News of Canada’s apparent ejection from the list of countries that stand to benefit from Saudi Crown Prince Mohammed Bin Salman’s largesse reminded me of something that Stephen Poloz, the Bank of Canada governor, said last month.
It was from his interview with the Financial Post. I had asked Poloz if he thought Canadian aluminum and steel exports might push through U.S. duties the same way lumber shipments had? He surprised me by saying the issue was bigger than that. “It could be that we’re putting too much energy into it,” he said, referring to the tit-for-tat response to the Trump administration’s tax on metal imports.
“But at the same time,” Poloz continued, “if we’re not going to spend energy on it, just because this is small, or that’s not going to have much effect, what good are we? There are principles involved.”
Principles now are driving relations between Canada and a country that had excellent potential to help Prime Minister Justin Trudeau with his quest to make Canadian companies less reliant on the United States.
Late last week, Freeland, and then her department, tweeted statements of disappointment over the imprisonment of advocates for women’s rights by Saudi authorities.
There was no reason to pay any attention to those tweets. Canada has little, if any, influence in the Middle East, and those are the sorts of comments democratic countries direct at their partners all the time.
The kingdom responded to Freeland’s by expelling the Canadian ambassador and freezing “all new business” with Canada.
“Any further step from the Canadian side in that direction will be considered as acknowledgment of our right to interfere in Canadian domestic affairs,” the Saudi foreign ministry said in a statement. “Canada and all other nations need to know that they can’t claim to be more concerned than the kingdom over its own citizens.”
All this should be a reminder that politics now represent one of the biggest threats to the global economy.
The trade wars get most of the attention, but the issue is bigger than that. Before the financial crisis, a democratic world order seemed possible. Now, emerging powers are looking to different role models. China’s brand of state-sponsored capitalism has a track record of generating wealth, and Beijing’s see-no-evil approach to international investment offers an alternative to Western money that comes with strings attached.
Authoritarian regimes in countries such as Turkey, Russia, and the Philippines feel emboldened to go their own way, putting pressure on France, Canada, and other winners of the Cold War to stand up for free trade, the rule of law and human rights. All of this makes geopolitics acutely unpredictable, especially since it’s difficult to know on any given day on which side of this divide U.S. President Donald Trump places himself.
Here’s an example of how quickly political conditions change.
The first thing someone at Export Development Canada will need to do when the Ottawa-based agency reopens after the holiday weekend is tweak its assessment of Saudi Arabia as an investment destination.
EDC, which, among other things, sells insurance for potential losses from arbitrary government decisions, currently rates Saudi as “open” for business, with a “low risk” of political interference.
The Crown lender, like many others around the world, had become excited by bin Salman’s plan to spend a fortune over the next couple of decades overhauling his country’s economy to make it less dependent on oil and a bloated public service. Bin Salman intends to finance at least some of his program by selling a stake in Saudi Aramco, the world’s biggest oil company, although it remains unclear when the sale will happen. EDC spied opportunities for Canadian companies and investors in power generation, telecommunications, natural gas exploration, and the production of petrochemicals.
“The country’s efforts to diversify its economy is driving opportunities for Canadians in many sectors,” EDC says on its website. “Business opportunities exist across a wide range of sectors that match Canadian capabilities.”
That was true on August 3. Today, probably not. Saudi Arabia’s rulers are said to hold grudges.
“It would appear that Canada continues to view Saudi Arabia with an outdated ideological lens,” said Omar Allam, a former diplomat and chief executive officer of Allam Advisory Group, a trade consultancy.
“The current Canadian trade playbook is clearly not working, and Ottawa’s foreign policy and engagement strategy in Saudi Arabia has backfired.”