Canada’s Conflict With China Can Be Solved With Joint Tariffs By Democratic Allies

(Front L-R) Brazil President Jair Bolsonaro, French President Emmanuel Macron, Indonesia President Joko Widodo, Chinese President Xi Jinping, US President Donald Trump, Saudi Arabia’s Crown Prince Salman, Japan Prime Minister Shinxo Abe, Argentine President Mauricio Macri, Russian President Vladimir Putin, Turkish President Recep Tayyip Erdogan, South Korean President Moon Jae-in, South African President Cyril Ramaphosa, Netherlands Prime Minister Mark Rutte, (Second row L-R) Spanish Prime Minister Pedro Sanchez, Egypt President Abdel Fattah el-Sisi, President of the European Commission Jean-Claude Juncker, Australia’s Prime Minister Scott Morrison, British Prime Minister Theresa May, India Prime Minister Narendra Modi, Canada Prime Minister Justin Trudeau, Italian Prime Minister Giuseppe Conte, European Union President of the European Council Donald Tusk, Senegal President Macky Sall, Chile President Sebastian Pinera and Singapore Prime Minister Lee Hsien Loong and third row’s invited guests attend the family photo during the G20 Osaka Summit in Osaka on June 28, 2019. Photo by Ludovic MARIN / AFP / Getty

Journal of Political Risk, Vol. 7, No. 6, June 2019 

By Anders Corr

Canada is in an awkward dispute with China. On the one hand, it wants two Canadians, Michael Kovrig and Michael Spavor, released from detention, under conditions some would call torture. The lights are left on 24 hours a day, they cannot see loved ones, they undergo daily interrogations without legal counsel present, and they only get short visits from their consular officials once a month. On the other hand, Canada wants to comply with its extradition treaty with the U.S., which wants Meng Wanzhou for alleged lies to financial institutions in order to evade Iran sanctions. Perhaps more urgently, Canada wants to continue its lucrative trade with China. A solution is for other allied democracies, including in the U.S. and Europe, to use their substantial power to impose tariffs on China to help out their fellow democracy, Canada. Our neighbor to the north could do the same, in its own defense. Canadian tariffs against China, linked to demands for the release of Kovrig and Spavor, would likely get them freed overnight.

China is not too subtle about its demands. It wants Meng sent back safe and sound to China. Until then, apparently, the two Canadians will be detained and Canada will undergo increasing difficulty with its agricultural exports to China. All of Canada’s China problems will go away if it just signs on the line and releases her from home detention, according to China and its Canadian intermediaries.

The Kovrig-Spavor predicament is awkward for Canada because it is arguably a result of decades of democracies’ prioritization of trade over human rights issues. That includes Canada. Now that Canadian citizens have been targeted, Canada is wondering whether it is getting the same cold shoulder from its allies that it gave to human rights activists in the past.

The newly-found Canadian human rights concern for Kovrig and Spavor rings hollow after it largely ignored, for purposes of trade, the thousands killed by China at Tiananmen Square in 1989, and the 1-3 million Uyghurs and other Turkic Muslims detained in reeducation camps. By not taking a stronger stand on all of China’s human rights abuse, but instead focusing on just the two Canadians of the millions harmed by China, Canada undermines its own moral authority, and with it, any advocacy for the human rights of the two Canadians.

Canada’s rule of law argument is unconvincing to the CCP. China sees its own authoritarian rule as preferable to the “chaotic democracy” of Canada and its allies. It sees human rights, including those of the two detained Canadians, as something that should be sacrificed for the greater good of China’s Communist Party rule, which is the type of meritocracy the world needs, according to the most sophisticated of Chinese propaganda.

Canadian voters, like voters in the U.S. or other democracies, typically want their leaders to promote their respective national interests. This makes it easy for China to divide and conquer. They first divided off Tibet and Xinjiang in the 1950s, which the democratic world ignored to facilitate China trade. Then they isolated Taiwan diplomatically in the 1970s. In the 2000s until today, they claimed the South China Sea and started pushing out the fishermen from neighboring countries, like the Philippines and Taiwan. All of this was largely ignored by Canada and others in order to maximize their trade with China. The Asian economic giant is now dividing off Hong Kong, Christians, Muslims and Buddhists within China, all of whom are generally ignored by Canada to follow its national interests.

Now that Canadians are targeted, few of the above potential allies are available or inclined to help Canada by risking their own trade interests. The U.S. can still help, but like Canada, it is preoccupied with its own Chinese trade negotiations. Trump promised to raise the issue of detained Canadians at the G-20 meeting in June, but would Canadian issues really stand in the way of a grand bargain between the U.S. and China that would improve Trump’s hope for a second term? Unlikely. 

The trend and the lesson is clear. By selfishly following national interests, natural democratic allies have frittered away their former economic and military advantages, not to mention the moral high ground, and allowed China to divide and conquer. Had we stood on principles of democracy and human rights from the beginning, and really resisted the Chinese Communist Party’s depredations rather than just maximizing trade, we might have nipped the CCP problem in the bud. But now we are left with a tough choice: either give into a much more powerful CCP than in the 1940s and 1950s, or fight back, including economically, diplomatically and militarily. 

The conflict is indeed already at a military level — US and allies are risking military conflict nearly every day in the South China Sea, the East China Sea and the Taiwan Straits. A Canadian frigate, HMCS Regina, was buzzed by Chinese fighter jets in late June. That was an unfriendly maneuver by the Chinese military that puts Canadian sailors at risk. The Chinese Navy sank a Philippine fishing boat in mid-June, leaving 22 crew for dead. They luckily survived with the help of a nearby Vietnamese fishing boat. China could do the same to Canada, which might not be so lucky. 

Appease Stand Firm Intervene
National Interests Quick growth of CCP power Slow growth of CCP power High risk
Global Values Slow growth of CCP power Erosion of CCP power Medium risk

 

The table above shows the policy options available to Canada and most democratic states when addressing the China threat. It summarizes the likely effects of various strategic choices. We can argue that until recently, Canada has typically appeased China on global values, while seeking to stand firm on national interests. Other countries have done the same. As indicated by the respective outcomes, both strategies have lead to slow growth in CCP power from 1945 to the present. China was able to grab power in Beijing in 1949, followed by claims to Tibet, Xinjiang, and the South China Sea, because few countries have opposed China in areas where China does not substantially conflict with their national interests. The people in these regions who were or are being colonized, are typically too weak to resist. As a result, the CCP’s power grows, and Canada and other countries’ ability to resist, diminishes.

Ethical Tariffs Against China

A better strategy for Canada and allies is to stand firm on global values, and use their economic power to achieve their goals. This encourages a maximally strong and broad alliance to oppose China’s growing power, and discourages appeasement and cooptation for moral reasons. Without standing on principles such as democracy and human rights, cooptation is easier, and appeasement doesn’t seem like appeasement but support for peace.

The moral approach to the China threat has been depicted as simplistic and may mean some sacrifices in terms of access to the Chinese market for some Canadian firms. But losing firms could be compensated by the Canadian government, as the U.S. government has compensated U.S. farmers targeted by China for retaliatory tariffs.

Economic sanctions, or more targeted Canadian tariffs against China, hold much promise to leverage Canada’s substantial GDP, which is the 10th-largest in the world, for ethical purposes. Targeted Canadian tariffs could also open up new economic opportunities for Canada. Canada could potentially get U.S. tariffs lifted against it, for example, were Canada to seek a tariff deal with the US that included new Canadian tariffs against China. Canada could also revive Canadian strategic industries and jobs, were it to give them a little extra protection from Chinese imports. Canada needs strategic industries, just as it needs a military, to credibly deter international aggression.

Canadian tariffs against China would strengthen its bargaining position on human rights issues, for example the detention of Kovrig and Spavor, for three reasons. First, China fears a broadening of the US trade war to an allied democratic trade war against China. Were U.S. tariffs against China to spread to Canada, Europe, and our allies in Asia, China would have a hard time saying no to our joint demands.

Second, Canada imports more from China than vice versa, which means that Canada has more trade leverage from threatened tariffs than does China. China imports only $18 billion per year from Canada, while Canada imports approximately $55 billion per year from China. In other words, Canada has about $37 billion of leverage over China. As Trump has pointed out with respect to our negative trade balance with China, the customer is always right. That intuition is confirmed by a simulation by economists John Whalley, Jun Yu and Shunming Zhang. They found that, “Optimal trade policy differs from that in a conventional goods only trade model in that countries which run trade deficits in goods will have more strategic power through tariff policy (and surplus countries less) than in models with balanced trade.” China would quickly buckle on Kovrig and Spavor if Canada started talking about its tariff advantage from the balance of trade.

Third, Canadian tariffs against China would strengthen Trump’s hand, who would therefore more ably represent Canadian interests, ideally by including Canadian officials at the bargaining table with China. If Trump is truly committed to an allied approach to confronting China, he should be willing to include at the bargaining table representatives from Canada and Japan, for example. A common front will empower all of us on our specific demands. Those demands will be credible if we start coordinating tariffs against China. 

The same approach should be true for European negotiations with China. The US, Europe, Canadian and allied negotiators, all of whom import more than they export, should confront the China threat together. The more they coordinate, the stronger their respective bargaining positions. China fears joint actions against it, and has responded with retreat in the past. The strategy mitigates risk for democracies, diverts conflict from the military to the economic field, decreases the likelihood of militarized disputes, and maximizes the chance of long-term success for Canada, the U.S., Europe, and our allies in Asia. 

A focus on shared values of democracy and human rights, backed up with the threat of tough internationally coordinated tariffs against China, is the least risky and most powerful strategy. We thereby protect democratic economies and jobs, and promote human rights and democracy in China. Democracy and human rights are what unite us, and we need more unity against the CCP. The Chinese people generally feel the same way, but are not allowed to say so. If we can help their government find democracy, we help them, and we help ourselves. A democratic China would be a peaceful China as we know empirically from history that democracies almost never fight each other.

Anders Corr is the publisher of the Journal of Political Risk and the editor of Great Powers, Grand Strategies: the New Game in the South China Sea (US Naval Institute Press, 2018). He holds a Ph.D. in government from Harvard University, and a B.A./M.A. from Yale. He worked for five years in U.S. military intelligence as a civilian, including on China and Central Asia. JPR status: opinion.