Sean Speer: Canada’s shifting stance on China was the most important public policy development of 2022

I was recently a guest on an end-of-year podcast about the top Canadian policy issues in 2022. There are a lot of options to choose from. It’s been a target-rich year for policy wonks including the lasting effects of the COVID-19 pandemic on our health-care systems and educational outcomes for children, the global energy crisis precipitated by Russia’s invasion of Ukraine, and ongoing challenges with inflation and the risk of an impending recession. 

But as important as these issues are, they don’t strike me as a threat to our basic policy assumptions. That is to say, they’re complex, hard, and substantive but ultimately not paradigmatic. They still fit broadly within today’s prevailing policy framework.

The biggest policy issue in 2022, in my view, is the Trudeau government’s new Indo-Pacific Strategy because of what it signifies about Canada’s shifting conception of its relationship with China and its far-reaching implications. 

Its reversal of long-standing assumptions about the case for bilateral engagement—particularly in the form of two-way flows of trade and investment—essentially restores Canadian policy thinking vis-à-vis China back to where it stood prior to the so-called “October handshake” in 1970 which first led to the current prime minister’s father’s official recognition of the People’s Republic of China and ultimately set in motion more than fifty years of Canadian policymaking. 

A policy of engagement 

Although there were brief periods when it looked like Canada might fundamentally change its China strategy, including in the immediate aftermath of the Tiananmen Square massacre in 1989 and the Harper-led Conservatives’ rise to power in 2006, the policy paradigm of engagement has proven durable across successive governments. 

The underlying assumptions behind this policy consensus were reasonable enough and broadly subscribed to by policymakers elsewhere in the Western world including the United States and Europe. The basic idea was that China’s integration into the global economy, including increased bilateral trade and investment with Canada, would reduce the risks of bilateral and multilateral tensions, raise up China’s middle class, and ultimately produce a form of Chinese politics that was more liberal within its own borders and more committed to the preservation of the liberal international order outside of them. 

China’s accession into the World Trade Organization in December 2001 was the apogee of the West’s strategy of engagement. The Chrétien government was a major proponent of this key step in the evolution of China’s integration into the global economy. Prime Minister Chrétien called it at the time “part of China’s broad agenda of developing the rule of law, to ensure fair and equal treatment before the courts for both people and companies.” 

In a 2019 interview with the Globe and Mail, his former International Trade Minister, Roy MacLaren, elaborated on how its WTO accession reflected the era’s beliefs about the interrelationship between trade, prosperity, and political liberalization. As he explained:  

To get China into the World Trade Organization was fundamental to our trade policy…There was some debate even at that time about the Chinese record on human rights. But we didn’t think that human rights and trade promotion/trade expansion/trade liberalization were antithetical. We [believed that] deepening trade and investment relations with China, not only through the Team Canada mission but the far more important question of getting China into the WTO, would lead—in my view and in Jean Chrétien’s view—to human-rights advances. As the Chinese economy expanded and liberalized, China would be drawn into the liberal international order.

MacLaren concluded: “I have no doubt that the China strategy was the right one. In my view, it worked.”

Evidence mounts against engagement 

By the time of his 2019 interview, however, there was plenty of evidence that challenged the idea that the strategy of engagement had worked. The evidence has only mounted in the subsequent three years. 

Under President Xi Jinping, the country’s small steps toward liberalization have been halted and reversed. The widespread use of surveillance technology has actually made China’s form of autocratic government more ruthlessly efficient. Its geopolitical and technology goals are increasingly interconnected and aggressive including its growing antagonism vis-à-vis Taiwan. And, of course, we still don’t have answers about the origins of COVID-19 and the extent to which the Chinese government’s failure to share early information with the world contributed to its massive reach and devastating consequences. 

These major developments don’t even account for its lack of reciprocity in trade and investment policy, its sustained use of corporate espionage and cyber attacks, the negative effects of heavily-subsidized Chinese import penetration on key domestic industries and labour outcomes, and ongoing human rights violations including its genocide of the Uyghurs in Xinjiang province. 

This incomplete list hardly reads like a validation of the policy of engagement. But in fairness to Maclaren, he wasn’t alone in his inability to see its failings. Policy elites across the Western world remained committed to a probabilistic understanding of how economic gains in China would transmit into democratic ones long after it was justified. 

It may not be popular to observe but it’s still true that Donald Trump is probably more responsible than any other Western political figure for catalysing the end of our bilateral and multilateral strategies of engagement with China. As a neophyte with no intellectual or professional stake in the West’s bet on engagement, he was uniquely positioned to observe its growing failings. He was also speaking directly to the voters who were the losers of the so-called “China shock.”

The net result is that through a combination of happenstance, intuition and political opportunism, the Trump presidency brought into serious question the prevailing consensus on how Western countries thought about their economic and geopolitical relationship with China. 

The end of engagement 

Thereafter, one by one, countries started to revisit these basic assumptions. Australia was a first mover because of its heightened integration and proximity to China. Its “strategic realignment” in 2017 signaled a growing recognition of the economic and national security risks posed by its previous policy of engagement, including a bilateral free trade agreement. Others have since followed suit. 

The most significant developments, however, have been in the United States under the Biden Administration. If President Trump’s raw intuitions caused him to challenge the prevailing consensus on China, his erratic and polarizing governing style limited his ability to bring expression to a new policy approach. The Biden Administration has effectively substantiated such an agenda through a combination of domestic and foreign policy reforms. 

Consider one example: The CHIPS Act is, in my view, the single most important policy development anywhere in the world in 2022. It’s a piece of bi-partisan legislation that essentially signals that the U.S. government is prepared to use the levers of public policy—including massive public investment—to cultivate the domestic production of microchips and semiconductors rather than merely defer to the market’s allocation of production.  

There’s reason to believe that this isn’t an exhaustive case either. American policymakers seem prepared to intervene in markets more broadly in the name of national interests including in energy, clean technologies, and other advanced technologies. In a recent New York Times op-ed, for instance, former U.S. Trade Representative Robert Lighthizer actually called for extending the principles of the CHIPS Act to other parts of the American economy. The Senate also just voted unanimously in favour of legislation to ban TikTok. National security has a renewed paramountcy over the fidelity to markets in Washington. 

Canada has been slower than most to rethink its China policy. The Trudeau government came to power with big ambitions about its relationship with China due in part to the legacy of the prime minister’s father and in part to progressive Canadians’ assumptions about the end of the so-called “American empire.” China seemed like the future—the prime minister even infamously expressed admiration for the rationality of its technocratic system. 

The government’s resistance to the growing facts about the Chinese regime was reflected in its foolhardy pursuit of free trade negotiations and its vaccine production deal with a Chinese company with close ties to the military. But if the first five years or so of the Trudeau government were marked by increasing isolation over its insistence on engagement with China, its recently-released Indo-Pacific Strategy outlines a significant policy shift. The new strategy is a sign that Ottawa is finally getting with the program. 

A new paradigm: the Indo-Pacific Strategy

The Trudeau government’s commitment to a new, more hawkish policy vis-à-vis China will be tested over time. But its Indo-Pacific Strategy should be viewed, at least in theory, as a major shift in strategy from engagement to a new, more circumscribed, and realist position. 

It thinks and talks about Canada’s relationship with China in a way that we haven’t seen in decades. At its core, it’s an expression of Ottawa’s growing recognition that China is fundamentally a geopolitical and technology rival and possibly an outright enemy. 

This change in Ottawa’s thinking is personified by Industry Minister François-Philippe Champagne. He was previously the trade minister when the government was consulting on free trade negotiations with China. You can still find on the government website a statement from him outlining the great business opportunities that can flow from a stronger economic relationship with China. Fast forward to the past two months and he’s talking about decoupling, kicking Chinese firms out of Canadian investments, and announcing new national security restrictions on Chinese investment in Canada’s economy more generally. 

The Trudeau government’s policy shift isn’t above criticism. The main problem is that even as Ottawa talks increasingly tough about China, it still hasn’t been forthright with the Canadian public about the magnitude and nature of Chinese acts of espionage and political interference in our country. We still know too little for instance about allegations of espionage in Winnipeg’s top-security infectious disease laboratory or recent reports of Chinese meddling in the 2019 federal election. 

The government’s discretion on these matters may have been justified while the two Michaels were detained in China but the case today is far weaker and leads to questions about Ottawa’s motives. If the government expects Canadians to support a new strategy that may involve trade-offs such as higher consumer prices, it’s important that they have a reasonable understanding of the issues at stake. 

But that doesn’t change that the Indo-Pacific Strategy marks a sea change in Canadian policymaking that will have far-reaching implications across a range of policy files, including research and development, investment and trade policy, defence and national security, energy and climate, and so forth. Every policy decision will need to be subjected to a new geopolitical lens rooted in Canada’s national interests. It marks what policy thinker Robert Asselin has previously described at The Hub as the “return of political economy.”

It’s bound to be a durable change too. The Conservative Party was ahead of the Trudeau government in rethinking Canada’s China policy and so, if anything, it’s poised to get even more hawkish if the next federal election produces a change in government. The Indo-Pacific Strategy is, in other words, a new baseline for thinking and talking about Canada’s relationship with China. 

When we look back at Canadian policymaking in 2022 therefore there’s a high probability that the most lasting and far-reaching policy development is the Indo-Pacific Strategy and its reconceptualization of the country’s relationship with China. It brings an end to fifty years of policy continuity and ushers in a new era.