Canada – China Relations Strained: Possible Outcomes Remain Convoluted

Chinese president Xi Jinping is under pressure to maintain China’s status not only as economic world player, but increasingly as a country with political clout. The Wanzhou issue is test of just how far China will go to maintain its growing authority.

By Max Singh

Political relations between China and Canada have been strained since the arrest of Meng Wanzhou, the chief financial officer of China’s global telecommunications giant Huawei. Wanzhou was arrested in Vancouver on December. 1 on suspicion of fraud involving violations of U.S. sanctions on Iran. American prosecutors are seeking her extradition from Canada, while.  Chinese president Xi Jinping is under pressure to maintain China’s status not only as economic world player, but increasingly as a country with political clout. The Wanzhou issue is test of just how far China will go to maintain its growing authority.

The arrest has led to increased tensions between Canada and China, and some are fearing Beijing could target areas such tourism, student studies and trade in the quest to put pressure to release Wanzhou. In return there is speculation that Canada will ban Huawei from its intention to enter the 5G communications technology market. The relationship has also deteriorated as Canadian Michael Kovrig was arrested in mid-December and detained in China on charges of endangering national security. Kovrig, a former diplomat was based in Hong Kong as an adviser with the International Crisis Group, a think tank agency. On December 10, Michael Spavor – another Canadian was also arrested, just days after China promised retaliation for Canada’s arrest of Ms. Meng. Mr. Spavor, a Canadian entrepreneur in China, were detained by Chinese authorities on suspicion of “engaging in activities that endanger the national security.”  However most political observers say the arrests are simply tit-for tat retaliatory measures by the Chinese government.

In another dramatic twist, a Canadian man charged with drug smuggling in China four years ago will be “put on trial” by the Liaoning Provincial High People’s Court in northeastern China. The Canadian government has played down this incident with Global Affairs Canada, saying it has been following this case for several years and has been providing consular assistance to the Canadian.

Prime Minister Justin Trudeau reaffirmed Canada’s commitment to the rule of law after U.S. President Donald Trump apparently hinted about interfering in the case of detained Huawei CFO Meng. Meanwhile, in a strident statement issued on December 21, Canadian Foreign Affairs Minister Chrystia Freeland called for the “immediate release” of Mr. Kovrig and Mr. Spavor. “We are deeply concerned by the arbitrary detention by Chinese authorities of two Canadians earlier this month and call for their immediate release,” Ms. Freeland said. Key Canadian allies, including the, U.S. United Kingdom, Australia, and the European Union have spoken in support of Canada and the detained Canadians.

The key issues in the strained relationships are its possible effects, if it continues to drag on. The areas of bi-lateral tourism, work and study programs and visa, and continued trade are of concern. Gong Chou, a Vancouver travel agent says he is worried that Chinese tourism to Vancouver- a sector that brings in many millions of dollars in terms of revenue may suffer if Chinese travellers feel they could face scrutiny or harsher measures for whatever reason in Canada. It may also work the other way if Canadian tourists – and in particular Canadians who work in   Non – Government organizations in China feel they could be under threat in an increasingly draconian Chinese political climate.

Kalvin Chan of the New Bright Academy in Vancouver says he is also concerned that Chinese students – who make up a huge proportion of international students in Canada may also be impacted. “Chinese students bring in many millions of dollars to the Canadian University schools and colleges system– why would Canada want to jeopardize that?”

Benson Wang a Vancouver importer and exporter says that any trade sanctions are unlikely as yet, unless China makes the first move. “But it’s still possibility.” He adds. “I think the Canadian government should release Meng, instead of doing the Americans dirty work for them. Canada imports so much from Canada. If there is a trade war, the shelves in every Walmart in Canada will be empty in a month – everything is made in China nowadays.”

The arrest of Meng also means that a new free trade agreement previously under negotiation between China and Canada is now stalled. China is Canada’s second largest trading partner, after the U.S. and Canada has been actively courting China for the free trade deal as one of the world’s largest economies.

The arrest of Meng also means that a new free trade agreement previously under negotiation between China and Canada is now stalled. China is Canada’s second largest trading partner, after the U.S. and Canada has been actively courting China for the free trade deal as one of the world’s largest economies. The deal is important after 14 months of hostile negotiations with the United States, on a new NAFTA deal under the combative and unpredictable Donald Trump administration. Canada is now looking to diversify for new trading partners and China has been considered one of the top prizes by Premier Trudeau’s trade department.

Canada hopes to increase agricultural exports to China to $75 billion by 2025, a substantial increase over total exports – in all sectors – of $18 billion in 2017.  Canada mainly exports natural resources to China, and largely imports manufactured goods: mechanical appliances and electrical equipment in the form of consumer items. Other major imports include plastics and rubber, as well as rare earth metals, such as yttrium and cerium, which are used in the manufacture of hybrid cars, plasma screens and laptop computers. Canadian exports to China include nickel, copper and in recent years potash, which is used in the manufacture of fertilizer. China is also a major buyer of Canadian wood and paper products, as well as fish products – such as salmon and lobster, oilseeds, canola, cherries, blue berries and speciality produce.

Intelligence critics have shared concerns with the Canadian government about Huawei. The Globe and Mail newspaper reported in recent years, that Huawei has invested millions of dollars in Canadian universities, with critics warning that the company now owns numerous valuable patents they have gained through research partnerships that could have a negative impact on infrastructure security, as the company seeks to dominate the burgeoning field of 5G technology.

Political and economic observers hope that there is no further escalation in the diplomatic battle, which could hurt interests both in China and Canada. David Mulroney, Canada’s former ambassador to China said, in a recent interview “There is a crisis in the relationship between China and Canada – and the Canadian government has concerns – rightly so, that the economic cost of future trade deals if they are jeopardized will have effects. I think the relationship is very robust. If we’re causing problems, or the Chinese perceive that we’re causing problems, they’re not afraid to raise really difficult issues and to pound the table,” he said.

Mark Lazner , an International trade lawyer based in Vancouver argues that China would not limit or seek to engage in trade war,” Why would China want to shoot itself in the foot when it comes to trade?”, China want to sell more of its goods all around the world and it is unlikely they will fire the first shot.” He adds. “It is all about politics, but it is an interesting question, China is really taking the Meng issue by playing politics, not trade warring. It’s not in anyone’s interest. Hopefully there will be a diplomatic solution.”

Meng Wanzhou is out on a ten million dollar bail in Vancouver, — but the extradition case against her could continue for years, and have long lasting repercussions for Canada and its relationship with China.