The still quite recent news that the state-owned China Minmetals Corp. (in effect the government of China) wants to buy the venerable Canadian resource sector firm Noranda Inc. has signaled a bold and even somewhat unsettling new phase in the apparently never-ending debate about Canadian national economic development. To help move things along, the November 8, 2004 issue of the Statistics Canada Daily has just published a related short study called “Tiger by the Tail? Canada’s Trade with South Korea.”

As its various intriguing pieces start to come together, this new phase of the debate clearly has the potential to generate a kind of agonized confusion that some segments of the present diverse true northern demography would still prefer to avoid and evade. As the Globe and Mail has noted, the proposed Chinese “takeover of Noranda … has shocked many Canadian observers.”

Here as elsewhere, however, it is starting to seem equally clear that the next Canada is coming, whether even most of us like it or not. A Globe interview with Chinese foreign minister Li Zhaoxing has pointed out that “the controversial $7-billion takeover of Noranda Inc. is just a small element in a much more ambitious strategy of investment in Canada’s resources sector to feed China’s voracious appetite for raw materials.”

As Canada’s long and intimate relationship with the world’s current largest national economy in the USA has shown, voracious appetites of this sort can have their dangers as well as their opportunities. Depending on whether you look at raw gross national income statistics in US dollars, or similar statistics adjusted for so-called “purchasing power parity,” China is currently the sixth- or second-largest national economy in the global village. With a much vaster population, its now rapidly growing economic base is likely enough to surpass the USA in absolute magnitude, within the lifetimes of many of us alive today – and perhaps much sooner.

The side-interest of South Korea in all this is that it could provide some healthy counterweight to the lure of the giant new Chinese Middle Kingdom, within the wider Pacific region. Or, as the November 8 Statistics Canada Daily has explained: “Within the Pacific Rim group of countries, South Korea ranked as Canada’s third largest trading partner of the region, behind China and Japan” in 2003. And: “South Korea’s expanding market is of great importance to our economy, carrying the promise of opportunities for Canadian businesses.”

(In a wider North American perspective, South Korea is also interesting because it is right next door to North Korea. And, as we heard with unusual clarity in the recent US presidential debates, North Korea raises particular concerns nowadays as a potentially quite dangerous rogue state, with its own nuclear weapons of some sort, and in some degree – to say nothing of an alarmingly neurotic national leadership, at best. But that of course is another question altogether.)

First, the good news

Late last month current Canadian Prime Minister Paul Martin “welcomed” the “Chinese proposal to purchase mining giant Noranda Inc., even as his Industry Minister admitted some unease about the uncharted waters Canada might be entering in allowing such deals” (from the Globe and Mail again).

Among other things, Martin’s industry minister, David Emerson, has noted that “having a state-owned company own Canadian resource corporations is different than private ownership.” And this is no doubt true enough, in a number of important respects. But Emerson has also quickly enough seen to the very bottom line for Canadian national economic development himself: “You can’t endlessly complain about being too dependent on the United States and then the next-largest trading partner is China … we have to be careful we don’t jeopardize that aspect of our forward-looking economic diversification.”

It just may be, that is to say, that at the bottom of everything else Canada remains a lucky country (and that remains the secret of its sometimes surprising longevity). At various points in its now 137-year-old modern history circumstances have seemed to be conspiring to defeat the apparently somewhat strange prospect of a long-term independent country in the most northern part of North America. And then, almost at the last minute, something new has come along in the global village to breath fresh life into the prospect, for several more decades, and on and on.

So ever since the ultimate decline and fall of the British empire, and its allied networks of international trade, in the 1950s and 1960s, successive Canadian federal governments have been searching for some new international counterweight, to the geographically (and culturally) inevitable overwhelming influence of what Pierre Trudeau called the elephant next door, in the USA. Trudeau’s long federal regime of the 1970s and 1980s itself famously put forward something called the Third Option – focused around the concept of increasing Canadian trade with the then European Economic Community (and now European Union).

As good as it looked on paper, this pan-European version of a Third Option never worked practically. (The new Europe was just not that interested.) And this finally led to Brian Mulroney’s Canada-US Free Trade Agreement of the late 1980s – an extension, as it were, of the sector-specific Canada-US Auto Pact of 1965.

Adding Mexico to the mix in the North American Free Trade Agreement (NAFTA) of 1994 helped hedge against the most obvious threats to Canada’s continuing political sovereignty in the earlier Canada-US FTA. But Canada’s growing extreme economic dependence on US export markets nonetheless proceeded apace. In 1996 77.5% of all Canadian exports were going the United States. By 2003 the number had risen to 83.8%.

Now in 2004 a new and potentially quite practically effective Chinese version of the Third Option has finally come knocking at the door – without exactly being asked by anyone in Ottawa, it seems. As Chinese foreign minister Li Zhaoxing has explained, the Chinese and Canadian economies “are highly complementary, and are yet to tap their tremendous potential, especially in resource and energy co-operation.”

Almost as if to quantitatively confirm the benign new trend, by the end of September 2004 Canada’s exports for the preceding 12-month period to China and a wide assortment of other places in the global village (including the European Union), were at least growing at considerably faster rates than its exports to the USA.

And then, the assorted bad news too …

As industry minister David Emerson’s recent guarded circumlocutions on the issue also make clear, no one in Ottawa is as yet breaking out cases of imported champagne to celebrate this apparent fresh batch of good news for Canadian national economic development.

Even the traditional most aggressive economic nationalists in the NDP have just raised fresh variations on traditional concerns about foreign investment review by the federal government. (“I find it unacceptable,” NDP leader Jack Layton has intoned in parliament, “that the Prime Minister is not standing up and telling us what his plan is to deal with our resource industries being bought up by foreign governments and foreign investors.”)

Just to start with, the quest for diversification in Canada’s traditional economic base has had various dimensions. And, as generations of business journalists have noted, growing beyond the primary resource economy first established by the northern North American fur trade of the 17^th and 18^th centuries has been one of them.

As a sign of the progress that has been made on this front, in 2003 the largest Canadian export sectors were machinery and equipment (23.5%) and automotive products (23.4%) – compared with such resource sectors as energy products (12.0%), forestry products (9.0%), and agricultural and fishing products (7.5%).

The parts of Canada’s current economic base that China is seriously interested in, however (and it seems that this applies to such places as South Korea as well), are the older and more traditional resource sectors. Moving forward on geographic diversification in international trade in this context will also mean some degree of what might be called moving backward on domestic sectoral diversification.

(And contrary to some kinds of rumours this is not just a potential concern in Southern Ontario. The so-called secondary and tertiary sectors of the economy are at least the largest employers in virtually all the more populated parts of Canada nowadays. For 21^st century population sizes generally, there is not much domestic employment bang in any kind of primary resource expansion that does not include its own domestic secondary and tertiary complementary activity.)

In this and other contexts, there is also the point about Chinese government ownership to which David Emerson has already alluded. It is one potentially good thing for Canadian (or perhaps even Canadian-based North American) resource firms to find new export markets in such places as China, Japan, and South Korea. It is a potentially quite different thing to have substantial chunks of the Canadian resource sector owned by the Chinese government.

These are indeed uncharted waters. Even aggressive proponents of unfettered free markets might agree that the Canadian federal government ought to be taking a very close look at whatever vague preliminary maps might be available (as it no doubt has already started to do, within the cloisters of the Ottawa bureaucracy).

Then again – and especially if the Chinese government is going to be owning Canadian-based firms that will be employing Canadian citizens – there is bound to be some further concern expressed, about the present Chinese government’s human rights record. Prime Minister Martin has himself has already alluded to this, and part of the concern is no doubt genuine.

Whatever Chinese government officials might say in interviews with Canadian newspapers, it is clear enough that China today is not exactly a “free and democratic society,” in the spirit of Canada’s Constitution Act 1982. Canadian citizens now include quite large numbers of recent migrants from Hong Kong and other parts of contemporary China. Their reports do seem to confirm assorted reasonable grounds for concern about potential Chinese government activity in Canada, even for Canadians who have not yet visited China in person themselves.

Another part of the human rights concern no doubt is just code for a more diffuse and as-yet rather unexamined apprehension about the rapidly rising new Chinese Middle Kingdom of the early 21^st century – shared by perhaps most non-Chinese countries in the global village today.

Inevitably, all of us outside China who are paying attention to such things are starting to learn a lot more about China. And we are coming to have more respect for the impressive achievements of a long and deep Chinese past, which is just starting to rediscover itself, after some two centuries of wandering in a world-historical wilderness.

Among many other things, it is now said that China’s ancient description of itself as the “Middle Kingdom” is in fact more aptly translated into English as the “Central Kingdom.” As we in the so-called West at last try to grasp the real sweep of world history ourselves, we can start to see that down to about the middle of the 18^th century China probably was, for a number of generations, the most advanced national society on the planet.

That was certainly how the historic Central Kingdom saw itself – at the centre of the known human universe: and the place where anyone else who also wanted to be at the centre had to come. Just how all this recently revived history is going to play out in the 21^st century is a growing question in a great many parts of the world outside China. It is hardly surprising that modern Canada, in the most northern part of North America, is no exception.

In any event, taking practical advantage of fascinating new trends in global economic development has always been a tricky business in modern Canada’s as yet still quite short and new history. Even when most people still did work in primary resource sectors, the country has had to live by its wits (as perhaps most resource-dominated economies still have to – world markets still being the very tricky things they are).

We will soon start to see whether the current crop of federal policy makers, freshly elected by the diverse sovereign people of Canada just this past June, is up to the challenge. And this is one policy debate that finally ought to burst out beyond the bureaucratic cloisters in Ottawa, as clever, cunning, and able as they no doubt sometimes have been in their own version of the short and happy past, to the continuing advantage of Canada and Canadians today.

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The Globe and Mail stories referred to here are: “China set to buy up Canada’s resources,” 21 October 2004; and “PM lauds Chinese takeover of Noranda,” 22 October 2004. They can be searched and (nowadays) purchased at Globeandmail.com. Further related Statistics Canada material includes: the study Tiger by the Tail, by Sandra Bohatyretz (a PDF file); the International Merchandise Trade Annual Review (another PDF file); and the latest monthy report on Canadian international merchandise trade.