The proposed purchase of a Canadian oil company with global reach by a state-controlled Chinese oil company is not about a mortal Canadian enemy seizing control of a single and strategic asset. Neither buyer nor seller has earned either reputation. It is more about the inexorable, patient, and long-term strategy, of China to gradually own preferred access worldwide to the resources it does, and will, need, and the degree to which short-term western financial markets seek rapid fire returns and profits. When a fiduciary manager or a target company can add 40% to shareholder value quickly, they are hard pressed to look away and may well be sued by institutional and other shareholders if they do. The very market forces that built, with some regulatory help (like Mr. Diefenbaker’s Ottawa Valley Line), the traditional oil and gas basins of Canada’s west now make it hard for the market and senior managers to resist the high valuation blandishments of state-owned entities abroad. One need not pre-judge what should be a rigorous net benefit assessment process on the proposed Nexen deal to underline some other strategic questions Canada and Canadians should assess.
Building a deep trans-Pacific trade relationship with Asia matters, and India, Malaysia, Japan and China are vital parts of this puzzle. China has shown no interest in the trans-Pacific partnership to which Canada seeks to negotiate entry. What will this imbalance mean?
China recently submitted a “nine dash map” of the South China Sea, (where each dash underlines a critical area of Chinese territorial claim) to the UN. This impacts the legitimate fishing and mineral rights of other Canadian trade and Commonwealth partners, such as Malaysia, who is also a large investor in our energy resources. No global power is increasing its military spending or naval expansion in any way that compares to Chinese investment in these areas. While China argues that it seeks peaceful co-existence and constructive negotiation on any regional disputes, it clearly means to be the best and most combat-ready power entering any such negotiations.
Around the world Chinese investment and diplomatic synergies have been profoundly unhelpful to democracy, the rule of law, humanitarian intervention and effective global engagement. Canada backs sanctions against Iran. China does not. Canada and the rest of the world sought to engage when Sudan’s attacks on their own minorities were genocidal. China, heavily invested in Sudanese oil, used its veto to stop that, as they have with Russia, by emasculating the UN on Syria. The fact that China allows little democracy, human rights or real religious freedom at home, while Canada fights for all of these around the world as foreign policy principles, is also worth noting. The Caribbean/Chinese construction companies that built key infrastructure on a lost leader basis had onerous requirements, such as 75% of the work force coming from China, immunity from local labour rules, proprietary Chinese leasing and economic requirements. Throughout Africa, despite some notable improvements, repressive Chinese attitudes towards local indigenous populations and labour have produced considerable resistance. Generally speaking, most authoritarian leaders worldwide (like Mr. Mugabe at the height of his excesses) could count on Chinese support.
Do we face the prospects of Canadian oil or its profits from enabling Chinese crackdowns on democracy, neighbouring territorial rights, or territorial assertions, even by the use of force? Or would Canadian oil and rights worldwide be supporting an anti-democracy China-based axis supporting the likes of Iran, Assad and conspiring with Putin’s authoritarian excess? This is likely an exaggerated fear. But exaggerated does not, in this context, mean baseless.
Part of being an ‘energy super power’, believing in open markets and living in a quarter by quarter corporate reality, makes these kinds of bids and debates in Canada unavoidable. The tremendous work over the decades by generations of Alberta oil and gas engineers, investors, managers, oil field workers and the rest has created a compelling and large asset base. This effort should never be taken for granted. Profit-taking is a normal part of this cycle and the profits go to many unions, pension funds and other stakeholders that serve millions of middle class Canadians from coast to coast.
There is an economic net benefit and a larger “what are we doing here?” perspective that we should embrace through the coming analytical process. China’s economic growth, her lifting of millions out of poverty, her amazing domestic productivity and employment growth challenges, should not be outside this analysis. We need not hypothecate all economic relations to concurrence between domestic political values in our two countries. But where democracy and human rights are so absent from a major power’s domestic or worldwide pursuits, it is certainly cause for thoughtful pause and careful reflection.
The Prime Minister’s advice that nothing should be taken for granted here is not only spot on but appropriately reassuring.
Senator Hugh Segal chairs the Special Senate Committee on Anti-Terrorism and is a Senior Research Fellow of the Canadian Defence and Foreign Affairs Institute
1d9b4 Responses to “Hugh Segal - Canada and China: Take Nothing for Granted”
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August 8th, 2012 at 12:46 pm
And from Maclean’s magazine:
“Our Chinese oil sands
Nexen could be just the beginning…
In June, the Alberta government launched a website publicly outing employers who haven’t paid their workers—an online hall of shame. Among these “deadbeat bosses,” as the media quickly dubbed them, the worst offender was a subsidiary of China Petrochemical Corp. (Sinopec), a Chinese state-owned oil giant. That same subsidiary, along with others, is facing charges after the deaths of two Chinese workers flown in to work on a site near Fort McMurray, Alta., in 2007. After much delay, the trial begins this fall.
It’s the kind of bad press Chinese firms can’t afford as they seek to buy up swaths of Alberta’s oil patch and attempt to win over Canadian regulators and a wary populace…”
http://www2.macleans.ca/2012/08/08/our-chinese-oil-sands/
Mark Collins
August 9th, 2012 at 7:38 am
Twaddle to the max:
“CNOOC-Nexen: An opportunity for negotiated benefits
At this advanced point in Canada’s economic and bilateral engagement with China, it simply does not make sense – unless we ban all foreign investment in our resources – to debate whether the Canadian government should approve the CNOOC proposed takeover of Nexen. The answer has to be – yes.
To reject the deal would have a negative impact on Canada’s bilateral political relationship with China. Goodwill with China permits engagement with the next generation of leadership within a positive framework. This will permit a mature and frank discussion on topics of strategic importance like North Korea, Syria and Iran…”
http://www.ipolitics.ca/2012/08/09/gruetzner-cnooc-nexen-an-opportunity-for-negotiated-benefits/
Good grief. What Canada may think about such issues will have zero impact on the Chicoms. Get real.
Mark Collins
August 9th, 2012 at 7:52 am
Meanwhile Chinese, er, justice:
“Murder Trial of Chinese Official’s Wife Begins and Concludes
HEFEI, China — The murder trial of Gu Kailai, the wife of the deposed political leader Bo Xilai, began here on Thursday morning and came to an end seven hours later, with officials saying that the defendant and an accomplice had all but confessed to poisoning a British businessman who had threatened the safety of Ms. Gu’s son.
In a statement read to foreign journalists, the deputy director of the Hefei Intermediate People’s Court placed most of the blame on Ms. Gu, 53, saying she gave the Briton, Neil Heywood, a fatal dose of poison as they sat in a hotel room in Chongqing, the metropolis in southwest China that was run by her husband until his downfall last spring.
“The criminal facts are clear; the evidence is solid,” the court official, Tang Yigan, said.
A verdict will be announced at a later time.
According to the statement, the killing took place on the evening of Nov. 13 after Ms. Gu and Mr. Heywood spent time drinking together at a rented villa on the outskirts of the city. After consuming some tea and alcohol, Mr. Heywood began to vomit and asked for a glass of water, at which point Ms. Gu “poured poison into his mouth,” the court said. The statement said the poison was prepared in advance and given to the family employee, Zhang Xiaojun, 33, who had accompanied Mr. Heywood to Chongqing from his home in Beijing.
The court provided no further detail of Mr. Zhang’s role, nor did it specify who prepared the poison…”
http://www.nytimes.com/2012/08/10/world/asia/murder-trial-of-bo-xilais-wife-concludes.html
Mark Collins
August 9th, 2012 at 12:35 pm
Earlier, in Africa:
“Zambian miners crush a Chinese manager to death.
Remember that when Beijing boasts about its ‘win-win’ African parternships
Suppose a manager of a British mining company picked up a gun and opened fire on his African workforce? What if the company concerned paid its Zambian miners less than the legal minimum wage? Suppose relations on the shop floor became so poisonous that furious workers chose to crush a manager to death?..
Yet all of the above has happened at a Chinese-owned mine in Zambia. When workers at Collum coal mine protested about poor wages and working conditions in 2010, their Chinese managers responded by opening fire with live rounds. In fairness, they were not shooting to kill: no one actually died, but 11 of the miners suffered bullet wounds.
The Chinese argued they were acting in self defence, and Beijing made clear that should charges be pressed against them, bilateral relations would suffer. Zambia, unable to stand up to its biggest foreign investor, duly caved in: no criminal case was ever brought against the managers…”
http://blogs.telegraph.co.uk/news/davidblair/100175001/zambian-miners-crush-a-chinese-manager-to-death-remember-that-when-beijing-boasts-about-its-win-win-african-parternships/
Just so you know.
Mark Collins