As major Pacific summit wraps, Canada is sidelined on a new U.S.-led trade initiative

Goldy Hyder laughed a bit when a reporter asked him Thursday evening what he thought Canada had accomplished at this week’s Asia Pacific Economic Cooperation (APEC) summit in San Francisco.

“It’s a short list, unfortunately,” the president of the Business Council of Canada said, before lamenting something Canada hasn’t accomplished yet: membership in U.S. President Joe Biden’s Indo-Pacific Economic Framework (IPEF). It’s a group of 14 trading partners that concluded agreements this week on supply chain protections, lowering carbon emissions and fighting corruption — while promising more collaboration to come.

There’s no question Canadian officials from Prime Minister Justin Trudeau on down were busy taking meetings all week.

“We’re doing the work,” Trade Minister Mary Ng insisted when reporters questioned why Canada still isn’t in IPEF, despite her insistence that all the current members would support having Canada at the table.

Unlike the U.S., which pulled out of its Pacific Rim trade deal, the Trans-Pacific Partnership, when Donald Trump took over in 2017, Canada stayed in and pushed to rename the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

 

Trudeau, Xi stand next to each other in APEC leaders’ photo

 

Featured Videorime Minister Justin Trudeau stood next to Chinese President Xi Jinping for the leaders’ photo at the Asia-Pacific Economic Co-operation summit in San Francisco.

As Canada takes over as chair of the CPTPP in 2024 and celebrates its fifth year of implementation with its first new recruit — the dubiously Pacific nation of the United Kingdom — Ng said one of her top three priorities would be ensuring the deal lives up to its “progressive” rebranding and supports smaller businesses, women entrepreneurs, and Indigenous enterprises.

But it’s this kind of values-driven foreign policy that’s left stakeholders frustrated with how Trudeau’s government approaches summits like APEC.

Hyder suggested multiple times this week the Liberals need to read the room and understand how things have changed during their tenure. Given wars in Ukraine and Gaza, and growing threats in the South China Sea, investors are anxious about big international ventures that could otherwise be driving economic growth.

“This is a complicated environment in which we operate,” he said. “It is not the time to preach … It is time to be pragmatic.”

He said recent speeches by Foreign Minister Melanie Joly have sounded more on point about the imperative of working with regimes that are less aligned with Canadian principles. He also pointed out that a country like Australia manages, by taking a more practical approach, to sit at more international tables than Canada, serving its national interests well.

Australia is one of a half-dozen or so countries that find value in participating in Biden’s IPEF talks even though they also enjoy the liberalizing benefits of the CPTPP’s tariff cuts, market access and harmonized standards.

CPTPP remains more compelling, ambassador says

Canada’s year-old Indo-Pacific strategy is overseen by its ambassador in Tokyo, Ian McKay.

Speaking to reporters at APEC, McKay appeared to throw shade at IPEF, saying that the CPTPP is “much more compelling” and beneficial to Canada than “other non-binding, almost voluntary agreements.”

“The work that we need to be doing with our partners in the region is being done,” he insisted, echoing Ng’s point from the day before. “If IPEF comes and they have a process whereby new aspirants can join, I have full confidence that Canada will be the first.”

“If” is the operative word in that statement. For now, there is no process to join. And not everything about it is redundant.

 

Biden, Xi meet face-to-face for 1st time in a year

 

Featured VideoAfter a year of silence, U.S. President Joe Biden and Chinese President Xi Jinping spoke face-to-face for the first time ahead of this year’s APEC Summit in San Francisco. Both leaders acknowledged the importance of the meeting and of continuing dialogue.

IPEF includes countries that Canada is still struggling to negotiate trade deals with, including large southeast Asian markets like Indonesia as well as the notoriously protectionist India.

Both Ng and McKay began saying the quiet part out loud this week: the prospect of restarting trade talks with Prime Minister Narendra Modi’s government is now contingent on India’s cooperation in investigating and bringing the murderer(s) of Canadian Sikh activist Hardeep Singh Nijjar to justice.

How long all this takes, and how much IPEF moves along without Canada in the meantime, remains to be seen.

If the IPEF club does admit Canada in the future, Ottawa may have to sign on to text it wasn’t at the table to shape, with countries that weren’t necessarily looking out for Canada’s interests.

The political environment in Washington, with populist trade skepticism rampant on both sides of the congressional aisle, won’t let the Biden administration negotiate anything resembling a trade deal at the moment. U.S. Commerce Secretary Gina Raimondo admits IPEF is unlikely to be a trade deal, per se — as a presidential election year looms.

That doesn’t mean, however, its convening power can’t facilitate more investment and trade for American businesses if the Biden administration pulls this off.

As he posed for a family photo with other leaders and ministers in San Francisco Thursday, Biden saluted what IPEF had been able to negotiate in “record time,” calling its work a “race to the top.”

Biden also announced that the deal would include a critical minerals dialogue, something that risks eating Canada’s lunch on one of the strongest emerging exports Canada has to offer a world transitioning from fossil fuels to electric and hydrogen batteries.

Critical minerals

Canada’s ambassador in Washington, Kirsten Hillman, has been heavily engaged in positioning Canada as America’s top supply chain partner for critical minerals. She downplayed this new IPEF initiative as a warning sign Americans might look outside North America for suppliers.

“I’m not really seeing any worries about [Canada] being anything but at the forefront of this dialogue internationally,” Hillman said, noting that critical minerals are part of the economic “pillar” in Canada’s Indo-Pacific Strategy. “We’re talking to all countries … there’s no magic to one particular configuration or another.”

Hillman said once the outcome of IPEF discussions is known, Canada can analyze what joining means.

Hyder agrees that other countries want Canada as a critical minerals supplier. But in his conversations from a business perspective, he’s detecting skepticism that Canada will be able to deliver.

“Are we going to create the regulatory and permitting process that has a predictable, stable environment in which businesses can invest with confidence that, irrespective of elections … the projects are able to move forward,” he said. “If these other countries that we’re competing with can do that, they will draw the capital and they will be the ones that will end up being part of that supply chain.”

Trade diversity still a priority

The U.S. turned to Canada in its push to be less reliant on the world’s dominant battery provider: China. But too much focus on North American supply chains brings the same risk for Canada that it’s experienced when relying too much on the U.S. for other kinds of trade.

“Our national interest is to have more than a single market,” Hyder said. “It’s important for Canada to be able to trade their assets to different countries so that those countries have to compete to pay for those assets.”

Trudeau said Friday that Canada can pursue multiple partnerships at once, without being at the IPEF table.

“We have critical minerals engagements with the United States that is strengthening and seeing a lot of real investments and supports in Canada,” he said, while also noting that Canada’s strategy includes work with Australia and Indonesia that also will continue.

What’s missing is an admission of how hard it is for Canada to pursue an independent foreign policy.

“The perception of Canada from the rest of the world is directly proportionate to how America perceives us,” Hyder said. “And if America leaves us on the outside of something as important to them as the Indo-Pacific Economic Framework, it suggests they don’t want us in there, or Mexico for that matter. And it’s troubling.”

If Canada can’t leverage its relationship with the U.S., it will hurt its ability to have influence and impact, Hyder added.

 

Highlights from President Biden’s visit to Canada

 

Featured VideoKirsten Hillman, Canada’s ambassador to the U.S., gives her thoughts on President Biden’s visit to Canada, while CBC’s Rosemary Barton and Alex Panetta break down the big pledges that came out of it and what could change for both countries as a result.

The U.S. may have no strategic interest in facilitating Canada’s economic success in Asia, even as Canada benefits diplomatically from the U.S. re-engaging, particularly with China.

Hillman said Biden’s hours-long discussion with Xi on Wednesday is “good for the world.”

“It’s important for that line of communication to be open,” she said. “As a diplomat, I always think… we need to be talking to each other. We do engage with the Chinese at senior official levels, and there are other discussions that will flow.”

As reporters tried to draw more detail out of Trudeau about his own brief interaction with Xi Thursday, the prime minister suggested in French that Canada might eventually sit down with China for a bilateral meeting. But things aren’t there yet.

In the meantime, at least nothing between them got worse. Trudeau chided a reporter for suggesting that in a summit devoid of announcements from the Canadian delegation, making no news — staying discrete, low-key and controversy-free — might be strategic.

“If you don’t think that doing good work with people across the Indo-Pacific is news, well, that’s a reflection the media has to take,” he said. “There is good work being done here and I think that is important news for Canadians.”

Put another way: it’s a summit. Don’t underestimate the importance of talking.

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