‘Ottawa’ Support grows for joining Asia Infrastructure Investment Bank: ‘Clearly in Canada’s Best Interests’
OTTAWA — From all the recent rhetoric, you would think Canada could soon be on the losing end of free-trade deals with its European and Asia-Pacific partners.
But Canada’s decision this week to join a relatively new global organization, the Asian Infrastructure Investment Bank — one based on funding projects in the world’s developing nations — could add a new narrative to the current tone of politics and protectionism that has played a large part in slowing progress in the implementation of long-sought and hotly debated international deals.
Momentum for the Trans-Pacific Partnership has slowed amid a divisive U.S. election campaign that is rattling confidence in global commerce with all the talk about tearing up trade pacts and “building walls,” rather than eliminating barriers. Meanwhile, the U.K.’s decision to leave the European Union has created trade concerns in Europe.
But moving against that tide of tighter trade rules, support for the AIIB appears to be gaining momentum both globally and in Canada, where, under the previous Conservative government, support had been stalled.
“We believe that Canada’s membership will generate commercial opportunities for Canadian companies, create good jobs and contribute to global economic growth,” Finance Minister Bill Morneau said Wednesday in Beijing.
“Participation in the bank is clearly in Canada’s best interests,” said Morneau in a joint news conference with the bank’s president Jin Liqun.
Some say it’s about time this country bucked up to help grow these economies — and benefit from new trade opportunities with these countries that is expected to follow.
Others, however, warn it will only add to the burgeoning debt among developed nations, like Canada, which under a new Liberal government has embarked on a multi-billion-dollar, multi-year stimulus program after only just eliminating the red ink from its recession-era spending binge.
During this week’s summit of Group of 20 industrialized nations in China, Canada announced it had applied to join the 57-member AIIB that already includes Australia, Britain, France and Germany. The bank will help fund projects in countries such as Indonesia and Bangladesh and Pakistan.
The United States has yet to decide whether to join the group.
Developing nations are hungry for construction services, and maintenance and repair services, which represent over a half-billion dollars a year in export activity.
“We’ve got prominent companies that are world leaders with respect to infrastructure,” said Peter Hall, vice-president and chief economist at Export Development Canada.
“So, cracking into the Asian market in that way, being a part of the infrastructure (the) bank facilitates, is clearly the right thing for Canada to do,” he added. “Infrastructure is one of the greatest logjams in the economy. There’s great need around the world — and this is a region that is particularly dynamic. There’s no question what the opportunity is there.”
To execute large-scale projects, these countries need to attract major construction and infrastructure companies from countries like Canada, as well as from pension funds and other international institutions.
“Domestic constraints are requiring companies to think more (internationally). The way that business is actually done requires more and more of a footprint on the ground where the business is actually happening in the region,” Hall said.
“Having a heads-up on where infrastructure is actually going is great information to have when making those kinds of decisions.”
Still, despite these opportunities, there are domestic concerns about Canada piling up debt in the process.
“The investment will impact our fiscal framework, representing both a cash and accounting cost that will add to our burgeoning debt,” Joe Oliver, who was finance minister under the Conservative government, wrote in a commentary in the Financial Post.
“Beyond the photo-ops, a feel good reaction from the Chinese and high-level talking points, one hopes a hard-headed analysis was conducted to determine whether the significant expenditure can be justified in Canada’s national interest.”