SIM Report: Release of high-profile detainees unlikely to significantly improve tense Sino-Canadian relations

SIM REPORT: NORTH AMERICA, ISSUE 15

The release of Huawei CFO Meng Wanzhou from detention in Vancouver in late September, and China’s subsequent freeing of imprisoned Canadians Michael Kovrig and Michael Spavor, was a hugely significant moment for Canada-China relations. The detainees’ cases, settled after Meng’s legal team reached an agreement with US prosecutors to resolve a bank fraud case against her, had marred relations between Ottawa and Beijing for almost three years. In both countries, the freeing of the detainees was touted as a triumph of justice, with Meng welcomed by a large crowd in Shenzhen, and Kovrig and Spavor received by Prime Minister Justin Trudeau upon their arrival in Calgary. Several weeks after their return home, Canada’s ambassador to China, Dominic Barton, said that ‘the major issue’ in bilateral relations had been resolved.

The resolution of the high-profile detention cases, however, is highly unlikely to trigger a substantial near-term improvement in Sino-Canadian relations. Despite recent developments, diplomatic relations remain heavily strained amid disagreement on a large number of bilateral and multilateral issues. Canada, for example, has publicly criticised China’s treatment of ethnic Uyghurs in its western province of Xinjiang, with the former’s parliament formally accusing Beijing of genocide. Ottawa, moreover, has repeatedly criticised China’s efforts to quell pro-democracy activism in Hong Kong and has facilitated migration from the territory, primarily from young Hong Kongers who have recently finished their studies. In October, Canada sailed its HMCS Winnipeg warship through the Taiwan Strait, leading the Chinese military to accuse Ottawa of threatening regional stability.

The tense state of relations, moreover, has spilt over to commercial ties. China has imposed significant restrictions on the import of Canadian rapeseed (canola) since 2019, prompting a dispute between the countries at the World Trade Organization (WTO) and costing Canada’s industry an estimated CAD2 billion (USD1.61 billion) in lost sales and reduced prices. Canadian firms, furthermore, have effectively blocked Chinese telecoms giant Huawei from participating in the country’s 5G network, albeit without a formal government ban. Ottawa has also repeatedly criticised China’s trade practices in international fora, which bodes poorly for Beijing’s attempts to join the CPTPP trading bloc, and imposed trade restrictions over forced labour concerns in Xinjiang.

Canada, however, has shown signs that it is sensitive to Beijing’s interests. Unlike its allies from the US, UK and Australia, Trudeau’s government did not join the AUKUS security pact, an agreement primarily aimed at containing Beijing’s military influence. Canada, moreover, has yet to issue a ban on Huawei, unlike its main allies, nor has it curtailed the activities of CGTN, China’s state-owned broadcaster, as have Australia and the UK. Trudeau’s victory in the 2021 federal election is set to give continuity to this nuanced policy approach in the coming years.

Companies whose interests are affected by Sino-Canadian relations, therefore, will remain subject to political tensions between Ottawa and Beijing. Given the multitude of disagreements between the countries, a major improvement in ties is assessed as highly unlikely in the near term. The resolution of the detainees’ cases, however, bodes positively for other areas of cooperation, including the potential resolution of commercial disputes. To operate successfully in this environment, organisations should closely monitor bilateral and multilateral developments and assess their significance for operations and planned investments.

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