There was a time – until the 1990s – when Canada’s foreign policy began and ended with the United States. This is no longer so. Canada’s worldview has been expanding, with a visible pivot to Asia’s Pacific region. Diversifying its external relations has been a priority. Understanding the changed scenario now as the India-Canada Track 1.5 Dialogue resumes in Ottawa later this week, involves examining the three pillars that constitute Canada’s foreign policy.
The U.S., the first pillar, continues to be Canada’s largest trade, economic, defence and political partner. This partnership came under unusual stress after Donald Trump entered the White House. There was a natural clash between Trump’s ‘America First’ line and protectionist tendencies and Canada’s commitment to multilateralism and free trade. This was not a difference on theoretical formulations. The new U.S. president threatened to annul the North American Free Trade Agreement (NAFTA), which has been the bedrock of trade and economic relations for the U.S., Canada and Mexico since 1994. Trump had repeatedly called it “the worst trade deal in history”. Following tough and complex negotiations for over a year, the U.S. and Canada (and separately, Mexico) managed to accept changes in NAFTA, which has now been rechristened the U.S., Mexico, Canada Agreement (USMCA).
Expectedly enough, the U.S. exaggerated the positive impact of such revisions on its own manufacturing and exports, whereas Prime Minister Justin Trudeau underplayed its effect on Canada. Both leaders projected USMCA as the vindication of their own stand, a victory for their own country.
But the new agreement, which awaits ratification, was crafted out of mutual compromise. It enjoined Canada to import from the U.S. the equivalent of 3.6% of the Canadian dairy market. The U.S., in turn, agreed to continue NAFTA’s dispute-settlement provisions. The two leaders, thus, “fought the good fight, protected the reddest of red lines, and lived to fight another day,” wrote Andrew MacDougall.
The European connection
Canada, a nation of immigrants, mostly from Europe, shares a long history, common values and close ties with the European Union (EU), especially Great Britain, France and Germany. The EU, the second pillar, is Canada’s second largest trade and investment partner. Defence partnership is a vital plank, with Canada and 22 EU member-states being members of the North Atlantic Treaty Organization (NATO).
Two new agreements, signed in October 2016, gave a fillip to the Canada-Europe partnership. The first, the Comprehensive Economic and Trade Agreement (CETA), which came into force in September 2017, ushered in a new age of duty-free trade flows between the two geographies, with commercial opportunities opening up for Canadian and European businesses.
The second, the Strategic Partnership Agreement (SPA), saw the EU-Canada joint ministerial committee committing to secure three goals: strengthening the EU-Canada relationship, enhancing foreign policy coordination and addressing global challenges and opportunities. The joint statement, issued at the end of the committee’s first meeting in December 2017, also called on Russia to uphold the principles of the rules-based international order. Canada and the EU were also willing “to engage with Russia to address regional crises and common challenges, …” the statement said.
The Pacific dimension
Beyond the U.S. and Europe, Canada has shown an increasing interest in Asian affairs, its third pillar; and this is in keeping with the general shift in global politics. It has formed meaningful relationships with China, Japan, the ASEAN and India through the Asia Pacific Economic Cooperation (APEC) and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), as also by participating in ASEAN-related institutions and bilateral platforms. As a group, ASEAN’s ten member-states are currently Canada’s sixth largest partner. This is visible change, non-existent 20 years ago.
Canada-China relations seemed to be on an upswing after Prime Minister Trudeau’s first visit to China in August-September 2016. The leaders of the two nations shared a great bonhomie, agreeing on political issues and starting negotiations on an FTA. When Prime Minister Trudeau could not take these negotiations further during his second visit in December 2017, critics blamed Canada for insisting on the FTA incorporating provisions relating to human rights, gender issues and environmental standards – and annoying the Chinese side. An FTA will benefit this relationship: bilateral trade in 2017 was Canadian $95 billion and two-way foreign investment was Canadian $27 billion.
Canada and China will collaborate when they can, and compete when they have to, according to Grant Duckworth, a Canadian strategic expert whose view is that his country should play “the long and short game simultaneously” and devise a “Made-in-Canada China Strategy”.
So does Canada have a strategy for Japan? Its G7 partner was baffled when Canada seemed less than enthusiastic last year about joining the CPTPP. The two nations, which now cooperate actively, share a substantive economic relationship – bilateral trade in 2017 stood at Canadian $29 billion. Japanese investment in Canada was of the value of Canadian $29.6 billion, whereas Canadian investment in Japan was lower – Canadian $4.7 billion. They are now negotiating a bilateral FTA.
Compared to China and Japan, Canada’s economic engagement with India is far smaller. Business leaders and experts say there is immense scope for their economic cooperation to expand if long-pending agreements are concluded soon. But first, Ottawa and New Delhi need to address a sensitive political-cum-security issue – “the albatross of Sikh separatism.”
How Canada’s strategy in the Indo-Pacific evolves merits a close watch, especially by India, which should follow the ongoing debate on this subject in Canada’s strategic community.
Rajiv Bhatia is Distinguished Fellow, Gateway House and a former ambassador. He writes regularly on Canadian affairs.
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 Prime Minister Pierre Trudeau said that to be Canadian, living next to the U.S., was like being a mouse, sleeping next to an elephant. Citing this, his son, Prime Minister Justin Trudeau observed in a speech on 9 February 2018: “Personally, I think of us a less of a mouse and more of a moose – strong, resilient, but still massively outweighed.”
 This Dialogue has been conceived by Gateway House, Mumbai and Centre for International Governance Innovation, Waterloo. They conduct it with the support of the governments of India and Canada. The first round took place on 20 February 2018 in Mumbai. The second round is due to take place in Ottawa on 30 October 2018.
Canada is the United States’ largest customer, buying more goods than China, Japan and the UK combined. Canadian companies operating in the U.S. employ half a million Americans. Close to 400,000 people cross the U.S.-Canada border every day for business, pleasure or family reasons. The two countries share a 9,000 km. long border that is crisscrossed by over 300 rivers. Beside cooperating on trade, travel, water management and climate change, the two countries have been close defence partners as members of the North American Aerospace Defence Command (NORAD), created in 1957.
Cruz, Oscar, Wilson Center, Infographic | The USMCA, 5 October 2018, <https://www.wilsoncenter.org/article/infographic-the-usmca>
MacDougall, Andrew, Maclean’s, Trump wins, but not enough for Trudeau to lose, 1 October 2018, <https://www.macleans.ca/opinion/trump-wins-but-not-enough-for-trudeau-to-lose/>
Government of Canada, Joint statement – EU and Canada: A progressive and dynamic strategic partnership, 4 December 2017, <http://www.international.gc.ca/world-monde/international_relations-relations_internationales/europe/2017-12-04-spa-aps.aspx?lang=eng>
Government of Canada, High Commission of Canada in India, in New Delhi, <http://international.gc.ca/world-monde/india-inde/new_delhi.aspx?lang=eng>
Duckworth, Grant, Canadian International Council, A Made-in-Canada China Strategy for 2018?, 10 September 2018, <https://thecic.org/a-made-in-canada-china-strategy-for-2018/>
Government of Canada, Canada-Japan Relations, <http://www.canadainternational.gc.ca/japan-japon/bilateral_relations_bilaterales/index.aspx?lang=eng>
 The reference here is to two agreements currently under negotiation between the governments of India and Canada. They are: the Comprehensive Economic Partnership Agreement (CEPA) and the Bilateral Foreign Investment Promotion and Protection Agreement (BFIPPA).
Nachiappan, Karthik, Live Mint, India Canada relations remain frozen in time, 27 February 2018, <https://www.livemint.com/Opinion/wxA6fo7hCjzicF8bVNbN4M/India-Canada-relations-remain-frozen-in-time.html>