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Escalating China-Taiwan tensions a concern for Canada

Trade relationships increasingly complicated as Ottawa navigates geopolitical minefield

The rapidly escalating tension in the Taiwan Strait – as China steps up aggressive military exercises around the self-ruling island, which recently hosted a one-day visit from U.S. House Speaker Nancy Pelosi – creates another diplomatic tightrope that Canada must manage.

That is the opinion of several Asia-Pacific affairs observers, although ideas on how Ottawa should walk that tightrope vary, particularly as China continues to be Canada’s second-largest trading partner.

As of Aug. 4, Ottawa’s only move has been Foreign Minister Melanie Joly’s public statement in conjunction with other G7 countries calling on Beijing to de-escalate. 

“We think that legislators do visits around the world and clearly the visit cannot be used as a justification for heightened tensions or a pretext,” Joly said in her media appearance in Montreal.

The call comes as G7 nations issued a statement collectively chiding Beijing over “live-fire exercises and economic coercion, which risk unnecessary escalation” in the Taiwan Strait: “There is no change in the respective one-China policies, where applicable, and basic positions on Taiwan of G7 members.” 

Pelosi visited and left Taiwan in early August during her trip across Asia. Beijing retaliated by issuing a number of sanctions against Taiwanese imports and by setting up a large group of live-fire military exercise zones around the island for three days.

Despite continued tensions between China and the West in recent years, Canada-China trade grew last year. Exports jumped 14 per cent to a record high of $28.84 billion. Chinese imports also rose 12 per cent to $85.67 billion during the same time.

However, Canada also has significant trade with Taiwan: exports rose 46 per cent to $8.2 billion last year. Taiwanese imports also jumped 48 per cent to $6.2 billion.

Gordon Houlden, director emeritus of the University of Alberta’s China Institute, said the current situation is legitimate cause for concern.

“Simply, at this moment, I think what you have is a shift in the power relationship,” Houlden said. “In 1995-1997 [during the last Taiwan Strait Crisis], China had about one-tenth of the GDP it has now. China is currently basically the U.S.’s peer in terms of economic potential … and it’s drawing closer in military terms. And I think you also have a president [Chinese leader Xi Jinping] who’s taking a hard line on wanting to preside over unification.

“There are two ways for Canada to think about this. There are thoughts: ‘Why couldn’t Canada be more forthcoming with its own visits?’ But I think the net effect for Canada in a destabilizing U.S.-China relationship is a negative one. Our narrower relationship with Taiwan may benefit in the short-term, but it may undermine our broader interests in East Asia.”

Former Canadian ambassador to China David Mulroney – one of the most vocal critics of Canada’s ambiguous position on China – disagrees. In a number of tweets, Mulroney was adamant that Ottawa can learn from Washington by taking a clearer, harder position against Beijing.

“What Ottawa doesn’t get, and won’t get with the team it has assembled, is that our China challenge won’t simply go away if we continue to ignore it,” Mulroney said on his Twitter account. “It’s a domestic, in-Canada problem threatening our institutions and autonomy.”

Mulroney also praised Pelosi’s visit as capping a three-decade position of challenging China’s position on human rights and democracy.

Taiwan leaders themselves have been eyeing current tensions between China and the West as an opportunity – although they are exercising more caution in the wake of Chinese military threats. Last week, a Taiwanese delegation of legislators visited Canada – and stopped in Vancouver – in an effort to encourage Ottawa to show approval of Taiwan’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an 11-nation trade bloc of which Canada is a member.

Chiu Chih-Wei, one of the legislators heading the delegation, said the group has visited other CPTPP countries, such as Malaysia and Singapore, to drum up support for Taiwan’s formal application to join – which was filed in 2021.

Chiu, however, did note a key difficulty: China applied for CPTPP membership shortly before Taiwan’s bid. While few expect China’s bid to succeed given the wide gap in regulation standards on items such as intellectual property rights and equitable labour laws, most experts view the bid as an informal block on Taiwan’s application to join.

“Taiwan’s regulation is completely in-line with CPTPP requirements,” Chiu said. “What we need is the support of key states like Canada, Japan and Singapore. China may have rushed in with an application, but their legal standards are not there yet; Taiwan is there. Given the anti-Chinese sentiments [in the West], we have to use that macro environment for momentum.”

But Houlden warned that there are obvious risks in that approach – not only for Canada, but for Taiwan – because Taiwan has benefited from China’s economic rise through investment and trade over the last three decades.

“The one good thing I can say about the situation is that none of the parties actually want war,” Houlden said. “Taiwan wants independence. China wants unification. The U.S. wants military stability and security in the west Pacific. None of them are 100 per cent happy, and it’s not perfect. But most of the world’s poorer countries would love to have Taiwan’s problems. More than 80 per cent of the population has a university education. The people are rich.… The many scenarios from upsetting the status-quo are far worse for everyone.”

Taiwan, also known as the Republic of China, entered its current status after the Nationalist KMT lost the Chinese Civil War to the Chinese Communist Party in 1949. The KMT retreated to Taiwan, and the country became democratic in the 1990s.

China, or the People’s Republic of China (PRC) under communist rule, sees Taiwan as a renegade province and has not ruled out unification by force. The PRC has held the Chinese seat in the United Nations since 1971, before which the Chinese seat was represented by Republic of China officials from Taiwan, even after the KMT lost control of almost all Chinese territory in 1949.