With Prime Minister Stephen Harper expected to visit China in November, there is at last a recognition that China, indeed all of Asia, needs to be a much higher priority when we think about Canada’s future in a fast-changing world.
For the past 25 years, we have been preoccupied with North America, with negotiation of the Canada-U.S. Free Trade Agreement, its enlargement to include Mexico in the North American Free Trade Agreement, and since then an intense focus on deeper integration with the United States.
But while North America will continue to loom large in our future, the intense focus on North America represents old thinking.
The future is global, and in particular Asia, and Canada in recent years has too often been absent.
A new report from the Asian Development Bank — Asia 2050: Realizing the Asian Century — spells out the potential of that vast region, stretching from central Asia to the Indian subcontinent, to Thailand, Vietnam and Malaysia, up through China, Korea and Japan and through the Philippines to Indonesia.
Before the Industrial Revolution of the 19th century, Asia accounted for about 58 per cent of the global economy. But as growth accelerated in the West, Asia’s share fell rapidly, to a low of 15 per cent in the early 1950s. Today, its share is close to 30 per cent and by 2050, Asia’s share of global GDP could rise to 50.6 per cent, with per capita GDP rising to that of today’s level in Europe, bringing with it the emergence of a vast Asian middle class, the bank report says.
Home ownership, university enrolments, automobile sales, credit card penetration and cellphone subscriptions are rising rapidly. Asia also represents a growing share of global financial markets, with Shanghai, Hong Kong and Mumbai developing as global financial centres to rival New York and London. We can also expect many more Asian mutinationals.
Much of the world is entering an investment boom, with $5 trillion added each year to the global capital stock, and in 20 years this could double to $20 trillion a year. Most of this capital accumulation will be in Asia. By 2050, Asia could be accounting for 75 per cent of this growth.
“All of this assumes that Asian economies can maintain their momentum for another 40 years and adapt to a shifting global economic and technological environment by continuously recreating their competitive advantage,” the report cautions.
And there are huge challenges, including large and rising inequality within many Asian countries, an intense competition for resources (not just energy and minerals but water and arable land), the rise in disparities in living standards between countries, climate change, the surge in the growth of mega-cities and the overriding challenge of systems of governance.
But the challenge that the Asia Development Bank focuses on is what it calls the Middle Income Trap.
This is the difficulty that countries, which experience rapid growth based on cheap labour, have as their labour and other costs rise, and they are unable to make the transition to high-skill industries with high productivity and innovation. This is what happened in Latin America, the bank says. If Asia experienced this same trap, then its 2050 GDP would be $61 trillion, not $148 trillion.
The report is cautiously optimistic, pointing to the success of Japan, Korea, and Taiwan and the growing investments in education and research in China and India, and the growth of Asian capabilities in electronics, computers, information technology services, communications, drugs and biotech.
Asia’s rise is Canada’s challenge and Canada’s opportunity.
Can we build innovative companies in manufacturing and business services that can compete with Asia in global markets or will we become primarily a supplier of raw materials and food and a destination for wealthier Asian tourists? How will our universities and colleges compete for students and faculty?
Will our financial markets link with those in Asia? Will we build our strengths in clean water technology, urban transportation and smart infrastructure by investing in our own cities to develop the technologies we can export?
We have to make Asia an opportunity, not a threat. But if that is to happen, we have to build a much more innovative country of our own. We have to have something tangible to bring to Asia so that when our future prime ministers go there, Asians will pay attention.
Economist David Crane is a syndicated Toronto Star columnist. He can be reached at crane@interlog.com.