Thank you, Mr. Chair and members of the committee. My colleagues and I are very grateful today to have the opportunity to give you some background on China and Canada's relationship with it.
Let me start by acknowledging the preoccupation that I know we all have with the coronavirus outbreak in China and the impact this is having on Canadians. The safety and well-being of Canadians at home and abroad is of paramount importance to the Government of Canada. Canada is deeply concerned by the current outbreak of the novel coronavirus, particularly regarding its potential impacts on Canadians in the Wuhan area.
Global Affairs Canada is working closely with the Public Health Agency of Canada and supporting their engagement with Chinese health officials to provide a timely and coordinated response to the outbreak. Some 156 Canadian citizens have contacted Global Affairs Canada for departure assistance. The government has secured a chartered aircraft and is now working on the diplomatic front with officials in China to obtain the authorizations to proceed with an assisted departure.
This latest crisis is occurring after a long period of instability in Hong Kong and, as you are well aware, a difficult year in Canada-China relations. Canada's relations with China are complex, with both opportunities and challenges. Now more than ever, Canadians are asking questions about what China's economic growth and governance model means for their future prosperity, their security and Canada's place in the world.
The committee is taking on important work at a crucial time. A common understanding of where the People's Republic of China is going and how it touches Canada's national interests will make our policy better. The committee will decide what issues to examine in closer detail and will have the opportunity to hear a wide variety of views from experts and stakeholders. Ambassador Dominic Barton, whom you will meet next week, will provide an excellent view from the ground in Beijing.
The governments of Canada and China have, or at least had until the end of 2018, close ties in a number of areas. Few government departments or agencies do not have a partnership with their counterparts in China, in one form or another, and do not have a mandate in which China occupies a major place. Global Affairs Canada is taking a lead role in coordinating the Government of Canada's approach to China, in order to ensure that our relationships are consistent.
I am here to present a general background, which I invite you to consider when you are establishing your program.
For many years, citizens of Canada and the People's Republic of China have built bridges between our countries. While October 2020 will mark 50 years since we established diplomatic ties, many years before that Canadian missionaries helped found leading medical schools in China, and Canada traded wheat to stave off famine across China in the early days of the People's Republic.
It is remarkable that Canada and Canadians, despite our ideological differences, reached out across the Pacific to support the people of China even without an embassy to support them. With the founding of diplomatic relations, Canada launched a broad official relationship, including a bilateral aid program that wound down in 2013.
Through our aid and engagement, Canada supported China's modernization and opening up. Canadians made substantial contributions to reform in the non-profit, legal, educational and agricultural systems over the decades. For example, Canadian programming helped Chinese farmers adapt to the WTO as China completed a accession process.
Reform was critical to China's success in alleviating poverty. According to the World Bank, China has lifted 850 million people out of poverty. China's poverty rate fell from 88% in 1981 to 0.7% in 2015. In 2018 China's GDP was 174 times the size it was in 1952, and per capita annual income had surpassed $10,000 U.S.
As China's economy opened and grew, Canadian trade and investment in China did as well. China is now Canada's third-largest trading partner after the U.S. and the EU.
While still only accounting for roughly 5% of Canadian exports, Canada's trade with China has grown rapidly in recent years. In 2018 two-way merchandise trade between Canada and China reached $103.2 billion, including $27.6 billion in Canadian exports and $75.6 billion in imports.
As my colleague Steve Verheul will explain in the next session, Canadian exports to China fell in 2019. Canada exports mostly raw materials to China under the direct oversight of the Chinese government. As we have been able to see, Canadian exports of canola can be vulnerable to interventions from the Chinese government, interventions that contravene international rules and standards.
Our commercial relations with China have grown not only in exchange of goods, but more broadly. In 2018 service exports to China were valued at $7.4 billion, while imports from China were valued at $2.8 billion, a 6.1% year-on-year increase in two-way services trade.
China is Canada's third-largest source of tourists and its second-largest source of international students to Canada.
But as China's market grew, so did competition for access to it, and China itself has become more competitive. China's economy now accounts for nearly one third of global growth each year. Even at modest rates for China of 6% annual growth, China adds the equivalent of an Australia to its economy every year.
China has enormous potential to contribute to resolving common global challenges. Indeed, when it comes to global problems such as climate change and health, China, by virtue of its population and economic weight, will continue to play a significant role in tackling our collective problems.
As a permanent member of the UN Security Council and an increasingly important economic and military power, China's influence on Canada's international security priorities cannot be ignored.
On December 10, 2019, Parliament passed the motion establishing this special committee to examine all aspects of the Canada-China relationship. December 10 is also International Human Rights Day, and December 10 is also the day in 2018 when Michael Kovrig and Michael Spavor were detained arbitrarily by authorities of the People's Republic of China.
December 10, 2018, is a day that changed Canada's outlook on its relations with China. Canada and many of our partners were shocked and saddened by the detention of Michael Kovrig and Michael Spavor.
We condemn arbitrary detentions and sentencing. Coercive practices, especially those that target innocent individuals for political ends, undermine the norms and principles that are the foundation of international relations. International partners have also condemned the detention and the practice of residential surveillance at a designated location that falls outside of any recognized judicial process for many detained in China.
We have also raised concern about the failure to recognize the residual immunities of Michael Kovrig, who is a colleague and friend for many in Global Affairs Canada.
These detentions reflect broader features of China's governance that pose challenges to human rights and the rule of law: the Communist Party's increasingly authoritarian grip on power; restrictions on civic freedoms in Hong Kong and abuses of human rights in Xinjiang; coercive diplomacy against individuals and countries that threaten the Chinese government's interests; and threats to democracy and democratic institutions.
The Government of Canada has not shied away from disagreements with the Government of the People's Republic. We have called at every opportunity for the immediate release of Michael Kovrig and Michael Spavor, as well as clemency for Robert Schellenberg and all death penalty cases.
As an absolute priority for the Government of Canada, Canadian officials have worked tirelessly to advocate for these cases bilaterally and multilaterally, while remaining consistent in our policy approach to bilateral relations with China.
We have always indicated our deep concern with the restrictions on the rights and freedoms of the Uighurs and other Muslim minorities. We do so both in our bilateral relations and in multilateral forums such as the Human Rights Council. We have asked the Chinese authorities to respect the freedom of religion of all Chinese citizens in Xinjiang and in Tibet, whatever their faith—Muslim, Christian, Buddhist or practitioners of Falung Gong. We have also asked them to put an end to the efforts to silence those standing up for human rights.
We have argued in favour of Taiwan's genuine participation in international forums where international action is needed, such as the World Health Organization.
On these issues, Canada is not alone. Like-minded partners have added their voices to call for the release of Michael Kovrig and Michael Spavor and an end to arbitrary detention. Canada enjoys the good company of many democratic nations in our call for an end to human rights abuses in China.
In the face of these challenges, however, we must also recognize our deep people-to-people ties, including the nearly two million Canadians of Chinese descent. Exchanges take place not just between governments, but between companies, students, tourists, artists and athletes. Governments play a facilitating role in these people-to-people exchanges, which are an important foundation for progress.
Looking forward, the relations with China will continue to be complex, and Canada will need to chart a path that allows us to protect Canada's interests, to work with China on issues of mutual benefit and to continue to press for justice and human rights.
Canadian businesses will benefit from the growth of the Chinese economy, which will become the biggest in the world, and from an increasing role in the value chain for goods and services.
Whether we are involved in global solutions to climate change, financial systems, or pandemics, we have to rely on participation from China. Multilateral cooperation begins with the creation of solid bilateral relationships.
Canada needs to enhance our understanding of China, not only to adapt to the opportunities it presents, but also to better defend the core values of democracy, human rights and freedoms that Canadians enjoy at home and abroad. This can only happen, I believe, with enhanced people-to-people ties and ongoing engagement, all of which starts with the return of Michael Kovrig and Michael Spavor and clemency for Robert Schellenberg.
The work of this committee presents an important opportunity to review all aspects of the Canada-China relationship and to chart a path forward that takes into account both risks and opportunities.
I wish you much success in this important work.
I will be pleased to answer your questions.
I would like to welcome our witnesses and thank them for that presentation. I confess in all sincerity—and I do not say this pejoratively—that I was expecting a statement that was a little more syrupy and full of generalities, having heard that Chinese authorities must be following the appearance this morning very attentively. So my thanks to you for your presentation.
Just now, a comparison was made between the difficulties that Canada is currently experiencing with the People’s Republic of China and the difficulties that other western democracies could be experiencing with the same country. I am not sure that this is a good basis for comparison.
Traditionally, in fact, Canada has developed excellent relations with the People’s Republic of China more quickly than other western democracies. This may be because of the influence of a man like Norman Bethune, because of the food aid that you mentioned in your presentation, or because of the involvement of the father of the current . Canada's relations with the People’s Republic of China have always been excellent, until the unfortunate episode involving the arrest of Meng Wanzhou, which made Canada the battlefield for two superpowers in their negotiations with each other.
The American government’s involvement seems interesting to me. Whatever the good intentions, the Americans always first and foremost defend their own interests, not ours, in the negotiations that they are currently conducting with China. As a consequence, I believe that they have used Canada for their own interests by demanding that Meng Wanzhou be arrested and extradited to the United States. President Trump confirmed as much a few days ago when he stated that all that would be needed to drop the demand to extradite Meng Wanzhou is an agreement with China. That highlights the difficulty in which we find ourselves at the moment.
I am going to ask my questions all at once, because I know that they keep track of our time.
You emphasize that the Communist Party’s control over China as a state is constantly increasing. This despite the fact that Canada has modified its traditional position towards China, a position that always focussed on the question of human rights. During the 1990s, Canada decided to put more emphasis on the development of trade relations. That approach had considerable success, as you mentioned. But we can clearly see that it had very little positive effect on the human rights situation.
Given the hold that the Communist Party has on China as a state, let me first ask you this question. Are Canada’s relations limited to China as a state or are we also trying to develop relations with the Communist Party?
My second question is about the arrest of Meng Wanzhou. Given that she is accused of breaking United States sanctions against Iran, sanctions that Canada does not even apply, what justified that arrest? I know that the matter is now before the courts and that unfortunately it is no longer possible to respond politically, which immediately rules out the possibility of a prisoner exchange. Such an exchange would damage Canada’s assertion that we are governed by the rule of law, not to mention that it would invite any other country in the world to imprison Canadians in that kind of manoeuvre.
How do you explain the impact of having no Canadian ambassador in Beijing for those months? Does it not prove to the Chinese authorities that, basically, the arrest of the two Michaels is not that important for the Canadian government, which has left the ambassador’s residence vacant for several months during this crisis?
Thank you and good morning, Mr. Chair and members of the committee. We are pleased to have this opportunity to update the committee on recent challenges facing the Canada-China trade relationship and ways in which the government is seeking to improve conditions for Canadian exporters. Following my remarks, we would be happy to provide further details and answer any questions you may have.
As you heard earlier, Canada's trade and investment relationship with China has grown substantially as the Chinese economy has developed. China is our third-largest trading partner, accounting for nearly 9% of Canada's trade with the world and about 5% of our total exports in 2018. China is also now the third-largest source of foreign direct investment from Asia into Canada, with the stock of Chinese investment in Canada valued at $16.9 billion in 2018. This growth in bilateral trade and investment led Canada to explore ways to improve the environment for Canadians to do business in the Chinese market over the past decade. However, as you are well aware, the deterioration of Canada-China bilateral relations has affected the policy environment.
From January to November 2019 our exports to China fell by some 14.7% compared with those in 2018, driven by a drop in the canola seed, wood pulp, and nickel shipments. However, I should point out that part of that was clearly due to the economic slowdown in China as well as to the deteriorating relationship.
It has also changed the way some Canadians do business with China. Some Canadian businesses have reported increased scrutiny of their exports at the border. Others have seen a slowdown in sales as Chinese importers have become reluctant to bear the risk of political uncertainty.
In March of 2019, China suspended shipments from two major Canadian canola seed exporters and increased inspection of all Canadian canola seed exports to China, citing an alleged discovery of pests. This move effectively blocked a large portion of Canada's largest agricultural export to China. Canadian canola seed exports to China have since fallen by around 70%.
Our priority since has been to seek a science-based solution to fully restore market access. We are working closely with the governments of Alberta, Saskatchewan and Manitoba, as well as with industry partners.
On September 9, 2019, Canada requested formal consultations with China at the World Trade Organization after trying to resolve the issue through bilateral engagement. Those consultations took place on October 28 and provided us with an important opportunity to request further information and clearly voice our concerns with China's restrictive import measures.
At Canada's request, Canadian technical experts met with Chinese plant specialists in Beijing from December 18 to 20 to discuss China's canola seed quarantine and inspection methodology. We are assessing the information provided by China in order to determine next steps. We expect further technical discussions to take place in the coming months.
The government remains engaged with Alberta, Saskatchewan and Manitoba and with our industry partners through our working group on canola, chaired by Agriculture and Agri-Food Canada and the Canola Council of Canada. This collaboration will continue to be important as we collectively work to fully restore market access.
It is important to consider, however, that the challenges faced by some Canadian businesses in China are not necessarily new or exclusive to Canada. Since China's accession to the WTO in 2001, many international partners have expressed concerns over certain elements of China's economic and trade policies. These include a variety of issues that affect Canadian exporters. These include a lack of transparency, an inconsistent application of rules and regulations, extensive subsidies for domestic industries, and the large role of state-owned enterprises in the Chinese economy. Nonetheless, China's increasing importance as a consumer market and trading partner continues to present unrivalled new opportunities for business and growth.
This means that we cannot turn our backs and walk away from the trade challenges we face with China. If we do, our competitors will gladly take up Canada's current market share. Indeed, even though political tensions may have affected how some Canadians do business, we will continue to trade, exchange investments, and engage with China. This creates a need for Canada to consider how we engage constructively with China. How do we address barriers to doing business and other concerns while thinking strategically about our trade and investment relationship with China and the rest of the Asia-Pacific region?
In this regard, one notable consideration for Canada is the ongoing trade dispute between China and the United States.
Since 2018, China and the United States have engaged in a series of escalating trade actions against one another, including levying tariffs on $455 U.S. billion worth of exports and launching a number of new WTO dispute settlement cases. This fight between the world's two largest economies has fostered uncertainty and put a damper on global economic growth. It has also shifted how countries do business with China, the United States and the rest of the world.
As China and the United States have raised tariffs on each other's goods, they have shifted their exports and imports to other trading partners. Over the past year we have seen China divert its exports away from the United States to Europe, as well as to Vietnam, Korea, Mexico, Australia and Canada. It has also increased its imports from other countries in areas affected by this trade dispute, which has led to new opportunities and increased exports for certain Canadian sectors such as lobster and wheat.
As you are aware, on January 15 China and the United States signed a phase one trade deal intended to address some of the concerns that have led to their trade dispute. The deal includes commitments in areas like agriculture, intellectual property and technology transfer. China pledged, under an unprecedented expanding trade chapter, to restore imports to levels before the trade dispute. It also committed to purchasing an additional 200 billion U.S. dollars' worth of American goods and services over the next two years, a 90% increase over 2017 levels by the end of 2021.
However, the agreement does not address a number of key concerns for both sides, such as the complete removal of U.S. tariffs on Chinese goods and structural changes to the Chinese economy, like industrial subsidies and support for state-owned enterprises.
For Canada and the rest of the world, the phase one deal presents new considerations for our future trade and investment with China and the United States. It presents a challenge to the free and open rules-based trading system by prescribing a managed trade outcome that would likely cause global market distortion and trade diversion effects. This could potentially have negative implications for certain Canadian agricultural sectors that compete with the United States in the Chinese market. On the other hand, the diversion of U.S. exports to China could create opportunities for Canadian businesses to diversify their exports and replace losses in China with the increased market share elsewhere. Similarly, any systemic changes to the Chinese regulatory environment spurred by the deal could benefit Canadians as well.
We are reviewing the agreement and considering the complex web of implications for Canadians. Throughout this process we will continue to work with Canadian stakeholders and our provincial and territorial partners to fully understand the impact of the U.S.-China deal.
In conclusion, Canada's trade with China will evolve as the Chinese economy grows and reforms over time. Our interests and priorities will also shift with major developments in how the world trades and engages with China. That is to say, even as Canada focuses on finding solutions to our own tensions with China, it will be important for us to keep in mind the impacts of changes in other countries' relationships with China on Canadian interests as well.
To echo a point I said earlier, it will be important for Canada to find ways to enhance and leverage our business and people-to-people ties in order to better understand China and advance our bilateral interests. This includes tapping into China's vast economic opportunities while at the same time defending our core values of democracy, human rights and freedoms.
This concludes my opening remarks. We are happy now to answer your questions about Canada-China trade. Thank you very much for your attention.