The Institute of Geoeconomics (Kazuto Suzuki, Director, Institute of Geoeconomics) is pleased to announce that recorded audio of the Geoeconomic Agenda, “Canada & the Indo-Pacific,” and its transcript are now available. Geoeconomic Agenda is a new Pacific-centric, globally-minded podcast that investigates the connections between economics, geopolitics, business, and society. Hosted by Paul Nadeau, Geoeconomic Agenda will feature interviews with guests from across the Asia-Pacific region and beyond, from the policy world, academia, business, and more.

Transcript

October 10, 2023 (auto-generated by otter.ai)
Updated on October 16, 2023

Paul Nadeau 00:07
Hello and welcome to this episode of the geoeconomic agenda, a podcast from the Institute for geoeconomics at the Asia Pacific Initiative in Tokyo, that investigates the connections between economics, politics, business and society. I’m your host, Paul Nadeau, and I’m a visiting researcher here at the IOG. In a moment, we’ll sit down with Dr. Steven Nagy, professor at International Christian University in Tokyo and a visiting fellow at the Japan Institute of International Affairs to talk about Canada’s role as an Indo-Pacific power. But first here are the latest developments from the world of geoeconomics. US Commerce Secretary Gina Raimondo’s visited Beijing on August 29. During her visit, China and the United States announced that they had agreed to hold regular discussions on commercial issues and export controls. According to Secretary Raimondo, one working group will include business leaders and will discuss commercial issues, and another will be a government-to-government exchange of information about US enforcement of export controls. According to a Commerce Department official, the discussions will cover how regulations are enforced but not how policy is made or which products are covered. Secretary Raimondo and her Chinese counterpart Wang Wentao further agreed to meet annually. Japan announced an emergency fund of 20.7 billion yen or $141 million on September 4 to assist exporters harmed by China’s import banned on Japanese seafood. The new fund is an addition to 80 billion yen, or $547 million dollars previously allocated to support Japanese fisheries and seafood processing facilities in anticipation of backlash against Japan’s plans to discharge treated water from the Fukushima Daiichi nuclear plant. These funds will be used to find new markets for Japanese seafood and to fund government purchases of seafood products. Mainland China’s the biggest overseas market for Japanese seafood, accounting for 22.5% of Japan’s total exports, but makes up a limited portion of Japan’s overall trade with China. Chinese imports of Japanese seafood were down 68% in August. Italy is expected to leave China’s Belt and Road Initiative at the end of this year when Italy’s participation comes up for renewal. Italian premier Giorgia Meloni has been opposed to the project since Italy first joined in 2019, and is expected to put BRI renewal up for a vote before Italy’s parliament, where a conservative majority would endorse Meloni’s plans to withdraw from VRI. During a meeting with Chinese Premier Li Qiang, Meloni emphasized her hope for continued strong economic relations with China, while neither country statement following the meeting mentioned anything about BRI. The Australia-China high level dialogue took place in early September following a three year pause resulting from Australian concerns about Chinese interference and its elections and Australia’s decision to prohibit Chinese firms from participating in Australia’s 5G network rollout. The dialogue includes senior representatives from industry, government, academia and elsewhere to discuss trade investment, as well as security issues. The meeting will be chaired by Australian Trade Minister Craig Emerson, and Chinese foreign minister Li Zhaoxing, the United States and Vietnam elevated their relations to a comprehensive strategic partnership. The highest level in Vietnam is diplomacy that places the United States at the same level as countries like China and Russia. This occurred during US President Joe Biden’s trip to Vietnam on September 10, where both countries also signed a Memorandum of cooperation for Vietnam to receive funding from the International Technology Security and Innovation Fund, or ITSI, which was created under the CHIPS Act passed last year to provide $500 million to “ensure a more diverse, resilient, and secure global semiconductor supply chain”. The United States also set aside $2 million for training workers in the assembly, testing and packaging of semiconductors in Vietnam. This is the geoeconomics agenda with Paul Nadeau. Today I’m sitting down with Dr. Steven Nagy. He’s professor in the Department of Politics and International Studies at the International Christian University in Tokyo, Japan, and a visiting fellow with the Japanese Institute of International Affairs. Dr. Nagy, thanks for sitting down with us today.

Steven Nagy, 04:47
Paul, it’s great to be here. Thank you.

Paul Nadeau 04:48
Today I’d like to talk about your home country, Canada, and more specifically, Canada’s geoeconomic strategy and its role in a lot of these debates that are ongoing, not just in the region, but worldwide. So, first question, does Canada have an international economic strategy?

Steven Nagy 05:11
I think it’s working on it. Last year, at the end of the year, they released something called the Canadian Indo-Pacific Strategy. It was meant to pivot some of Canada’s resources, a significant amount of resources, they put forward 2.3 billion Canadian dollars towards the Indo-Pacific over five years. And this is apparently a down payment for a much longer term engagement. And they’ve looked at how Canada can engage in the Indo-Pacific, but also, I think, globally in terms of being an energy provider, being a critical mineral provider, helping contribute to norm building in terms of trade agreements, like the Comprehensive Trans Pacific Partnership. And what why I think that’s important, again, is geoeconomics, is includes your trade partner, includes standard setting, includes things like protecting intellectual property rights, which really are the basis for fueling research and development, our next economy. They’ve thought about engaging in the Indo Pacific region, but agreements like the TPP really, also include labor law, environmental law, and limiting the role of state owned enterprises. So for thinking about a geoeconomic strategy. Again, I would probably look at Canada’s pillars as being again, that energy provider of the coal mineral provider, but also part of the rule setting process to ensure that those 21st century trade agreements are creating synergy and creating the conditions for Canada to be at the forefront of research and development, and shaping the way we think about trade, environmental, environmental labor law and, how much state should be involved in the economy. And I think that’s a really, really important way to think about Canada’s geoeconomic engagement.

Paul Nadeau 07:06
So what exactly are Canada’s interests in, you know, the Indo Pacific region when it invests, he has significant resources, like what you described, that may sound a little too self serving as they ask what it’s looking to get back in return? But what what does Canada see coming back the other way, in terms of benefits to its national security to its economy to what have you?

Steven Nagy 07:30
Well, I think it’s, you know, the reality is the Indo Pacific region and let’s frame that Indo-Pacific region, from the western Indian Ocean to through the Indian Ocean through the South China Sea through the Pacific. So it’s connecting the huge North American and South American market, we shouldn’t forget that. It’s connecting that to the East Asia, Southeast Asia, and Indian subcontinent. This is the place of global growth, it has the largest growing population of middle class consumers, this is so important, right? Because we sell stuff. I think that it’s going to be it is the place with the largest populated countries, India, followed by China, Indonesia, these will all be centers again, of consumption, and potential opportunities for Canada. Now, aside from it being kind of the locus of global economic growth, I think it is a region of under institutionalization, or a paucity of institutions requiring I think, Canada to be part of the region, part of the rule setting that I mentioned earlier, so that, you know, we’re on at the table, not on the menu. So how do we lock Canada into the region by being part of the rule setting processes. So I think that primarily is Canada’s national interest to make sure that we are embedded in the region where part of the rules setting processes are not locked out of the region. Another area that I think is important that we don’t talk about enough is the instability or potential instability in the region, whether that’s traditional security issues, such as territorial issues in the East China Sea, South China Sea and Himalayan plateau, whether it’s the nuclear challenges on the Korean peninsula, or the non traditional security challenges that have impacted us all over the past three years in terms of COVID-19, right, disrupted supply chains, disrupted trade, disrupted tourism. So I think Canada is looking at the region as a place where it needs to provide more resources to help deal with the traditional security challenges and the non traditional security challenges because they will spill over into Canada. And, you know, really, a good example of this is what’s happening across the Taiwan Straits or Taiwan Strait we think about it, Taiwan is you know, this semiconductor superpower and that if there was friction, some kind of kinetic conflict across the Taiwan Straits, how would this affect these semiconductor supply chains? And I think, you know, we’re talking in Japan, Japan’s signature industries would be devastated whether it’s Honda, Suzuki, Toyota, Sony, Hitachi, all are using these kinds of semiconductors in their products, it would devastate our airlines, our defense systems. And I think some Canadians might think, well, we have nothing to do with this. But in reality, you know, there’s Toyota companies and factories in Canada, and they’re making those cars and they employ hundreds of thousands of Canadians. So from my standpoint, Canada has a deep vested interest in being part of the region providing stability, ensuring that these pressure points within the region don’t actually turn into kinetic conflict and cause regional and global economic disruption.

Paul Nadeau 10:54
So that that touches on the idea of economic security, of course, but also supply chain security. You mentioned COVID, and all the disruptions from that. You talked earlier about the role of critical minerals and how Canada can be a supplier of all of this, can you talk a little bit about Canada’s efforts to, to increase supply chain security in the region, sort of maybe specific initiatives that it’s taking what seems vulnerabilities that Canada particularly may encounter?

Steven Nagy 11:29
So I think this is an evolving area. You know, last year, we hosted Mélanie Joly, who’s our foreign minister here in Tokyo, and it really resilient supply chains wasn’t on the one, it just wasn’t, we weren’t discussing it. But if you go back to the March for ministers G7 event that was held in Karuizawa, so of course, resilient supply chains were part of the discussion and the G7 summit, they came out of Hiroshima, and talked about resilient supply chains. And they had a whole extra document talking about economic coercion supply chains. So it seems that we’re now on the on the same page of the book as the other G7 members and some of our critical partners in the region, such as Japan, such as South Korea, on the importance of strengthening supply chains, creating more resilience. I call it selectively diversifying the new sexy terms de-risking, but I think in reality of selectively diversifying, where our supply chains are going, and Canada sees itself has having a role in terms of providing those critical minerals that can be used in the electronics that again, our partners like Japan, South Korea, others are putting into these sophisticated technologies. So I think it is trying to position itself to be that critical mineral superpower, reliable, politically stable, a country of rules, transparency, and even if we have a change in power, political power that our allies, and partners don’t have to worry about a major disruption in critical minerals. On the energy side, liquid natural gas is another area that I think Canada is thinking about, in how they’re able to export to the region. And they’re here, they’re working with the Japanese to try and find opportunities to export liquid natural gas to Japan, Japan has invested in Canada, has created some infrastructure in the west coast of Canada, that should be online, I think, in 2024, to 2025, which would be an area where liquid natural gas can be processed and then exported to the region. So there’s more can be done. Environmental politics back in Canada are tense. And I think there’s a lot of division between at the political level and some of the provinces that really have all the resources, but they feel like the federal government is allowing them to get it out to markets. And this is difficult. The domestic or domestic politics in the country are I think, making it more difficult for Canada as a country to realize its efforts. And what’s interesting about this, Paul, is that what we’re seeing is the provinces are starting to produce their own Indo-Pacific strategies.

Paul Nadeau 14:19
Oh, interesting.

Steven Nagy 14:19
Yeah. So Quebec has one, Saskatchewan has one, and we’re likely to see an Albertan one, these are the energy rich provinces come out because they feel there’s some disconnect between the national Indo-Pacific strategy and their regional needs. So I think in the coming year, you should not be surprised to see provincial approaches to the Indo-Pacific to try and get the energy resources out of the country to bypass some of the national level politics.

Paul Nadeau 14:47
And that would be a very interesting development sort of go from the provincial level to the geopolitical level. Obviously, one of the big hallmarks of the region today is the geopolitical competition. And you can insert whichever adjective you prefer, between the United States and China. Where does Canada fit into that. And you know, obviously Canada’s an ally of the United States longest undefended border in the world. But at the same time, China’s, needless to say, an important economic partner just as it is for everyone else in the region. And at the same time, we’re seeing the the economic architecture of the region shift and change and develop amongst that. Where does Canada step in on not just the geoeconomic geopolitical competition, but also in terms of trying to proactively build an economic architecture that can accommodate two large economies who may not even might not always excuse me, see eye to eye.

Steven Nagy 15:42
So I think it’s a useful place to start is to look at Canada’s trade trade figures. So about 80% of his trade is within North America. And NAFTA 2.02 agreement, of course, has only strengthened the supply chains within North America. And what we’re seeing is the market become more integrated. And we benefit tremendously from that. So our primary interest continues to be investing in North America. Over the past five years, the relationship between China and Canada has worsened. You know, with the arrest of the Huawei executive Meng Wanzhou, back in 2018, and then the subsequent hostage diplomacy and the rest of Michael Kovrig and Michael Spavor, right, really created a negative spiral in our bilateral relations. And, of course, we’ve had threats against Canadian politicians, Michael Chong, as well as I think some very solid evidence of interference in our political system. So China is it’s a radioactive topic. And I use that term a little bit to sarcastically since the Fukushima disinformation about some Fukushima treated water. But everything about China’s radioactive right now, and I don’t think we have a rational approach. We look at the data, Prairie Provinces continued to increase their agricultural exports to China. They benefited throughout the pandemic throughout the very negative relations. And they continue to benefit from this relationship. We have huge numbers of Chinese tourists coming to Canada, again, we benefit, we benefit from it, they go to our education institutions. So it’s a paradox. And I think Japan and Canada share many paradoxes when it comes to the relationship is that Japan enjoys a $391 billion trade relationship with China. It’s largely equal. There are severe security challenges. But at the economic level, there’s so many complementarities, and I think we see the same in Canada. So how do we continue to have these benefits, while at the same time, be realistic that the current domestic trajectory of China and some of its economic conversion practices aren’t targeted to Canada? The way they were targeted in Australia or South Korea or Japan? And I don’t think we have the political space at this stage to do something to craft and nuance policy, although I know there is discussions on this. How far do we align with the United States? The United States is our biggest trade partner. We have many shared cultural, political and social institutions and, of course, our mutual level of hockey, but also your interest in hockey. So I think that we have to continue to craft a policy to deal with the changing economic architecture within the region that complements our closest partners like the United States and Japan, while at the same time, it has a distinct Canadian brand that tries to weave a less politicized, less securitized approach with China. And the reason why I say that is that Canada is a middle power country. We don’t have the resources that Japan has and the United States has. And we can be a casualty very easily if we don’t make wise choices. And the rest of Michael Spavor and Michael Kovrig is a good example of that. So we need more nuance in our policy. I’m a big advocate of looking at how Japan is managing the relationship. Because they’ve, even though there’s many problems that continue to deepen their economic relationship and find ways to solve problems. I think more of that’s going to be necessary to again deal with the changing economic architecture and the evitable boomerang effects that will come from intensification of the US China strategic rivalry.

Paul Nadeau 20:10
In turning to another one of Canada’s partners in the Indo-Pacific region recently there’s a been a big, not sure what to call it exactly, diplomatic blow up between your country and India. Can you explain what that’s about?

Steven Nagy 20:28
Well, it appears that a Canadian citizen, who’s a Sikh and also an advocate of a separatist policy of, I suppose they called Khalistan. Apparently he was killed and assassinated in June 2023. According to the media, and according to Prime Minister Trudeau, his comments, the security services seemed to have identified that the Indian government may have been part of this. So this is the killing in a foreign country by a foreign state. This is the kind of things that we’re accustomed with Russia doing right. Yeah. But we’re not accustomed to India doing this. So I don’t know the details in terms of intelligence. So I hesitate to say if this is state sponsored assassination or not.

Paul Nadeau 21:21
The diplomatic fallout seems fairly significant.

Steven Nagy 21:25
You know, Canada put India in its Indo-Pacific strategy and wanted to diversify and strengthened its economic partnership with India as part of its geoeconomic engagement, they wanted to sign an FTA free trade agreement at the end of the year, with India, you know, it is tried to enhance the movement of Indian, highly skilled migrants to Canada. And the backlash from this, but also a series of, of, I think, faux pas, and taboos by the Canadian government in India over the past five or six years, have culminated in I think, a real souring of bilateral relations. And the real concern of this is that if you’re wanting to engage in the Indo-Pacific region, it can’t just be Northeast Asia and Southeast Asia, you have to have an Indian component. Because India, again, it plays such an important geographic position. But it’s, it’s a rising power to a rising economy, it will be part of shaping the norms of the region. And if we don’t have a working relationship with India, this will create challenges in terms of a sustained meaningful foreign policy in the region. And this will be it is so important for any country engaging in the region, to be taken seriously is that again, they have to have a long term sustainable, realistic, pragmatic, engaged policy within the region that’s nuanced.

Paul Nadeau 22:56
So I guess this is what you’re getting at when you’re talking about the difficulty in balancing all of these different competing things. Is that fair to say?

Steven Nagy 23:06
So no country does it well. It’s very difficult. I think the Indo Pacific region is very heterogeneous, we have socialist states like Vietnam, you know, authoritarian states, like China, we have democracies, we have many different kinds of states. So if you want to engage in the region, you have to, I think, have a more interest based approach to the region, and build your geoeconomic, your economic security policy, based on those, this interest based approach. And this contrast with a valid value based approach, right? You can value human rights and democracy and diversity at home. But maybe these aren’t the best pillars to engage in the region when the region doesn’t really value these. As they think about trade agreements, as they think about infrastructure and connectivity, as they think about new digital infrastructure and new digital rules. Or you think about the Indo Pacific economic framework again, you know, it’s not talking about values, striking about interests and development and the environment. And these are the priorities here. And I think Canada is going to need to think more carefully about how to approach this region to be effective.

Paul Nadeau 24:25
Let’s talk about IPEF for a little bit. Because the sense that I get in talking to people here and around the region is that it’s very, obviously a next best alternative to CPTPP. But it’s also the best you’re probably going to get from the Biden administration, which, and in terms of, you know, the negotiations for all that it sounds like everyone is taking it seriously negotiating in good faith. There does seem to be some progress, but it’s obviously got a much lower ceiling in terms of economic benefits, I mean, sort of editorializing here. It seems to have a much lower ceiling in terms of what you can gain economically than you could with a more permanent free trade agreement. And what’s what how would you describe Canada’s approach to IPEF? Is this something that they’re along with for the ride? Do they see this as something that can build up towards something more enduring? What’s what’s the take here?

Steven Nagy 25:27
They’ve come around to the table of the importance of iPEF. But with the initial discussions, candidates are not part of the initial rounds of the discussion. So I’m part of a research group, based in Singapore at the Institute for Southeast Asian Studies, in a big project that’s funded by the Konrad Adenauer Foundation here, Tokyo, we put together a series of policy briefs, looking at different countries positions, Canada is now part of the night of the Japanese side, you know, our general take is that this is an inclusive agreement. It’s not a trade agreement. It’s meant to create some shared norms and a trajectory of how the region is going to move towards building institutions that have some shared interest and shared shared norms about, let’s say, the environment, let’s say about the digital economy. Let’s say we’re talking about trade facilitation, rather than market access. And I think that we collectively as a group, or saying, this is not necessarily bad, it may be a better approach for heterogeneous region that is allergic to binding relationships. And if they can create a shared norms and shared behavior, that’ll be enough to deepen.

Paul Nadeau 26:48
They still moving the ball forward, I can say.

26:50
The reality is the United States is not coming back to the TPP. I don’t think the TPP is going to eventually include China, because state owned enterprises in the direction of China right now. So the limits of what we can think about in terms of creating an economic architecture within the region will be based on I think what the IPEF is, is providing. I think it’s interesting, because it’s ala carte, meaning that if you’re Vietnam, you don’t have to take all the four pillars, you can take what you want. And this may be again, the best approach to deal with a heterogeneous region interest. And I think countries like Japan, and South Korea, they’re very comfortable with this. Of course, they would like a hard trade agreement. But they’re very comfortable with this kind of approach, because it brings in more partners. And that’s what they’re looking for more partners do they share laws building shared institutions. And it seems that the direction of IPEF, in January they’re going to come complete the first round. And after that, I think Canada will come to the table and join the second round of negotiations. And I think that this will again become another layer of Canada’s geoeconomic engagement with the Indo-Pacific region. And it’ll be interesting to see where it goes. And the commitment of the government and how well they’ll be able to play with some of the heterogeneous members in the region.

Paul Nadeau 28:23
Interesting. Well, Dr. Steven Nagy, thank you so much for joining us today. It’s been a fascinating conversation and I hope we can revisit these topics again in the future.

Steven Nagy 28:33
Thanks, Paul’s great, much appreciate it.

Paul Nadeau 28:35
Not at all. This is the geoeconomics agenda with Paul Nadeau. Finally, China’s influence in North America is well known and goes back hundreds of years. And some listeners might also be familiar with Peru’s famous lomo saltado, a stir-fried beef dish with origins in Peru’s Chinese population who migrated to South America to work as laborers in the 1800s. But China’s influence in Latin America goes back even farther than that. Writing in America’s quarterly Peter Gordon and Juan Jose Morales describe the trade route between Manila and the Philippines and Acapulco, Mexico that enabled the world’s first truly global trade route, with goods from Asia passing through the Americas on their way to Europe. sailing west from Mexico to Asia was fairly straightforward given the prevailing winds and currents along the equator provided a fairly direct voyage that sailors had been using for years. But explorers realized that by sailing far enough to the north, as far as the 38th parallel, they could take advantage of the westerly winds blowing towards California and make the return voyage to Mexico. This even led the Spanish to found waystations and what would eventually become Monterrey and San Diego that were founded to resupply the merchant ships coming back from Asia on their way to Acapulco and Mexico. Of course, people eventually made the trip as well with merchants and workers from China in the Philippines settling in Mexico City. An Asian market could be found in the Plaza Mayor selling spices, porcelain, jewels and fabrics from all over Asia. It wasn’t just luxury goods that could be found either. But there were also mass market goods for the general public like furniture, clothing and linens. Gordon and Morale is also described how Chinese manufacturers would even design products specifically for the Mexican market, using porcelain to manufacture the traditional man Mexican gourds for drinking chocolate. The Spanish paid for these goods with Mexican silver, which was in higher demand in China than European gold because of its purity and weight. And because China had few domestic sources of this critical mineral itself. Vendors in Mexico made these coins round and with raised in serrated edges to prevent merchants from “clipping” the edges as a way of fraud and to help guarantee the coin’s value. Gordon and Morale is right that these coins formed the basis of China’s coinage in the 18th century. With China naming the currency after its round shape the yuan, or as it’s known in Japan, the Yen. That’s all for this episode, but stay tuned for more on the way. Until then we want to know what you want to hear about, as well as take your questions for the show. So send us an email at geoeconomicagenda@ihj.global. Be sure to like rate and subscribe wherever you get your podcasts, tell your friends and most of all, keep listening. Thanks for joining us, thanks to the team that API for making this happen. And we’ll talk to you next time.

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The views expressed in the IOG Geoeconomic Insights do not necessarily reflect those of IOG or any other organizations to which the speakers belong.