Majority Politics in Canada: Foreign Investment with the Asia-Pacific

The Canadian government of Stephen Harper recently confirmed that is has ratified a foreign investment treaty with China. In the works for more than two years, the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA) will come into force this Wednesday October 1, effectively ushering in a new era in Canadian economics. Shrouded in mystery since being first announced in 2012, the deal and its unexpected ratification have been met with immediate and strong opposition. While some consider the agreement a bold and potentially lucrative economic move, reaction in Ottawa, the media and the public seems overwhelmingly critical. One of the most potent arguments has charged the Harper government with putting Canada’s long-term economic sovereignty at risk. Is this criticism warranted, and should Canadians be concerned of the potential pitfalls of a foreign investment deal with China? In today’s post we delve into this issue by exploring in brief Canada’s economic history with the Asia-Pacific.

In the immediate decades following the close of the Second World War Canada’s economic policy was predicated by domestic commitments to North American security and a deep sense of moral internationalism. Eager to contribute to global recovery and long-term stability, Canada was prepared to invest in foreign partnerships to promote economic growth, social justice, and improved quality of life in regions that were then developing at a rate less than its own. Canadian exports to countries of the Asia-Pacific, including Japan, China, Australia, New Zealand and others, increased steadily and significantly, amounting in excess of $1000 million by the early 1970s. By comparison, imports from the Asia-Pacific to Canada amounted to some $650 million at that time. These numbers accounted for a third of Canada’s total market share, surpassed by only the United States and Western Europe respectively.

John Diefenbaker’s Progressive Conservative government (1957-63) did much to foster and grow trade with the Asia-Pacific. After struggling to sell Saskatchewan grain to the United States, the conservatives made a bold move in early 1961 by agreeing to sell a large quantity of wheat to Beijing. The agreement was meant to secure a major foreign market for Canada’s economy and aid a then famine-stricken China, but the United States Treasury Department opposed the deal on the grounds that Canada was attempting to trade with an openly Communist nation. Although the issue dissipated as more pressing Cold War concerns mounted, American resistance to Canada-China trade fueled the infamously sour relationship between President John F. Kennedy and Diefenbaker, to the extent that the conservatives sought further potential investment opportunities outside of North America to spite Washington. 

Canadian investment in the Asia-Pacific continued to grow in the years following Diefenbaker’s tenure. Trade with Japan led the way, as exports and imports amounted to $625 million and $495 million respectively by 1970. Canadian sales were limited at the time to industrial raw materials and food as well as food-related items, while finished goods made the bulk of Japanese sales to Canada. Trade with China was considerably less, accounting for $125 million of Canada’s total exports at the time. Wheat sales made up roughly ninety-eight per cent of Canadian trade with China, and thus Canadian investors hadn’t much pause for concern in trade with Communist China.  

Current global economics are in a vastly different state than they were in the 1970s, but similar concerns are today being voiced of Harper’s government that were first raised throughout the Cold War years in reaction to Canadian foreign economic activity. On one hand foreign investment agreements provide a measure of protection and confidence for Canadian investors to expand and succeed abroad, while on the other they open Canada’s economic stability to potential risk.

The recently ratified FIPA agreement with China provides a framework of legal obligations and rights that are meant to enhance foreign investment. Yet unlike Canada’s economic posture of the past, this most recent deal is significantly focused on what China can provide Canada, rather than the reverse. This point alone has been met with a vehemently strong reaction in both public and political circles. A First Nations group has challenged the agreement in court, while the New Democrats have asserted numerously an open opposition, saying recently in a statement that, “the agreement will give China’s state-controlled companies the same protection under the law as private Canadian companies … [i]n effect, it will give China access to, and control over, some of Canada’s natural resources for the next 31 years.”

Adding to concerns already high as a result of the duration and terms of the agreement, is Harper’s recent economic diplomacy. Deputy Green Party Leader Bruce Hyer criticized the Conservatives for signing the deal “behind closed doors.” Parliamentary debate did not take place prior to the agreements ratification, and for this Harper’s government is taking the most heat. Hyer added that the move was “not just undemocratic in itself,” but was also “a profound attack of Canada’s sovereignty as a nation, and an erosion of the rights of all Canadians to make democratic decisions about our economy, environment, and energy.” On this point, it’s hard to argue.

Ultimately, as historians we admit our limited understanding of domestic and international economics. This is not to suggest that we’re ill equipped to offer an informed opinion, but rather quite the opposite. Admitting ignorance opens the mind to new questions in the pursuit of knowledge, and as historians this allows us to offer insight from multiple points of view. We allow our readers to judge our work, so take from it what you will. But operating as perpetual learners demands in-depth and open debate – historical inquiry is dependent on this point alone. So while we admit to not understanding in full the implications of foreign investment agreements in a changing global economy, we have no reservations against questioning Harper’s recent economic dealings. The Conservative's have a majority, and seemingly more power than most had expected. This is our opinion, but what say you?