OTTAWA — Canada wants its businesses to trade more in more Indo-Pacific markets and to expand innovation links to Asia as part of a new regional plan responding to a “generational global shift” in world affairs. The Liberal government is also looking to contain China’s economic influence, promising new foreign investment controls and IP safeguards. Here’s what you need to know about the new federal Indo-Pacific Strategy, unveiled on Sunday:

Trading places: The new plan promises to add to Canada’s portfolio of economic and investment deals. But Ottawa isn’t announcing talks with any new potential free-trade partners, instead citing ongoing negotiations with India, Indonesia, and ASEAN, as well as the possibility of inducting new members into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The strategy also pledges to promote interoperability and “coherent” regulations for the Internet and digital economy. Canada has already asked to join Chile, New Zealand and Singapore in a compact that sets standards for AI, data flows and electronic trade systems.

Ottawa has already started the work toward the trade part of the Indo-Pacific Strategy, noted Trevor Kennedy, vice-president of trade and international policy at the Business Council of Canada, a lobby group representing the CEOs of the country’s largest firms. But he highlighted that the document devotes sections to India, Japan and South Korea. Under the strategy, Global Affairs Canada (GAC) will add a dedicated desk focused on India to its Trade Commissioner Service, which helps businesses with advice, research and local contacts in new markets. Ottawa is looking to export energy, hydrogen and critical minerals to the North Pacific countries.

The bulk of Canada’s bilateral commerce continues to flow across its southern border. Ottawa has big ambitions to diversify, with a target of increasing overseas exports by half between 2018 and 2025. But even its extracontinental ties are concentrated. Canada did $95.9 billion in merchandise trade with China in the 12 months through September, 6.44 per cent of its total, according to Statistics Canada data. India, Japan and South Korea jointly accounted for $58.6 billion, or 3.93 per cent.

Indo-Pacific nations are “urgently looking” for “credible and reliable partners” to meet demand for energy, food, infrastructure, minerals and technology, Trade Minister Mary Ng said at an event announcing the new strategy in Vancouver on Sunday. Ottawa plans to spend $244.4 million on programming over five years—from a $2.27-billion total budget—to meet the plan’s economic objectives. It’ll set up a new “trade gateway” in Southeast Asia, a $24.1-million hub in Singapore that will provide Canadian firms with market intelligence and help them find sales opportunities. 

It’s allocated $45 million to send businesses on trade missions to the region—a development Kennedy sees as “very positive,” noting “there’s a role for firms of different sizes to participate.” The strategy cites trips to India for cleantech and renewable energy firms as one priority. 

Cross-border capital: Even as Ottawa is looking to encourage investment to and from several nations in the region, it’s promising to more closely scrutinize money coming from one.

“China is making large-scale investments to establish its economic influence, diplomatic impact, offensive military capabilities and advanced technologies,” the strategy states. In response, the document says, the federal government will review and update the Investment Canada Act to “protect our national interests.” It’s also committing to “acting decisively” when state-owned or other foreign entities threaten critical minerals supply chains and other assets. 

Innovation, Science and Economic Development Canada and Public Safety Canada are working to develop those legislative updates, a senior government official told reporters on Monday. (The government routinely conducts such technical briefings on the condition that officials not be publicly identified.) But officials did not specify what the changes could entail. As The Logic first reported in October 2021, Ottawa has considered new notification requirements for deals in sensitive sectors like AI and quantum, or involving state-owned enterprises.

State-owned Chinese businesses began acquiring Canadian companies about a decade ago, noted Subrata Bhattacharjee, national chair of law firm BLG’s competition and foreign investment review group. Ottawa has approved some major deals, including CNOOC’s $15.1-billion takeover of energy firm Nexen in December 2012, but blocked others, including CCCC International Holding’s $1.51-billion bid for construction company Aecon. 

Earlier this month, the federal government ordered three Chinese firms to divest from three Canadian lithium miners. Beijing has identified “a state-owned or state-controlled supply chain” for critical minerals “as a national economic imperative around the world,” said Bhattacharjee. The U.S., meanwhile, is trying to build a feeder network for its own industries, while working to discourage Chinese investment—including by putting pressure on Canada. “It is the grand game of trying to maintain control over that supply chain versus China, and we’re being drawn into it,” Bhattacharjee said. 

The act gives the federal government the power to review foreign investments on national security grounds, but Ottawa’s recent moves suggest it’s assessing against a broader standard of “national integrity,” according to Bhattacharjee. “It’s basically anything that [the government thinks] is critical to us or our economy.” In March 2021, the federal government updated its review guidelines, noting it would consider investigating foreign investments involving critical minerals, personal data and disruptive technologies like AI and quantum. 

The new strategy also promises to protect domestic IP and research, and instructs federal departments to reconsider all bilateral agreements with Beijing. But it’s keen to promote capital flows and innovation cooperation with other countries in the region.

Earlier this month, the federal government announced it would allocate $750 million to FinDev Canada, one of its international financing agencies, to fund sustainable infrastructure projects in Indo-Pacific countries. Ottawa wants to rope in “Canadian pension funds, who already are some of the largest private-sector investors in the region,” Ng said on Sunday. 

In recent years, Canada’s institutional investors have bought up stakes in infrastructure, renewable power firms and other assets in Asia, with India a particularly popular market. But the Liberal government also wants pension funds to deploy capital at home, and has launched new funds to incentivize them to finance infrastructure and cleantech projects. “It is in fact the investors who came to us” about the new Indo-Pacific program, said Ng, responding to a question from The Logic about how Ottawa will balance its domestic and international interests. She cited the significant need for “infrastructure that will help build towards climate resiliency in the region.” 

For example, the Trade Commissioner Service, Export Development Canada and the Canadian Commercial Corporation are working on a new framework for such projects in the Philippines. Operators there need “concessional financing to help them make the project a commercially-viable one, to which then our very important pension money can go,” said Ng. That in turn creates new business for Canadian cleantech startups whose technology they may buy, or engineering and design firms whose services they may use.

The strategy also seeks to boost science and technology links with the region. Ottawa will spend $65.1 million to back “co-innovation and business-oriented R&D partnerships” involving Canadian firms, as well as research collaborations in India, Japan, Singapore, South Korea and Taiwan. It’s allocating $16 million to support cleantech firms to run commercial demonstrations of their products in Asian markets. 

The audience: Canada wants to be that sought-after “reliable partner” in the Indo-Pacific, Foreign Affairs Minister Mélanie Joly said Sunday, and what she acknowledged to be a “long-awaited” strategy is designed to make its case. 

Global Affairs has been working on the plan for over three years amid growing pressure from local allies, business groups and foreign policy experts concerned by geopolitical disputes with China and increasing tension between Beijing and Washington. The new document will help international partners better understand Canada’s moves in the Indo-Pacific, said Kennedy. “It’s an important contribution to Canadian foreign policy and Canada’s place in the world.”   

The Biden administration released its own strategy in February. In a statement Sunday, U.S. ambassador David Cohen welcomed Canada’s version, saying it would “advance our countries’ shared priorities in the Indo-Pacific region.”  

Last month, Joly announced Canada did after all want to join the U.S.-led Indo-Pacific Economic Framework (IPEF), launched in May in part as a counter to China’s influence in the region. The 14 member countries are working to develop measures such as cleantech incentives, emerging technology standards and cross-border data regulations. The first round of negotiations is scheduled for Brisbane in mid-December and is “currently limited to existing framework members,” said Global Affairs spokesperson Sabrina Kalisa, so Canada will not be participating.

While the group does not yet have a formal ascension process, the U.S. and Japan have publicly backed Ottawa’s bid to join. Prime Minister Justin Trudeau and other ministers discussed IPEF membership during bilateral meetings at summits in Asia this month, according to a senior government official, who requested anonymity because they were not authorized to speak publicly. “We had a good conversation also with India, and many other countries,” Joly told reporters Sunday, in response to a question from The Logic. “I think the reaction is extremely positive, and I’m very optimistic.”