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Foreign Policy

Canada’s New Indo-Pacific Strategy and China

Jan 31, 2023
  • Hugh Stephens

    Distinguished Fellow, Asia Pacific Foundation of Canada

In November of 2022, the Government of Canada finally unveiled its long-anticipated Indo-Pacific Strategy (IPS), what is described as a new, whole-of-government Canadian approach to what, until recently, was termed the “Asia Pacific” region. The new strategy has been developed against the backdrop of the significant downturn in U.S.-China relations, a reality that has clearly influenced its direction. The IPS posits that “The rising influence of the Indo-Pacific region is a once-in-a-generation global shift that requires a generational Canadian response.”

It starts out by highlighting the economic realities of the region, well known to anyone even remotely familiar with the rise of Asia. It notes that “By 2040—less than two decades from now—the region will account for more than half of the global economy, or more than twice the share of the United States.” In terms of international trade, the region is identified as Canada’s second largest export market, including six of the country’s top 13 trading partners. (Why 13 and not the top 10? Because the authors of the strategy wanted to squeeze in India, Taiwan and Vietnam.) But the strategy is based on much more than just trade and economic opportunity. It has five components: trade and investment, peace and security, people-to-people relations, sustainable development and climate change and finally, Canada’s presence in the region. They are interlinked.

With respect to trade and investment, an “inconvenient truth” for the strategy is that Canada’s largest export market in the region is and will continue to be China. In fact, Canadian exports to China in 2021 exceeded exports to Japan, South Korea, India and Taiwan—combined! In terms of supply chains, imports from China equalled imports from the entire EU and easily overshadowed imports from all other countries in the Indo-Pacific region. If one goal of the strategy is to diversity Canadian trade and investment away from the U.S. toward the Indo-Pacific (the U.S. remains hugely dominant in Canadian trade, taking 75% of Canadian exports and providing 62% of imports), then China must be part of this strategy. This is where the Indo-Pacific Strategy is somewhat contradictory.

The main focus of the strategy is to de-emphasize and move away from China by diversifying to other parts of the region and putting the emphasis on alternative partners, ranging from Japan and South Korea in the North Pacific to India and ASEAN in South and Southeast Asia. At the same time, the realities of the potential of the China market cannot be ignored, and the strategy references this: “Canada will continue to protect Canadian market access in China while working with clients to diversify within, and beyond, that market.”

But, of course, China is much more than a market. It is a significant global power, one that is increasingly challenging the norms of the established “rules-based order”, but also one whose participation is essential for global governance and tackling global issues, like climate change, energy transition, poverty, migration, pandemics and so on. Further complicating the equation is the way China governs domestically, particularly when it comes to minorities such as its Uyghur or Tibetan populations, as well as its actions towards entities such as Hong Kong and Taiwan, and in the South China Sea. Here the IPS stakes out new ground in terms of Canada-China relations which, until the arrest of Huawei executive Meng Wanzhou in Vancouver on a U.S. Department of Justice warrant, and the subsequent retaliatory arrest in China on national security grounds of Canadians Michael Kovrig and Michael Spavor, were relatively warm despite periodic Canadian criticism of China’s human rights record.

In the IPS, China is called out as “an increasingly disruptive global power.” Canada’s approach going forward is apparently going to be “clear-eyed”. The strategy states that Canada’s approach is “aligned with those of our partners in the region and around the world.” That is a doubtful assertion since many in the region, like the ASEAN countries, have tried to keep a balance in their relations with China, not wanting to have to choose between the PRC and the United States. In dealing with China in the future, the mantra espoused by Foreign Affairs Minister Melanie Joly is that Canada will compete with and challenge China when it should, but will cooperate with China when it must. This last “concession” is a reference to, among others, climate change and global health.

While the focus of the IPS is on diversification of efforts away from China—in everything from trade and investment promotion to academic and student exchanges, development assistance activities and enhanced Canadian presence—China still occupies a central place. There is a call for reassessment of relations, but no call for decoupling or reshoring. At the same time, the trade-off for continued engagement with China seems to have been a shift in rhetoric to more hardline positions on military security and vocal advocacy on human rights.

Regarding the objective of promoting “peace, resilience and security,” Canada will deploy more of its modest military assets to the region but will also work on cyber-security, bolster capacity to collect and assess intelligence and tighten oversight over foreign activities within Canada. Unstated but obvious is the target of such activities. However, there is no mention of AUKUS, or seeking to join the “Quad” (comprised of the U.S., Japan, India, Australia) defence arrangement, structures that are seen as largely aimed at containing China from a military perspective.

At the end of the day, the IPS is a compromise. It shifts attention and resources away from China to other parts of the region, areas where Canadian engagement has been seen as sporadic or lacking, but at the same time it recognizes the reality of China as a global player and important economic market, both for exports and essential supply chain inputs. The balance struck is somewhat uncomfortable, with the wheels of continued Canada-China cooperation being greased with the oil of harsher criticism of China’s international and domestic behaviour. This may have been necessary for domestic Canadian (and U.S.) consumption, but a key question remains; how will China react to the IPS? 

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