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Ottawa’s delay on Asian infrastructure bank shows divided approach to China

Finance Minister Joe Oliver delivers remarks as he attends the Industrial and Commercial Bank of China event launching the Canadian Renminbi Clearing Centre and Trading Hub in Toronto on Monday, March 23, 2015.

Chris Young/The Canadian Press

Ottawa's delay in staking out a position on a new Beijing-led infrastructure bank is raising questions about the Conservative government's strategy toward China at a time when relations between the two countries appear to be improving.

Britain, France, Germany and Italy all announced this month that they would join the contentious Asian Infrastructure Investment Bank, leaving Canada among a shrinking number of industrialized countries that have not yet signed on. As a March 31 deadline to become a founding member approaches, Ottawa has remained non-committal, saying it continues to weigh the decision.

Observers say the delay likely reflects a well-known divide within the government over how to engage with Asia's largest and most influential economy. Those urging Ottawa to join say Canadian companies could benefit from lucrative infrastructure contracts as the bank's influence grows.

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While the U.S. initially opposed the bank, it has since softened that stand as a number of other countries joined. Washington said recently that it would be open to co-financing projects with the new institution, though it is still not expected to sign up as a member.

Australian Prime Minister Tony Abbott said Wednesday that Australia is "disposed" to joining the new institution, though he expressed reservations about how much power Beijing will wield. There are concerns the bank will become an extension of China's influence in the region.

Speaking in Toronto earlier this week, Finance Minister Joe Oliver said he had discussed the question of joining the bank with the Chinese ambassador and with senior officials in the Chinese government, including China's Finance Minister.

"Infrastructure is an extraordinarily important area for our government and for governments around the world, so we're looking at that," Mr. Oliver said.

He declined to comment on whether Canada would join the new bank, however. "We're going to make a decision in Canada's national interest," he said.

Asked about the matter again on Wednesday, a spokesman for Mr. Oliver said he had nothing more to add.

There have been a number of positive steps in Ottawa's relationship with Beijing in recent months. Since Prime Minister Stephen Harper visited China last November, the government has established a new yuan trading hub in Toronto and China announced it would ease visa requirements for Canadian travellers.

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But there are still concerns that Canada's strategy toward China remains unfocused, as Ottawa attempts to balance economic interests with concerns about getting close to an authoritarian regime.

"I think that in the last three years in particular, Canada has been particularly reactive, rather than proactive, on some of the big issues in Asia," said Paul Evans, who teaches international relations at the University of British Columbia and specializes in Canada-China relations.

He said that extends beyond the bank, adding that China has made a number of other proposals for financing facilities and infrastructure projects.

"Even as the Chinese ambassador has suggested that these could be relevant to Canada, there's been no, what I would call strategic or structural, response to them. In fact, Ottawa's been silent on everything," Prof. Evans said.

The Asia Pacific Foundation of Canada has expressed support for the bank, saying it will offer Canadian companies new opportunities and help address a massive gap in infrastructure funding that the World Bank and the Asian Development Bank have been unable to fill.

"Right now, if you look at the existing structures that we have, there just aren't enough resources for development in Asia," said Eva Busza, vice-president of research and programs at the foundation. "For Canada, it's a super opportunity, first of all to indicate our commitment to Asia."

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Joining as a founding member could give Canada a say in how the new institution in structured, Ms. Busza added.

Part of Ottawa's reticence in making a decision about the bank may stem from a long-standing debate within the Conservative government over how to handle relations with China, said Charles Burton, a political science at Brock University who specializes in Canada-China relations.

While some cabinet members favour greater economic engagement, others raise flags about China's human-rights record. "I'm sure the [bank] debate is cracking along the same lines," Prof. Burton said.

The Chinese embassy in Ottawa said the door will remain open for interested countries to become involved with the bank after the March 31 deadline to become a founding member.

Asked about the matter during Question Period, the parliamentary secretary to the Finance Minister said Canada's ties with China have improved dramatically. "We have just recently announced the renminbi trading hub in Canada, which will help businesses. We are continuing to look at this possible bank venture as well," Andrew Saxton said.

With a report from David Kennedy in Toronto

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About the Author
Parliamentary reporter

Kim Mackrael has been a reporter for The Globe and Mail since 2011. She joined the Ottawa bureau Sept. 2012. More

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