Energy, Trade and Geopolitics in Asia: The Implications for Canada

Canada’s growing interest in trade with countries in the Indo-Pacific region corresponds with an ominous growth in geopolitical instability and insecurity in that part of the globe. With Indo-Pacific hunger for oil expected to soar – especially in China, where demand will translate to 80 per cent of imports in 10 years – Canada needs to develop policies to deal with the region’s turbulent realities. The Indo-Pacific comprises countries in South Asia and Southeast Asia, and includes such unstable and unpredictable players as North Korea and Pakistan, both of which have nuclear weapons and long-simmering border tensions. India is an emerging economic and military rival to China. In the next 20 years, China and India are expected to lead the global demand for gas as coal consumption continues to decline, and Canada has a stake in this prosperous future. Along with territorial squabbles in the region, Canada will have to deal with complex issues such as terrorism, human trafficking, transnational crime, piracy and cybercrime, as well as the struggle for global dominance between China and the U.S. One key area for potential conflict is China’s recent construction and militarization of artificial islands in the South China Sea. The Canadian government’s new military strategy, Strong, Secure, Engaged does little more than make a plea for peace and the rule of law in the South China Sea. However, more trade crosses the Pacific Ocean from Canada than crosses the Atlantic. And with Canada signing on to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the region’s troubles will need to be resolved by more than good intentions on paper. Canada must shift more diplomatic, security and military resources to the IndoPacific; otherwise, its efforts will be spread too thinly to be effective in the region. Trade, especially through a major route like the Strait of Malacca, could easily be disrupted by any one of a number of disputes, such as a conflict between China and Taiwan or if historic resentments boil over among competing territorial claimants in the region. Thus, Canada needs to step up and reaffirm its security commitments to the Association of Southeast Asian Nations (ASEAN) as a partner in the region. Participating in maritime exercises and Freedom of Navigation (FON) operations would also help to reinforce to countries in the region the importance of abiding by international law. Meanwhile, Canada should set aside for now any intentions to negotiate a free trade agreement with China. China does not share some of Canada’s key trade and security goals and its aggressive behaviour in the South and East China Seas clearly signal that now is not the time to talk about a trade pact. China must demonstrate that it is willing to take a more cooperative approach to resolving trade and security issues in the Indo-Pacific and to support and respect the rule of law in the region. Canada has the potential to become a reliable, stable source of energy for Indo-Pacific countries. There is also an opportunity for provinces such as Alberta to strike their own strategic deals to provide energy resources to countries in that region, in return for trade and investment benefits. However, while investing at home in the necessary infrastructure and export capability to expand its role, Canada must also strive to bring its own unique approach to enhancing regional and energy security in the Indo-Pacific.