The Canadian government’s approval of the controversial Northern Gateway oil pipeline and participation in the 11th ASEAN-Canada Dialogue are only two of several recent indicators the Great White North has its sights firmly set on the Asia-Pacific region as the key to securing its economic future.
Since taking office in 2006, PM Harper’s Conservative Party has gradually made the consolidation of ties with Southeast Asia a cornerstone of its economic and foreign policy agenda as it seeks to check Canadian dependence on the United States.
Appointing the first Canadian Ambassador to the Association of Southeast Asian Nations (ASEAN) in 2009, Harper’s administration has since signed several agreements with ASEAN, including the Treaty of Amity and Cooperation (TAC) in 2010, the ASEAN-Canada Joint Declaration on Trade and Investment in 2011, and also agreed to the creation of the Canada-ASEAN Business (CABC) and ASEAN-Canada Plan of Action (2010-2015).
While Canadian trade with Asia has historically been dominated by economic heavyweights China, India and Japan, Canadian direct investment in ASEAN recently exceeded Canadian FDI in China and India combined.
Reaching US$6.3 billion at the end of 2012, Canadian FDI into ASEAN has stimulated a more than 19 percent increase in bilateral merchandise trade over the last five years and a more than two-fold increase in ASEAN FDI into Canada over the same period. Together, ASEAN now represents Canada’s seventh largest trading partner worldwide.
In addition to strengthening Canada’s ties with ASEAN ahead of the bloc’s integration into the ASEAN Economic Community (AEC) next year, the current government has also vigorously pursued bilateral free trade agreements (FTAs) with several other Asia-Pacific economies while securing Canadian inclusion in larger initiatives such as the Trans-Pacific Partnership (TPP).
Signed in March 2014, the Canada-Korea FTA will soon become the country’s first free trade agreement in the Asia-Pacific region and is expected to boost Canadian exports to South Korea by 32 percent while injecting more than US$1.7 billion into Canada’s economy. Other ongoing FTA negotiations with Asia-Pacific states include those with Japan, Singapore and India in addition to exploratory discussions with Thailand. Joining TPP negotiations following domestic consultation in 2012, if the agreement is successful it will place Canada in a prime position to connect its economy to the 11 negotiating Partnership countries that together account for 40 percent of global GDP and 30 percent of international trade.
Despite Canada’s current emphasis on FTAs and the TPP, its long-term strategy in the Asia-Pacific region extends beyond trade diversification.
With approval for the Keystone XL pipeline, which would connect Canada’s oil sands with the U.S. Gulf Coast, mired in political debate in Washington, Enbridge’s Northern Gateway pipeline is now being championed by the Conservative government as the first step towards diversifying Canadian energy exports and reducing dependence on U.S. demand.
While legal and regulatory obstacles remain, the Northern Gateway pipeline will, when completed, ship around 500,000 barrels of oil-bearing bitumen a day from Canada’s oil sands to its western coast for export to Asian markets. Although the Northern Gateway cannot compete with Keystone XL’s projected 700,000 barrels-a-day capacity, becoming a major energy supplier to Asia may ultimately be a wise decision in the long-term.
With Asia’s energy demand set to skyrocket over the next two decades and American political rhetoric increasingly focused on a shift towards clean energy, a refocusing towards Asian markets may be inevitable for Canada, whose exports continue to be dominated by fuel and oil – accounting for around 28 percent of total Canadian exports last year.
Whatever the future may hold for its Asia-Pacific relationships, Canada is making no secret of its ambition to ramp up trade diplomacy in the short-term.
Speaking at a press conference earlier this month, Canadian Foreign Affairs Minister John Baird hailed Canada’s economic partnerships with Southeast Asian countries as more important than ever.
“Trade is increasingly important to our economy, especially to support the job growth Canadians are looking for. We are looking to the Asia Pacific region not just to build a new Canada and create opportunities and growth through continued immigration, but also through improved trade,” he said.
Baird continued, “Our new free trade agreement with South Korea is a big deal; it is a big economy, a G20 member, and our discussions with Japan on an agreement is continuing. Opportunities in ASEAN, countries like Vietnam, are very important as well. We love free trade. We support the free trade of goods [and] we believe free trade brings opportunities for free enterprises both in Canada and for other countries.”
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