Bruce Gilley, political science professor at Portland State University

Michael Hart, Simon Reisman Chair in Trade Policy and professor of international affairs at Carleton University

Wenran Jiang, associate professor of political science at the University of Alberta

Christopher Sands, senior fellow at the Hudson Institute

Jeffrey Schott, senior fellow at the Peterson Institute for International Economics

Elinor Sloan, professor of international relations at Carleton University

Robert Sutter, professor of international affairs at Georgetown University

The Canada-U.S. relationship will not weaken with the rise of China, argued Bruce Gilley of Portland State University at an event hosted by the Canada Institute and International Journal, in collaboration with the Wilson Center's China Environment Forum and Kissinger Institute on China and the United States. The program offered a timely examination of the evolving economic, political, and environmental relationship among Canada, the United States, and China and featured the authors of articles on the impact of China on Canada-U.S. relations; the articles will form a special issue of International Journal.

Security and Defense: the United States, Canada, China

Gilley maintained that Canada's strong structural and ideological ties to the United States will ensure the Canada-U.S. relationship remains strong during China's rise. Nevertheless, the international system will be altered as China gains status as a global economic power—though how disruptive this transition will be remains to be seen. As this occurs, said Gilley, Canada will likely attempt to use its status as a liberal power to strengthen democratic alliances globally. To this end, Canada may leverage its relationship with the United States in order to gain a "seat at the table" on political and governance issues in Asia. From a power standpoint, however, Canada can expect its influence in the international system to diminish, primarily due to its distance from and lack of strong ties to East Asian nations. Canada, explained Gilley, still views itself as an Atlantic nation and part of the Atlantic alliance rather than a part of East Asia; he added that there is no structural reason for Canada to disalign itself from the United States.

Elinor Sloan discussed the implications of China's growing military for Canada-U.S. relations and global security. She noted that China is hoping to professionalize its military and create more technologically advanced and educated infantry units by 2020. Despite little information from the Chinese government on the intent of its military, Sloan argued that there are those who believe China is developing a military, particularly a naval force, with the capability of carrying out missions far from Chinese borders.

Sloan maintained that the Pentagon views China's naval buildup with concern that it could be used to complicate a U.S. response to a crisis in Taiwan or missions eastward to the Western Pacific and Indian Ocean.
Sloan outlined two scenarios for Canada in light of China's military rise. The first sees Canada as a willing and able contributor in any U.S.-led military campaign against Chinese aggression in the region. The second, and far more likely scenario, envisions Canada working in concert with China and other allies to secure the global commons against mutual threats such as pirates, terrorists, and the smuggling of illicit goods. Trading nations, she added, depend on an open maritime highway.

Robert Sutter of Georgetown University cautioned both Gilley and Sloan not to let popular perceptions drive their conclusions on the impact of China's rise on the international system and Canada-U.S. relations. China, said Sutter, will not be the same type of power as the United States. One major reason for this is that the United States has always viewed its own interests as closely tied to maintaining regional and global order, whereas China rarely pursues international actions that do not directly benefit its own interests. If power transitions in the Asia-Pacific region are a long way off, then we should not soon expect any power shift in North America.

China, the United States, and Canadian Energy Resources

In his presentation about the implications of China's growing energy demand on Canada-U.S. relations, Wenran Jiang argued that Canada can benefit from an energy relationship with China. He pointed out that the often emotional reaction to the presence of Chinese investment in Canada is overblown, since Chinese foreign direct investment in Canada only amounted to 0.33 percent of all FDI in Canada in 2009.

After the failed attempts of entering the North American market through acquisitions of Noranda and Unocal, China has primarily participated through minority share holding and equity-based capital investment rather than personnel injection. As recently as last December, Prime Minister Stephen Harper and the Conservatives have warmed up trade relations again with China through a new strategic partnership with the Chinese. This has implications for the long-established Canada-U.S. energy relationship, entrenched after decades of market integration. Jiang emphasized the need for Canada to consider the benefits of a rising China as another destination for Canadian energy exports, particularly in the face of a declining U.S. market vis-à-vis the high growth rates of the Chinese market, and the labeling of Canadian oil as "dirty" by Americans.

China and Canada-U.S. Trade

Michael Hart stated that China should be viewed on the whole as a positive force in the world with regards to international trade. Although analysts denounce the growing U.S. trade deficit with China, the metrics used to calculate this deficit are highly suspect, he said. China's role in the global supply chain is often to assemble or partially assemble a product from elsewhere and then ship the final product back to the United States. In fact, said Hart, of the products the United States imports from China, only 20 percent of the valued added in the manufacturing process from those products can be claimed by China.

Hart maintained that China's rise has had a profound impact on the Canadian economy. China has vastly increased the demand for energy and other resources, which has in turn driven up prices for those commodities. Canada has responded to this shift by reorienting its economy from manufacturing to resources. China's appetite for resources has also driven up the value of the Canadian dollar, which presently sits near parity with the U.S. dollar.
Hart stated that continued engagement on the trade front with China by both Canada and the United States would be the best policy going forward, because a weakened China could have negative repercussions on the global economy as a whole.

Christopher Sands described the implications of China's entry into the North American auto industry. After outlining the nature of the Chinese auto industry, as well as previous expansionary experiences of other East Asian car makers into North America, he explored the potential ways that the Chinese auto industry could enter the North American market through importing and exporting, joint ventures, acquisitions, and establishing North American assembly facilities. He also outlined some potential challenges, such as coping with North American labor unions, matching the quality of other automotive companies, and competing with established North American retail networks. Sands concluded that while Chinese automakers will eventually break into the North American market, their approach to overcoming these challenges—and Mexico's and Canada's role in facilitating their entrance—remain to be seen.

Jeffrey Schott of the Peterson Institute offered his own views on China's impact on the Canada-U.S. trade relationship. While the rise in energy prices due to China's demand for resources is good for Canadian exports, said Schott, higher energy prices means slower economic growth for the United States. In addition, Schott stressed that more research needs to be conducted to determine how Chinese products will affect North American competitors both in the North American and international market.

The articles, including an article on environmental issues by Arthur Hanson, form a special issue of International Journal.

Drafted by Tina Wong, Program Intern and Ken Crist, Program Associate
David Biette, Director, Canada Institute