Canada Saudi Arabia Position Paper

Canada and Saudi Arabia Position Paper: Global Business, Leadership & Corporate Social Responsibility

Introduction

Canada-Saudi Arabia relationship has been deteriorating in recent weeks, resulting in a diplomacy crisis, which have sent shock waves to both the Canadian and Saudi corporates that trade with each other as they grasp on ways to address the emerging challenges. The two countries enjoy a cordial but limited relationship, and cracks emerged recently at the start of August when the Canadian government through the foreign ministry questioned human rights abuse and urged Saudi authorities to reconsider their approach. The Saudi did not take Canada request well as they accused Canada of meddling in its internal affairs and what ensued next was a series of online spats that led to the diplomatic crisis as Saudi expelled the Canadian ambassador and recalled theirs from Canada. The two countries enjoy a lucrative business relationship valued at over C$3 billion as Canada import from Saudi in 2017 was C$1.5 billion while its export C$2.4 billion (Canada International, 2018). Military equipment is the leading export product from Canada as the country is the biggest non-U-S export destination which as for last year contributed to almost half of sales outside the U.S at 48.25% (Global Affairs Canada, 2018). Following the diplomatic dispute between the two countries, Saudi threatened to cut its trade ties and investment with Canada putting critical bilateral relationships at stake. The two countries have a history of strained diplomatic relations because of Canada criticism of Saudi involvement in the war in Yemen that has had devastating outcomes, and the recent events will only fuel the dispute further. Given how the countries have handled this situation in the Canadian government stands to benefit a lot as they have demonstrated effective leadership and shown concern over its corporate social responsibilities.

From the ongoing diplomacy crisis, the type of leadership demonstrated by the leaders of both sides will determine the country whose trade will benefit or lose. Canadian Prime Minister Justin Trudeau and Saudi Crown Prince Mohammad bin Salman leadership skills together with how they handle the conflict will be crucial for the survival of the Saudi-Canada bilateral trade. MBS as the Saudi Crown Prince sometimes refers himself is still a young leader at 32 who is ambitious and has shown interest in reforming and modernizing his country by relaxing on the traditions restrictions imposed on his subjects. Those are characteristics of a good leader who is ambitious and acknowledges the need for change such as he has done by lifting a driving ban on women and diversifying the economy of Saudi. However, regarding his stance in Yemen which has divided the Arab peninsula and the recent diplomacy crisis with Canada MBS has failed to show quality leadership skills that will lead the prosperity of his country.

The decision by Canada to end Canada-Saudi arms deal is not based on economics but on ethics and morals which can have a significant impact on the public perception of their government. Trudeau has been under intense pressure to end the Saudi arms deal as more evidence emerges on Saudi deploying Canadian-weapons in the Yemen war (Lukacs, 2018). This revelation poses an ethical quandary for the Canadian government as people continue to question Canada’s role in the atrocities that happen in Yemen. By cancelling the arms deal, Canada stands to gain by ending unethical behaviour which will promote its public image, increase citizenship behaviour and reduce conflicts (Mayer, Aquino, Greenbaum & Kuenzi, 2012; Hassan, Wright & Yukl, 2014). Therefore Canada will have better image Canada as it shows that the country stands for its values of advocating for human rights.

If you consider the use of rhetoric between the leaders of both countries, then Canada has a better chance of persuading the world into siding with its position in the diplomacy dispute. Saudi questionable history of human rights, the adverse impact of the war in Yemen that it is wagging and alleged murder of Jamal Khashoggi by Saudi government does not help the situation. Effective use of rhetoric by a leader can help sway the emotion of the public into supporting them. According to a study by Shamir, Arthur and House (1994) charismatic leader reference to morals and values justification is essential in motivating others into following your views. In Canada’s case, their leaders have appealed for respect of human rights which the Saudi government has dismissed as an interference of its internal affairs. This situation helps to endear Canada to most people in the world who value human rights and at the same time painting MBS and his regime as a dictator and arrogant. MBS might find support from some individuals in Muslim countries who are afraid of losing their traditional values due to globalization. However, Ghemawat (2016) indicated that effective use of Rhetoric could help change people views on globalization by presenting complex issues in more straightforward terms that echo reality. Therefore, by pointing out on the apparent human rights violation, Canada can influence the masses into supporting its position and dismiss Saudi claims of interference of its internal affair as an overreaction.

When you compare the twitter spat between the foreign ministries of the two countries, we can observe effective and ineffective leadership in reactions of both ambassadors. According to Mihelic, Lipicnik and Tekavcic (2010), some of the characteristics of an ethical leader include being humble and concerned about the greater good. The aim of Canada foreign ministry tweet about human rights abuse in Saudi is to promote the greater good of all humans. On the other side, the Saudi's ambassador shifts blame on others by turning the argument into interference of his country internal affairs.

Today Yemen is at the brink of collapsing as the war has led to the destruction of business, homes, cities and lives. Instead of pushing for a ceasefire for humanitarian need and end the suffering of the people of Yemen Saudi continues to wage war casing more harm. The Saudi leaders are rationalizing abuse of human right under the disguise of restoring democracy. Their actions point to their hypocrisy where they blame Canada for interfering with their internal affairs, yet they are doing the same in Yemen. Some of the characteristics of a leadership style that rationalize immoral behaviours include denial of responsibility, injury, social weighing, and appeal to higher loyalists (Anand, Ashforth & Joshi, 2004). In Canada-Saudi diplomacy crisis Saudi leadership it is evident that the Saudi have rationalized the human rights abuse which will affect their reputation negatively.

Saudi has repeatedly denied causing harm to innocent people in Yemen as they believe that they are only fighting the rebels. Saudi leadership claim that the situation in Yemen could have worse if they did not act. However, these tactics as warned by Anand and his colleagues (2004) risk setting bad precedence where human right abuse is assumed to be normal among its citizen as in the case of corruption in an organization. Saudi leadership have also employed social weighing as they compare their actions with what western countries have been doing by invading other countries. However, the main concern with the international community is on the impact of the war on civilian which Saudi claims that it is protecting their democracy. Furthermore, Saudi has appealed to higher loyalty as a justification for their presence in Yemen. According to Saudi leaders, their military is in Yemen for a more important cause which is to restore democracy. However Saudi rationalization helps improve Canada’s credibility and support in the ongoing diplomacy war.

Global business face various challenges and their survival depend on how their leaders address these issues. Government policies are a crucial deciding factor in promoting a conducive business environment that supports Foreign Direct Investment (FDI) or creating act as a barrier (Nicoletti, Golub & Hajkova, 2003). In the case of Saudi, its government is threatening to impose policies that will cut trade ties with Canada because of infringement in its internal affairs. The two Countries need each other, and some may argue that Canada will lose more if the relationship as Saudi can find a new trade partner for weapons. However, even if this happens such policy by Saudi will not set a good precedence and as more European countries such as Denmark, Finland, Germany, and Dutch continue to withdraw its military links with the country they may find themselves isolated (Stone, 2018). Furthermore, the war in Yemen has had devastating impacts, and Saudi continues to receive pressure from other countries which leaves one to wonder if they are going to cut ties with everyone.

The bilateral relationship between countries plays a crucial role in promoting trade, and some of the threats given by Saudi are not helping the situation. A meta-analysis review by Moons and van Bergeijk (2017) indicate that various studies have concluded that bilateral diplomacy has a significant impact on the trade and economy. Therefore, instead of Saudi ending its ties with Canada, they should consider means that are less aggressing which entails consultations to find an amicable solution to the crisis. The series of Tweets by Saudi foreign ministry only makes the matter worse instead they should have recommended for meeting between the two sides to clarify the issue. If you consider the Khanna, Palepu and Sinha (2005) strategies that fit emerging markets, then Saudi fails, and as a result, Canadian business will be justified for ties with Saudi. According to the Khanna and his colleagues, the political and social systems are crucial in determining if an organization will survive in the foreign country. Some of the critical questions that Canadian organization might ask in their bid to identify institutional voids includes accountability of politicians, government interference in business, freedom of civil right groups and openness of the market among other things (Khanna, Palepu & Sinha, 2005). In recent years Saudi has tried to adopt liberalization policies to allow FDI to thrive into the region. As much as Vietor and White (2014) acknowledge the efforts that the Saudi government put much effort into improving the regain ease in doing business through economic reforms and liberalization their recent actions risk resending them back to their old ways.

Cultural difference is another factor that business from both sides should consider if they are to be successful. Studies have shown that cultural difference has a role in the success or failure of an organization as it affects commitment, trust and cooperation (Mehta, Larsen, Rosenbloom & Ganitsky, 2006). Both Canada and Saudi have different cultures, and as a result, they may have conflicting views when many issues. As a Muslim country with a legal system based on the Sharia law Saudi culture is different from that of the Western world in aspects relating on how the subjects of the two countries are ruled and what might pass as normal in one is considered barbaric in the other community. Therefore, Canadian government should try to understand and respects some of the cultures in Saudi. There is always a great debate regarding the universality of human rights and cultural relativism. There are concerns that dictatorial governments use abuse cultural relativism to justify human rights abuse. Canada prides itself as a country that advocates for human rights, and as advised by Robinson (1992) Canada should fight for the rights of the oppressed regardless of the relationship they have with the oppressor. Canada did not threaten or use sanction to point out to Saudi of violation of human rights. However, Saudi reacted aggressively with threats despite Canada noble intentions. Given Saudi record on human rights and its involvement in the war in Yemen that has led to the loss of civilian lives Saudi might end up losing because various studies have shown a negative relationship between FDI and human rights violations (Garriga, 2016).

In the ongoing diplomacy war, some people have criticized the Canadian government and corporations doing business in Saudi for failure to improve the situation in Yemen. These critics question Canada adherence to its corporate social responsibility (CSR) casting doubts its leadership style. The Canadian government has tried to warn Saudi against human right abuse, but their concerns have been ignored, and some people demand that they should do more. As much as CSR is contributing towards the well-being of both the company and society, it is crucial to weigh on pros and cons on both sides. Furthermore, there are various stages that a business passes for it to achieve CSR. According to Mirvis and Googins (2006), the first stage towards corporate citizenship is stabilizing in the market before it can be ready to move into the second step of philanthropy and environmental protection and some of the Canadian businesses are still in the early stages. Also, Ni and Van Wart (2015) observed that manager-led organization could experience challenges in embracing CSR because there is a conflict between short-term and long-term goals. Bearing this in mind then Canadian corporations might encounter barriers outside their control which limit the leadership models that they can apply.

The criticism of Canada, especially towards the hesitation of Justin Trudeau to cancel the Saudi arms deal seems harsh. First of all Canada relationship with Saudi is crucial as stabilizing the Middle East and diversifying on trade even at the expense of associating its self with Saudi unpleasant foreign policies (Juneau, 2016). Another reason as pointed out by Juneau is that the Canadian government will pay a heavy price in case they decide not to uphold the deal. Furthermore, there was no sufficient proof that Saudi is deploying Canadian weapons in Yemen hence the government could not act without adequate evidence. However, as Saudi continues its aggressiveness and new proofs emerge that show Saudi use of Canadian weapons the Justin Trudeau is open towards ending the Saudi-Canada arm deal, which will send a strong message regarding Canada’s commitment into fighting for human rights at the expense of lucrative trade deals. Therefore, despite the criticism that the Canadian government and corporations that do business in Saudi face there have tried their best towards to show exemplary leadership skills in the global environment and CSR.

Conclusion

Canada has faced a lot of criticism because of its arms deal with Saudi Arabia, a country with questionable human rights. The two countries are currently engaged in a diplomatic crisis after Canada questioned the Saudi abuse of human rights abuse and the situation has escalated after Saudi threatened to cut its trade ties with Canada. Throughout the wrangles, the Canadian government and corporations have shown exemplary leadership skills in global business and SCR in the way they handle the crisis. On the other side, Saudi has demonstrated poor leadership skills making abrupt decisions without providing room for consultation. However, some people believe that Canada has portrayed poor leadership skills and lack of commitment in promoting SCR. This position is not entirely correct as the Canadian government was avoiding making rush decisions like Saudi until it was sure of the accusations against Saudi. Now that more evidence of Saudi violation of human rights emerge there is hope that the Canadian government will cancel the Saudi-Canada arm deal soon.

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