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Does Ottawa have the right tools?

HEATHER SC OF FIELD

Economic revenge is the answer to everything these days.

Unruly protesters in the street? Cut off their bank accounts.

Russians invading Ukraine? Cut off their access to international payments systems.

Unrest in Haiti? Economic sanctions.

Unscrupulous China? Build up our economic ties everywhere but there.

Flexing our economic muscle is Canada’s answer to foreign policy, defence policy and even domestic public safety. But Ottawa is scrambling to ensure its tools keep up with its ambition.

Of course, economic security has always been paramount for Canada — a medium-sized economy that depends on vigorous trade and investment for much of its wherewithal. And of course, money has always been part of the arsenal in every country’s international relations, especially because it’s not nearly as obviously bloody as, say, bombs — at least not initially.

But it’s clearly the first line of defence for this Liberal government, even as it rushes to fill in the blanks of policy that supports its approach.

The hearings last week on the use

of the Emergencies Act were especially instructive.

“This is about following the money. This is about stopping the financing of these illegal blockades,” Finance Minister Chrystia Freeland said last February, explaining the rationale behind what was arguably the strongest measure against the convoy protesters among those allowed by the invocation of the act.

The intent made a lot of sense. At the time, it looked to Freeland and her cabinet colleagues that the only way the protesters were able to remain indefinitely in their trucks and on the streets was because they were underwritten by flows of money that couldn’t be detected — let alone brought to a halt.

Testimony shows that Freeland and her department believed they had enough authority to track suspicious cryptocurrency movements, but not enough to monitor crowdfunding. They also didn’t have the scope for financial institutions to move in quickly if nefarious activity was detected.

So the government invoked the Emergencies Act, tweaked current laws and is now looking harder at what else needs to be done, if money coming from or destined for undesirable sources is in the pipeline.

But economic revenge cuts both ways. The protesters hit the country’s Achilles heel — the very border where a billion dollars of trade crosses every day, buoying up much of the daily economic life in Ontario and beyond.

The country’s top bankers told Freeland the country was looking like “a joke” and a “banana republic,” the minister said last week, and that Canada’s reputation as a solid and reliable place to invest was at risk at a terrible time — prompting a “heart-stopping” moment for the minister, she recalled.

And when the government signalled it would instruct banks to freeze the accounts to clients connected to the protests, the chill went well beyond those on the streets of Ottawa. Many a creditunion customer withdrew funds in a panic, while others raised questions about the security of their deposits.

In other words, in an era where the federal government prioritizes economic warfare, we are vulnerable to counterattacks, and we are vulnerable to collateral damage.

When it came to the invasion of Ukraine last winter, Canada pushed hard to cut Russia out of the international financial system.

Freeland and Prime Minister Justin Trudeau pushed aggressively in the early days — not just to impose sanctions but also to kick Russia out of the global payments system, isolate Russia’s central bank and sovereign wealth funds, and sabotage the flow of money in and out of that country.

The measures have had some effect, to be sure. But the sanctions have also led to higher prices around the world in an inflation-prone global economy, and we’re still waiting for Russia to be brought to its knees.

Clearly, in dealing with global powers, economic measures are more effective if they’re accompanied with military might — something that wasn’t lost on the crafters of the Indo-Pacific strategy finally released this weekend.

Foreign Affairs Minister Mélanie Joly announced a $2.3-billion plan that lumps China in with North Korea in terms of peace and security in the region, and earmarked almost a quarter of the spending to boosting Canada’s military presence.

That’s a solid commitment from a Canadian perspective, but the big power in the new strategy comes through the economic side. More than half of the $2.3 billion goes toward building up Canada’s business presence in everywhere that’s not China — especially Japan, South Korea and India.

There’s $241 million to bolster supply chains, a commitment to set up a trade hub in Singapore to usher Canadian investors toward deeper ties, and — most importantly — more than $900 million to put toward building infrastructure in an effort to alleviate dependence on Chinese financing.

At the same time, Innovation Minister François-Philippe Champagne has signalled he will take a tougher approach to Chinese investors flirting with Canadian natural resources. He ordered three companies to leave this month.

But the most striking part of the new strategy was its vagaries. Officials have talked about developing new positions, bolstering current laws, tweaking various policies and insisting on a place for Canada in existing trade arrangements across the region.

The strategy, so far, is only a document full of ambition, with a long to-do list. It’s clear we don’t yet have the tools we need to fully engage in a foreign policy through economic aggression.

BUSINESS

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2022-11-29T08:00:00.0000000Z

2022-11-29T08:00:00.0000000Z

https://torontostar.pressreader.com/article/282071985918397

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