The Importance of the Asia Pacific Region for Canada

The Standing Committee on Foreign Affairs

An Interim Report

Chairperson : The Honourable John B. Stewart

Deputy Chairperson : The Honourable Pat Carney, P. C.

June 1997 


MEMBERS OF THE COMMITTEE

(April 25, 1997)

The Honourable John B. Stewart

Chairperson

 

The Honourable Pat Carney, P.C.

Deputy Chairperson

 

and the Honourable Senators

Andreychuk *Fairbairn, P.C. (or Graham)
Bacon Gauthier
Bolduc Grafstein
Corbin *Lynch-Staunton (or Bernston and Kinsella)
De Bané, P.C. Ottenheimer
Doody Stollery
Whelan, P.C.

 

* Ex officio Members

 

(Quorum 4)

The following Honourable Senators also participated in the work of the Committee:

Jack Austin, Edward M. Lawson, Donald H. Oliver, Raymond J. Perrault, Marcel Prud’homme.


ORDER OF REFERENCE 

Extract from the Journals of the Senate, Thursday, October 3, 1996:

"With leave of the Senate,

The Honourable Senator Stewart moved, seconded by the Honourable Senator Moore:

THAT the Standing Senate Committee on Foreign Affairs be authorised to examine and report on the growing importance of the Asia Pacific region for Canada, with emphasis on the upcoming Asia-Pacific Economic Cooperation (APEC) Conference to be held in Vancouver in the fall of 1997, Canada’s Year of Asia Pacific;

THAT the Committee have power to engage the services of such counsel and technical, clerical and other personnel as may be necessary for the purpose of its examination and consideration of the said order of reference;

THAT the Committee have power to adjourn from place to place outside Canada; and

THAT the Committee submit its final report no later than July 31, 1997.

The question being put on the motion, it was adopted."


MOTION 

Extract from the Journals of the Senate, Wednesday, April 16, 1997:

"The Honourable Senator Stewart, seconded by the Honourable Senator Kinsella:

THAT if before the dissolution of the present Parliament the Standing Senate Committee on Foreign Affairs has adopted but not presented a Report on the growing importance of the Asia Pacific region for Canada, with emphasis on the Asia-Pacific Economic Cooperation (APEC) Conference to be held in Vancouver in the fall of 1997, Canada’s Year of Asia Pacific, the Honourable Senators authorized to act for and on behalf of the Senate in all matters relating to internal economy of the Senate during any period between sessions of Parliament or between Parliaments, be authorized to publish and distribute this report of the Committee.

The question being put on the motion, it was adopted."


TABLE OF CONTENTS

LIST OF ACRONYMS AND COUNTRY GROUPINGS

INTRODUCTION

THE RELEVANCE OF THE ASIA PACIFIC REGION FOR CANADA

A. The Growing Economic Importance of East Asia

B. Canada-Asia Pacific Merchandise Trade Links

1. Canada’s Merchandise Exports

2. Canada’s Merchandise Imports

3. Canada’s Export Performance

C. Canada-Asia Pacific Services Trade Links

D. Canada-Asia Pacific Investment Links

1. Overview

2. Competing for Foreign Direct Investment

E. Canada-Asia Pacific Immigration Links

1. Overview

2. Canada’s Hidden Advantage

THE APEC FORUM

A. APEC Defined

B. APEC’s History and Achievements

C. The 1997 Vancouver Summit: What Legacy Can Canada Provide?

1. APEC-Driven Agenda

a) Trade and Investment Liberalization

b) Business Facilitation

c) New Directions for Economic and Technical Cooperation

d) Increased Business Participation in APEC Activities

e) The Membership Issue

2. Other Canadian Priorities

3. China’s Accession to the World Trade Organization

THE NEED FOR FURTHER STUDY

APPENDIX: List of Witnesses


LIST OF ACRONYMS AND COUNTRY GROUPINGS

ABAC

APEC Business Advisory Council

APEC

Asia-Pacific Economic Cooperation (18 members include Australia, Brunei Darussalam, Canada, Chile, the People’s Republic of China, Hong Kong, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Philippines, Singapore, Chinese Taipei (Taiwan), Thailand, and the United States)

ASEAN

Association of Southeast Asian Nations (Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam)

Asia Pacific

Includes: the countries of East Asia, Oceania, Canada, the United States, Mexico, and Chile

Asian tigers

East Asian economies experiencing high rates of economic growth over an extended period of time

CDIA

Canadian Direct Investment Abroad

CTPL

Centre for Trade Policy and Law

CYAP

Canada’s Year of Asia Pacific

DFAIT

Department of Foreign Affairs and International Trade

East Asia

Includes: Japan, China, the newly-industrialized economies (NIEs) (Hong Kong, South Korea, Taiwan, and Singapore), the other members of the Association of Southeast Asian Nations (ASEAN) (Brunei Darussalam, Indonesia, Malaysia, Philippines, Thailand, and Vietnam) and the other developing economies in the region (Cambodia, Laos, Papua New Guinea, and Burma)

EAEC

East Asian Economic Caucus

EU

European Union

FDI

Foreign Direct Investment

FDIC

Foreign Direct Investment in Canada

GATT

General Agreement on Tariffs and Trade

GATS

General Agreement on Trade in Services

GDP

Gross Domestic Product

IIP

Immigrant Investor Program

MAPA

Manila Action Plan for APEC

NAFTA

North American Free Trade Agreement

NGOs

Non-governmental organizations

NIEs

Newly-industrialized economies (Hong Kong, Republic of Korea, Singapore, and Taiwan)

NTBs

Non-tariff barriers

OECD

Organization for Economic Cooperation and Development

Oceania

Australia, New Zealand, Cocos Islands, Nuaru, Norfolk Island, Papua New Guinea, Fiji, Tokelau, Niue, Cook Islands, Solomon Islands, Kiribati, Pitcairn Island, Tonga, Western Samoa, Wallis Futuna Islands, Vanuatu, New Caledonia, French Polynesia, Guam, American Samoa, and United States Outlying Islands)

Pacific Rim

Includes East Asia and Oceania

PECC

Pacific Economic Cooperation Council

PIDS

Philippine Institute for Development Studies

SMEs

Small and medium-sized enterprises

WTO

World Trade Organization


INTRODUCTION

        In 1997, Canada’s relations with the Asia Pacific region are in the spotlight. The Canadian government has designated 1997 as Canada’s Year of Asia Pacific (CYAP) and has scheduled a number of activities and events across the country to showcase Canada’s growing ties with the region. As Chair of the Asia-Pacific Economic Cooperation (APEC) forum in 1997, Canada will manage APEC’s agenda for trade and investment liberalization and facilitation, and economic and technical cooperation. In November 1997, Canada will host the meetings of APEC’s Leaders and Foreign and Trade Ministers in Vancouver. Besides these activities, the Asia Pacific region(1) has become the subject of numerous articles, books, and conferences both in Canada and internationally.

Why is Asia Pacific receiving so much attention now? The end of the Cold War has shifted the foreign policy focus away from security concerns and towards trade and economic issues. For some time now a large share of global economic activity has been occurring in East Asia(2) and the region has become one of the world’s major growth poles. It is estimated that over the next decade all of Asia may contribute between one-half to two-thirds of world economic growth. For exporters, the dynamic East Asia economies represent growing markets for consumer goods and services, capital goods, and infrastructure construction expertise.

Another reason to pay attention to Asia Pacific is China’s integration into the world economy and its emergence as a major world power. Over the last ten years, the Chinese economy has been expanding at an average rate of almost 10% per year. Some have suggested that by the year 2020 China could have the world’s largest economy measured in purchasing power terms. As China’s military might grows in proportion to its economic strength, the security balance in the region will be altered.

Since 1983, Canada’s trade across the Pacific Ocean has exceeded this country’s transatlantic trade. However, despite references to Canada as a Pacific nation, this country’s commercial connections remain rooted in North America. In 1996, more than four-fifths of Canadian merchandise exports were shipped to the United States and over two-thirds of merchandise imports were sourced in that country. Partly because of the Canada-U.S. Free Trade Agreement and NAFTA, Canada is becoming more economically-integrated with the United States, and is trading proportionally less with East Asia and Europe as a result.

If North America is becoming more economically-integrated, the same is true of East Asia. A rising proportion of East Asian trade and investment is intra-regional in nature. East Asia is now Japan’s largest export market and one of the most popular destinations for Japanese foreign direct investment. The rising value of the Yen during the 1980s hastened regional integration as Japanese companies fought to regain their competitiveness by moving operations to low wage countries in East Asia. The region’s increasing integration suggested to some that a Yen bloc was forming in East Asia with Japan as the hub. Malaysian Prime Minister Mahathir’s proposal to form an East Asian Economic Caucus (EAEC) that would exclude outside countries, such as Canada and the United States, heightened concerns about the formation of an exclusionary Asian trading bloc.

United States support for APEC was partly an effort to counter the formation of the EAEC, which the U.S. opposed as a threat to open trade in the region. APEC provided also a means of impressing on the European Union (EU) the importance of concluding the Uruguay Round of GATT negotiations. For Canada’s part, the government believes that APEC offers a means to improve access to commercial opportunities in some of the world’s most dynamic economies. APEC will facilitate business between Canadian and Asia Pacific firms and it will establish the basis for cooperation between governments.

This interim report begins with an overview of the growing economic importance of the East Asian region. It has been 25 years since the Committee reported on Canada’s relations with the region.(3) Since then, the developing East Asian economies have tripled their share of world income and trade and become the most dynamic area of the world.

The second section of the interim report outlines Canada’s trade, investment and immigration links with East Asia. Despite recent publicized sales to East Asian countries by Team Canada missions, the evidence shows that Canada’s shares of the import markets of most of the dynamic East Asian economies has been slipping in recent years. Why have Canadian exports not performed better in these markets? Canadian investment links with the region, although growing, also remain underdeveloped. Is Canada underrated as a location for East Asian investment? If so, why? On the other hand, immigration links with East Asia are very strong, with about one-third of all immigrants arriving from the region in 1996. How can Canada capitalize on this underutilized resource?

One way to help address Canada’s lackluster trade performance with East Asia is by using APEC to negotiate improved access to these markets. The interim report’s third section examines the APEC process of trade and investment liberalization and facilitation, and economic and technical cooperation. As Chair of APEC in 1997, Canada has a unique opportunity to push forward the main APEC agenda as well as to advance Canadian trade liberalization interests. What legacy should Canada provide to APEC?

The interim report’s final section outlines the considerable amount of work remaining to complete this study. The Committee’s final report will address issues involving (1) Canada’s trade and investment competitiveness, (2) human rights in the Asia Pacific context, (3) regional security concerns, and (4) Canada-East Asian cultural linkages.


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