Colleagues talking during a meeting.

Canada’s Supply Chain Vulnerabilities and the Links to National Interests

John Gilmour · Former member (retired) of Canada's intelligence and national security community · Posted: June 5, 2020

Supply Chain, Cargo productsThe experience surrounding the procurement of medical supplies and pharmaceuticals from China in support of Canada’s fight against the Covid-19 pandemic has been described as something akin to the wild-west. Cutthroat competition between nations has often resulted in the highest bidder, some reportedly carrying briefcases full of cash, walking away with the goods regardless of whether contracts with other parties had been signed in advance. The Chinese government does not seem interested in enforcing contractual obligations.  Indeed, China is being accused of  ‘weaponizing’  its dominant position in medical supply and pharmaceutical manufacturing  to advance its economic and political influence at both domestic and international levels. 

As an interim measure, the Government of Canada has seen fit to retain private sector firms to ensure personal protective equipment (PPE) purchased in China is in fact secured, delivered and of the quality necessary to protect Canada’s front-line heroes. At a much higher level, the challenges encountered in procuring medical supplies from China has raised questions at some senior levels regarding strategic dependencies for key supply chains sourced within potentially hostile countries.  The Covid-19 experience has served to demonstrate the risks to national interests posed by such dependencies. While such concerns are applicable to a number of different countries that may pose a supply chain risk, let us focus on China as an example. 

How did we get into this situation in the first place?

As was the case with Russia in the immediate aftermath of the Cold War, for the past several decades, western countries have adopted a policy of ‘strategic engagement’ with China. As part of a broader climate of globalization, the hope was that increased trade and enhanced commercial ties would, over time, move China towards an acceptance of more democratic institutions. So how did that work out? Given a strong centralized economy (i.e. playing by its own rules) and cheap sources of labour, China has benefitted disproportionality from globalization and has achieved overwhelming dominance in the production and export of certain manufactured products. It has used its significantly enhanced economic power as a geostrategic weapon, to the point where it can exploit economic dependencies for political gain.  Instead of the sought-after democratic reforms emerging, China’s authoritarian government has invested the wealth generated by its industrialization to extend its political control, both at home and abroad.

The Covid experience with China has served to demonstrate to Canada and other western countries that supply lines linked to key national interests cannot be subject to the malicious whims or cronyisms of authoritarian regimes, some of which have a vested interest in undermining the agendas of democratic-based countries, both new and old, by whatever means possible.  But how is this best accomplished?

President Trump has, from the outset, said there is a need to de-couple US interests from the Chinese economy, although the outcome of that particular dance has been hard to categorize. More recently, UK Prime Minister Boris Johnson has ordered his officials to develop a post Covid-19 plan, code-named  Project Defend,  to identify where economic vulnerabilities for the UK’s key supply chains are at risk from potentially hostile foreign governments. The aim is to identify opportunities to diversify supply lines and to no longer depend on individual countries. Of course the assumption is that other, less risky, supply chain sources exist. If they do, they are likely more costly. 

The other option is to imbed key supply chains domestically. Again, the result would likely be products that are more costly to both produce and purchase (although this may be mitigated to some degree by export opportunities).  A bigger challenge would be to get a consensus within a variety of communities as to what the key, strategic domestic supply chains would be. On this, the experience of the Canadian government is spotty. In the post-9/11 environment, efforts were undertaken between both public and private sectors to reach agreement on what constituted key infrastructure within the country, ostensibly to direct resources to priority sectors for their protection from future terrorist attacks. These discussions continue to this day, without any clear policy definitions.

Perhaps some initial legwork on this issue has already been done. In a recently released report, the Henry Jackson Society, a UK foreign policy think tank, has identified that Canada, the US, UK , Australia and New Zealand, are “strategically dependent” on China for 831 categories of goods. Canada specifically is identified as depending on China for 367 categories of goods, including minerals, industrial products, and medicines and vitamins. Communication products are sited specifically.

Understanding and securing the critical needs of Canadians and the supply chains that meet them, will require in-depth and likely lengthy policy discussions in order to define what the most strategically important supply chains are. What are some specific short-term steps that could be undertaken?

First of all, it is ridiculous that Atlantic Canada is obliged to import foreign oil from countries like Saudi Arabia because a certain province objects to the construction of the Energy East pipeline for reasons of   “social conscience”.  In the interest of bolstering Canada’s economic security, the Prime Minister has the power to overrule any province (and a few special interest groups) when it comes to national security issues. Canada’s economic security and potential should not be held to ransom the way it is now. The PM needs to do what is right for Atlantic Canada in the name of national security.

Second, it is time to update Canada’s first and only national security policy (circa 2004) to highlight  the importance of key, strategic supply chains, and to give them the necessary policy coverage they both deserve and require.

Third, and looking at the issue from the other end of the pipe, the agendas of certain interest groups in undermining a robust application of the foreign investment review process enshrined in the Investment Canada Act need to be called out for what they are – serving short-term commercial interests versus long-term security interests - or that ‘globalization’ should prevail over all other considerations. The culture of political enfeeblement that is typically associated with a rigorous enforcement of the Act (the Huawei case being a good example) must be overcome in the interest of protecting Canada’s market economy, critical infrastructures and national security.

Beyond more clinical considerations of how strategic dependency impacts national interests, one other perspective requires consideration. In this case it is hard not to single out China specifically. China’s well documented willingness to threaten the economic prosperity of those countries that question its domestic agendas has led to western-based liberal democracies, including Canada, to look the other way when it comes to China’s egregious human rights abuses. Just ask the Tibetans, Uyghurs, Hong Kong activists, or the families of Canadians Michael Kovrig and Michael Spavor who have been held captive in China for more the five hundred days. Such conduct on the part of western democracies, and Canada specifically, goes beyond hypocritical, and is closer to something more malodorous.

Disclaimer: The views and opinions expressed in this blog post are those of the authors and do not necessarily reflect the official position of the Professional Development Institute of the University of Ottawa.

John Gilmour joins the PDI team after a thirty-seven year career in the federal government in positions of growing responsibility. His initial professional experience was with Transport Canada and the management of Canada’s major international airports. This  included serving as project manager and analyst for airport security programs. This led to a two-year assignment to the Security and Intelligence (Operations) section of the Privy Council office as a senior policy analyst, in support of the office of the National Security Advisor to the Prime Minister (NSA). 

From there John joined the Canadian Security and Intelligence Service (CSIS), where he served in a variety of branches, most recently as the Head-Strategic Planning and Operational Analysis with the Service’s Counter Terrorism Division.  Although retiring in 2018 from the Service, John continues to be retained as a senior advisor for that  unit.

John has a BA from Carleton University (Ottawa), and a Masters and Ph.D from the War Studies Program of the Royal Military College of Canada (Kingston).

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