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Sean Speer: National security matters too—Why we must reshore our critical industries


On November 22, 2022, as part of the Ontario Chamber of Commerce’s Ontario Economic Summit, The Hub’s executive director Rudyard Griffiths moderated a “Munk-style” debate involving Globe and Mail columnist Andrew Coyne, C.D. Howe Institute CEO Bill Robson, former Ontario Cabinet minister Sandra Pupatello, and The Hub’s own editor-at-large Sean Speer. The debate’s resolution read: Be It Resolved: Ontario Needs Reshoring as Part of Its Growth Agenda. Pupatello and Speer argued in favour of the motion. Coyne and Robson argued against it. The Hub is honoured to publish the debaters’ opening statements.

Let me say what an honour it is to have someone as distinguished and public spirited as Sandra Pupatello as my debate partner. 

It’s also kind of cool to be debating Andrew Coyne and Bill Robson, who’ve both had formative influences on me through their thinking and writing over the years. That’s not a dig, by the way, at how much older they are. 

That I’m up against them is of course a bit intimidating—though Sandra and I have one thing going for us that they don’t: the better argument.

What are their arguments? I suspect that we’ll hear about Public Choice theory: the idea that the politicized allocation of resources in the economy causes capital to flow based on political preferences rather than market forces. There’s a reason after all the Nobel Prize-winning founder of Public Choice called it “politics without romance.”

They’ll also probably point to other Nobel Prize-winning economists like Friedrich Hayek or Milton Friedman who’ve written powerfully about the productive benefits of leaving the allocation of resources to the invisible hand of the market economy. The invisible hand of course being a reference to the founder of modern economics himself, Adam Smith.

But Smith wasn’t a dogmatist. While he understood the benefits of a self-regulating economy, he had important caveats. He once wrote for instance that “defence is of much more importance than opulence.” 

Herein lies the weakness of Andrew and Bill’s argument. They fail to reckon with a globalized economy in which China, home to 30 percent of global manufacturing output, is neither a reliable trading partner nor a responsible stakeholder. National security must ultimately trump our fidelity to markets. 

I think a big part of the problem is that they’ve succumbed to a post-Cold War nostalgia that said if we brought China into the world trading system, it would boost its economic growth and wealth creation and in turn put it on a path to something resembling democracy and ultimately a stake in defending the liberal international order. 

It was a reasonable experiment. More than twenty years ago I was only a teenager, but I probably would have supported China’s inclusion into the World Trade Organization on these grounds. 

Remember, though, the purpose of an experiment is to collect evidence, test our hypothesis, and adjust accordingly. The evidence is pretty clear: our underlying assumptions about China have been proven wrong. 

China isn’t a reliable trade partner. Instead, it’s used our asymmetric openness to copy our technologies, steal our ideas, and turn our supply chain dependency into a geopolitical weapon. Think of Canada’s own experience with vaccine development and production early in the pandemic. Is there any doubt that the Chinese government was using our vaccine partnership as a geopolitical weapon to punish us?  

It’s not a responsible stakeholder. There are too many examples. The unlawful detention of the two Michaels, recent news of its interference in our elections, and plenty of proof in the words of President Xi that the Chinese Communist Party subscribes to a zero-sum view about technology, geopolitics, and China’s relationship to the world. 

And it certainly hasn’t moved in the direction of democracy. Quite the opposite. Modern technology has enabled it to realize a form of totalitarianism that past autocratic regimes couldn’t have imagined. 

The upshot: we should abandon the failed experiment and reduce our supply chain dependence on China. We ought to have the goal of greater economic self-determination—specifically in areas that are critical to our national interest. 

Let me wrap up with some observations about reshoring. 

First, a reshoring strategy requires clear parameters to determine which productive capacities are indeed critical or strategic. I agree that it can’t become an excuse to substitute the preferences of politicians for markets in every part of the economy. 

There’s a strong case, for instance, for governments to use public policy to ensure vaccine production within our borders. But there isn’t a case to redomicile t-shirt production. A reshoring strategy must be able to distinguish between the two.  

Once we have made these judgements, then we need a set of policy tools—including R&D investments, tax preferences, regulatory forbearance, etc.—that can achieve reshoring while minimizing economic distortions. 

The ultimate goal must be to enable markets to function as freely as possible within a framework that recognizes that, in certain cases, national security must trump opulence. 

Thank you. 

Mark Johnson: Let’s stop the talk about war with China


Almost every day brings an ominous news article about China and its relationship with Canada and its allies. Usually framed as a confrontation between a democratic, rights-respecting West and China as an authoritarian human rights abuser and destabilizer of world order, the relationship appears to be on a one-way downward track, beset by hostility and mistrust, with a looming, perhaps inevitable military conflict at its conclusion. The current political discourse and media coverage are almost exclusively focused on the dangers of a newly rising China. 

Both sides have far too much to lose if this belligerent tone continues. Canada has much to gain if we take prudent steps to protect our interests yet leverage the benefits of the relationship. With 1.4 billion people, China presents Canada with enormous opportunities but also acute problems; we should not let one blind us to the other. Both sides need to pull back, look at the larger, long-term picture, stop the sabre-rattling and war talk, and build a constructive way forward. 

The negative tone is not confined to Canada. In a recent article in Foreign Affairs, called “The China Trap”, Prof. Jessica Chen Weiss lamented:

Competition with China has begun to consume U.S. foreign policy. Seized with the challenge of a near-peer rival whose interests and values diverge sharply from those of the United States, U.S. politicians and policymakers are becoming so focused on countering China that they risk losing sight of the affirmative interests and values that should underpin U.S. strategy. The current course will…bring indefinite deterioration of the U.S.-Chinese relationship and a growing danger of catastrophic conflict…

Former U.S. Secretary of State Henry Kissinger wrote of the rising tensions in the China-West relationship: “The two sides need to absorb the history of the decade before World War I, when the gradual emergence of an atmosphere of suspicion and latent confrontation escalated into catastrophe.” 

Things with China have not gone the way Canada and the West wanted. Under President Xi, the Chinese government has grown more authoritarian at home, constructed an oppressive surveillance state, eradicated democracy in Hong Kong, committed atrocities against the Uyghurs and Falun Gong, militarized the South China Sea, kidnapped two Canadians, and engaged in massive industrial espionage against the West. We also learned that, according to a CSIS report, operatives of the Chinese government interfered in our 2019 election. The Chinese government has reportedly opened three secret police outposts in Toronto to surveil and pressure Chinese dissidents and fugitives to return home. (Disclosure: One such station is allegedly in the riding of Scarborough-Agincourt where I ran for Parliament in 2021.) 

There’s no question that Canada must stand four square and take tough countermeasures against this behaviour. If there are Chinese agents engaged in espionage or other misconduct on our soil, then our police and intelligence agencies must act forcefully. At the same time, we can be realistic and look at the relationship in its entirety. 

Too big to fail

China is our second-largest trading partner. We are deeply linked in business and trade, immigration, law enforcement, cultural and family ties, and tourism. Our business links run the gamut from small, local businesses in every neighbourhood that import goods from China to the Chinese being massive consumers of our mining and agricultural products. 

General Motors sells more cars in China than it does in America. China is the second largest customer of Ford. Let that sink in. It’s the country where much of our consumer goods are produced. Will we truly go to war with our second-largest trading partner, GM’s largest customer, and a major customer for our agricultural and natural resources sectors? We’d be shutting down our own economy. Looking at the economic disruption caused by Russia’s invasion of Ukraine—any conflict with China would cause a global economic calamity that is exponentially larger.

Equally important, China and the West must collaborate to combat climate change, manage the North Korea issue, and respond to global pandemics.

Simply put, this harsh reality requires that the Canada-China relationship not only work but work well. Framing it as a zero-sum game, an inevitable conflict, or a looming war is detrimental to both sides. 

Anti-Asian bigotry: Words hurt

The drumbeat of confrontation and suspicion by officialdom may also contribute to anti-Asian bigotry in Canada. About 1.8 million Canadians, or five percent of the population, are of Chinese ancestry, whose original ethnic homeland, generally speaking, is China. No one needs to be reminded of their contribution to this country. Like most immigrants, they are immensely proud of their ancient culture. Opinion leaders constantly portraying the homeland of a visible ethnic group in a harsh light, even with disclaimers and qualifiers, risk having their words being twisted and exploited by the unscrupulous and unhinged among us. When politicians and other leaders stoke fears of a fifth column in our midst from China, that Canada is rife with Chinese spies and agents in its universities, businesses, and governments, then we cannot be surprised when innocent Chinese Canadians fall under suspicion and become the victims of anti-Asian bigotry. They don’t deserve this. 

To be clear, this does not mean that domestic diaspora politics should influence our foreign policy. What it does mean is that political leaders must choose their words and pick their issues so as not to cause harm to their own citizens. All Canadian leaders must tread carefully. 

A two-track approach

Canada need not abandon the moral principles of its foreign policy. Canadians as a people are both moral and practical; therefore, our foreign policy must be moral yet practical. The challenge for Canada and other Western nations lies in having a mutually constructive, multi-faceted relationship with a regime that is increasingly authoritarian. 

We can take the long view–promote closer business and trade relationships that are mutually beneficial but confront them with well-calibrated measures in coordination with our allies to deter their abuses and coercive actions.

China is not the new Soviet Union. It is a capitalist economy, our second-largest trading partner, and it does not wish to lead a worldwide ideological revolution as the Soviet Union did. In the grand scheme of things, China is not a threat to our system or way of life. 

We need to get off this spiraling war rhetoric. At the G20 summit in Indonesia, President Xi and President Biden met in person and wisely expressed a desire to right the ship and improve communications and cooperation for the benefit of both sides. Time will tell if they can make an effective course correction.

As Winston Churchill famously said, “To jaw-jaw is better than to war-war.” Nothing could be truer about our relationship with China.