Address by Minister Baird to CCBC AGM and Policy Conference

October 16, 2013 - Beijing, China

Check Against Delivery

Ladies and gentlemen, it’s a great pleasure to be back in Beijing.

I am grateful to the Canada China Business Council for inviting me to speak at this event and for organizing such an impressive gathering.

Yet it is with a heavy heart that I stand here today. I would like to express my deepest condolences to the Desmarais family and the CCBC membership as we mourn the loss of Paul Desmarais. In 1978, well before most Canadians understood how important China would become to Canada, Mr. Desmarais’ Power Corporation of Canada, along with nine other Canadian firms, founded the Canada China Business Council. Mr. Desmarais served as its founding chairman and a steward of early Canadian investment in China. He will be missed—but his vision lives on.

As Canada’s foreign minister, I thought I might offer a somewhat broader view of the Canada-China relationship than might be customary at the CCBC. In doing so, it is important to identify not only what is going well in our relations but also challenges going forward.

It is also important to keep in mind that China’s rise—nationally, regionally and globally—is not simply an economic phenomenon. Its pace of urbanization is unprecedented in human experience. And the spread of the Internet and mobile communications across Chinese society exceeds what we could have imagined even a decade ago, with wide-reaching implications.

We can also no longer think of regional or global governance without considering China’s real and potential contributions. China’s role in international trade, investment and finance is profound, and China is increasingly central to discussions of several security issues and related trends. Indeed, we cannot talk about development in Africa and elsewhere without including China in that discussion.

The fact is that China’s economic growth at home over the last two decades and its rapidly growing impact and influence globally mean that Canada has a much greater stake in our relationship than ever before.

But let me return to the economic dimension, to which the CCBC and its members make an important contribution.

We have made significant commercial progress.

Both Canada and China recognize that we have much to offer one another, that our respective strengths are remarkably complementary and that we have significant unfulfilled potential.

Both sides have a compelling interest in the deepening of our economic partnership.

But it is also evident to me that there is nothing predestined about this process. We have to work at it, just as we have worked hard to get to the point where we stand today.

It is not by accident that China has become Canada’s second-largest trading partner after the United States.

It is no accident that Canadian exports to China have grown more quickly over the last six years than Canadian imports from China.

In fact, THREE TIMES as quickly.

And we must take into account the almost 200-percent growth in Chinese direct investment in the Canadian economy in that same period.

And the $4-billion-plus Canadian investments in China.

And the 84,000 Chinese students studying in Canada.

There is a Chinese saying—easily understood by Canadians—that three feet of ice didn’t freeze in one night. These milestones reflect the determination, planning, risk-taking and sheer hard work of thousands of individuals and leaders in business, the education sector and our provinces, cities and civil society.

They also reflect a commitment by both governments.

Political leaders are engaging one another to an unprecedented degree. The range of subjects under discussion is greater than ever before.

We are engaging one another on matters where there is natural agreement. We are equally doing so where we have differences of views and where our respective values don’t fully align.

And we have not just been talking.

We have been building a foundation of relationships critical to taking us forward. We have also been hammering out tangible frameworks and mechanisms that create and deepen opportunities for our business sectors, and societies more broadly, to deepen engagement.

Prime Minister Stephen Harper has been and remains deeply invested in this process, and no one could have missed the steady flow of ministers travelling back and forth across the Pacific to engage on issues that matter to all Canadians. Indeed, in addition to my own four-city tour, Canada’s Minister of International Trade, the Honourable Ed Fast, was in Beijing and Shenyang just last week.

You will also be aware that Canada’s Governor General, His Excellency David Johnston, will arrive in China tomorrow to raise the profile of several important dimensions of the bilateral relationship, including prosperity, innovation, education and culture. An impressive group of Canadians, including Natural Resources Minister Joe Oliver and several members of Parliament, are accompanying him.

This political engagement is yielding results.

These results link directly to our standard of living as Canadians and are helping to assure the future well-being of our children and grandchildren.

As you know, we now have signed the Canada-China Foreign Investment Promotion and Protection Agreement [FIPA], and we look forward to bringing it into force.

This FIPA isn’t just words on paper.

It will ensure greater protection of foreign investors against discriminatory practices and expropriation without compensation. Overall, the FIPA will enhance the predictability of the policy framework affecting foreign investors and their investments.

A Supplementary Protocol to our Nuclear Cooperation Agreement was signed by our governments a year ago. We are already seeing concrete outcomes flowing from this agreement. The first shipment of Canadian-origin uranium as part of long-term supply contracts between Canadian firms and Chinese customers is scheduled to arrive in China this month.

During Prime Minister Stephen Harper’s 2009 visit to Beijing, he announced that China had granted Canada Approved Destination Status. That has already resulted in China becoming Canada’s fourth-largest source of foreign visitors, with 20-percent growth in 2012 alone.

I believe Canada will be very well positioned to benefit from the 100 million annual Chinese travellers overseas estimated by 2020.

I should also take a minute to mention the outstanding work of the Tourism Industry Association of Canada, currently on a mission to China and visiting Shanghai, Hangzough and Nigbo. Tourism is so important to the Canadian economy.

It means $17 billion in sales annually.

It means 604,000 Canadian jobs in every corner of the country—from coast to coast to coast.

Last year, during the Prime Minister’s trip here, our two countries expanded the Canada-China Air Transport Agreement. This not only helps Canadian businesses reduce costs, making them more competitive, it serves to facilitate the flows of tourists I just referred to.

Our government is actively exploring how we can deepen our economic ties further.

China’s ongoing social and economic transformation is creating new opportunities.

The “rapid rise of China’s cities,” as I wrote in last week’s Ottawa Citizen.

A broad-based middle class.

Connectivity of its citizens to one another and to the world.

It is clear that China is rapidly becoming a world centre for innovation. In 2011, nine percent of all international patent applications came from China, up from just 2.6 percent in 2006. China now ranks fourth in the world as a source of international patent applications.

I am highlighting the innovation theme because international science and technology collaboration is a key mechanism to promote prosperity.

Canada is strongly supportive of the Canada-China Agreement for Scientific and Technological Cooperation, which aims to increase collaboration in sectors of the future—health and life sciences, energy and environment, agriculture, civil aviation, clean tech and information and communication technologies.

But as China shifts to a more innovation-based society, its needs for traditional commodities, nevertheless, remain acute. Last month, the Chinese government predicted that in the coming five years, China’s imports of commodities will exceed US$10 trillion, and overseas investments will reach US$500 billion. China’s growing consumption of Canadian wood and paper products, ores and minerals, and agriculture and food products, among others, have already helped our own society withstand the 2009 global economic downturn by allowing Canadians to shift trade to China when our traditional export markets were down.

Canadians are adjusting to the reality that some of the mature markets we have historically relied upon cannot, on their own, meet Canada’s future export needs. The vast majority of future global trade growth will take place in the so-called emerging markets. Most of those high-growth markets are in Asia, and China is the Asian region’s centre of gravity.

It is clear that Canada must diversify its markets, which is why our government is leading the most pro-trade agenda in our country’s history.

Let us take the energy sector as an example. You will all be aware that Canada has one of the largest proven oil reserves—the third largest, in fact. In past decades, almost all of our oil and gas exports went to the U.S. In what seems like a blink of an eye, the so-called shale gas revolution has resulted in the U.S. finding itself transforming from a significant energy importer into a country that could soon be a net exporter.

In short, Canada must diversify its energy trade. Meanwhile, China knows that it must not only expand its energy imports but also diversify them to improve its own energy security.

A deepened Canada-China energy relationship is a natural for both sides. Other Asian markets have significant needs, as well—India and Japan, among others. For this reason, Canada is strongly committed to creating the conditions for private sector investment in energy pipelines and terminals. We are working with provinces, the private sector, communities and Aboriginal Canadians to capitalize on this critical opportunity over the next decade. If we do not, some of our competitors will do so in our place.

I mentioned earlier that I am not only visiting Beijing on this trip. I have just travelled to Shanghai, Chongqing and Chengdu, where I was able to reach out to officials, business leaders and civil society. China’s size and diversity, coupled with its rapid urbanization, are creating a network of megacities.

Canada is paying attention. We are taking concrete action to strengthen our commercial and diplomatic engagement with these important regional centres.

Since 2009, our government has opened six new trade offices. These new offices are located in Chengdu, Nanjing, Qingdao, Shenyang, Shenzhen and Wuhan. Together, these cities account for almost 65 million residents, representing tremendous commercial opportunities for Canadian companies.

These new offices complement the services already offered by the Canadian embassy in Beijing and our consulates general in Chongqing, Guangzhou, Shanghai and Hong Kong.

It is clear to me that the successes so far of the Canada-China relationship are the result of determination and hard work by many, including by governments.

We must now harden our resolve and intensify our efforts.

But with success comes challenge.

The Asia Pacific Foundation of Canada has, since 2004, undertaken an annual survey of the views of Canadians on Asia, including on China.

Its 2013 report sends a sobering message. Canadians recognize that China has become more important to Canadian prosperity. But there are also deep hesitations over deepening our relationship further.

The 2013 survey shows that Canadians are concerned about state-owned enterprises.

The fact is that many Canadian companies feel that we don’t yet have a fully level playing field in the relationship. The Government of Canada shares that view and has called for our businesses to be treated the same way in China that Chinese firms are treated doing business with Canada.

Our government continues to encourage China to implement import and investment rules that are aligned with international standards and applied consistently and transparently. Encouraging China to consider the benefits of creating a more secure and predictable environment for Canadian and other foreign investors in China is a priority for our government. It comes down to the golden rule, which both Canadians and Chinese know well: don’t impose rules on others that you wouldn’t choose for yourself.

We do recognize that this will take time. But we would like to see more steady progress.

We are aware of and welcome the Chinese government’s commitment to economic reforms at home, particularly those that strengthen the role of China’s private sector and commercialize the operations of state-owned enterprises. We are supportive of China’s efforts to tackle corruption. I am also encouraged by those voices in the country calling for a strengthening of the rule of law, respect for the constitution, an independent judiciary and strong protection of the rights of citizens and of corporate entities, which are requirements for a stable, prosperous and fair society.

Progress in these areas is essential if we are to increase the prospects of two-way investment, of expanded trade and of a full range of bilateral partnerships for the 21st century.

The kind of mutually beneficial economic relationship we seek is also compatible with constructive engagement on governance and human rights.

And we will deepen our discussions on regional security, global governance and on our respective interests and roles in other parts of the world.

Canada, too, must do its part. Everyone in this room appreciates that our two societies have different histories, distinct cultures and proud national traditions. We also have political and administrative systems that can contrast quite sharply. These factors need to be understood and respected but ultimately overcome as barriers to increased cooperation.

I stated earlier that some 84,000 Chinese students today have decided to get to know Canada better—to understand our culture and our values. Many of them will become lifelong friends and supporters of Canada.

In contrast, an estimated 3,400 Canadians currently study in China.

Canadian society must increase its Chinese literacy and our Chinese competencies. We must, especially, encourage our youth to become engaged.

Our government cannot address this challenge alone. This must involve a national effort of our business leaders, our various levels of government, our educational institutions, our media, our communities and individual Canadians.

The stakes are high.

We cannot afford to forgo the opportunities before us.

Deepening our engagement with China must continue to be a national imperative.

We must invest in a deepened process of cooperation. This process should capitalize on our growing common interests and work to reduce our differences.

That is diplomacy, and that is the only way we will realize our full potential while protecting our interests and values.

Our government is ready to play its part, and I know you will play yours.

Thank you.