Fresh off the high from the G-7 economic summit in Sendai, Japan, Canadian Finance Minister Bill Morneau pointed to renewed interest in pursuing a spot in the recently launched Asian International Investment Bank – a China-spearheaded global development bank focused on the Asia Pacific region.
In a recent conference call with reporters, Morneau noted Ottawa’s “positive perspective on the impact that it (the AIIB) can have on infrastructure investment and the impact on the global economy.”
“I think we’re waiting for the bank to take the next step, and we’re actively considering our position and see the positive outcomes that this new bank can have for the economy,” says Morneau.
In a sense, the news is a turning point in Canada’s potential relationship with the AIIB – which carries some similarities to the World Bank and closely-related cousin the Asian Development Bank – after deciding not to join during the open invite phase when the Beijing-based organization started gaining momentum in 2013.
Since then, 60 members have joined including Italy, the U.K., France and Germany, while others, including Canada and the U.S., have watched from the sidelines.
With the most recent discussions concerning the AIIB, that could change.
“China is Canada’s biggest trading partner and if China is going to build more infrastructure and trade linkages with Southeast Asia, this is something that potentially Canada could also benefit from,” Anton Malkin, an expert on the role of China in the international monetary and financial systems and a research associate at the Waterloo-based Centre for International Governance Innovation think-tank told Yahoo Canada Finance.
Two-way trade between China and Canada adds up to about $170 billion a year.
Malkin points out that while CIGI is a bi-partisan organization and he’s not well versed in the politics side of signing onto AIIB, his suspects Canada’s failure to sign on during the open invitation “might have something to do with Canada being a U.S. ally.”
“The United States and Japan raised some concerns about the AIIB partly due to U.S. and Japanese support for the IMF and World Bank – their positions stated by President Obama and Prime Minister Abe was that they prefer infrastructure and development lending to be done within the existing framework of international institutions.”
But with China pushing ahead on a more Asia Pacific-focused institution that will fund projects in the region, Canada’s likely going to want a seat at the table.
“(We) could be more plugged in to the trade linkages and investment linkages between Canada and Southeast Asian countries,” says Malkin.
While membership is still up in the air – the AIIB is expected to have its inaugural meeting June 25-26 – Malkin suspect industries focused on infrastructure and aerospace would see the most benefit from Canada’s potential role.
“It looks to be a project-based institution… so road building, dams, things like that… Canadian companies could be involved,” says Malkin.
While some, like David Mulroney – Canada’s former ambassador to China – have argued that taking some time to let the newly-formed development lender gestate isn’t such a bad thing, others like a report released by the Institute for Research on Public Policy in partnership with the University of Toronto’s Munk School of Global Affairs calls it a once-in-a-lifetime opportunity to improve relations with China.
“If the (AIIB) even partially succeeds, it will have a significant impact of linking poor Asian countries into the global economy,” says the report. “The potential for new business is significant. But to realize these opportunities, Canadian firms will have to expand their links with Asian supply chains and Canada will need to join the AIIB.”
But Malkin points out that it’s also worth recognizing the role Canada would play if it joined.
“The voting rights Canada will have in this organization (are) unlikely to be anywhere as big as China or Russia or India for example,” he says. “That being said, it doesn’t mean Canada will be irrelevant, there will be other countries similar to Canada… developed economies not the biggest by GDP but altogether they can represent a coherent set of interests in this organization.”