Canada and the Revival of the Pacific-Rim Trade Agreement

Joost van de Loo

The Trans-Pacific Partnership (TPP), now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), is an eleven-member trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The goals of the CPTPP are: to reduce trade barriers; enforce environmental regulations; promote human rights; increase labour standards; synchronize regulatory cooperation; and create an investor-state arbitration dispute settlement. This monumental trade deal will affect roughly 495 million people from eleven different countries with a total combined GDP of $13.5 trillion. Before understanding the effects that the CPTPP will have on Canada, we must first understand its history.

The CPTPP Timeline

The forerunner to the CPTPP was the 2006 Trans-Pacific Strategic Economic Partnership Agreement (P4), consisting of just four countries: Singapore, Brunei, New Zealand, and Chile. By 2016, all seven countries now forming the CPTPP, along with the United States, expressed interest in joining the P4. The agreement eventually became a US-led initiative to curb Chinese economic and political influence in the Pacific-Rim region.  As defined, the TPP would have covered 800 million people with a total combined GDP of $38.5 trillion, or 40 percent of the global economy. All twelve countries signed the TPP in February 2016, with intent to ratify the deal and bring it into force soon after.

However, in January 2017, Donald Trump, President of the US, withdrew the United States from the TPP. This dealt a significant blow to the trade agreement, as the US made up 60 per cent of the combined GDP of TPP. The trade agreement was put on hold.

Thanks to the efforts of the Japanese and Australian administrations, reviving the TPP without the US seemed plausible. However, it was then Canada which held back progress towards an agreement. During the Asia Pacific Economic Cooperation summit in Vietnam this past November, Trudeau raised concerns about the need to protect Canada’s (but mainly Quebec’s) culture, and Canada’s automotive sector from the potential harm of the TPP.

Canada negotiated a bilateral agreement with Japan to resolve non-tariff barriers within the automotive sector, a binding dispute settlement mechanism and exemptions from participating in certain cultural provisions. Along with a name change to the CPTPP, the finalized text was confirmed on January 23, with the intent of signing this March and ratifying the trade deal in late 2018 or early 2019.

However, there are still a few differences between the old TPP and the current CPTPP. Without the United States – the world’s largest economy – the CPTPP has less economic and political impact than its predecessor. There are also a few provisions formerly negotiated under the TPP that were suspended or changed, including: businesses can sue the government for investment contract breaches, copyright terms will stay at life of the individual plus 50 years instead of the proposed 70 years, an increase in patent protections  and increased transparency in government procurement competitions.

 Benefits for Canada

As of today, the CPTPP will contribute $4.2 billion to Canada’s GDP, thanks to Canadian exporters having greater access to emerging markets such as Vietnam and Malaysia, as well as access to the world’s third largest economy, Japan. Minister Champagne also highlighted that the CPTPP would create well-paying middle-class jobs. Furthermore, the CPTPP will ease the process of foreign investment into the Canadian economy. However, before the CPTPP can be put into force, it will mean amending federal, provincial, and territorial legislation to ensure compliance with the provisions of the agreement.

Domestically, Canadians will enjoy a greater variety of goods and cheaper prices for certain imported goods due to lower tariffs. This could also mean the end of supply management as imports of dairy, chickens and eggs will increase. Fuelled by the demand of the growing CPTPP populations, Canadian agrifood producers are expected to export an additional $75 billion annually starting by 2025.

Resource industries in Canada will be among those who benefit the most from the agreement. The majority of the world -including the CPTPP member countries- is experiencing synchronized economic growth not seen since 2010. To sustain such growth, countries will require raw resources.

Potential downsides of the CPTPP

The CPTPP is lenient in its text in regard to the auto manufacturing industry, while the US has argued for stricter rules of origins during NAFTA negotiations. This could potentially create a clash during further NAFTA talks, as the US is trying to curb Chinese automotive parts from entering its market. Surprisingly however, Trump has stated that the US is open to potentially joining the CPTPP in the future.

Secondly, the language surrounding the progressiveness of the CPTPP regarding improved labour standards, better respect for human rights, and the liberalization of government-controlled enterprises, is not necessarily binding. This could be damaging to certain parts of Canada’s manufacturing sector, as it faces unfair competition from state-owned enterprises in Vietnam and Malaysia. This may also set an unwanted precedent for a future trade deal with China, where large parts of the economy are state-controlled. If Canada is unable to assert economic liberalization within the CPTPP, it will signal to China that they could gain access to Canadian products without conceding its advantageous state-owned enterprises.

Conclusion

The CPTPP has had a turbulent endeavour, and one that is not over just yet. Further analysis of the true effects of the CPTPP on Canada and Canadians will need to wait until the complete text of the trade agreement is released.

Joost van de Loo is a 2019 Master of Public Policy Candidate at the University of Toronto’s School of Public Policy & Governance, and holds a Bachelor or Public Affairs and Policy Management with a Specialization in International Studies from Carleton University. His main policy interest includes economic policy, international affairs, and global studies. When he is not in class, Joost can be found reading history books or enjoying a good board game with friends.

 

 

 

Advertisements

One response to “Canada and the Revival of the Pacific-Rim Trade Agreement

  1. Pingback: Economic Relations in Canada and Beyond – February 21, 2018 | The Public Policy & Governance Review·

Comments are closed.