Activist countries

Western countries are already adopting ‘friend shorification’ to reduce trade with authoritarian regimes, Freeland says

Deputy Prime Minister and Minister of Finance Chrystia Freeland speaks to business leaders in Gatineau, Quebec on October 17.Adrian Wyld/The Canadian Press

Deputy Prime Minister Chrystia Freeland said major Western countries were setting an example by embracing “friend-shoring”, or shifting trade to friendly partners and like-minded democracies: an approach that would dampen some trade relations with countries like Russia and China.

At a press conference in Gatineau on Monday, Freeland noted that the European Union was proposing to ban imports of products made with forced labor in response to pressure from human rights activists concerned about the modern slavery in China’s Xinjiang region.

She also noted that the US Congress passed legislation in August with tax incentives for electric vehicles that only apply if they are assembled in North America and that critical minerals in their batteries come from countries with which the United States entered into a free trade agreement. This means automakers will have to end any reliance on Chinese sources for battery materials.

“I think the friendship is there,” she said.

When asked what friend-shoring, a portmanteau between “friend” and “offshoring”, means for relations with non-democratic countries, Ms Freeland replied: “I think it means acting with caution . We must be very careful not to have any strategic vulnerability in the face of authoritarian regimes.

Elaborating, she said any trade dependency of Canada should be with a friendly partner, not an illiberal country. “We also have to be realistic and be sure that where our economies are vulnerable to the decisions of another country, where we are dependent. First, we should aim for this dependency to be with another democracy.

She said Brussels, with its plan to ban slave labor imports, and Washington’s efforts to exclude China from the electric vehicle supply chain are leading the way.

“From the two largest economic and democratic blocs in the world – the US and the EU – we are seeing clear moves in this direction,” she said.

When the Deputy Prime Minister was asked what this means for Canada’s next Indo-Pacific strategy, a blueprint for relations with Asia and India that Foreign Affairs Minister Mélanie Joly is in the process of elaborate, Ms. Freeland was cautious.

“I’m not going to steal his thunder. She’s going to have a lot more to say about the Indo-Pacific strategy in the weeks to come.

However, Ms. Freeland has already outlined an assertive approach to China in a speech she gave last week in Washington to the Brookings Institution, in which she also said Canada must embrace friendship. “We should design our procurement and government incentive programs with the relocation of friends in mind.”

There, she said Canada must stand up for other bullied democracies, naming three countries that faced mistreatment at the hands of China after standing up to Beijing.

“We must then be prepared to expend domestic political capital in the name of the economic security of our democratic partners,” Ms. Freeland said.

“We cannot allow Lithuania to be coerced on its policy towards Taiwan, or South Korean companies to be harassed and boycotted in retaliation for legitimate national security decisions taken by Seoul,” she said. “A commitment to support each other in the face of such economic hardening is the best way to ensure this does not happen again.”

Russia has used energy as a weapon in recent years.

“It’s not just Russia,” Ms Freeland said in her Brookings speech. “China is also adept and intentional in using its economic ties with us as leverage to achieve its geopolitical goals. This is what Norway learned in 2010, when the Nobel Prize was awarded to [human rights activist] Liu Xiaobo and Norwegian fish exports to China were halted as punishment,” Ms Freeland said.

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Similarly, “much of Australia’s trade with China was frozen in 2020 when Canberra called for an independent investigation into the origins of COVID-19”.

Canada itself has come under pressure from China after shutting down a Chinese tech executive at the request of the United States.

“Canadian pork and canola exports were banned – as two Canadian citizens were wrongfully imprisoned – when Canada honored its extradition treaty with the United States and detained Huawei’s chief financial officer.”

Ms Freeland said that despite the need to reduce dependence on authoritarian countries, there will always be a need to work with them to fight climate change, tackle global health issues and address imbalances in the system. global financial.

“There is a global common good and we must work together to maintain it,” she said.

Akshay Singh, a research associate at the University of Ottawa’s Center for International Policy Studies, said it was remarkable that Ms. Freeland’s October 11 speech specifically highlighted China’s coercive behavior and how this behavior has spread.

He said his speech indicates that Canada is increasingly interested in establishing closer ties with other democracies in the Indo-Pacific region, such as Japan and South Korea, to offset the risks of future disruptions. commercial.

Singh said relocating friends would not end China’s role as a Canadian trading partner or diminish its status as a major global economic player. But, he said, moving crucial supply chains to friendly countries would protect Canada from coercion from Beijing, and doing so in concert with a network of democracies would thwart efforts to pressure on Canadians.

“A group of like-minded countries that can resist future economic coercion most likely matters significantly to the Politburo,” Singh said, referring to China’s leaders.

US Treasury Secretary Janet Yellen popularized buddy relocation. In a July 2022 speech in South Korea, she cited the need to reduce reliance on China for vital products or goods.

“We cannot allow countries like China to use their market position in key commodities, technologies or products to disrupt our economy and exert unwanted geopolitical leverage,” Yellen said in July.