08/17/2011 11:15 EDT | Updated 10/17/2011 05:12 EDT

Stephen Harper and Brazil: One Step Forward, Two Steps Back?

Emerging economies have numerous leaders visiting them in efforts to hitch onto success and it is a very good sign that Canada is in the mix. Yet when the troubles hit, Canada will likely to return to established friends -- even when those friends have precipitated risky economic activity.


There have been a number of extremely positive signs that Canada is at last seriously engaging the BICS (BRICs minus Russia), the ascending countries of Brazil, India and China. After a period of time where Canadian governments either ignored or alienated this important constellation of states an impressive shift has occurred in which a concerted effort is under way. No sooner had Prime Minister Harper ended his successful visit to Brazil than it was announced that he would visit China for the second time in November 2011. The first trip, at the end of 2009, was paired with a visit to India with a high-powered delegation of MPs and business representatives.

This engagement of the BICs cannot be separated from the G20. Although unfortunately overshadowed by the violent street disturbances in Toronto, it should not be forgotten that this June 2010 summit allowed PM Harper to host both President Hu Jintao and Prime Minister Dr. Manmohan Singh for state dinners.

President Luiz Inácio Lula da Silva of Brazil certainly would have received the same treatment -- and most probably an even more elaborate reception given his stature as a twice elected and highly respected global statesman -- if local difficulties (massive floods in the northeast of his country) had not prevented him from leaving Brazil for the Toronto G20.

Moreover, the November 2010 G20 summit in Seoul allowed Canada to engage with India in a particularly focused and constructive fashion. Caught in the middle of a bitter struggle over the issue of trade re-balancing, Canada and India took on the role of co-chairs of a committee tasked to make proposals on these questions. On the sidelines of the G20 there was also an initiative to official start negotiations bilateral negotiations on a free trade deal.

Still, amid the constructive advances by design on the bilateral front in PM Harper's trip to Brazil the multilateral connections with the BICS via the G20 went missing by default.

There could be few better examples of a situation in which Canada should engage the BICS than during the market turmoil centred in the U.S. and the EU.

Yet when the troubles hit, the Canadian response in a collective fashion was via a statement of G7 finance ministers' forum not the G20 -- a declaration that had little or no impact.

What signal does this approach send to Brazil -- and indeed to the BICs more generally? That Canada is eager to engage but at moments of trouble the instinct will be to return to established friends -- even when it is those friends who have precipitated the problems through risky economic activity and disjointed political practices.

The new relationship between all the BICs and Canada is animated by a new form of complex interdependence based on growing patterns of investment and other forms of interaction. The two countries have moved from the years when the relationship was marred by tensions over the Bombardier/ Embraer dispute and beef bans to a point where key CEOs have been able to form a chief executives forum that will offer Ottawa and Brasilia policy advice.

But the Canada-Brazil relationship is consolidated by a coincidence of interests that are projected forcefully in the G20 context.

Both countries demonstrated safe and reliable banking systems that weathered well the shocks of the 2008 financial crisis. Both therefore opposed new forms of bank levies advanced by the U.S. and the Europeans.

Both countries fear currency wars that whipsaw them between the U.S., China and the EU. -- scenarios that will make their exports less competitive.

Both countries after introducing successful stimulus packages in the aftermath of the 2008 financial crisis have introduced some public spending cuts.

And both countries now have policy-savvy leaders, although of course Brazil has moved from the charisma of Lula to the technocratic orientation of Dilma Rousseff.

Such commonalities could (and should) have been used to help animate the G20 into some form of action -- beyond a short statement by finance ministers and central bankers after the G7 statement -- and confirm its role as a global crisis committee in a time of need.

A strong argument can be made that if the G20 is not used in precisely this type of situation punctuated by financial fragility -- the momentum that built up in the post-2008 years will be lost by neglect.

But the collateral damage for Canada, if not by design but by default, through this non-use of the G20 potentially extends beyond the multilateral arena into the bilateral relations.

As the major engines of current world growth all of the BICs have numerous leaders visiting them in efforts to hitch onto success and it is a very good sign that Canada is in the mix.

Nonetheless it is only when troubles hit -- and choices about selective institutions are made -- that a more accurate indicator of which relationships are privileged can be gauged.

By reverting to the G7 as the primary go-to forum, there is a great risk that the BICs will operate themselves in a more exclusive fashion -- as they have the means to do.

At a time when Canada has considerable strengths -- not only in terms of a mix of high tech and resources, but stable financial institutions, and a high degree of political coherence, potential gains will be lost if there is a disjunction between what is done bilaterally and what is said and hopefully done at the multilateral level.