FAIT Committee Report

In November 2002, the Subcommittee on International Trade, Trade Disputes and Investment undertook an examination in view of strengthening economic relations between Canada and the Asia-Pacific region. This marks the third such regional study in as many years. In June 2001, the Subcommittee presented Crossing the Atlantic: Expanding the Economic Relationship Between Canada and Europe. This study was followed a year later by Strengthening Canada’s Economic Links with the Americas which focused on improving economic ties with Latin America, with a special emphasis on the Free Trade Area of the Americas (FTAA) negotiations.

The decision to examine how to improve Canada’s economic relationship with Asia-Pacific was motivated in large part by the tremendous trade and investment opportunities in the region. Indeed, Asia-Pacific countries have been at the forefront of global economic growth for decades, beginning with Japan and the newly industrialized economies (NIEs — South Korea, Hong Kong, Singapore and Taiwan) and more recently led by China, India and some member countries of the Association of East Asian Nations (ASEAN).

Recent developments in China make that country worthy of particular attention. China is currently experiencing a tremendous period of economic expansion, fuelled by domestic market-based reforms and an increasingly international focus, demonstrated by its recent accession to the World Trade Organization (WTO). The emergence of China in international markets is having, and will continue to have, a considerable influence on established world trade patterns.

The second motivating factor behind this study is that in spite of the tremendous opportunities available in the region, Canada has noticeably disengaged from Asia-Pacific in recent years. Prior to the Asian Crisis and the Asia Pacific Economic Co-operation (APEC) summit in Vancouver — both in late 1997 — Canadian interest in the economic potential of the region was high. Since that time, however, exports have fallen, government visits have decreased and business connections have been allowed to atrophy.

As a result, Canada’s presence in Asia-Pacific is shrinking at the very time when trade and investment opportunities in the region may be the greatest. The principal objective of this report is to examine Canada’s shrinking presence in Asia-Pacific in light of these tremendous opportunities, and to make recommendations for a new Asia-Pacific policy aimed at reinvigorating Canada’s economic ties with the region.

The Subcommittee began its study in Ottawa with a series of briefings and formal hearings from government officials, business leaders, academics and experts on the Asia-Pacific region. Witnesses were asked to provide the Subcommittee with their views on how Canada could improve its economic relationship with the region. The Subcommittee focused on two specific questions: how best to encourage businesses to look to Asia-Pacific; and what obstacles stood in the way of greater trade and investment, and how those obstacles could best be overcome.

These hearings were followed by the Subcommittee’s two successful fact-finding trips to Asia-Pacific. The first trip in early May took the Subcommittee to India, Thailand, South Korea and Japan. Unfortunately, the timing of the outbreak of severe acute respiratory syndrome (SARS) at that time forced the Subcommittee to postpone further travel until later in the year. In early September the Subcommittee travelled to China, Hong Kong, Malaysia and Singapore. While in the region, Subcommittee members also had the opportunity to meet with Canadian government and business representatives located in Mongolia and Indonesia.

The main objective of these trips was to learn firsthand about the specific challenges and opportunities present in key markets in Asia-Pacific. To that end, we met with Canadian officials and business leaders operating in the region, as well as local government and business leaders and research institutions. These individuals and organizations provided invaluable information: by demonstrating the potential of the region; sharing their unique perspectives and insight; alerting the Subcommittee to theretofore unknown challenges; and making helpful recommendations.

The main body of this report is divided into two sections. Chapter II, “The Problem Defined: A Shrinking Canadian Presence in a Region Brimming with Opportunity,” makes the case for why, with the exception of Canada’s North American Free Trade Agreement (NAFTA) partners, we believe Asia-Pacific should be Canada’s number one priority for increased trade and investment. It examines recent trends in economic growth, reform and integration in the region, as well as some of the opportunities in specific sectors.

Chapter III, “Towards a New Asia-Pacific Policy for Canada,” outlines the Subcommittee’s recommendations on steps Canada can take to further develop its economic relationship with the Asia-Pacific region. These are divided into three categories. The first addresses the importance of removing the barriers to trade and investment with the region. The second outlines a number of broad suggestions which, although not directly related to trade and investment, create an enabling environment in which to more effectively pursue closer economic ties. Finally, recognizing that it is the business community that drives trade and investment, the third section examines the role that the federal government can play in helping the Canadian business community succeed in Asia-Pacific.