Many Americans think of Canada as our 51st state. But recent events highlight Canada’s desire to avoid a satellite status and, instead, to expand its commercial relationships with China.
Canadians, led by Prime Minister Stephen Harper, are angry with the United States because the Obama administration decided to delay until 2013 approval of the proposed 1,700-mile Keystone Pipeline. Proponents of the oil pipeline point out that the $7 billion project would create thousands of jobs, help the U.S. and Canadian economies, lower gasoline prices and reduce U.S. dependence on OPEC imports.
To compensate for this loss of an export market for Canada’s hydrocarbons, Harper and Chinese Premier Wen Jiabao in February negotiated a half-dozen agreements on natural resources, the environment, education, agriculture, science and technology. These include:
A memorandum of understanding on sustainable development of natural resources to promote Canadian expertise, technologies and services.
Renewal of a memorandum of understanding on energy cooperation to attract Chinese capital to develop Canada’s energy resources and foster technological innovation.
An agreement to increase exports of Canadian uranium to China.
Canada and China also concluded talks on a foreign-investment agreement that protects and promotes foreign investment through legally binding rights and obligations.
Canada has the world’s third-largest oil reserves and is the world’s largest producer of uranium and potassium.
Although Canadian officials say they expect America to remain Canada’s biggest trading partner, they want to be more independent of their neighbor to the south.
Last year, the U.S. accounted for 67.7 percent of Canadian trade; China’s share was 7.2 percent. But China is now Canada’s second-largest merchandise trading partner. In 2011, Canadian merchandise exports to China were almost $17 billion. Imports from China were $48.1 billion.
Canadian investment in China reached a record at the end of 2010. Chinese direct investment in Canada reached $14.1 billion that year. In Vancouver, Chinese real-estate investments have sent valuations soaring. Developers are marketing directly to buyers in China and often give buildings and developments names that translate to Mandarin well.
According to Dealogic, a Wall Street boutique firm that provides investment banking analysis, Chinese investment exceeded U.S. companies’ investments in Canada’s oil patch every year since 2009, pumping $12.8 billion into companies and projects.
Canadian demographics have encouraged greater emphasis on Asia. In 2011, Canada’s resource-rich western provinces — those west of Ontario — had more people than the eastern ones, according to government census data, and this demographic shift was driven in part by heavy immigration, particularly from Asia. Chinese is the third-most-spoken language in Canada, after English and French.
To facilitate more trade with Asia, the Pacific coastal province British Columbia and the Canadian federal government have spent billions to retool the country’s infrastructure.
Because Canada’s natural resources far exceed its domestic demand, it exports much of this production. It makes economic sense for Canada to sell more of its production to China. China recently became the world’s biggest consumer of energy, accounting for 20.3 percent of global demand, according to the 60th Annual BP Statistical Review of World Energy.
According to David Wilkins, the former U.S. ambassador to Canada under President George W. Bush, “The U.S. decision to delay approval of the Keystone XL pipeline is a catastrophic cop-out by the Obama administration.”
Harper could have said: “Mr. President, this is the end of a beautiful friendship.”
That friendship, while far from over, will have to deal with Canada’s divided attentions now that our northern neighbor has taken up with China. As Harper put it, the Keystone delay “does underscore the necessity of Canada making sure that we are able to access Asian markets for our energy products, and that will be an important priority of this government going forward.”
Originally published in the Sarasota Herald-Tribune
