Writing in the Ottawa Citizen, Macdonald-Laurier Institute Managing Director Brian Lee Crowley says that Canada has to improve its trade relationship with Japan or risk missing out on Asia’s rise in the global economy.
By Brian Lee Crowley, March 27, 2015
Geography, history, immigration and economic self-interest all say Canada should be an Asia-Pacific country. Europe still matters, but our old Atlantic focus seems increasingly out of step with an Asia-obsessed world. Yet our Asia-Pacific aspirations remain largely just that: aspirations.
Some Canadians talk a good game about the Pacific Century. We remain, however, babes in the Asian woods, sure that we must be present, but having little clue how to turn our good intentions into real engagement.
One classic mistake is to be dazzled by China’s rise and therefore assume our principal Asian relationship should be with the resurgent dragon. Japan, however, is a far better fit for Canada.
The issue isn’t market size. On this it is hard to compete with China, now the world’s second largest economy. On the other hand, Japan is still the world’s third largest economy, and as a customer in its own right, as well as stepping stone to other faster-growing Asian markets, it is hugely attractive.
It isn’t just that Japan is rich — it is more technologically advanced than China and its large multinationals are highly profitable juggernauts whose products are prized around the world for quality and sophistication. Tokyo is, along with New York and London, one of the world’s three principal financial hubs where global capital is managed with unparalleled skill and speed.
Japan moved early into the high value added sectors of R&D, finance and design, and into cutting edge technologies like nanotechnology, biopharmaceuticals and materials engineering. It simultaneously moved much manufacturing offshore; Japanese wage levels simply made it uneconomic at home. Japan’s economic might therefore radiated throughout East and Southeast Asia, helping to spawn, for example, shipbuilding in Korea, textiles in China and electronics in Taiwan. Today Japanese know-how, companies and investments are a cornerstone of prosperity in almost every corner of Asia, including China.
Yet unlike China, Japan is a successful democratic society under the rule of law with a deep commitment to a stable world order. We share a deep belief in resolving international disputes by negotiation rather than by force. Japan is a staunch member of the Western alliance.
Like Canada Japan enjoys freedom of speech, press and religion, not just in theory, but in enthusiastic practice. Its legal system allied with a culture of scrupulous respect of property and contract stand in stark contrast to risky autocratic countries where guanxi (personal and family pull) and palm-greasing are the common coin of business.
These are among the deep ties that bind Canada and Japan. Far from Canada being new to Asia, our third foreign embassy opened in Tokyo in 1929, some of our biggest companies have been doing business there for decades while the Japanese have been investing in Canadian industries as diverse as forestry, autos, video gaming, food processing and oilsands production. Partnership with Japanese companies almost inevitably brings in its train links to other Asian countries. Japex, for instance, is not only in the oilsands, but is a partner with Malaysia’s Petronas in a consortium that may be the first to liquefy Canadian natural gas and ship it to Asia.
And unlike China, Japan is under no illusion that everyone must pay it court. Rather to Japanese eyes Asia has become a darker place as anti-Japanese demonstrations have rocked several countries, and China is increasingly and aggressively self-assertive. America’s willingness to counterbalance Chinese power is ever more equivocal, reducing the value of its security guarantee and leaving the Japanese seeking reliable friends and allies.
Japan recognizes the complementarity of our two economies and prizes many Canadian products. They find us, however, an unfocused, parochial and diffident partner who too often fails to deliver. If we can prove them wrong, there is hope for us yet as a Pacific nation. The alternative is to be a mere spectator at Asia’s rise.
Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.