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The Supply Chains of Canada v.s. China
Diana Suchodolski
Wayne State University
Introduction:
This report will analyze the political, environmental, social, technological, legal and
economic aspects of China and Canada in a PESTLE analysis. Political differences can be found
in the structures of each country’s respective governments and how laws play their part in the
logistics and supply chain areas. Focusing on the impact logistics operations may have on the
environment, our analysis highlights the different acts and regulations and how they influence
business activity. Certain social aspects may influence business structure and work conditions in
each country and is a key factor to consider when attempting to understand each country’s
supply chain logistics. Each country will try to leverage the technologies that provide the greatest
value to the efficiency and operation of the many supply chains that exist within each. Analyzing
business laws and lawmaking highlights the impact laws can have when operating in either
China or Canada. Our analysis compares the difference in economical strength each country
possesses and how this has an effect on supply chain and logistics.
Political:
The political stability and political doctrine of a nation is extremely important when it
comes to doing business in a country. The politics of a host nation can affect the speediness, the
efficacy, the profitability, and the ease of doing business. Canada and China have vastly different
political systems and in turn, have vastly different business environments. China is a one party
communist dictatorship, while Canada is a parliamentary democracy and constitutional
monarchy with a variety of different political parties.
The authoritarian nature of the Chinese government can be a positive and a negative for
foreign companies considering investing in a factory in China. On the positive side, China’s
authoritarian political nature has been known to make construction of factories and facilities
extremely fast when compared to their Western competitors. On the negative side however,
China’s politics have a history of damaging foreign companies' ability to do business effectively.
For instance, foreign companies are required to create a joint venture with a Chinese citizen or a
Chinese company in order to open a business in China (McDONALD, 2018). China also has
developed a notorious reputation for forcing foreign companies to restructure their business so
that the Chinese government has a say in how the company is run and a say in who gets
appointed to the company’s board of directors (McDONALD, 2018). China has also begun to
punish foreign companies that express political views counter to China’s political interests
(McDONALD, 2018). China made headlines with this practice in 2019, when they began to
drain the NBA and the Houston Rockets of tens of millions of dollars until they issued a public
apology, and punished the Houston Rockets’ general manager because he signaled support for
the Hong Kong protests (Rogin, 2019). This often hostile political environment experienced by
foreign businesses operating in China and its consequences, is something that should be seriously
analyzed and considered by presumptive investors before committing to investing in a factory in
China. Taken as a whole, China’s authoritarian political environment is most likely a net
negative for the vast majority of businesses, as the price of admission is too high for most
potential investors to bear.
Canada on the other hand has a democratic parliamentary system. This system also has
positives and negatives for potential investors. On the positive side, Canada has a good track
record when it comes to protecting intellectual property rights and allowing foreign companies to
operate independently from the Canadian government. On the negative side, Canada’s politics
favor a more protectionist business agenda that has been known to be harder on foreign
companies than domestic companies. Canada also has a reputation for having a lot of political
fired tape” that makes investment in Canada more difficult and takes longer. For instance,
Canada has a law that requires foreign businesses to make an appeal to the minister of industry (a
political appointee) on why it would be a net benefit to Canada to have their business invest
(Burney, 2011). If the minister of industry decides a foreign company will not be a net benefit,
their request to invest is denied (Burney, 2011). If the business’ request is granted, then the
business now must repeat the process with local and provincial governments (Burney, 2011). On
the positive side, Canada currently has a free trade agreement with the United States as per the
USMCA. Canada is also ranked as one of the most politically stable nations in the world,
meaning that chances of political and civil upheaval, or political gridlock is low (Canadian
Economy, n.d.). The political environment in Canada is overall highly conducive to doing
business, and most investors would find the political environment when it comes to business
investment, semi accommodating if not a little annoying.
Environmental:
The two countries, Canada and China, do not have a great deal in common when it comes
to their environmental policies. In fact, the two powerhouse nations have drastically different
policies and put an emphasis on different things in terms of the environmental regulations
associated with their supply chains. The Canadian government has held strict environmental
policies for multiple decades, whereas the People’s Republic of China has only begun to initiate
strong policies in the past six years, enacting their first blanket policy in 2014. Environmental
policies and regulations are being enacted now more than ever due to the rising concern for the
planet and the shift in the general publics’ mindsets. People’s ideas of what is right and wrong in
terms of pollution has changed dramatically in the past few decades. This all directly impacts
supply chains for a multitude of reasons. Supply chains are forced to abide by these
environmental policies which can impact the ways they do business. It puts regulations on their
factories and demands a certain level of corporate social responsibility to be shown in order to
appease the public and the communities in which their factories are located.
Canada has a primary law, The Canadian Environmental Protection Act established in
1999. This law grants federal authority and allows their government to regulate a very large
range of environmental concerns (Government of Canada). The primary concern of this act being
pollution prevention. Along with The Canadian Environmental Protection Act, there are a
number of other acts passed by the Canadian government to support environmental protection.
These acts are more case-specific and discuss the protection of many natural environments.
These acts include the Department of the Environment Act, Water Governance and Legislation,
Lake of the Woods Control Board Act, and The Weather Modification and Information Act. The
Department of the Environment Act was initially enacted in 1971 with the purpose of having a
large impact on the environment and climate change issues arising in Canada and globally. This
act also helped to preserve the natural environment of Canada by means of providing
meteorological services and creating other policies and programs to meet the environmental
objectives.
However, the most effective rule or requirement enacted by the Canadian government is
the Administrative Burden Baseline Initiative. This initiative requires all departments and
agencies to establish a baseline count of federal regulatory requirements that impose an
administrative burden on the business. It also requires businesses to annually update and report
publicly upon the fulfillment of baseline requirements (Transport Canada). This is an extremely
effective measure because of the fact that it forces Canadian businesses to hold environmental
standards for themselves and ensures they will follow through by making reporting annually a
requirement for all. There are currently fifty-one regulations associated with the Administrative
Burden Baseline Initiative.
China is a nation known for its mass pollution due to the density of their population.
However, in the last decade they have improved their environmental legislation a great deal. The
law that has made the largest impact on the environment of China is the Environmental
Protection Law, established in 2014. This law focuses on protecting and improving the
environment through having a firm grip on the pollution and public hazards present in China
(China Dialogue Network). Along with this, they have enacted many new regulatory authorities
to monitor corporate and industrial pollution in the country. Regulatory laws are extremely
strictly enforced in China. There are often on-site inspections to ensure all businesses are
following environmental guidelines and everything is above the board.
Another beneficial law the Chinese government has enacted is the Environmental Impact
Assessment Law, this law requires companies to investigate the effect of projects on the
communities as well as the environment before they begin construction on the project (Chun,
Zhang). This is extremely relevant to the supply chain due to the fact that if a company was
intending to build a new factory to increase the span of their supply chain, they would need to go
through these assessments before even being able to break ground. Along with these laws, they
also have several laws that not only apply to corporations but also apply to the general public.
These laws include the Atmospheric Pollution Prevention and Control Law and the
Water Pollution Prevention Law.
All of these factors have a large impact on the way businesses operate their supply chains
due to the fact that each policy, law, and regulation forces supply chain managers to take these
rules into consideration when they are thinking about the factories they are using, or planning to
use, for manufacturing and the transportation methods which they are choosing to deliver their
materials. This is especially true in countries like China, who in recent years have found clear
evidence that they are an extremely large contributor to world pollution. Canada, on the other
hand, is not a large world polluter, but they seem to take a great deal of preventative and
precautionary measures to avoid an increase in their overall pollution, and hopefully influence a
potential decrease with these policies.
Social:
There are differences and similarities between Canada and China when it comes to the
social work environment. The normal working conditions in the two countries are similar but
have some key differences. The wages paid to employees between the two countries is vastly
different. Both countries have an issue with poor working conditions sometimes. It is a complex
