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What does a US-China reset mean for Canada?
A breakthrough in US-China relations is signaling a possible detente. Earlier this week, US Commerce Secretary Gina Raimondo visited her counterpart Wang Wentao in Beijing to discuss smoothing trade relations. While the Biden administration is still committed to trade and security restrictions on China, it’s hoping to open space for more trade on consumer goods while “de-risking” the relationship between the countries – meaning reducing the chances of an accident or misunderstanding escalating into a full-blown crisis. For its part, Canada, as always, is following in the wake of the big powers.
Why now?
China’s economy is slowing of late, putting pressure on Xi Jinping. Chinese exports were down 14.5% year on year in July, while imports were down 12.4%, and economic growth between April and June was down to 0.8%. Trade with the US, meanwhile, is down 34%.
Between China’s economic slowdown and the Biden administration’s desire to de-risk and stabilize relations, there’s now an opportunity for the two to build a little trust in a relationship long marked by distrust – but that doesn’t mean sunshine and rainbows. As Anna Ashton, a China expert at Eurasia Group, warns, this reset is not a return to US-China relations pre-Trump. “It’s not a detente that is aimed at ending the competition between the two countries or resolving ideological differences, or rectifying concerns about national security. It’s something else.”
That “something else” may be a smoother and more responsible sort of competition. “It’s like we’re in this chapter of both sides recognizing each other as rivals and potential adversaries,” says Ashton. But they’re also acknowledging the mutual need to have clear channels of communication and engage in crisis prevention. “I find that unexpected,” she says, describing the relationship as “rivalrous and constructive at the same time.”
And what about Canada?
Canada-China relations are currently rocky, at best, and some say they’ve reached “an all-time low.” Prime Minister Justin Trudeau is facing pressure to call an inquiry into alleged Chinese electoral interference – despite special rapporteur, former Governor General David Johnston, recommending against one. Johnston warned of subversive threats to Canadian democracy from foreign interference but said little to no evidence was found to support allegations that China had directly funded candidates in the 2019 Canadian election or targeted candidates for defeat. He also found no evidence that former Liberal MP Han Dong had interfered in the process to secure the release of two Canadians, Michael Kovrig and Michael Spavor, arrested by China. Dong left the party’s caucus over the allegations but is now seeking to return, having been vindicated by the report.
So, given these tensions, where does the US reset with China leave its northern neighbor? Canada is one of America’s top three trading partners, alongside Mexico and China, with nearly $8oo billion in trade between the two countries in 2022. Trudeau will be watching Biden’s China policy closely and keeping tabs on how the 2024 election takes shape. Canada struggled to deal with the Trump administration during its tenure, cursed with managing both the mercurial president and traditional trade challenges such as softwood lumber disputes.
As president, Trump forced a long, difficult renegotiation of the North American Free Trade Agreement – now the US-Mexico-Canada Agreement. Last month, former US trade representative Robert Lighthizer revealed in his memoir “No Trade Is Free,” that during that time, the relationship between the two countries sunk to its lowest since the War of 1812. History buffs may remember that war as the one where the British, who claimed and governed Canada as its territory at the time, set the White House on fire – so it’s a high bar for low relations.
The magical powers of supply chain security
If Canadians are worried about what Biden’s rapprochement with China means for them, they may be buoyed by the administration’s desire to secure its critical supply chains. Graeme Thompson, senior analyst of global macro-geopolitics at Eurasia Group, says that while the president is making space for more trade with China on consumer goods, Canada remains a trusted ally – especially when it comes to sensitive trade goods.
“Canada is already treated as, essentially, a domestic source for US military procurement, and it benefits from measures in the US Inflation Reduction Act that incentivize electric vehicle manufacturing and cross-border supply chains within North America,” he says. The two countries are particularly close on critical mineral trade and trade related to technologies with national security implications, such as microprocessors. Still, Canada is left to shape its policy to conform to American imperatives – and that includes not being too far out of step in its relationship with China as the Biden White House seeks a more stable relationship with Beijing.
Ottawa in the middle
Canada is caught between the US and China and left responding to events rather than shaping them – and that's not a new problem. This conundrum was exemplified by the Meng Wanzhou affair, in which Canada arrested the Huawei executive (and daughter of the company’s founder) at Washington’s request, which prompted China to arrest the two Michaels (mentioned above) and charge them with espionage. The men were freed the day Meng was released with a deferred prosecution agreement negotiated by US prosecutors.
Once again, Canada has plenty of work to do now to warm up its own relationship with China and to follow the American lead on trade policy. As Thompson puts it, when it comes to choosing sides and trade relations, “There isn’t really much choice for Canadian policymakers – the option is to stay closely aligned to the US, and the alternatives aren’t readily apparent.”
As concerns over supply chain security and reliability persist, it makes sense that the US and Canada, long-term trusted allies and neighbors, would keep close, even while Biden attempts to de-risk relations with China. That’s good news for Canada. But at the same time, the White House is seeking to break with past Democratic presidents – Obama and Clinton – to focus more on protecting American workers, which further puts pressure on Canada as it struggles to get its share of the American manufacturing and trade pie.
The break with past trade and industrial policy means more goods manufactured in the US and a more closed economy. It also means putting a bit of a brake on globalization. Policies and laws such as the IRA, The Build America, Buy America Act, and the CHIPS and Science Act include protectionist provisions and reflect the president’s home-first focus. But the securing of supply chains may still be a boon for Canada despite a more isolationist American bent.
Canada should still have a significant role to play in the US economy – and not just for consumer goods. “There’s a lot of talk of re-shoring, but also near-shoring and friend-shoring,” says Thompson. “While American policymakers want to bring jobs and production home to the US, having strategic supply chains run through close security partners and allies is an acceptable second best. And because of geographic proximity, an intimate security and defense relationship, and what Canada sells into the market, all of those things put Canada in a very strong position to capitalize on US concerns about supply chains.”
Between navigating a response to the US-China detente and America-first policies, Canadian trade and foreign policy folks have their work cut out for them – but with both countries facing elections, it’s unclear how long they have to maneuver.
The electoral factor
National votes are pending in the US in 2024 and Canada in 2025, and campaign politics have a way of changing the diplomatic mood. In recent weeks, Canadian Environment Minister Steven Guilbeault, for example, caught heat from opposition Conservatives for heading to China to discuss climate change.
In the US, there are calls from both sides of the aisle to toughen relations with China. “There’s far more political incentive to be hawkish than anything but hawkish,” Ashton says.
So while both Biden and Trudeau are currently pushing for better relationships with China and cooperation on critical shared problems such as climate change, things could change quickly as elections loom. As always, politics comes first.
China’s tech crackdown & the Jack Ma problem
Is the Communist Party losing support in China?
On GZERO World with Ian Bremmer, Shaun Rein, founder and managing director of the China Market Research Group, explains why wealthy Chinese citizens fear that the country is moving towards socialism and is no longer pro-business as it was in the past.
“People have trusted the Chinese government to do the right thing. It was almost like they were invincible,” Rein explains, “But zero-COVID wasn’t done well, so they’re starting to lose some support, especially among the wealthy.”
Along with zero-COVID sapping domestic consumption and production, Rein also points to the example of Jack Ma. Ma was a hero to many young Chinese, rising from a peasant to become the billionaire owner of one of China’s biggest tech companies, Alibaba. But Communist Party's crackdown on the private sector forced Alibaba to split into six separate companies and forced Ma to give up his control.
Rein says he agrees with the decision because companies like Alibaba were becoming too powerful, controlling too many industries and stifling fair market competition. But the Beijing's crackdown has rattled the business community and some worry that China’s ethos of “socialism with Chinese characteristics” is starting to look a lot more like traditional socialism, full stop.
Watch the GZERO World episode: China’s economy in trouble
And watch GZERO World with Ian Bremmer every week on gzeromedia.com/gzeroworld and on US public television. Check local listings.
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U.S. Vice President Kamala Harris and Second Gentleman Doug Emhoff walk to a helicopter on their way to Cape Coast in Accra, Ghana, Tuesday March 28, 2023.
What We’re Watching: Zambia warns against anti-LGBTQ protests, AI scares tech leaders
Zambia warns against anti-LGBTQ protests ahead of Harris’s arrival
Zambia’s President Hakainde Hichilema is warning against anti-LGBTQ protests ahead of US Veep Kamala Harris’s visit Friday, part of a three-nation Africa tour aimed at shoring up US relations across Africa.
While in Lusaka, Harris will (virtually) address the Summit for Democracy, a Biden-crafted international conference designed to bolster democratic institutions and norms amid rising global authoritarianism. But dozens of Zambian opposition MPs claim the summit also aims to introduce gay rights to the country.
The opposition Patriotic Front Party reportedly plans to hold protests before the summit, but Hichilema has called for calm and for a dialogue with his opponents. Earlier this month, he vowed to maintain Zambia’s laws criminalizing consensual same-sex acts, which carry a life sentence.
This isn’t the first time gay rights have come up during Harris’s tour. In Ghana, she noted that LGBTQ rights are human rights but did not discuss the proposed Ghanaian bill to criminalize LGBTQ identification and advocacy. Harris’s visit also follows Uganda’s adoption last week of a draconian law that criminalizes identifying as LGBTQ, which could involve the death penalty in some cases.
Is AI getting too smart, too fast?
Yes, according to billionaire Elon Musk and over 1,000 other artificial intelligence luminaries, who've published an open letter calling for a six-month "pause" on further AI development. Why? So it doesn't threaten humanity by creating digital minds so powerful that they can't be controlled by humans.
But perhaps "humanity" is code for white-collar jobs. After all, Goldman Sachs just warned that AI could put up to 300 million people out of work in a decade. Most at-risk jobs are desk gigs, not blue-collar manufacturing jobs we once thought would be wiped out by automation.
Should that be more or less important than stopping AI from automating political misinformation in social media? And what if China takes advantage of the pause to beat the US in the AI race? Let us know your thoughts on taking an AI break here.
Washington watches as Beijing bargains
China announced last Friday it had brokered a deal to restore diplomatic relations between Iran and Saudi Arabia for the first time in seven years. Beijing will also reportedly host a summit later this year, bringing together representatives from Iran and the six-nation Gulf Cooperation Council. Like all early stage diplomatic breakthroughs, this one remains fragile. It will take at least two months to hammer out details, and Iranians and Saudis aren’t about to become fast friends. But President Xi Jinping wouldn’t trumpet this news unless he believed all relevant parties were sincerely interested in an agreement of substance.
This is something Joe Biden might call a “big F deal.”
First, any handshake that puts a floor under relations between Iran and Saudi Arabia, the two most important rivals in a critically important region, matters for stability.
Second, China is swimming into uncharted waters here. In the past, Beijing confined its leadership in diplomatic interventions to Asia, avoiding direct involvement in anything not directly relevant to China’s national security. And now we see China brokering a Middle East deal that Americans and Europeans could not have made.
It’s also a big deal because China might successfully hold Iran to its promises to not build a nuclear weapon, a point toward which Iran appears to have edged ever closer in recent weeks. That would be good for the region, for the world, and for US and Israeli national security.
It’s also impossible to end the horrible war in Yemen, and the humanitarian catastrophes it has triggered, without bringing Iranians and Saudis to the table. The agreement China announced is only a first step, but the newly pragmatic relations could bring the Yemen conflict – in which Tehran supports the Houthi rebels and Riyadh supports the Yemeni government – to a halt much sooner.
In fact, China’s Middle East plan underscores the limited value of a Biden administration foreign policy the US president continues to insist is built on support for democracy through containment of autocracy.
There won’t be any freely or fairly elected officials at Beijing’s Middle East summit. Outside Israel, there aren’t many Middle Eastern democracies to defend (and even Israel’s on dicier ground these days …). Also, you can’t broker a deal unless you’re talking to both sides … and unless both sides see you as an honest broker. It’s been a while since the US and Saudi governments have seen eye-to-eye on the issues of the day, while US and Iranian officials (very) rarely appear publicly in the same room together.
Nor is the US a predictable partner in the Middle East these days. The Saudis don’t want to see Iran develop a nuclear weapon, and Iranians want to know what they’ll get by cutting a deal to trade that opportunity away. Barack Obama made a deal. Donald Trump withdrew from the deal. Joe Biden wants back in the deal. Maybe. Why should anyone in the Middle East believe Washington can steer a straight course?
Saudis and Emiratis can also see the US hasn’t done much to stop Iranian drone strikes on their territory and infrastructure. If China can bring leaders together to put an end to those attacks, why should they say no?
But China’s new diplomatic ambitions aren’t limited to the Middle East.
After unveiling a detailed framework to negotiate an end to the war in Ukraine, Xi is now prepping for a phone call with Volodymyr Zelensky and a visit to Moscow to see his friend Vladimir Putin.
In this case, we should be more skeptical of China’s value. Here, the honest broker principle works against Beijing. China’s Ukraine plan is entirely unacceptable for Kyiv, mainly because it doesn’t call on Russian invaders to leave Ukraine, and Zelensky still insists Ukraine’s army can push them out. Zelensky knows there’s a big difference between China's strategic partnership with Russia and its nominal recognition of Ukrainian sovereignty and territorial integrity. The Chinese aren’t going to condemn Russia’s illegal invasion, illegal annexations, or war crimes.
But even here, China may eventually offer something the US can’t. Unless one side wins a highly unlikely complete victory, the war in Ukraine must eventually end with some kind of sustainable deal between Moscow and Kyiv. China is potentially in a better position to broker that agreement than the Americans and Europeans, whom many outsiders feel are pushing for escalation and enabling more bloodshed by providing military support for Ukraine and slapping sanctions on Russia.
Let me be clear: I personally support Western backing for Ukraine against naked Russian aggression. But most of the developing world, an audience China would like to engage, is less interested in justice for Ukraine than an end to a war that’s inflicting real damage on the global economy and distracting world leaders from addressing problems they care far more about … like economic recovery from the pandemic’s damage to the global economy and a plan to manage their growing debt in a reasonable way.
More broadly, Washington should see both risks and opportunities in China’s more ambitious global diplomatic role.
It’s not like China is about to replace the United States in the Middle East. Given the hardware the US already has patrolling the skies and waters of the region, Beijing would have to spend billions upon billions over many years to supplant that influence.
Nor is the US retreating from China’s backyard. The American withdrawal from the Trans-Pacific Partnership limited Washington’s economic influence in Asia, but the US remains critical for the security of its many Asian and Pacific allies. Washington is now extending that commitment with its Quadrilateral Security Dialogue with Japan, India, and Australia.
But a larger global leadership role for China will come at a cost for US influence.
In the Middle East, Washington has a big presence, but it doesn’t have a clear purpose. It’s on the wrong side of most Middle Eastern countries, in part because the Biden administration wants to transition away from fossil fuels, but offers little talk about the continuing importance of hydrocarbons for keeping that transition stable. In that sense, the Gulf oil producers don't share a core interest with the US. China, on the other hand, isn’t ambivalent about quenching its thirst for fossil fuel. Given that the Saudis and Iranians will have to compete with Russia to sell oil to China, new deals with Riyadh have extra value.
It’s in the US national interest to welcome others to broker peace where Americans can’t. But there will be areas where China’s diplomacy won’t make Washington happy. We’ll get a good look at that problem when Xi turns up in Moscow as an ostensible peacemaker, rather than as an enabler of the man who launched this war.
Given the Chinese president’s startlingly explicit recent criticism of the US and its role in the world, the most hawkish comments made by a Chinese leader about Washington in decades, it’s clear there will be plenty of instances where US and Chinese interests just don’t align.A central processing unit (CPU) semiconductor chip is displayed among flags of China and U.S., February 17, 2023.
What We're Watching: US-China tech race, Ukraine-Russia confusion, Greek train politics, world's most populous "country"
Who's winning the US-China tech race?
China is now ahead of the US in 37 out of 44 types of advanced technology, according to a new report by the Australian Strategic Policy Institute. These include artificial intelligence, quantum computing, and robotics — all key to winning the race to dominate global tech. Beijing is finally reaping the benefits of decades and vast sums of money invested in scientific research, a priority for Xi Jinping. So, can China declare victory? Not so fast. The study points out that it’s not easy to turn cutting-edge research milestones into manufacturing prowess. In other words, the Chinese might have acquired the technology to make the most advanced quantum computers in the world, but the country still lacks the capacity to mass-produce them at the same quality standards as less powerful American-made models (this applies, for instance, to semiconductors). For now, at least, China is not yet eating America's tech lunch.
Fatal attack in Russia: whodunit?
Kyiv and the Kremlin are trading accusations after an apparent attack in the Western Russian province of Bryansk, which the local governor says killed two civilians and wounded a child. President Putin blamed the attack on Ukrainian “terrorists,” but Ukraine denies responsibility and points out that a Russian anti-Kremlin group calling itself the “Russian Volunteer Corps” has in fact claimed responsibility. Little is known about this group, and some have wondered whether the attack might even be a false flag operation by Russia to escalate the war. The Bryansk attack follows a series of Ukrainian drone strikes deep inside Russia earlier this week, which exposed weaknesses in the Kremlin’s air defenses. Should the paramilitary group have acted alone, the raid would underscore the volatility of the conflict and the potential for any violent acts to escalate the chaos. We’ll be watching to see whether the saboteurs were part of a government plot or a paramilitary attack.
Greek train tragedy gets political
Days after Greece experienced the worst train crash in its history, recriminations are already flying. In Athens, protesters hurled stones at the offices of the state railway company in anger over the deaths of at least 57 people killed when a passenger train collided with a freight train on Tuesday. Ahead of national elections this spring, the crash has put Prime Minister Kyriakos Mitsotaki on the defensive because of a series of reports about Greece’s decrepit transport infrastructure. Greece’s state railway system has come under scrutiny in recent years, largely due to its poor safety record (it had the highest fatality rate of 29 countries examined in 2022 by the European Union). But speaking of the EU, the plot thickens: Some analysts say Greece’s neglect of its rail infrastructure is at least partly due to the austerity measures that Athens was forced to impose in 2009 in exchange for bailouts from the EU and other international creditors.
The UN "recognizes" a fictional country
Ever heard of the United States of Kailasa? Probably not, mainly because ... it doesn't exist. But that didn’t stop UN officials from allowing reps from the fictional country to attend two UN meetings in Geneva. Kailasa was "founded" in 2019 by Nithyananda, a self-styled guru who fled his native India over charges of sexual assault and rape and bought an island off the coast of Ecuador. He named it Kailasa after the Himalayan mountain home of Shiva, a Hindu god. Ecuador's government denies ceding its sovereign territory to anyone, guru or not, and the UN now says it'll ignore future requests by anyone representing Kailasa to show up at events. Undaunted, the country’s “official” website still claims that the US recognizes it (it does not) and, our favorite, that Kailasa’s population is nearly twice as large as India’s.
How democracies nurture the growth of artificial intelligence
China wants order to beat the US in the race to dominate artificial intelligence. But open-ended research? No way — and that's a problem for Beijing.
"If you are in a society where there are certain things that you can't ask, you don't know what you can't ask, and the penalty for asking those things you don't know that you can't ask is very high ... it will start to limit the capabilities of researchers to explore," Azeem Azhar, founder of the Exponential View newsletter, says in a Global Stage livestream conversation hosted by GZERO in partnership with Microsoft.
Meanwhile, he adds, the US or Europe are freer societies where culture wars hurting academic freedom are the biggest threat to AI research.
What does this mean? For Azhar, democracies are ahead because "people have the freedom of thought to think and challenge in their process of research."
Watch the full Global Stage conversation: AI at the tipping point: danger to information, promise for creativity
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The Graphic Truth — US vs. China: Who invests more in Africa?
Twenty years ago, the US was the largest single outside investor in Africa, by a huge margin. How times have changed. After peaking in 2009, American foreign direct investment — an ownership stake in a company or project made by an investor, company, or government from another country — was overtaken by China, now the biggest source of FDI on the continent. In recent years the US has narrowed the gap some, particularly as Beijing has become both warier of the bad optics of so-called “debt-trap diplomacy” and more focused on its own economic challenges at home. Here we look at net FDI flows from the US and China to Africa since 2003.
Will China determine the fate of the world?
Who's the most powerful person on the planet right now? Xi Jinping, who just got a third term as boss of China's ruling Communist Party and got all his loyalists appointed to the CCP's top decision-making body. But having so much power comes with big tradeoffs.
Zero-COVID is saving Chinese lives, yet killing the Chinese economy. And Xi is feeling the heat from his increasingly muscular foreign policy.
On GZERO World, Ian Bremmer speaks to Antoine van Agtmael, the investor who coined the term "emerging markets" and knows a thing or two about China. He believes China is now the second largest economy in the world and soon to surpass the largest, the United States.
For van Agtmael, that means a world that'll be "less nice" because the forces of globalization will be weaker. China will lead one power bloc and the US the other.
So, how much will the future of China determine the future of the world?