At the end of the week, the world’s 20 most powerful nations are coming together in Japan at a time when the international system that binds them together is under heavy pressure from its two biggest players.
The world’s largest trade dispute, between its two biggest economies, is affecting people who are neither Chinese nor American — like Canadian canola farmers.
“The whole world of trade has been turned upside-down,” said Brian Innes of the Canola Council of Canada. “We were functioning in a rules-based system, where if we had problems we would try to work them out without escalating things and taking impulsive measures against other countries.”
Now, he told CBC News, “we’re seeing a really challenging situation when people are looking to make investments in planting a crop that may not be sold for another year, or making investments in new seed varieties, or facilities to process our canola or export our canola, in an environment of uncertainty.”
On the face of it, Canada’s canola farmers should be in a better position than their soy-growing counterparts in the U.S. After all, Canada produces 75 per cent of the world’s canola, so it can’t be replaced as easily.
In practice, though, Chinese consumers can simply switch to other kinds of oil, like soybean oil. So Canadian farmers are competing with the same Brazilian and Argentine soy producers who have benefited from China’s tariffs on American soy.
Both U.S. and Canadian farmers worry about whether they’ll recover that market share when (or if) the current trade dispute ends.
Caught between titans
Tensions with China are not running high over trade alone, of course. The trade dispute has spilled over into the legal arena, with the U.S. targeting Chinese telecom giant Huawei.
Huawei (the name means “China’s achievement”) is seen by the country’s leadership as a national flagship, the culmination of the huge technological strides that have revolutionized China.
U.S. officials say those strides were made partly through espionage, technology theft and forced technology transfers.
As countries prepare to upgrade their cellular networks to 5G, the U.S. has been leaning on allies to not make use of Huawei technology — which is cheap but distrusted by U.S. intelligence agencies because they believe it may contain a “back door” that would allow Chinese authorities to monitor communications and even sabotage infrastructure.
The Chinese say such talk is just a pretext cooked up to limit the growth of a successful competitor.
All U.S. allies are being forced to choose sides. But Canada, because it had the bad luck to enforce the U.S. extradition warrant against Huawei executive Meng Wangzhou, was dragged into the angriest and most fraught aspect of the dispute.
China’s rage became clear when it threw its carefully-cultivated image of moderation overboard and detained two Canadian citizens — Michael Spavor and Michael Kovrig — on flimsy pretexts of national security.
This G20 is happening as Canada’s relationship with China is at a low point, while its complicated relationship with the Trump administration is in a relatively good place.
China’s decision to detain two Canadians — including one seen by Canada as holding diplomatic status — dramatically raised the stakes in the confrontation.
There is anger in Ottawa, too, as the Chinese government shows no sign it is even willing to discuss matters with Canada and appears to be holding out for some kind of capitulation.
When Prime Minister Justin Trudeau visited President Donald Trump in the White House last week, he asked him to bring U.S. influence to bear on the dispute.
“I’ll represent (Trudeau) well, I will tell you,” said Trump, as the Canadian leader sat beside him in the Oval Office. “We have a meeting set up with President Xi, and it’s obviously on the big transaction that we’re talking about and negotiating. Our people are actually speaking now, and we’ll see what happens with that. But anything I can do to help Canada, I will be doing.”
Pressed on whether Trump would mention the Canadian hostages, Trump replied: “I would. At Justin’s request, I will absolutely bring that up.”
But experts are skeptical that the U.S. can resolve the hostage issue for Canada as long as it insists on extraditing Meng Wanzhou.
Lynette Ong, who teaches at the University of Toronto’s Asian Institute, said she doubts China will be open to discussing the detainees as long as Meng remains under house arrest in Canada.
“I have difficulty seeing how Trump would be able to represent Canada’s interests appropriately,” given that he has so many other issues to resolve with China, she said. “Much hinges on the trade talks.”
Barring movement on the trade front, “I do not expect the Chinese position (on detainees) to change,” she added. “I think we’ve been snubbed in the past, and I think that is likely to happen again.”
Ong said China’s leadership has shown a willingness to suffer harm to the country’s image in the West rather than release the detainees.
But she said the detentions undermine President Xi Jinping’s message at the G20, which deputy foreign minister Zhang Jun said will be a commitment “to firmly safeguard multilateralism, safeguard (the) international order based on international law, and safeguard international fairness and justice.”
That’s hypocrisy, said Ong. “You cannot demonstrate multilateralism on the trade front, and then turn around and detain people randomly.”
Yves Tiberghien heads the Institute for Asian Research at the University of British Columbia. He agreed that China has little incentive to even discuss the detainees except as part of a wider deal with the West that resolves other outstanding issues.
“If the Chinese get the sense that the only purpose of the meeting is for Prime Minister Trudeau to scold them to release the two Michaels, they’re not going to take the meeting,” he said.
Tiberghien said that the detainees’ release likely depends on a wider resolution of China’s trade conflict with the U.S. and the release of Meng, with Spavor and Kovrig thrown in “as part of the package.”
China’s leaders juggle priorities
For China’s leaders, who have been riding the tiger of explosive economic growth for years, the detainees are just two small pawns in a chess game with many more important considerations.
“They’re under a lot of domestic pressure. Unemployment is becoming an issue,” said Ong. “Also, slowing growth — so President Xi is surely under pressure to end this trade war.”
But even a dictatorship can’t ignore public opinion, she said. “This trade war has also become a nationalist issue, so definitely the leadership doesn’t want to be seen as weak or backing down too easily.”
Important as the detainees are to Canada, Tiberghien said that Canada’s economic future is also on the line in the dispute between Washington and Beijing. “What’s at stake now in this G20 meeting, and in the bilateral U.S.-China relationship, is the future of the global economy.”
Tiberghien said the U.S.-China relationship generates about 30 per cent of the world’s exports. If the U.S. were to impose punitive tariffs on all things Chinese, that would eventually lead to a “decoupling” of the world’s two largest economies, he said.
“You’d basically have a third of the world economy decoupling, and this is a huge shock to the global system. There would be ripple effects everywhere and a trading nation like Canada would be severely affected.”
Brian Innes of the Canola Council said he’s hoping that leaders will instead use the Osaka summit to begin to wind tensions down.
“What we’d like to see is a return to predictable trade, and we’re hopeful that discussions between China and the United States can help us move past this age of impulse and back to a world of predictability.”