As threats of ‘new Cold War’ between U.S. and China intensify, Canada needs firm strategy to adapt

Concerns about China present Canada with a conundrum, particularly as trade ties between the two countries continues to grow

Jul 31, 2021

"We are in a uniquely complicated spot. We’re being borne along a current with very few

OTTAWA — Back in April, prominent U.S. senator Chuck Schumer tabled a sweeping 1,445-page bill that would lay the groundwork for America’s broad strategy to blunt China’s global rise.

The legislation, called the Innovation and Competition Act, identifies strategic industries like quantum computing, advanced semiconductors and pharmaceuticals, where it recommends the U.S. should ramp up public support. It proposes deeper protections for critical minerals, expands research spending, and aims to strengthen cyber defence capabilities, among other things.

Tucked away in three brief sections of the legislation, U.S. officials detail a role for Canada in their China policy. Despite receiving little attention in Canada, the plans are deeply consequential, providing a rough sketch of the shape of Canadian foreign policy for the coming decades.

They come as U.S. officials gear up for what they expect will be a protracted battle with China for global supremacy, often referred to by observers as the new Cold War. It is already being fought across numerous fronts, encompassing cyber warfare, military expansionism, technological research, culture, infrastructure, and intellectual property.

The long struggle between the two behemoths has implicated Canada, and will continue to do so as competition heats up, observers say, particularly given Canada’s close ties with the United States. That will in turn force Ottawa to navigate an increasingly pronounced divide between China and the U.S., complicating policy choices for everything from trade to national security.

“We are in a uniquely complicated spot,” says Gordon Houlden, director of the University of Alberta’s China Institute. “We’re being borne along a current with very few options. So the idea that we can craft a way forward easily is wrong.”

Parliament has shown some initiative on the matter, including the signing of an agreement with the U.S. in January 2020 to establish new supply chains for critical minerals and rare earths, partly as an effort to combat China’s current dominance in the market.

But the agreement lacks hard details, and the Liberal government under Prime Minister Justin Trudeau has not yet outlined a broad strategy toward the U.S., critics say. It has also hesitated on several key decisions, including whether to allow China’s Huawei Technologies to build Canada’s next-generation 5G mobile network, even after the company has been barred by all other Five Eyes intelligence-pooling allies.

The American legislation effectively lays out high-level plans to work with Canada to uphold a “shared vision of democracy” and maintain the “rules based international order established after WWII,” including stronger ties between allies not seen since that time.

It also involves loosening export regimes between the U.S. and Canada, protecting “critical defence-related technology,” establishing open and transparent planning with Canada on infrastructure, co-operating on Arctic defence and energy connectivity, combatting “industrial espionage,” and deepening intelligence sharing, “particularly in 5G telecommunications technology.”

The plans reflect a U.S. administration under Joe Biden that, counter to some expectations, has continued with many of former president Donald Trump’s more combative China policies, in some cases intensifying them.

“We are in the midst of a fundamental debate about the future and direction of our world,” Biden said in one of his first public statements after assuming office earlier this year.

The more bare-knuckled China policy represents a shift for Biden, who took a softer stance toward the country under the Obama administration. But an increasingly bellicose and authoritarian China under President Xi Jinping has created a bi-partisan consensus in the U.S. toward the country. Some foreign policy experts believe that animosity across China-U.S. lines will only intensify given historical trends, and as Xi sees a perceived decline in America’s international dominance.

“On the current trajectory, war between the United States and China in the decades ahead is not just possible, but much more likely than currently recognized,” Graham Allison writes in his 2017 book, Destined for War: Can America and China Escape Thucydides’s Trap?

Many observers share that view. Others believe a sort of prolonged and tense coexistence between the two is more likely to prevail, where technology and the global economy are increasingly bifurcated along China-U.S. lines.

China has itself rejected the Cold War framing, accusing the Biden administration of “Cold War thinking,” or, as in an editorial in China’s Global Times last year, that Trump “summons the ghosts of McCarthyism” with his rhetoric.

From China’s perspective, aggressive diplomacy tactics are a necessary response to the so-called “century of humiliation,” when foreign powers including the U.K., U.S. and Russia began advancing well beyond China’s capabilities, causing the once-powerful nation to suffer a string of bruising defeats.

The period lasted well over 100 years, ending around the Mao Zedong era in the early 1950s. For a civilization thousands of years old, accustomed to long periods of global dominance, China and its leadership tend to view their current revival as a return to the natural order of things.

“They don’t see it in Chinese thinking as an oppressive thing, they just see themselves in more benign terms as the leading civilization in the world, and that they ought to have an important say in the affairs of the world, and even a dominant position,” Houlden said. “But it’s not a Nazi-like military conquest of the world.”

China and its leadership tend to view their current revival as a return to the natural order of things.

Instead, Xi has framed China’s rise mostly as an economic reorientation rather than an effort to export ideological beliefs abroad, analysts say. While it has made efforts to expand China’s cultural significance, most of its emphasis is placed on gaining economic advantage, for example with its Belt and Road initiative, which seeks to rapidly expand road, rail, sea, and telecommunications links with Europe and Asia.

Xi has repeatedly touted the notion of “socialism with Chinese characteristics,” which involves a commitment to communist belief, but one that is stripped of certain Marxist elements in favour of more capitalist-oriented policy.

“It’s been said that China doesn’t have allies, it has markets,” said Margaret McCuaig-Johnston, senior fellow at the University of Ottawa and former member of the Canada-China Joint Committee on Science and Technology.

Taken in isolation, China’s bid for economic supremacy wouldn’t pose a problem for Western allies. But ever since the country joined the World Trade Organization in 2001, it has continued to undermine multilateral institutions while reaping the rewards of more liberalized trade, McCuaig-Johnston said.

In 2015, Xi made a pledge with Obama that China would not militarize the artificial islands that Beijing had been building in the disputed South China Sea, only to do exactly that in the following years.

After promising not to spy on foreign companies, the country has continued to carry out systematic industrial espionage campaigns and methodically steal intellectual property. Western leaders, led by the U.S., recently officially blamed China’s Ministry of State Security for the hack of Microsoft email software earlier this year, which infiltrated around 400,000 servers globally.

Huawei, after being ordered to replace or reassess portions of possibly compromised software it had installed in the U.K., has made almost no progress in doing so, according to a recent report by Britain’s Huawei Cyber Security Evaluation Centre. Taken together, those slights point to a country little concerned with abiding by international norms, McCuaig-Johnston said.

“I attribute the Cold War spirit, and the Cold War stresses, in largest part to China’s actions, as well as the tone of their ‘wolf warrior diplomacy,’ which isn’t very diplomatic,” she said.

At the same time, China has made an effort to distort multilateral institutions by gaining positions of power within bodies that dictate international settlements or set diplomatic and industrial guidelines. Chinese nationals now occupy leadership positions in at least 40 United Nations institutions focused on engineering, maritime law, health, finance, atomic energy, and a range of other areas.

Those include top positions at the International Telecommunication Union, United Nations Industrial Development Organization, and Food and Agriculture Association, providing more leverage to China to gradually tip the scales of international systems of trade and oversight.

Concerns about China in turn present Canada with a conundrum, particularly as trade ties between the two countries continues to grow. David Mulroney, former Canadian ambassador to China from 2009 to 2012, recommends adopting a policy of “selective engagement” with the country as a way to capitalize on the advantages of Chinese expansionism while avoiding the pitfalls.

“It will require much more thought, it will require much more management of foreign policy,” he said in a virtual discussion hosted by The Hub, an online publication. “That will be difficult for everybody. It’ll be particularly difficult for Canada because we haven’t put much thought into our foreign policy for a long time, and we’re going to pay a price in terms of the learning curve that we have to go up.”

In 2020, Canadian exports to China increased eight per cent, up to $25 billion, while imports of Chinese goods increased nearly two per cent, to $76 billion, according to public data. That remains well shy of the share of Canadian exports that go to the U.S., at 75 per cent.

Maintaining healthy trade volumes with China in the future, Mulroney said, might mean breaking from China on areas deemed sensitive to national security, like artificial intelligence research or critical minerals, while partnering on other issues, like climate change or agriculture.

Perhaps most troubling, he said, Canada has begun to show signs of moral fatigue on the China issue. Last year, a group of former parliamentarians and diplomats called on Canada to release Huawei CFO Meng Wanzhou in exchange for two Canadians detained in China, Michael Kovrig and Michael Spavor, which Mulroney said points to a growing instinct toward capitulation.

“That’s the first step, when I talked about China’s assault on our sovereignty and our autonomy,” he said. “It’s sapping the will, it causes countries to feel that it’s just impossible, it’s too much work. And that was never Canada’s approach in the past, but I worry that we’ve succumbed to that to a certain extent.”

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