Opinion: On economic reliance on China, Canada cannot make the same mistake as Europe did Russia (2024)

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Casey Babb is the author of the forthcoming book, Digital Fortress: Strategies of Authoritarian Survival in Cyberspace, an international fellow with the Glazer Israel-China Policy Center at the Institute for National Security Studies (INSS) in Tel Aviv, and an associate fellow at the Royal United Services Institute in London, England.

Last March, during the annual meeting of China’s parliament as well as its top political advisory body, President Xi Jinping sent a clear message to his country and, indeed, the world: Beijing is preparing for war.

With Mr. Xi suggesting in one speech that his generals “dare to fight,” while in another calling for the country’s military to become a “great wall of steel,” the fate of Taiwan – a self-ruling island that China claims – has never loomed more perilous. Amid this increasingly aggressive rhetoric, and Beijing’s plan to significantly increase military expenditures for 2023, many in the United States security and intelligence community feel some sort of armed conflict involving China is brewing.

Yet Canadians – and Canadian businesses in particular – seem ill prepared for what an intensified conflict with China would look like. As Richard Fadden, a former national security adviser to the prime minister, recently wrote in a Globe and Mail op-ed: “Historically, absent a significant crisis, Canadians have not worried a great deal about the world.”

Well – it is time to worry.

It may come as a surprise, but China remains Canada’s second-largest trading partner after the U.S. In fact, Canada’s economic reliance on China, for a wide range of goods, is akin to Europe’s on Russia for natural gas – a dependence that led to the threat of an energy crisis and industrial decline at the foot of Russia’s invasion.

If the Taiwan issue comes to a head, we might see history repeat itself. Canada cannot make the same mistakes that Europe did, in terms of not decoupling from an adversarial country until it is too late.

As economic and political relations between Beijing and Ottawa have become historically strained in recent years – over issues such as interference in federal elections, the unlawful three-year detention of two Canadians, the banning of Huawei from Canada’s 5G network and reports of Chinese “police stations” operating on Canadian soil – it would be natural to assume Canada’s economic relations with China have waned.

However, this is not the case. According to Statistics Canada, trade between the two countries reached record levels in 2022, with Canadian imports of Chinese goods breaking the $100-billion mark for the first time ever. From importing $31-billion in consumer goods to $28-billion in electronic and electrical equipment, Canada appears to be as dependent on China as ever. This despite heightened bilateral friction and the increasing prospect of a military confrontation between China and the U.S. – Canada’s most important ally.

As reported in The Globe nearly three years ago, a British foreign policy think tank found in 2020 that “Canada depends on China for 367 categories of goods, such as pharmaceuticals and food additives, of which 83 are used to supply critical national infrastructure, including rare-earth minerals, industrial products and electronics” and that “Canada is also among the worst in terms of [dependence for] medicines and vitamins.” In the time since, these dependencies appear to have only deepened.

So, what might this mean if Beijing, Washington and potentially Ottawa, among other governments, escalate their tensions over a Chinese invasion of Taiwan?

It would likely result in Canadian businesses losing access to critical supply chains and imports vital to Canada’s economy and Canadian lives. Ultimately, Beijing would almost certainly weaponize its dominance of international supply chains and global shipping as a means of warfare. At the same time, this would dramatically hinder the ability of Canadian businesses to sell their products to China – exports that in 2022 accounted for an all-time high of nearly $29-billion.

In addition, Canadian businesses may also need to confront a barrage of offensive Chinese cyberattacks. Such measures would likely target and disrupt critical Canadian infrastructure, including banks and other financial entities, the electrical grid (some of which is cross-border with the U.S.), oil and gas facilities, health care services, manufacturing hubs, communication technologies, and other services and assets Canadians and Canadian businesses depend on.

As the potential for a Chinese invasion of Taiwan intensifies, Canadians and Canadian businesses need to seriously start preparing for what that could entail. From diversifying supply chains, to developing robust risk-mitigation strategies, to dramatically enhancing the security of critical cyber systems, contingency plans are needed sooner rather than later if Canada is going to be even remotely ready for the havoc and devastation that loom ahead.