[BRIEF NOTE] Russia as Canada

[rfmcdonald]

From RIA Novosti's press roundup, translated from the Russian from the journal Business and Financial Markets:

Russia turning into China's trade colony

The "big leap" in Chinese exports has enabled China - for the first time since the breakdown of the Soviet Union - to end the year with a trade surplus of $8.8 billion. Russian exporters have to admit that the Chinese market has practically been lost for goods with high added value.

Russian supplies to China are mainly crude oil and timber. The only exception is the chemicals that are still required in China.

On the other hand, engineering products have come to dominate Chinese supplies to Russia - last year they rose almost 90%, up to $8.7 billion. Supplies of vehicles from China to Russia have almost doubled, and the export of Chinese consumer goods has grown by 278%.

Experts said that in the past few years the trade and economic relations between Moscow and Beijing have undergone irreversible changes.

"Today a typically colonial structure prevails in trade between Russia and China. We supply raw materials to them, and they export engineering products to us," said Dmitry Sorokin, first deputy director of the Russian Academy of Sciences' Economics Institute.

He said that 10 years ago engineering products made up about one quarter of Russian exports. Raw materials and energy resources accounted for 5% of the total amount exported.

Now the picture is entirely different. Only 1.5% of Russian exports to China are engineering products, while two-thirds are energy and timber.

Chinese partners are in fact dictating to Russian exporting companies the prices at which they agree to buy hydrocarbons.

"China is energy-independent and in a position to substitute Russian gas and fuel oil with coal, reserves of which are vast in China. We, however, have no choice. Without Chinese contracts we will not be able to diversify our energy exports in order not to be tied exclusively to the European market," Sorokin said.

In the past, following Will Baird, I've blogged about Russia's potential future as a Chinese client state. This news item makes me think that Russia's relationship with China might rather be quite similar to that of Canada and the United States, exporting natural resources in exchange for high-value added goods.

The Watkins Commission, chaired by economist Mel Watkins was set up by the Liberal government and made its report in 1968. Watkins is an economics professor at the University of Toronto, and carried on the tradition of Innis and Easterbrook, connecting the staple model with a form of Marxist class analysis. Watkins, along with Jim Laxer, became influential in the NDP and were leaders of the Waffle in Ontario, a group that argued that Canada was dominated by the United States, and that Canadian nationalism was progressive and could lead in the direction of socialism. The Watkins Commission showed the extent of foreign ownership and argued that this hurt Canada. The arguments from this Commission and the Committee for an Independent Canada (set up by Walter Gordon) were influential in setting up the Foreign Investment Review Agency, Petro Canada and various other attempts that would allow Canadians to exercise more control over their economy.

Tom Naylor, in an influential article in the early 1970s, combined the Canadian historical approaches of Creighton and Innis with the Marxian categories of mercantile and industrial capital. Naylor, a professor of Economics at McGill University, argued that the colonial ruling and business class in Canada was essentially a mercantile class that made profits by marketing and transportation. According to Naylor, these Canadian capitalists were not interested in developing Canadian industry, with the result that Canadian industrial development has lagged and Canadian industry became dominated by United States capital.

This fear of being marginalized by a much more populous and wealth neighbour has played a major role in Canadian politics, making Canada's 1988 free trade agreement with the United States very controversial. I have no idea how this sort of tension could translate into a situation where the weaker power is also a regional superpower of note, but if the Russian leadership does think that it's interests have to be solidly intertwined with those of China some sort of tension is bound to arise.