Canada: Securing Canada's Place In Asia: Means, Institutions And Mechanisms

EXECUTIVE SUMMARY

IN MARCH 2012, the Asia Pacific Foundation of Canada established a taskforce to assess and make recommendations on the role that regional institutions and bilateral mechanisms should play in a government strategy to pursue Canada's interests and secure its place in Asia.

In the context of a world in transition, Canada's prosperity and influence in global organizations will be an increasingly important factor in its ability to project and leverage its capabilities in Asia. Asia's fast increasing share of world economic output, the shifting power dynamic between the United States and China, and the rising influence of the region in global institutions, all must be addressed in the development of Canada's foreign policy.

Asia itself is pursuing greater economic integration at the same time as it confronts complex problems of national identity, inter-state rivalries and intra-state conflicts. Regional institutions have developed processes to deal with these issues that are typically consensus-based and voluntary, and as a result, slow-moving. That institutions in Asia have espoused forms and rules of engagement that are different from those in North America and Europe reflects Asia's diversity, the lack of trust between many countries, and the imperative to maintain a balance between competing national interests. Most of these processes are open to and value non-Asian participation.

The Canadian government has made commendable strides over the last three years in expanding and deepening Canada's relations with its Asian counterparts. The challenge now is how it can further deepen and sustain these initiatives and create a coherent approach that is, and is perceived by Asians to be, more than just a series of independent, disconnected initiatives.

We consider active participation in key regional institutions an essential component in pursuing priority Canadian initiatives and negotiating bilateral mechanisms with important Asian partners. In an Asia Pacific context, process matters in reaching consensus and building relationships. Contributing is as important as receiving in the Asian mindset. As a result, commercial policy alone will not succeed for Canada in Asia; success on the trade and investment front requires a greater Canadian presence and participation in a broad spectrum of multilateral and bilateral processes.

Success in Asia, as countries like Australia continue to demonstrate, takes not just a whole-of-government but a whole-of-country approach. We contend that Canada's efforts must be large-scale, ambitious, coordinated, cross-partisan, multi-dimensional, and long-term.

The Taskforce is advocating a full-scale engagement with Asia that includes:

• Parallel bilateral and regional approaches
• The active and coordinated participation of government and non-government stakeholders
• Engagement in multiple domains including economics, politics, security, military, cultural and people-to-people relations

We identify the following as the key regional institutions and bilateral mechanisms of immediate relevance to Canada and our recommendations are:

To develop and implement a flexible and dynamic strategy able to inform and guide Canada's participation in key Asian institutions and mechanisms

1. Establish a coordinating unit with access to senior government officials on Canada's participation in Asia and convene on a regular basis with nongovernment stakeholders on specific issues.
2. Place priority on ensuring adequate human and financial resources to develop, implement and sustain a long-term Canadian strategy focused on Asia.

To advance Canada's overall objectives through visible and sustained participation in regional institutions

Bilateral mechanisms:

3. Formalize and sustain a bilateral dialogue with the United States focused on Asia.
4. Strengthen existing bilateral dialogues and initiate new dialogues with strategic Asian partners focusing on China, Japan, India, South Korea and Indonesia. These dialogues should include a discussion of regional institutions and processes.

Regional institutions:

5. Seek early admission into the East Asia Summit (EAS).
6. Assert credentials in APEC by volunteering to Chair and host APEC in 2017, and focus on the revitalization of the organization and topics relevant to Canada's prosperity agenda.
7. Seek admission into the ASEAN Defence Ministers Meeting Plus Plus (ADMM++).
8. Sustain ministerial participation at ASEAN Regional Forum (ARF) and ministerial and high-level participation at Shangri-La Dialogue.
9. Deepen the dialogue with ASEAN and consider appointing a Canadian Ambassador dedicated to the association.

To realize an ambitious and winning trade and investment strategy for Canada, pursue on parallel tracks bilateral and regional trade agreements

Bilateral mechanisms:

10. Conclude as a matter of urgency a Free Trade Agreement (FTA) with South Korea.
11. Pursue as a top priority comprehensive economic partnership negotiations with Japan.
12. Based on a recent study of complementarities, move towards a trade agreement with China.
13. Conclude trade negotiations with India.
14. Consider a trade pact with Taiwan.
15. Pursue double taxation and foreign investment agreements with as many countries as possible. Regional mechanisms:
16. Participate fully in the Transpacific Partnership (TPP) negotiations at the earliest opportunity.
17. Explore a trade agreement with the Association of South East Asian Nations (ASEAN).

The importance of and rationale for active Canadian participation, as recommended above, are discussed in the pages that follow. Full participation does not guarantee success for Canada, but limited or partial involvement will marginalize Canada, have a negative impact on our prosperity, and our influence in regional and global institutions.

INTRODUCTION

IN MARCH 2012, we were asked by the Asia Pacific Foundation of Canada to assess and make recommendations about the role that regional institutions and bilateral mechanisms might play in Canada's strategy to pursue its interests and secure its place in Asia.

We were immediately confronted with the question of why regional architecture matters. In interviews, we were asked why Canada should participate in slow-paced, Asian-centered institutions when Ottawa could focus exclusively instead on bilateral political relations and trade deals, and concentrate its efforts on more prestigious global institutions, especially the G20. Some we spoke to were not convinced of the value of the various regional economic, political and security processes in the Asia Pacific, even suggesting these were a distraction from Canada's key mission of expanding commercial relations with Asian countries.

Our argument is that regional architecture provides an important framework through which Canada can enhance and sustain its long-term economic interests in Asia. Our credibility and effectiveness in Asia depend upon building relationships with people and countries who do believe that economics are inseparable from the management of political and security issues. The recent use of economics to make political points seen in China's restriction of rare earth exports to Japan in the wake of the September 2010 fishing trawler incident is a testament to the interplay between economic, political and security interests.

Further, as a mid-sized country deeply dependent on foreign trade, Canada has an enormous interest in promoting an open and rule-based international system. Asia has gained both geo-economic and geo-political importance and Asian players are increasingly influential in global processes like the G20. To be effective in these global institutions, Canada will need deeper relations with Asian partners built on a firm grasp of the issues affecting the region as well as through active participation in the numerous institutions and mechanisms created to manage and address these issues.

As such, the issue is not whether Canada should participate in the operation of the regional architecture in the Asia Pacific, but rather how to do so.

Recent Developments

A number of recent reports have examined Asia's rising importance for Canada and specific measures that Canada can take to advance its interests and role, among them: "Winning in a Changing World: Canada and Emerging Markets" (2012); "Canada, China, and Rising Asia: A Strategic Proposal" (2011); and "Rising to Meet the Asia Challenge" (2012).

All of these studies underscore the pace and scale of the geo-economic shift that is transforming the world economy and making Asia an engine of global growth. We too believe that the geo-economic shift is fundamental but believe that it needs to be cast in a broader geo-strategic context. We hold firmly to the view that taking a pure commercial approach centered on trade and investment will fail for two reasons: 1) it is unlikely to succeed in delivering economic benefits and therefore undermine our competitiveness in global markets, and 2) it will impair Canada's ability to secure its place in this key region.

Ottawa has made significant headway in expanding and deepening its relations with Asian partners. Since 2010, Canada has kicked off trade discussions with India, Japan, China and Thailand and at the diplomatic level the pace of ministerial and Prime Ministerial visits has increased. The Minister of Foreign Affairs, John Baird, has been particularly active in Southeast Asia, visiting Myanmar earlier this year, announcing the opening of an embassy in Naypyidaw, and committing a C$10 million dollar fund to advance Canada-ASEAN relations. In June, the Minister of Defence, Peter McKay, gave an important speech at this year's Shangri-La Dialogue and the Canadian navy sent its largest contingent ever to participate in the Rim of the Pacific (RIMPAC) naval exercises. In August, the government released a complementarities study that could be the forerunner of a FTA with China.

These and other actions by the Canadian government are to be applauded. The challenge is how to deepen and sustain them in order to create a coherent approach that is, and is perceived to be by Asians, more than a series of individual and disconnected initiatives.

Canada was a respected regional player in Asia in the 1990s. Since then, however, it has been seen as having disengaged from the region at precisely the same time as Asia's global rise has been accelerating. Canada is making a comeback but, as some argue, it can only do so successfully by articulating a comprehensive and integrated set of objectives and priorities that reflect fresh thinking and investing the resources needed for implementation.¹

A World in Transition

The impact of Asia on the global order is a central theme in this report. At a moment of flux in the international system that is greater than at any time since the Second World War, Asia is playing an enormous and growing role. This has significant implications for the region and the world—implications to which Canada is not immune.

Asia is leading and growing its share of world economic output; it is a key theatre in the global power shift currently underway and centre-stage in a new phase of Sino-American competition; and it is gaining influence in global institutions. These must all be addressed in Canada's policy development.

The stakes for Canada are high and it is vital to understand how developments in Asia impact our global agenda. From an economic viewpoint, it is expected that Asia will continue to be a leading driver for global growth. From a legal perspective, the South China Sea disputes may have implications for the interpretation of the United Nations Convention on the Law of the Sea (UNCLOS) and how it can be applied to other contested regions such as the Arctic.

Issues such as terrorism, drug trafficking, human smuggling and trafficking, cyber-security, piracy, communicable diseases and other non-traditional security threats require close and coordinated action to arrest their spread. Canada has an interest in all of these issues and we believe that participation in regional institutions and mechanisms is an essential step in shaping the international rules, norms and practices that have a direct bearing on our interests and well being.

In terms of trade, the fact is that Canada has not concluded a single FTA with an Asian country and all of our major competitors have. The negative consequences for the prosperity of Canada are twofold: we miss opportunities to expand trade in fast-growing markets and we lose market share as a result of the preferential access enjoyed by our competitors that have concluded FTAs.

Asian Institutions and Mechanisms

Asia itself is pursuing increased economic integration at a rapid pace. At the same time it is confronting complex problems of national identity, political and social transitions, inter-state rivalries and intra-state conflicts. A myriad of Asian-centered regional institutions and processes with varied memberships have been developed to address these issues. Most are consensus-based, voluntary, relatively inclusive and move at a pace comfortable to all. They have multi-dimensional, overlapping and sometimes conflicting agendas, as seen for example, in the complex domains of the Asia Pacific Economic Cooperation (APEC) forum and the East Asian Summit (EAS).

These processes are open to and value non-Asian participation. We consider active participation in key regional institutions an essential component of pursuing Canadian initiatives and negotiating bilateral mechanisms with key Asian countries. Process matters in an Asia Pacific context in reaching consensus and in building relationships. Contributing as well as receiving is important. A commercial policy alone will not succeed for Canada in Asia; presence and participation in the broader arena counts.

Findings and Recommendations

The conclusions and recommendations in this report are derived from consultations with officials; industry representatives; researchers and diplomatic representatives from the Asia Pacific; our individual experiences in Asia and with Asia Pacific processes over the past twenty-five years; and our own assessment of Canadian objectives in Asia and the world.

"Regional architecture" refers to the various institutions and mechanisms through which Asian countries cooperate and collectively work towards common goals. The word "institution" is used here loosely to refer to regional fora, conferences, groupings and organizations for dialogue and cooperation. "Mechanism" refers specifically to bilateral processes, especially formal trade and economic agreements. Both are defining features of Asia's regional architecture and have distinctive characteristics that require careful understanding and nuanced policy responses.

Our definition of Asia encompasses the countries in Northeast, Southeast and South Asia. Reference to the Asia Pacific also includes non-Asian countries including Australia, New Zealand, the United States, Russia, Canada, Chile, Mexico and Peru. The key institutions and mechanisms of immediate relevance to Canada are in, or centered on East Asia defined to include China, Japan and South Korea in addition to the countries in ASEAN.

There are many other regional institutions in operation in the Pacific Islands, South and Central Asia, linking Asian members in other regional configurations, for example the Shanghai Cooperation Organization (SCO), or at a trans-regional level such as the BRICS summit process.

All of these are important. Canada should, however, focus on the East Asian-centered processes, many of them connected to ASEAN. These processes, to which Canada has access, are the most dynamic and visible in addressing the full range of economic, political and security issues that confront the region.

India deserves special mention because of its rising importance to Canada in terms of economics and human migration. India is quickly integrating into East Asian commerce as well as regional and global supply chains. This is reflected in its trade with ASEAN, which grew by 30% in 2010-11. India also participates in some, but not all, of the East Asian-centered regional processes. It has a strategic regional role, for example, as a player in naval balances in the Indian Ocean and South China Sea, in the geo-politics of responding to China's rise and great power maneuvering, and as a significant and potentially important player in regional and global multilateralism. But India is not currently a leader in any of the East Asian-centered processes even in those to which it belongs. It should not be ignored as a force of the future, but in our report is featured in the areas of bilateral diplomatic and trade relations rather than as a leader in the emerging institutional architecture.

In examining the regional institutions and mechanisms in Asia and the Asia Pacific region, we have observed that success in Asia, as countries like Australia are demonstrating, will take not just a whole-of-government but instead a whole-of-country approach. We contend that Canada's response needs to be big, ambitious, coordinated, multi-dimensional, and long-term, based on a cross-partisan consensus. We advocate a full-scale engagement with Asia that includes:

• A regional and bilateral approach: The two tracks are not mutually exclusive and can reinforce Canadian goals and objectives. There are a multitude of regional processes and Canada should place priority on the most important of these institutions. It is neither prudent nor possible for us to be everywhere at all times.
• Government and non-government stakeholders: Governments and policy experts have an essential role to play in building institutional frameworks, rules and norms. This role can be supported by non-government stakeholders from academia, business and civil society that participate actively in the various organizations and fora that structure the dialogue across the Pacific and within Asia (i.e. the ''track-two networks'').
• Engagement in multiple domains: We should harbor no illusion: A one-legged (read economic) strategy will seriously handicap Canada's ability to compete successfully with other countries that have recognized the importance of a comprehensive and coherent strategy in approaching the region. Institutions, dialogues and networks that focus on political, security, military, cultural and people-to-people concerns are not detours but necessary companions to the economic agendas vital to our prosperity.

We were asked to identify for Canada the most relevant Asian institutions and mechanisms and generate new ideas and recommendations on strategies for Canada's participation and leadership in the relevant regional fora.

We provide our recommendations and underscore the necessity of other complementary actions Canada must address to secure a place in Asia. These include investments in our domestic infrastructure to ensure they are oriented and have the capacity to respond to the demand of Asia for our goods and services, a focus on education and research, and consideration of overseas development and aid as tools to support Canada's regional and bilateral objectives. With each of these actions, it will be extremely important for Canada to invest the human and financial resources necessary to develop, implement and sustain a long-term Asia strategy.

To read this report in full, please click here.

Originally published in Asia Pacific Foundation of Canada, "Research Reports" series

Footnote

1. Job, Brian. "Realizing the other Half of Diplomacy". Canada-Asia Agenda. Asia Pacific Foundation of Canada. August 7, 2012.

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