A Case for Trade Barriers with China
The standard arguments for trade liberalization do not apply to the Xi government
So first thing’s first: the arguments made in this post are not targeted broadly at people of Chinese descent, or even against Chinese citizens. It is about how my views toward Canada’s relationship with the Chinese government have changed, due to evidence from the last 50 years, and especially since 2012 when Xi Jinping assumed control of his country. This evidence includes human rights violations in mainland China and Hong Kong, as well as that government’s aggressive actions against other countries. It also includes reports of interference in recent Canadian federal elections.
To be extra clear, nothing I write here may be taken as an endorsement of racial discrimination against people of Chinese descent. There are people, such as Prime Minister Justin Trudeau and his supporters, who have made accusations of racism against anyone who raises concerns with the conduct of the Chinese government. Perhaps ironically, as reported by Jeremy Nuttal of The Toronto Star, this tactic has been criticized by people of Chinese descent such as Bill Chu (Chinese-Canadian Concerned Group on the Chinese Communist Party’s Human Rights Violations), who called it a “deflection technique” which the Chinese Communist Party also employs, as well as by Fenella Sung (Canadian Friends of Hong Kong) who stated “I would encourage people to no longer pull the racist card out every time those kind of legitimate questions are asked about our politicians”.
This is not an issue of race; it is about a particular government that is purposely violating the national security of countries like Canada. People of Chinese descent cannot be held responsible for anything done by the Xi government because it is a dictatorship, so there is little Chinese citizens can do to stop it from doing what it is doing. Even Chinese people in countries like Canada might justifiably feel hesitant to publicly criticize the actions of the Chinese government, not only because they might have family in China who are under constant threat, but also because there is strong evidence that the Chinese government has agents in Canada to put pressure on them to tow the party line. I will provide evidence later to back up these points.
This is a call for Canada and its allies to unite against the Chinese government’s abuse of power over the global economy, and its apparent interference in the 2019 and 2021 federal elections. While it is true the overall results of the last election were likely not affected by the interference, that is not the point. The point is that it happened, and we might not be so lucky next time. Andrew Coyne of The Globe and Mail put it nicely when he wrote, “A bank robbery may not imperil the bank’s overall solvency, but it is still a bank robbery.”
As I will argue throughout this post, I believe trade barriers and economic sanctions against China’s government is still in our best long-run economic interest. I will also argue that despite my usual support for free trade, even from the perspective of human rights, case economic sanctions and other trade barriers are still the most appropriate responses to the Xi government’s abuses. Nonetheless, I emphasize that we must be careful because we want to minimize the negative consequences for Chinese citizens, most of whom are innocent bystanders in this dispute.
To put it in antitrust terms, China is a dominant firm in the world economy, and traditional arguments in favour of trade liberalization with such a country do not hold here. This is evident because despite more than 50 years of the Canadian government bending over backwards to have a mutually-advantageous relationship with China, the Chinese government has abused its economic power over us, especially since Xi Jinping took over the country. In scenarios where we talk about actual businesses, it can be difficult for smaller businesses to unite against the dominant firm due to fears of being busted for collusion. But that is not an issue for sovereign governments who are members of international organizations such as the United Nations and the World Trade Organization.
I do not make these arguments without a lot of thought and consideration; in fact, I have always been (and still am) very skeptical of the value of economic sanctions and trade barriers as strategic tools against other countries. From my perspective, they are far too often used primarily for political reasons, such as when governments argue they want to “spread democracy” around the world. Other times, they pretend their reasons are related to economics and/or national security, such as when former President Donald Trump levied steel tariffs against Canada with the (ridiculous) excuse that we were a national security threat. Then there are governments that argue the need for trade barriers against countries with whom they already trade very little, if at all, which exposes the unserious nature of these arguments.
So while I remain skeptical of strategic trade barriers in general, this case is different due to the interference of the Chinese government in our elections, not to mention the recent news regarding the alleged Chinese “spy balloon”. If something is not done to appropriately retaliate against China for its offenses against Canada, public trust in the validity of our elections could deteriorate, even when the results are legitimate. We cannot allow that to happen,
The remainder of this issue of my newsletter will proceed as follows. First, I will summarize the history of Canada/China relations to demonstrate how it went fairly well for both sides until 2012 when Xi Jinping assumed power of China, although there were already indications that Canada’s leaders were wearing rose-coloured glasses during this time. I will then demonstrate that relations between the two countries progressively deteriorated over the next 11 years to the point where we are today, while also assessing the pros and cons of “hostage negotiations” in the context of the “Two Michaels” and Meng Wanzhou. Subsequently, I will assess the pros and cons of economic sanctions and trade barriers against China, arguing in the end that the pros are outweighed by the cons. Finally, I will summarize what will come in next week’s issue of this newsletter, regarding specific ways in which Canada can retailiate against the Chinese government.
History of Canada/China Relations
The history of relations between Canada and China, particularly as it relates to the “Two Michaels” case, is covered quite nicely by Mike Blanchfield and Fen Osler Hampson in their book The Two Michaels. I will therefore summarize it in this section, and unless otherwise noted, this book is my source of all information provided.
Prime Minister Pierre Trudeau Uninterested in Chinese Human Rights
Our story begins in October 1970 when Prime Minister Pierre Trudeau decided it was time to establish diplomatic relations with China, and he made his first official visit there in 1973. Trudeau was partly fascinated with the country personally, but he also wanted to bring the Chinese into the “international family of nations”. Furthermore, he felt Canada was much too dependent on the United States as a trading partner, so he wanted to expand our trade options. Human rights were not high on the agenda.
In fact, Trudeau’s aversion to discussing human rights with the Chinese government was not because he wanted to focus on less contentious issues first, but because he simply had no interest in talking about human rights with Mao Zedong and his successors. This was confirmed by his son, Alexandre (Justin Trudeau’s younger brother), who in 2007 explained (as quoted by Tristin Hopper of the National Post), “His attitude was, Canadian society is a great society. But that doesn’t give it a right to impose its values on any other society”. The elder Trudeau maintained this view when he, along with Justin and Alexandre, visited China shortly after the 1989 Tiananmen Square massacre: as he told his sons, “outsiders simply cannot know what is best for China, or how it needs to travel down its chosen path.”
Brian Mulroney and the Tiananmen Square Massacre
Human rights concerns continued to barely register during Brian Mulroney’s first five years as Prime Minister of Canada, as his government pursued a stronger relationship with the government of China and its people. He is even quoted as saying his meeting with Chinese leader Deng Xiaoping “was like meeting Churchill”.
Unlike Pierre Trudeau, Mulroney might have been concerned with human rights issues, but he did not say so publicly, practicing “quiet diplomacy” when it came to China’s sensitive human rights issues. He instead focused on the recommendations of a secret memo titled A Canadian Strategy for China, which called for a coordinated drive to promote trade with China, as well as to help expand defence relations between the two countries, consult on security issues, and work on getting China into the General Agreement on Tariffs and Trade (GATT).
But then the Tiananmen Square massacre happened on June 4, 1989, which created a (temporary) bump in the road for Canada/China relations. Former Prime Minister Joe Clark, who at that time was Canada's External Affairs Minister, was one of the first Western foreign ministers to speak out against China's awful behavior. Mulroney’s primary instruction was to have Canada's mission at the United Nations call for the matter to be referred to the UN Security Council. A series of meetings in the following weeks solidified Canada’s actions, e.g., joining the U.K. and Australia to broadcast radio signals directly into China. Canada’s contribution was through Radio Canada International, and the intent was to transmit factual reports into China.
But the Canadian government did not want to completely abandon nearly two decades of work building a relationship with China, so Clark argued that while Canada was not accepting China’s desire for business as usual, he hoped we could find a way to renew some sort of constructive relationship with the country.
The following year at a G7 submit in Houston, Prime Minister Mulroney and his counterparts agreed the prospects for closer cooperation with China would be enhanced by renewed political and economic reforms, particularly in terms of human rights. He then welcomed Chinese Premier Zhu Rongji to Canada three years later, with the goal of reforming human rights in China. Such reform is yet to happen.
Jean Chretien Gets Suckered by the Chinese Government
By the time Jean Chretien’s Liberals came to power in 1993, Canada was very much back on its familiar path of economic engagement with China, including giving little consideration to human rights in China. This was true despite being repeatedly questioned by Canadian journalists on China’s human rights record every time he visited the country — six trips during his ten years in power.
Nonetheless, Chretien apparently thought he would succeed in convincing China to take part in the Canadian human rights process in exchange for Canada withdrawing its support for the UN human rights statement condemning China for its human rights record. Yet as one might expect, once China got what it wanted from Canada, it reneged on its end of the bargain, diminishing international solidarity on human rights for nothing in return.
Stephen Harper Takes a Hard Line Against China… Temporarily
Then Stephen Harper came to power in 2006 and immediately changed Canada’s approach to international relations, spending his first three years in office snubbing the Chinese government. He considered Communism to be an historic evil, looking down on those who value money more than China’s lack of political freedoms and human rights… that is until he got a lot of push-back from Canadian business leaders who wanted to do business with the second-largest economy in the world. Then those principled stands were put on the back burner.
Prime Minister Harper ended up making his first visit to China in 2009, expressing the importance of building economic relations between the two countries. Then in 2012, his government forged a new foreign investment protection agreement with Beijing, openly dreaming of one day signing a free-trade agreement with China.
Xi Jinping vs. the World
Justin Trudeau also had grand visions of being in an international family with China, but he failed to properly assess the significance of Xi Jinping, an authoritarian who strongly wanted to rise above the U.S. to become the world’s dominant economic and political power by boldly rejecting Western democratic values.
Xi’s approach involved a foreign policy centred around his Belt and Road Initiative, a huge Eurasian infrastructure project estimated to cost $50-100 billion per year, which would connect four billion people across several countries. Similarly, Huawei and its telecommunications technology were key to Xi’s strategic vision. In his mind, China was on a sacred mission to play the leading role in the future of the Internet.
Xi’s quest for world domination also involved a massive naval buildup in the South China Sea to expand its military might beyond its borders. His government created fake islands to house large landing strips and bases for the Chinese military, which frightened away foreign ships it unilaterally determined were trespassing on Chinese waters. Even when the International Tribunal in the Hague rejected the Chinese government’s sovereignty in the South China Sea in July 2016, and ruled the country was violating international law, China ignored the ruling with no consequence.
In other examples of Xi’s government ignoring any notion of the rule of law, it jailed record numbers of political opponents, and perpetuated what many call a genocide against the ethnic Muslim Uyghurs of China's Xinjiang province. He also violated a 1997 agreement with Britain, which stipulated Hong Kong would be handed over to mainland China in exchange for guarantees that its political and economic future be safeguarded — known as “one country, two systems”. In effect, with his 2019 national security law, Xi essentially outlawed democracy in Hong Kong.
Wanzhou Meng, Huawei, and “The Two Michaels”
Then came Wanzhou Meng. In August 2018, a New York court issued an arrest warrant for the Chief Financial Officer Huawei, who was also the daughter of founder Ren Zhengfei. The U.S. Department of Justice accused her of lying to HSBC about the company’s relationship with its Iran-based covert subsidiary Skycom, putting the bank at risk of violating U.S. sanctions against Iran.
Then on December 1, 2018, and by request of U.S. authorities, Meng was arrested by the RCMP in Vancouver while changing planes. In an obvious move of retaliation, the Chinese government then detained former diplomat Michael Kovrig, as well as business consultant Michael Spavor for espionage in China. Of course, the Chinese government denied these arrests were in retaliation for the arrest of Meng.
The conditions under which the Two Michaels lived were dramatically different from those of Meng, for she lived in two Vancouver mansions while her case was heard by Canadian courts, and she was allowed to venture around town with an ankle monitor; apparently, she was also allowed to have a party at a Vancouver restaurant while most other people in the city were under COVID-19 lockdown orders. Kovrig and Spavor, on the other hand, were held in isolation in their cells with lights reportedly turned on 24 hours per day, and they were denied access to consular officials and lawyers.
In the end, a deal (deferred prosecution agreement) was made with Meng where she would be permitted to return to China in return for acknowledging she made false statements in her meeting with HSBC executives. Not coincidentally, as soon as she was on her way back to China, the Chinese government allowed the Two Michaels to return to Canada “for health reasons”. That government also claimed (for the benefit of its own citizens) that the two men signed written confessions of espionage, but no such thing actually happened. It was clear they were only being held as bargaining chips for the release of Meng.
Arguments for and Against Hostage Negotiations
I have mixed feelings about negotiating for the release of hostages. On the one hand, it is argued that we should not do so because it encourages the hostage-taker to do it again in the future. This was the argument frequently made during the debate over whether Meng should be released in exchange for the Two Michaels.
From that game theoretic standpoint, part of me was inclined to agreee while it was happening, because although I did certainly care a lot about the welfare of the Two Michaels, I did not want the Chinese government to get the message this could work in the future. However, I have since grown to doubt that standing strong would really make a difference in the long run, not only because Xi has proven he has no interest in adhering to international norms, but also because there is no long-run credibility to such a policy for the simple reason that governments have to stand for re-election within five years.
To explain this argument, suppose Trudeau stayed strong and refused to negotiate with Xi, even to the point where the Two Michaels never left their Chinese cells alive. That would send a message that Trudeau will not “negotiate with terrorists”, but that does not mean he would make the same decision in a future hostage crisis; after all, politicians have never been known for their consistency. But ignoring any such possibility, the next Prime Minister will almost certainly have their own approach to governing, especially if Xi is successful in altering the results of our elections.
There is historical evidence to support this argument. For example, in March 1973, two senior U.S. diplomats were taken hostage by Palestinian terrorists from the Black September organization. President Richard Nixon refused to negotiate for the release of the hostages, and they were murdered. But then during the 1979 Iranian hostage crisis, President Jimmy Carter did negotiate with the terrorists — and ironically, Nixon backed Carter’s handling of the situation. With all the hostage crises in the U.S. over time, it is clear a “no negotiation” strategy does not deter future hostage takings.
Furthermore, on page 197 of their book The Two Michaels, Blanchfield and Hampson cite studies to show that while some countries such as the U.K. publicly refuse to ever negotiate when their citizens are taken hostage, hostage takings are not deterred any more than countries like Israel that negotiated hostage releases.
But in the end, the Michaels are safe and sound in Canada, which is a very good thing. However, we need to ensure that China does not take it as an invitation to do it again. I am hesitant to argue in favour of legally forbidding Canadians from going to China, like the U.S. did with Cuba, because I still have libertarian leanings in that respect. But the government needs to make sure Canadians understand that it is unsafe to go to China. I will discuss this issue more next week when I focus on how Canada can specifically respond to China’s illegal behaviours.
Alleged Chinese Government Interference in Canadian Elections
Last year, news agencies such as Al Jazeera reported that Xi Jinping chastised Justin Trudeau over alleged leaks of an earlier meeting at the G20 summit. Thus, despite Trudeau’s stated desire to normalize relations with China, Xi still wants China to dominate Canada.
Furthermore, evidence of Chinese spying in Canada was revealed, as the same source reported an employee at Canada’s largest electricity producer was charged with espionage for allegedly trying to steal trade secrets for China. Furthermore, in a separate case, Canada ordered three Chinese companies to divest investments in Canadian critical minerals, citing national security.
According to Sze-Fung Lee and Benjamin Fung of Policy Options, in an effort to respond to the Chinese governments alleged sins in Canada, Conservative MP Kenny Chiu introduced a private-members bill (Bill C-282: Foreign Influence Registry Act) in 2021, the intention of which was to impose “an obligation on individuals acting on behalf of a foreign principal to file a return when they undertake specific actions with respect to public office holders.” The bill did not pass, and unfortunately was subject to a misinformation campaign itself, as fake news was widely spread in diaspora Chinese communities via social media such as WeChat and WhatsApp.
Then all sorts of Hell broke loose when on February 17, 2023, Robert Fife and Steven Chase of The Globe and Mail obtained leaked CSIS documents, which indicate the Chinese government interfered in the 2021 federal election campaign to ensure Justin Trudeau’s Liberal government returned to power — but only in a minority status as they wanted to ensure that our politicians spent their time fighting with each other rather than passing legislation which could be detrimental to the interests of the Chinese government. There were also further allegations the Chinese government interfered in the 2019 election campaign to support 11 candidates, most of them Liberal and in the Greater Toronto Area.
The CSIS documents reveal that Chinese diplomats and their proxies, including some members of the Chinese-language media, were instructed to spread the word that the Conservative Party was too critical of China and that, if elected, it would follow the lead of former U.S. President Donald Trump, banning Chinese students from certain universities or education programs.
In fact, Kenny Chiu lost his seat in the 2021 election to Liberal candidate Parm Bains, and he is widely believed to be one of the victims of the Chinese government’s online disinformation campaign.
Possibly most damning for the Prime Minister is despite arguing in November he was not briefed on the alleged interference, he evidently did receive a national-security briefing during which he was told China’s consulate in Toronto targeted 11 candidates in the 2019 election as “friends of China”: nine Liberals and two Conservatives.
But that is not all. According to Sam Cooper of Global News, at least one of these 11 candidates was Han Dong, a former Ontario MPP who won his seat in 2019 and then won reelection in 2021. Allegedly, three weeks before the 2019 election, national security officials warned senior aides from Trudeau’s office that Dong was part of a Chinese foreign interference network. In fact, he was a “witting affiliate in China’s election interference networks.”
In an opinion piece for the National Post, John Ivison writes that according to security forces, this kind of influence-peddling in elections has occurred for at least 25 years. He writes the typical effort would see China engineer the nomination of someone sympathetic to mainland China by stacking the meeting with paid-for supporters. CSIS has long known about such efforts and even has footage of one candidate receiving cash from a Chinese consulate official.
Then in a February 28 report for The Globe and Mail, Fife and Chase reveal the Chinese government appears to have targeted Justin Trudeau in a foreign influence operation after he became Liberal Leader in 2013, which involved donating a significant sum of money to the Pierre Elliott Trudeau Foundation.
Again, no one is accusing the PM of being in collusion with these people, or that he even knew about it. Furthermore, it is not being alleged that Trudeau would not have won the last two elections without foreign interference — even current Conservative leader, Pierre Poilievre accepts the results of the last federal election, as noted by Aaron Wherry of CBC News. The point is it allegedly happened.
Chinese-Canadians Feel Threatened by Chinese Government
As I argued earlier in this post, is is irresponsible to hold people of Chinese descent responsible for the actions of the Chinese government, because even if they live outside China, they are still vulnerable to harm from that government. For example, in a piece for The Walrus, Ira Wells cites critics of the Chinese government that have been confronted by CCP-supported counterprotesters who photograph, harass, and attempt to silence demonstrators. It is so bad that Amnesty International Canada published a 2020 report documenting a “systematic campaign of harassment and intimidation that is often clearly linked to or backed by Chinese state authorities.”
For more examples of Chinese government threats against its dissenters around the world, see Xiao Xu’s article for The Globe and Mail on Wang Yuechi, a stand-up comic from China whose name was wiped off most major mainland Chinese social media shortly after finishing his North American tour in Toronto; as well as a piece in The Toronto Star by Joanna Chiu, who covers Chinese-Canadians who reported harassment from the Chinese government to Canadian police, and testified to a parliamentary Foreign Affairs Committee in 2006, but got nowhere. There is also Tasha Kheiridden’s opinion piece in the National Post, in which she writes about Cherie Wong, executive director of Alliance Canada Hong Kong, as well as former Miss World Canada Anastasia Lin, whose father was threatened after she won her title in 2015 because she was talking about Chinese human rights issues. Kheiridden also writes about Louis Huang, co-founder of the Vancouver Chinese Human Rights Watch Group, who was beaten by two men allegedly sent by Guo Wengui, a man Huang claims is a former spy working for the Chinese Ministry of State Security.
Closed-Door Probes
After a lot of pressure, Prime Minister Trudeau announced he will do something about the alleged Chinese government interference in our elections, but to critics it is not enough. Specifically, in a March 6, 2023 article in The Globe and Mail, Fife and Chase report Trudeau initiated two closed-door probes into Chinese election interference which will be reviewed by a special rapporteur. However, the opposition Conservatives and NDP argue this is insufficient because while the National Security and Intelligence Committee of Parliamentarians (NSICOP) will study the Chinese government’s interference in the last two elections, it reports directly to Trudeau’s office so the Prime Minister can redact information in its report. Poilievre also complained the special rapporteur should not be “hand-picked” by the Prime Minister rather than a “true independent inquiry, with the full legal powers” to compel testimony and obtain all unredacted documents.
Then on March 7, Fife and Chase reported in The Globe and Mail that Liberal MPs mounted a filibuster Tuesday to stop the opposition from calling the Prime Minister’s top aide to testify before a Commons committee studying Beijing’s election meddling, frustrating efforts to delve deeper into what the government knew.
So can the House of Commons order the Prime Minister to call a pubic inquiry? Katie O’Malley of iPolitics answers no, “even if a majority of MPs at committee, or in the House, want one.” But she argues they can still hold a vote of non-confidence in the government and there would be nothing the Liberals could do about it. However, I personally doubt the NDP would not be willing to force an election at this time since they do not seem to be prepared for it. They talk a good game about holding the balance of power in the legislature, but when it comes down to actual votes in the Commons, they tend to vote with the government.
Traditional Economic Arguments for and Against Trade Liberalization with Countries Like China
Historically, opponents of trade liberalization with autocratic countries like China have argued trade barriers will hurt them enough to change the way they do things. This was the argument used by the U.S. government with respect to Cuba since the rise of Fidel Castro in the 1950s, but very little changed over the next 60 years.
The problem with this view is people in power pass the pain on to ordinary citizens precisely because they are autocratic. Thus, supporters of trade liberalization with these countries argue greater economic ties will keep them in line because they do not want to lose the prosperity created by trade. This has been my standard argument.
However, I now believe the situation is different with respect to the current Chinese goverrnment, because while it did open itself up more to market forces since 1972, it has changed quite a lot in the opposite direction since Xi came to power in 2012. During the last 11 years, Xi has had no problem making enemies with countries that cross him, such as anyone moving along the South China Sea, as well as any country which shows any sign of viewing Taiwan as not part of China. Then there is its human rights violations with respect to the Uyghurs and the people of Hong Kong. In short, the Chinese government’s violations of human rights and international law have worsened despite increased integration into the world economy.
Still, one might argue it could be even worse for Chinese and Hong Kong citizens if we raised trade barriers and economic sanctions against the Xi government. But I am skeptical of that argument, because Xi is making no signs he is holding back with his abuses of power, as I documented above. He might be going more slowly than he otherwise would, but he is still going in that direction. He has even argued we need him more than he needs us so we have to just accept what he does, and the behaviour of our leaders over the last 50 years validated this argument.
What’s more, there is strong evidence that Xi has interfered in our elections, and that is something we cannot tolerate. If he can influence our elections in the future, and if he can also have actual influence over our leaders, then not only will it hurt us economically and in terms of human rights, but it will make him even more powerful with respect to taking away his own people’s human rights. So while there would be short-term pain for everyone from fighting back, there could be long-term gain for everyone (but Xi) if his dominance is reduced.
What to Do, What to Do
This has already been a long post, so I will wait until next week to publish my views on how Canada should specifically respond to the Chinese governments abuses of human rights and international law. For now, I will just say Canada needs to unite with its allies around the world in this fight, as we did when the Two Michaels were imprisoned, because it will be much more difficult to make a difference on our own.
Thank-you for reading to the end, and I hope you consider a paid subscription to help me afford the time and other resources to conduct my research.