A bit late, but Canada finally looking to Asia

For the past 25 years the people who, in effect, run Canada — our politicians, senior bureaucrats and business leaders — have been fixated on the United States.

For the past 25 years the people who, in effect, run Canada — our politicians, senior bureaucrats and business leaders — have been fixated on the United States.

Get closer to the Americans, adopt free trade and integrate much more deeply into their economy and our future will be assured, we were told.

But now, as the U.S. economy faces a period of slower growth and the risk of more protectionism, our establishment is belatedly waking up to the fact that there is a lot more action outside of North America, in Asia in particular.

While this realization is long overdue, it is better late than never.

One sign of this shift is the decision by the Canadian Council of Chief Executives to co-sponsor a study by Toronto professor Wendy Dobson — Canada, China and Rising Asia: A Strategic Proposal — spelling out an urgent need for an Asia strategy.

For much of the past 25 years, the council, which is a lobby group for Canada’s largest 150 corporations, has pursued an almost single-minded policy to deepen Canada’s ties with the U.S. Its co-sponsor of the Dobson study, the Canada-China Business Council, has to be sure been a tireless advocate for closer Canada-China ties, a relationship that was strongest when Jean Chretien was prime minister and met yearly with the Chinese leadership.

Dobson’s report charges that “Canada has a reputation in Asia for showing up there but not being serious about establishing long-term relationships.” She does acknowledge that Canada had worked to build the Asian connection, but that “Canada’s reputation has declined in recent years with our neglect of bilateral relationships and regional institutions.”

Although she doesn’t say so, it was the government of Stephen Harper that changed the focus.

As prime minister, Chretien worked the China, India and other files hard, leading Team Canada missions that were a means to give a high-profile for Canadian businesses.

These have since been scrapped.

As well, with its Asia-Pacific Gateway strategy, the government of Paul Martin planned an ambitious business-led council to advance the Asian connection, but this was cancelled by the Harper government.

Moreover, our relationship with China took on a chilly tone when Prime Minister Harper publicly attacked the Chinese government and refused to join other world leaders in attending the 2008 Beijing Olympics. More recently, Canada’s reputation in Asia has been hurt by our decision not to participate in the 2012 World’s Fair in South Korea.

Today, the Harper government is trying to improve its China policy, with several ministers making the trek to China over the past year.

In spite of the missteps by Canada in its relationships in Asia, Canadian multinationals are busy in that part of the world. Magna International, Bombardier, Power Corp., Manulife Financial, Potash Corp, Agrium, Bank of Montreal, Sun Life, SNC-Lavalin, CAE and the Canadian Wheat Board are all active there.

And the opportunities in Asia will only grow.

As Dobson says, “despite the challenges China and India face in the years ahead, their economic plans offer opportunities for Canadian businesses, particularly in areas such as agriculture, natural resource commodities, energy, and the environment (including so-called clean technology and greener urbanization) and in services such as health care, education, entertainment and tourism for which demand by middle-class Chinese and Indians is rising.”

Right now, though, the trading relationship is lopsided.

Canada exports low-value-added raw materials and food to Asia and imports manufactured goods. This is not due to trade barriers in Asia so much as to the fact that Canada is not an effective competitor in many areas of innovation and advanced technology.

But as Dobson warns, “complacently continuing our heavy reliance on commodity exports and investments will neither sustain nor increase future Canadian living standards.”

Instead, Canada must develop a catalogue of innovative or knowledge-based goods and services that Asians will want to purchase.

While Dobson puts much emphasis on the importance of leadership at the top in developing stronger relationships in Asia and in negotiating new trade and investment deals in Asia — and these are important — the reality is that unless we can grow the companies that can compete in Asia, we will simply end up as a supplier of raw materials and a tourist destination for the growing Asian middle class.

We do need an Asia strategy but we also need innovative companies that can participate in the great growth that is forecast for Asia.

Economist David Crane is a syndicated Toronto Star columnist. He can be reached at crane@interlog.com

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