved in a venture that bought the railway and is upgrading the port.
But Canada is being directly menaced in the region for the first time since the cold war. Russia threatens to become "a local hege-mon", says Rob Huebert of the Arctic Institute of North America at the University of Calgary. It is conducting bomber and submarine patrols in the region and has reopened at least ten military bases, which were closed after the cold war.
China has declared itself a "near-Arctic state" and aims to create a "polar silk road" to Europe through the Arctic Ocean. It is a question of time before Chinese submarines appear in the region, Mr. Huebert believes. An unexpected challenge comes from Mike Pompeo's swipe at Canada's claim on the Northwest Passage. If that is followed by a "freedom-of-navigation operation", that is, a navy or coastguard trip that Canada does not authorize, a new crisis in relations with America could erupt.
Coming to a conflict near you
Canada reckons that the best way to deal with novel threats is to do better what it has done well in the past: defend international norms, cultivate alliances and work with like-minded "middle powers" to encourage good behaviour by big ones. The new challenge "doesn't require Canada doing something entirely different, but doing more and better," says Roland Paris of the University of Ottawa, a former adviser to Mr Trudeau.
In Pearson's multilateral spirit, Canada leads the "Ottawa group" of 12 countries and the European Union, which is trying to solve a crisis caused by America's refusal to allow judges to be appointed to the WTO’s appeals panel. It is an active member of the "Lima group" of mainly Latin American countries, which is trying to restore democracy to Venezuela. To meet the Arctic threat, Mr Trudeau announced in May that the coastguard would get two new ships to join the navy in patrolling the region.
But Mr Trudeau's critics say he is a poor man's Pearson. Canada waited two years to heed a plea by the UN to send transport helicopters to help keep peace in Mali, says Richard Fadden, a former head of the Canadian Security Intelligence Service. The legalization of cannabis falls foul of international drug conventions, also part of the rules-based order. A test will be whether Canada wins one of five seats on the UN Security Council due to become vacant in 2021. "It's not a trophy," says Mr Trudeau. "It's a way of having an impact and affecting global debate in a positive and meaningful way."
If Mr Scheer defeats him, the tone, if not the substance, of foreign policy is likely to change. He claims to be harder-nosed about China than Mr Trudeau is. And he would move Canada's embassy in Israel to Jerusalem, one way that world leaders show they want to be friends with President Trump.
To the relief of most Canadians, Mr Trudeau has improved the relationship with America. Mr Trump's threat to scrap NAFTA, which governs most trade between America, Canada and Mexico, caused Canada to mobilize as if for a national emergency. The prime minister's office set up a dedicated war room. Ms Freeland became, in effect, minister for relations with America. Canadians from across the political spectrum lobbied mayors, governors and Mr Trump's inner circle, brandishing reports on how many of the 9m American jobs that depend on Canadian trade each state would lose.
Eventually, with similar effort from Mexico, the three sides hammered out the USMCA, which resembles NAFTA and will replace it, assuming Congress ratifies the new agreement. In May Mr Trump lifted tariffs on Canadian and Mexican steel and aluminium. Mr Trudeau says that relations are now "normal". Even so, Canada cannot relax. "The new normal for us is we have to have this elevated level of outreach" to America, says Mr Paris.
Had Mr Trump paid a visit to Windsor, Ontario, where the skyscrapers of Detroit loom almost within touching distance across the Detroit River, he could have seen for himself how intertwined the two economies are, how determined those on both sides are to intensify their relationships and how hostility and indifference from Washington can gradually undermine them. About 7,000 lorries, many laden with components or finished cars, cross the Ambassador bridge daily, the "largest single crossing in the second-largest bilateral trade relationship in the world", says Bill Anderson, director of the Cross-Border Institute in Windsor.
Keep the nurses coming
Some 1,500 health workers commute across the river from Windsor to Michigan every day. Out west, British Columbians head to Washington state to load up on cheap electronics and petrol. In border towns of Washington state, Canadians rent post-office boxes to take delivery of shipments from Seattle-based Amazon. Yet interchange is not as easy as it used to be. "When bars closed at 12.30 in Windsor you headed to Detroit. You didn't know there was a border," recalls Bryce Phillips, head of the Windsor-Detroit Bridge Authority, who grew up in the Canadian city.
Security tightened after the terrorist attacks on America on September 11th 2001. American border officials scrutinized all travel documents and required drivers to open their car boots, creating long queues. The two countries worked to restore the former ease of crossing, for example by introducing nexus cards, which let pre-screened border-hoppers use a special lane.
The Trump administration reintroduced friction. In 2017 the number of cars entering America from Canada dipped, even though the Canadian dollar strengthened, a sign that Mr Trump's glower was putting off some. In the same year a border official in Michigan misinterpreted a government statement to mean that health workers could no longer commute from Windsor. It took 48 worrying hours to clear up the confusion, says Laurie Tannous, an immigration lawyer. Canadian officials have been stricter during the Trump presidency, she says. "It's almost like retaliatory."
Co-operation between national-level agencies on both sides is not as good as it was, says Laurie Trautman of the Border Policy Research Institute at Western Washington University. "If there are four more years of Trump they will be strained even more."
Yet interaction and integration are hard to stop. Oregon, Washington state and British Columbia are studying the feasibility of a high-speed rail link between Portland and Vancouver. The nerd bird, a sea plane, has been ferrying techies between Vancouver and Seattle since last year. In Windsor construction has begun on a new bridge across the Detroit river, costing C$5-7bn, to take the load off the clogged Ambassador bridge. It will be financed by Canada and is due to open in 2024. If Mr Trump menaces Canada again, he will get pushback on the border. ■