09/07/2012 11:48 EDT | Updated 11/08/2012 05:12 EST

Can Canada Become China's New Australia?


The variations between Canadian and Australian politics and policies are as interesting as the fundamental similarities between them. Both are highly globalized, mixing multiculturalism with modified versions of the Westminster parliamentary system, federalism and urban/rural contrasts and Royal in the names of their armed services. Both have long and often distinguished traditions as middle powers, overlaid with bursts of economic nationalism when faced with challenges related to foreign ownership of domestic assets especially of fuel and non-fuel resources. Although in the past this nationalism has been directed toward the United States, it is now the question of Chinese access that has become the lightening rod of controversy.

Australian governments over the past few decades have been quite successful in balancing foreign policy interests that consolidate security links with the United States while catering to Chinese demands, especially in minerals. This has been true of the Australian conservative coalition that brings together the Liberal and National parties. But it also true of the Australian Labor Party (ALP) currently holding on with its fingernails to office. I cannot find too many examples of a country that has done a more successful job of segmenting security and commercial policy approaches.

On the one hand, Australia under Prime Minister Julia Gillard has ramped up its reputation for being a loyal ally to the United States by agreeing to the deployment of up to 2,500 marines in the Northern Territory -- a deployment commonly interpreted at being directed at China. On the other hand, notwithstanding some well-publicized irritants, the Australian-Chinese relationship in minerals such as iron ore has expanded considerably. Overcoming the spillover from the fallout of episodes such as Chinese authorities arresting and imprisoning four Rio Tinto executives (including Australian citizen Stern Hu on charges of stealing commercial secrets and bribery), Chinese investors from mostly state-backed steelmakers moved to increase their stake as the so-called resource super-cycle played out. In one of the best-known deals, state-owned Hunan Valin Iron & Steel Group paid $1.3-billion (Australian) in 2009 for a 16.3 per cent stake in Fortescue Metals Group.

At odds with this balanced approach, however, are signs in Australia that there is defection among the political elite from this successful model. Australia's opposition leader Tony Abbott used a speech in Beijing at the end of July to declare he prefers a more value driven approach rather than the pragmatic formula used by Labor and indeed by Abbott's predecessor, John Howard -- a politician that rode this approach for a long and unanticipated 10 years plus as prime minister from 1996 to 2007. Abbott followed up by announcing, through a Coalition discussion paper, that any government he leads would be wary of foreign takeover attempts in established enterprises. This would include agricultural operations such as the major cotton growing 'Station' that amid considerable raucous debate is to be bought out by a Chinese-led consortium.

This shift by Tony Abbott could simply be posturing from an aspirant prime minister unaccompanied to operating on the global stage. It could also be an attempt to differentiate on a partisan basis from 'the world is tilting toward China' vision espoused, in a number of speeches around the world, by former Australian prime minister and ALP leader Kevin Rudd. Still any such declaratory statements seem out of synch not only with the economic well-being of many of his major business and regional supporters, but also with the screeching halt of the resource super-cycle.

Whatever the direct salience for Australian politics and policy (although polls continue to put the Coalition ahead of the ALP), comparative analysis with Canada and the trajectory of Prime Minister Stephen Harper's China strategy is highly interesting. Akin to Tony Abbott's current approach, Stephen Harper came into office in 2006 with an approach that emphasized values over commercially based interests. In a plausible scenario for Abbott's future -- if and when he puts this platform into operation while in office -- Prime Minister Harper realized an adjustment was needed to unfreeze relations with Beijing. Big picture realpolitik won!

Still, as in the case for Australian governments, the tough test for Prime Minister Harper and indeed for Canada is when a yes or no call has to be made about pivotal Chinese resource investment deals -- think of the $15.1-billion (Canadian) bid made in July by the state-owned CNOOC Ltd. for Canadian energy company Nexen Inc. With the expansion of Chinese firms operating in Canada, and the signing of a long-delayed Canada-China Foreign Investment Promotion and Protection Agreement, Canada -- in the last couple of years -- has achieved an impressive performance in catching up to Australia's longstanding approach to China.

Overwhelming support (acknowledging the "daunting, unfamiliar challenges" Canadian Business magazine argues akin to representatives of the oil patch that it should be pursued) among Prime Minister Harper's business and regional based supporters (including Alberta's provincial government) for Nexen type-deals, means "yes" can be predicted -- with more deals likely to come. If so, it will again underscore the variation between two highly similar countries. As Australian conservatives, at least in opposition, tilt toward adopting restrictive policies, Canada's Conservative government looks to be open for Chinese business.

This blog first appeared in Andrew Cooper's CIGI blog Worlds of Governance.