In China trade talks, Alibaba tells Harper: ‘We want your cherries’

NATHAN VANDERKLIPPE AND STEVEN CHASE

BEIJING and HANGZHOU — The Globe and Mail

Published Friday, Nov. 07 2014,

Alibaba is a Chinese retail Goliath running the world’s most crowded online emporium, stocked with undergarments, SUVs and scanning electron microscopes. But on Friday, its founder, the billionaire

“I heard Canada has better cherries,” he said. “What we are interested in is how we can help Canada to sell more agriculture products to China.”

For Mr. Harper, the meeting with one of China’s brightest business stars marked the highlight of his first visit to China in more than two years. Over the weekend, he will formally meet Chinese President Xi Jinping for the first time, and help connect a coterie of Canadian business leaders with their Chinese counterparts.

As he travels, he carries with him the ambitions of a corporate Canada desperate for more profitable ties with the Asian power, and eager to see the Prime Minister move beyond the years of hostility toward China. Mr. Harper’s skepticism – and occasional scolding – have not changed Chinese behaviour. Trade and investment have flourished despite the frosty relations. So if those ambitions for greater Chinese-Canadian economic exchanges are realized, it’s likely to be in spite of the Prime Minister, not because of him.

Almost from the outset, warmth toward China has never emanated from the Harper government. In 2006, Mr. Harper shocked the business and political establishment by vowing not to sell out to what he called the “almighty dollar” in China. It was a comment born out of a personal feeling of deep conflict over China – one that remains today, according to a former official who spoke on condition of anonymity.

The official’s read of Mr. Harper is that the Prime Minister is very concerned that Beijing appears to be “unscrupulous in economic and commercial matters and lack any value system we would recognize in terms of their treatment of dissent and human rights internally.”

“But he’s also extremely pragmatic and practical so he understands we cannot ignore China,” the official added, and we “have got to do business with them, especially given the resource base of our economy.”

Mr. Harper accompanied his “almighty dollar” comment with an argument that the open-armed Team Canada approach of his Liberal predecessors hadn’t borne much fruit. “The fact of the matter is that neglecting human rights hasn’t opened a lot of doors,” he said. And for all the grief Mr. Harper has gotten since, the numbers suggest doing the opposite hasn’t closed many doors, either.

From 2000 to 2006, with Liberal leadership, two-way trade grew by $27.32-billion. From 2006 to 2012, under Mr. Harper, it rose by $27.75-billion. The value of Canadian investment in China has grown more under the Conservatives than under the Liberals. The value of Chinese investment in Canada has exploded under the Conservatives, with large growth coming in the early years of the Harper administration, when he was most public with his criticism.

Mr. Harper’s ambivalence, of course, hasn’t endeared him to Chinese leaders who remember only too keenly that he skipped the 2008 Olympics and granted honorary Canadian citizenship to the exiled Tibetan spiritual leader, the Dalai Lama. The chill in relations prompted warnings at home that the Conservative leadership has damaged the maple leaf’s standing in the Middle Kingdom. But the interests that define the relationship are another matter.

“The notion that this is about liking one another and being best buddies is a little bit overblown,” said David Mulroney, Canada’s ambassador to China between 2009 and 2012.

Take the $15.1-billion (U.S.) takeover of Calgary-based Nexen Inc., which remains the biggest foreign investment in Chinese history, one advanced by a state-owned energy company. Politics had little to do with it, argues Marvin Romanow, the former chief executive of Nexen Inc. who spent more than two years in discussions with Chinese interests, but left before the deal was done.

China wanted Nexen because it was looking to boost its oil holdings, and Canada seemed a promising place to buy assets. The quality of relations between the two countries was not a factor, he said. “I don’t understand why so much of the coverage tends to be about politics.” Even among state-owned Chinese companies, economic and strategic reasons are what “really move the needle an awful lot.”

Take Japan and China – countries whose people despise each other, but still maintain over $320-billion (U.S.) in trade.

But critics who advocate more cozying up to Beijing in the name of trade say Canada is losing out. China’s growing middle class will continue to propel demand for all sorts of products – not least among them, energy – at a rate far greater than Canada’s traditional trading partner, the United States.

Australia, for example, is endowed with natural resources similar to Canada’s, but it is on far better terms with China and sees far greater trade.

Geoff Raby, a former Australian ambassador to China, says the value of pursuing warmer relations lies in marketing, rather than persuading the Chinese government to open the spigots. Mr. Raby used to urge Australian politicians to visit so they could get their faces on CCTV, China’s national television.

“That keeps Australia in the minds of ordinary Chinese,” he said. “So when they’re thinking about travel or study or business, Australia is there as a comfortable destination.”

Mr. Raby sees the primary difference between Canada and Australia as one of orientation. Canada sees itself as an Atlantic nation. Australia has, by virtue of geography and generations of political leadership, oriented itself toward the Pacific. “From Bob Hawke in 1983 onwards, there’s been a consistent narrative across all governments about the benefits of integration with Asia, and China being central to that.”

Canada, of course, hasn’t had that, with a Conservative government eager to reject what it sees as Liberal policy.

Eight years after assuming office, the Conservatives also still can’t match the power of China’s Liberal lao pengyou, the “old friends” of the Communist Party such as Jean Chrétien and the Desmarais family. In 1998, speaking to Mr. Chrétien, then-premier Zhu Rongji declared: “Canada is our best friend.”

By contrast, a generation of Chinese scholars remains angry with Mr. Harper for pulling funding from 40 Canadian studies programs in China. Only two remain. “This just reflects that the Canadian government doesn’t put any emphasis on mutual relations,” said Tang Xiaosong, deputy director of the Centre for Canadian Studies at Guangdong University of Foreign Studies.

The Harper government is “so unfriendly to China,” he said. He described the current relationship as “awkward pragmatic,” with cool political but warm economic ties.

That has never sat easy with parts of the business community. Take Viking Air, a Vancouver Island aircraft manufacturer. Its president, David Curtis, has been trying to sell the Chinese on the Twin Otter plane and believes the market is huge. But breaking into China has been challenging.

He said he believes Mr. Harper’s visit can help, particularly since other countries use their politicians for corporate gain. “I am a big booster of economic diplomacy,” he said.

Others argue that corporate survival in China, like anywhere else, depends on building good commercial relationships. It’s “picking up the phone, working together and treating each other like sound business people,” said Christine Mitchell, who lives in Shanghai and works with Celestica, a Canadian electronics manufacturer.

The troubles Canada has had in doing that may be rooted more in problems on Main Street than on Parliament Hill. Polling by the Asia-Pacific Foundation has found Canadian support for engaging China fell from 55 per cent in 2012 to 39 per cent this year. Substantially more people oppose pursuing a free trade deal than support it. Those older than 55 – voters, in other words – are the most skeptical.

Still, China is playing an ever greater role in the Canadian economy. It has been the only bright light for trade in a decade – exports to the U.S. have been essentially flat since 2004, but have risen at a 13-per-cent annual clip to China.

But the China effect tends to be invisible to those outside the mining towns and ports that actually touch the coal and timber at the heart of the trading relationship. (And of the $4.9-billion in Canadian direct investment in China last year, nearly three-quarters flowed through a single company, Husky Energy, that is majority-owned by a Hong Kong billionaire.)

That has helped foster a Canadian ignorance of China. Yuen Pau Woo, president of the Asia Pacific Foundation for nine years, recalled a February appearance before the parliamentary international trade committee where Russ Hiebert, a Conservative MP, asked why Canadian students should bother learning Chinese when so many Chinese students are studying English.

It was, to him, emblematic of the broader problems Canada faces with China. The easy steps are done, like building ports and the like. The hard steps remain, like pursuing tighter trade ties through a free-trade agreement and instilling better cultural understanding. Against that background, Mr. Hiebert’s comments show the striking chasm between Canada and other nations.

“In a negotiation, if the other side of the table knows both languages and you only know one, who is at an advantage?” Mr. Woo said. “It is obvious. It is laziness and complacency that is holding us back.”