9. What can other countries learn from Canada’s Indo-Pacific Strategy?
Key Point Summary
Indo-Pacific strategies are vital in helping middle powers to secure their interests in the region. However, the failure of Germany, France and others to clearly identify China’s role in the region risks strategic incoherence.
Middle powers have influence and international recognition but nevertheless face a variety of challenges in implementing their Indo-Pacific strategies. Chief amongst these is learning to compete with China’s growing economic and diplomatic dominance in the region. Efforts to exclude China from regional groupings may lose support among potential partners in the region.
Canada sets the standard as the only middle power to have set out dedicated funding streams for Indo-Pacific projects. Funds totalling CAD$2.3 billion have been allocated to projects across development, trade and defence cooperation in the region.
This paper recommends middle powers emulate Canada’s approach by building an unambiguous strategy to compete with China’s growing influence in the Indo-Pacific through increased trade, investment and bolstering hard and soft power capabilities.
Why did Canada develop an Indo-Pacific Strategy?
In the past two years Canada, the EU, France and Germany have all released their own Indo-Pacific strategies, while major foreign policy reviews in the UK and Australia also included a focus on the region.
Common to all these strategies is a recognition that the stability of the Indo-Pacific region is critical not only to its own national interest but also to global prosperity. The Indo-Pacific region encompasses 40 economies, over four billion people and $47.19 trillion in economic activity – almost one-third of all global economic activity. As middle powers, these countries have influence and international recognition but cannot leverage the same resources towards shaping the region as the US and China.
Canada’s Indo-Pacific Strategy also arises from its own experience of China as an increasingly disruptive global power. Canada has experienced China’s ‘coercive diplomacy’ first-hand following the arrest of Meng Wanzhou, a senior Huawei executive, on a US extradition request. In response, China blocked the import of half a dozen Canadian products including beef, canola, peas, and soy on fabricated grounds, while also holding hostage Canadian citizens Michael Spavor and Michael Kovrig.
Furthermore, there have been serious problems in how foreign technology companies were being treated in China’s business practices. This can be seen in joint ventures, where the majority Chinese partner would manoeuvre to take over the technology and the company, as well as in over-regulation and sudden policy changes to disadvantage Canadian firms. One of the reasons that the Canadian Indo-Pacific Strategy was developed was to put resources into helping companies build new business partnerships in other countries that operate by the rule of law, in order to reduce and better manage their China risks.
Having been adversely affected by these actions, Canadian companies have learned hard lessons and are now diversifying to new markets. Of course, there will always be trade between China and Canada. China continues to need Canada’s natural resources and Canadians want China’s cheap manufactured products. But, by deepening relations with other countries in the region, Canada can help to reduce its exposure to the Chinese government’s coercive diplomacy, its punitive trade practices, and its capricious business tactics.
What can other countries learn from Canada’s Indo-Pacific Strategy?
Strategic clarity
The EU, France, Germany, UK and Australia have all alluded to the risk of de-stabilising actors in their Indo-Pacific Strategies. Yet few are willing to name China explicitly. Both the French and German strategies cite intensifying challenges to the international order and the risks posed by conflict in the Taiwan Strait, but fail to identify who the main aggressor in these scenarios might be.
Compared with other countries, Canada's recognition of China’s coercive diplomacy, assertive pursuit of its own interests and destabilising unilateral action is very clear. Following Canada’s approach, the UK government has directly expressed its concerns about China’s military intentions towards Taiwan in the 2023 Integrated Review Refresh. This is a positive change from the previous iteration of the same strategy, which did not mention Taiwan at all.
There may well be a diplomatic rationale behind other countries’ decision not to identify China so explicitly in their Indo-Pacific strategies, but doing so comes at the cost of strategic clarity. Germany’s deployment of its Bayern frigate in the region highlights the challenges that this presents to coordinated action. Although the mission was intended to demonstrate Germany’s willingness to work with allies to uphold navigation rights in the region, internal disagreements within the German government led to the ship declining to join allied expeditions in the region and shying away from sailing through the Taiwan Strait. Such actions send mixed messages to Beijing about Germany’s commitment to the region and highlight the limitations of this ambiguous approach.
Dedicated resourcing
Other countries should also seek to emulate Canada’s dedicated funding for delivering various aspects of the Indo-Pacific Strategy. The Strategy sets out a comprehensive suite of initiatives reflecting investments of CAD$2.3 billion in the region in the next five years, to be renewed in 2027.
Much of this strategy is focused on trade and investment to help meet the economic development needs of the region. The largest single investment of $750 million over three years is pledged to FinDev Canada, a development finance institution, to contribute to high-quality sustainable infrastructure in the region. Moreover, Canada will invest $244 million in economic projects such as the Indo-Pacific Agriculture and Agri-Food Office (IPAAO) and the Canadian Trade Gateway initiative Southeast Asia to boost opportunities for Canadian firms in the region. As part of its effort to diversify trade in the region, Canada is already a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) free trade agreement and is moving towards a trade deal with the ASEAN bloc with enhanced funding for the ASEAN-Canada Plan of Action Trust Fund.
The strategy also includes a range of hard power and soft power initiatives. $720 million is budgeted for advancing peace and defence cooperation in the region. This will reinforce and increase Canada’s military presence and participation in joint naval exercises with its partners in the region. To bolster people-to-people ties, Canada will invest $261.7 million in international assistance, visa processing capacity, and institutional and academic exchanges.
In contrast, the EU, UK, France and Germany’s Indo-Pacific strategies are not accompanied by a set of dedicated budgetary commitments. Instead, these Indo-Pacific strategies generally rely on existing departmental funds. This means that Indo-Pacific directed projects risk facing budgetary pressures from other policy commitments. As the West struggles to rebound from the COVID-19 pandemic and suffers the economic shocks of Russia’s invasion of Ukraine, ringfencing funds for the Indo-Pacific strategy is critical to its implementation.
What challenges will middle powers face in implementing their Indo-Pacific strategies?
Middle powers seek to engage in the Indo-Pacific without the economic and political heft of superpowers. As such, they face a number of challenges in implementing their Indo-Pacific strategies.
Above all, there is the challenge of managing the relationships that partners in the Indo-Pacific region have with China. In many cases, democratic countries will seek to build alternative forms of engagement that exclude China. For example, the US-led ‘Chip 4 Alliance’ works to produce a resilient semiconductor supply chain that does not include a major role for China.
While this may be necessary in cases relating to security and strategic interest, many countries in the Indo-Pacific will not want to choose between China and the US-led democratic bloc. Given that China consistently ranks as ASEAN’s top trading partner, pressuring Indo-Pacific countries to move away from China may prove counterproductive. Where possible, democratic countries must learn to compete with China’s role in the region.
The signing of the China-Solomon Islands Security Pact last year shows the urgency with which democratic countries need to begin competing with China in the region. The pact, which gives China the possibility to dispatch military forces to the region, comes after years of Chinese investment in Pacific island countries. Between 2008 and 2020 China provided nearly $3.148 billion in donations to the Pacific region, and has stepped up its diplomatic representation significantly.
In order to compete effectively with China, middle powers must be able to coordinate their respective Indo-Pacific Strategies. This will remain a key challenge as divisions emerge among and between these countries. Although the EU has produced its common Indo-Pacific Strategy, there remain divisions in its implementation. Surveys of policymakers in the EU found widely divergent views on future economic relations with China across member states, with some policymakers largely uninterested in the region. Divergent interests were brought to the fore in the wake of punitive Chinese trade sanctions on Lithuania in response to the renaming of the Taiwan Representative Office in Vilnius. While the European Commission supported Lithuania’s case against China at the WTO, German companies with business interests in China pressured the Lithuanian government to end its dispute with China.
Conclusion
Canada’s Indo-Pacific Strategy can provide a model for other countries as a comprehensive and fully-funded strategy that begins from a clear-eyed assessment of China. Its approach foresees closer collaboration with like-minded democracies such as Japan, as well as with those nations with common interests such as Vietnam. Such strategies open up new, alternative partnerships than countries’ historical reliance on China may have foreseen. They mark a modern and stronger Indo-Pacific with a rich network of alliances, both formal and informal. In many ways, a comprehensive super-region will help counter China’s aggression.
Recommendations
Counterbalance China’s growing regional dominance: Middle powers should seek to emulate Canada’s efforts to boost their economic partnerships in the Indo-Pacific through setting up trade bodies for the region and joining regional trade initiatives such as the CPTPP. Countries should also invest in sustainable infrastructure initiatives in the region, as shown by Canada’s FinDev commitment.
Dedicate budgets to operationalise Indo-Pacific outreach: Canada’s budgeted Indo-Pacific strategy sets the standard for middle powers. By specifying budgets for trade development, increasing people to people ties and security partnerships in the region, governments can ensure that their strategic interest in the Indo-Pacific is not undermined by other budgetary pressures.
Clarify strategic objectives: Governments must be clear in their recognition that China’s increasing assertiveness on Taiwan and territorial claims in the South China Sea pose the prime threat to a free and open Indo-Pacific. Freedom of navigation missions, joint exercises, training exchanges and other defence cooperation with allies in the region must be focussed on deterring China from taking military action against Taiwan.