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Economists worry growing conflict with China will make Canada and the world poorer

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Canadian domestic politics have helped magnify the most recent dispute between Beijing and Ottawa into a full blown tit-for-tat expulsion of diplomats.

While some experts who track relations between China and Canada play the spat down — one called it “pretty trivial” — it’s one more crack contributing to a far more dangerous long-term rupture.

Labelled “global fragmentation,” the issue was raised at a recent International Monetary Fund meeting in Washington, D.C. The current Canadian dispute may represent a further fracturing of the world into competing trade blocs that will not only make us all poorer, but impede crucial talks on shared global threats, including climate change and artificial intelligence.

Diplomacy’s economic impact

Critics of the Canadian government’s handling of threats against Conservative MP Michael Chong’s family in Hong Kong would not see the issue as trivial.

After being pressed by Tory Leader Pierre Poilievre, Foreign Affairs Minister Mélanie Joly cited China’s “interference in our internal affairs” in declaring Chinese diplomat Zhao Wei persona non grata. As expected, in reply China expelled a Canadian diplomat, Jennifer Lynn Lalonde.

While far less significant than previous disputes with Beijing that in the past led to the long-term imprisonment of innocent Canadians and may have contributed to persistent trade sanctions, the latest Canada-China spat is only one sign of hostility between the world’s free-market democracies and what appears to be an emerging alternative bloc.

Conservative Foreign Affairs critic Michael Chong rises during Question Period, in Ottawa, Monday, Nov. 14, 2022.
Conservative foreign affairs critic Michael Chong has pressed the government for action after his relatives were threatened by China, leading to tit-for-tat expulsions by Canada and China. (Adrian Wyld/The Canadian Press)
Just this week, China vowed retaliation against European sanctions on Chinese companies accused of aiding Russia’s war in Ukraine. Also this week, the U.S. government announced it had arrested Litang Liang, an American citizen accused of pointing out to China its friends and enemies within the United States.

“Even as we need more international co-operation on multiple fronts, we are facing the spectre of a new Cold War that could see the world fragment into rival economic blocs,” warned IMF boss Kristalina Georgieva earlier this year. “This would be a collective policy mistake that would leave everyone poorer and less secure.”

Bank of Canada governor Tiff Macklem raised the issue in testimony to the Senate standing committee on banking, commerce and the economy last month after discussions in Washington.

‘Cost to global growth’

“The reality is we have all benefited tremendously from an increasingly integrated global trade and investment system and if that goes in reverse, that will certainly have a cost to global growth,” Macklem told senators.

As an open trading economy, said Danielle Goldfarb, vice-president of global affairs, economics and public policy at the Toronto-based research company RIWI, a decline in global trade could hit Canada hard.

“From Canada’s perspective, as a small open economy and a democracy, we always have had an interest in this rules-based multilateral international order, basically, and that’s kind of an imperative for us,” said Goldfarb in a phone conversation this week.

Cost of Living9:00Trading with the frenemy and how Canada-China trade relations move forward

China-Canada relations are on ice, but trade between the two countries is hotter than ever. After all, what’s a little hostage-taking among friends? Paul Haavardsrud breaks down our current trading relationship and asks if it’s possible to boycott the second biggest economy in the world.

Goldfarb, who is also a fellow with the Vancouver-based Asia Pacific Foundation, said that until a few years ago, Canadian policy on China by both the current governing Liberals and the Conservatives before them assumed that welcoming the growing giant into global networks would make rules-based trade stronger.

“But we’re seeing something different now,” said Goldfarb.

As Deputy Prime Minister Chrystia Freeland outlined in a Washington speech last year, the failure of autocracies like Russia and China to follow what western countries considered free and fair trade rules means democracies must reshape their strategies.

The danger of “decoupling”

“You can’t simply disengage from the second largest economy in the world,” she said, pointing out that China is already beginning to develop policy in the important area of generative artificial intelligence that others, including Canadian AI leader Geoffrey Hinton, say demands global co-operation.

Canada and its allies know it is essential to keep the door open on “global public goods” including AI policy, climate change and avoiding nuclear conflict, said economist Dane Rowlands at Carleton University’s Patterson School of International Affairs in Ottawa. But he said relations with China have never been so bad.

 

Canada braces for retaliation over Chinese diplomat’s expulsion

 

China expelled Jennifer Lynn Lalonde, a Canadian diplomat in Shanghai, just hours after Canada named Chinese diplomat Zhao Wei persona non grata over allegations he tried to intimidate a Conservative MP’s family. Government sources say China could make further retaliatory moves involving trade or security.

“I think it is at a nadir right now; it’s at a low point,” said Rowlands. “I think the diplomatic fighting is something that’s just kind of accompanying the more general bad blood that seems to be out there between different groups of countries in the world.”

At the heart of the growing conflict is the expanding clout of China as an economic and military power that inevitably destabilizes the status quo as it challenges the dominance of the United States and its allies.

“It’s not that the United States has shrunk dramatically in terms of its share of the global economy,” said Rowlands. But the U.S. bloc is no longer able to dictate in world affairs, he added.

Feeling their growing power

“When they set a policy … they wouldn’t really have to care how much other countries bought into the idea,” he said of the U.S. But in their reaction to sanctions on Russia, he said that China and India have shown they can now frustrate U.S. and European policy. That is relatively new and a source of friction.

Goldfarb, Rowlands and many others have said that Canada’s ultimate goal must be to use any influence it has to prevent the conflict between China and the U.S. from escalating into war.

But as the IMF’s Georgieva has described, disruptions short of war could have a serious effect on the world economy.

It is a position Rowlands accepts even if there little proof of an immediate economic impact, but he thinks the IMF’s interests may be different from Canada’s.

“The IMF’s view is that globalization is great,” said Rowlands. “We should just let industries go to wherever they’re going to be more efficient.”

Responding to what some see as Chinese bullying in the Chong case may be one way of pushing back on the diplomatic front.

But Rowlands said that as security concerns grow and China threatens to block essential goods such as rare earth minerals, which it has done, it becomes imperative for Canada and its allies to become more self-sufficient, even if that makes us a little poorer in the short run.

“I think it’s a fair argument to make that by importing goods from overseas and letting them do all the production, that we are losing certain advantages economically, as well as as I mentioned, strategically in terms of security.”

 

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Wildfire season close to 10-year average heading into the peak summer months

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OTTAWA – The remnants of Hurricane Beryl have brought flash floods and destruction to parts of the Maritimes, but federal officials say the storm has also reduced the risk of wildfires in parts of Eastern Canada, at least for now.

Overall this wildfire season is far less severe than the record-setting year in 2023, but the risk for new fires is still high in particular for B.C., Yukon and Northwest Territories.

The ongoing drought in Northwest Territories has intensified, and Environment Canada said things are drier than usual in Yukon.

“We are now into the heart of our fire season and we are tracking carefully a number of fires across the country and the expansion of general wildfire activity,” said Deryck Trehearn, director-general of Public Safety Canada’s government operations centre.

The Canadian Interagency Forest Fire Centre reports 577 active fires as of Thursday, including 402 out of control. Federal officials say there is a response to try and douse the flames for about half the active fires.

The rest are being monitored but are too far away from communities or infrastructure to warrant a response at this time.

Just shy of 1.3 million hectares have burned, which is close to the 10-year average for this time of year. By contrast, 1.3 million hectares had burned in B.C. alone by mid-July of last year. Nationally by mid-July nearly 10 million hectares had already burned in 2023.

There are currently about 150 active wildfires across B.C., a figure that’s holding steady from Thursday following an eruption of wildfire activity this week.

An update posted by the B.C. Wildfire Service said a recent heat wave with little or no rain in many areas has left forests extremely dry and susceptible to new fires.

That heat wave extends into Alberta and Saskatchewan. Another prolonged stretch of hot, dry weather is expected to blanket much of the Prairies starting next week, raising the fire risk in those areas.

A wildfire near a stretch of the Manitoba-Saskatchewan boundary has prompted evacuation warnings in some communities.

People in Flin Flon, Man., and in Creighton and Denare Beach in Saskatchewan have been told to prepare emergency bags and be ready to leave on short notice.

The fire near Creighton is not contained, and town officials say on social media that a fresh-air centre is being set up for vulnerable people because of smoke.

Denare Beach says on its website there are concerns that people in the village may lose highway access and experience power outages.

Creighton municipal officials are asking people to conserve water, saying sprinklers have been set up for some town infrastructure as a precaution.

In northern Alberta, about 1,700 people were forced out of their homes earlier this week. Nearly 1,000 people have left Little Red River Cree Nation and 700 are out of Garden River.

Officials say none of the provinces have asked for federal help from the Armed Forces so far this season, and Canada hasn’t had to ask other countries to help fight fires.

Trehearn said there have been significant fire seasons so far in the U.S. and Mexico.

Provinces have been sharing wildfire fighting resources, including firefighters, through the Canadian Interagency Forest Fire Centre.

The last three months have seen higher than normal temperatures across the country.

This report by The Canadian Press was first published July 12, 2024.

— With files from Brenna Owen in Vancouver.

The Canadian Press. All rights reserved.



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Youth killed in floodwaters in western N.S., 1 year after major flooding in same area

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WOLFVILLE, N.S. – A young person was found dead after they were swept away by floodwaters in western Nova Scotia Thursday, in a region still recovering from flooding a year ago that caused extensive damage and killed several people, including two children.

RCMP say they received a call just before 8 p.m. Thursday about a youth who has pulled into a water-filled ditch at a park in Wolfville, N.S., and disappeared under the rushing water. The young person was playing with friends when the flash flooding began, police said in a news release Friday.

The youth’s body was found around 11:30 p.m. Thursday after the water drainage system in the area was diverted during search efforts, the release said. The Mounties, the local fire department and members of three search and rescue teams were involved in the search.

“Today is a devastating day for our province,” said Nova Scotia Premier Tim Houston in a news release. “On behalf of all Nova Scotians, I offer my deepest condolences to the family and friends who are processing a devastating loss. I hope they find some comfort in knowing that they are not alone in their mourning.”

Police are not releasing the youth’s name, nor any identifying details about them.

More than 100 millimetres of rain fell in the region in just a few hours on Thursday night, as the remnants of hurricane Beryl swept through the province. Emergency alerts were issued in Digby, Annapolis, Kings and Hants counties, warning of flash floods and urging residents to be vigilant.

For many in the area, including retired paramedic Amanda Dunfield in Windsor, N.S., the rushing waters were a grim reminder of the flooding nearly a year ago that tore up roads, forced hundreds to evacuate and killed four people, including two young children.

“Nobody quite knew where to turn and things were almost subsiding by the time there was any information flow,” Dunfield said about the disorganized response to the floods last year, when more than 250 mm of rain fell over 24 hours on July 20 and 21.

Dunfield said she and her neighbours spent all night Thursday pumping water from their basements. The community’s sewer system is too small — and has been neglected over the years — to handle the large floods that seem to be becoming more common, she said.

In Halls Harbour, N.S., about 60 kilometres northwest of Windsor, pictures posted to social media showed that part of West Halls Harbour Road had collapsed into the sea. The road appeared to be split in two and impassable.

Kings County Coun. Dick Killam said he noticed at around 11:30 p.m. Thursday that a lagoon on the other side of that road had begun to overflow and spill onto the asphalt and onto a newly installed boardwalk. Two hours later, the boardwalk was destroyed, he said.

Wendy Donovan, the mayor of Wolfville, N.S., said the rain came as tides were rising, which caused major flooding in parts of the town. “It’s the impact of climate change … and there is going to need to be a government response,” she said in an interview.

“There is also going to need to be an individual response because no matter how high you build your dikes or how big you make your storm sewers, if the water can’t escape, this is going to happen.”

Brett Tetanish, chief of the Brooklyn, N.S., volunteer fire department, said some roads in the West Hants Regional Municipality were completely submerged. Many people had flooded basements, he added in an interview.

Tetanish said his crew assisted the Hantsport volunteer fire department as they rescued three people whose home was cut off from the road by floodwaters. The fire chief said many people in the communities are reliving the anxiety and grief wrought by last year’s floods.

“I think everyone still thinks about the floods last summer …. That plays on your mind,” he said.

This report by The Canadian Press was first published July 12, 2024.

— By Michael Tutton and Cassidy McMackon in Halifax



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Youth killed in flash flooding in western Nova Scotia, police say

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WOLFVILLE, N.S. – Police say a young person was found dead Thursday night after flash flooding in western Nova Scotia.

RCMP say officers responded to a call at about 7:40 p.m. Thursday about a youth who was pulled into a water-filled ditch at a park in Wolfville, N.S., and disappeared under the rushing water.

They say police, search and rescue teams and the local fire department began looking for the missing person.

The Mounties say the youth’s body was found at about 11:30 p.m. after the water drainage system in the area was diverted during search efforts.

Police are not releasing the youth’s name nor any identifying details about him or her.

More than 100 millimetres of rain fell in the region in just a few hours on Thursday night, as the remnants of Hurricane Beryl swept through the province.

This report by The Canadian Press was first published July 12, 2024.

The Canadian Press. All rights reserved.



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