New Trans-Pacific Trade Agreement is Potentially Bigger, Better Than It First Seems

Commentary, Economy, Ian Madsen

The reworked Trans-Pacific Partnership trade agreement between Canada and ten other nations, now called the Comprehensive and Progressive Trans-Pacific Partnership, is due to kick in at the end of this year.  Even the boosterish federal government that heartily endorses the deal they rescued from the near-torpedoing it got from the Trump Administration concedes that it may only increase Canadian GDP by an estimated $4.2 billion, or about 2% of 2017 GDP.  So, it makes sense to understand what this agreement might or might not do for us, and trade and commerce in general.

There are just a few things the great majority of economists agree on, and one of those things is the benefits of free trade.  Most of these benefits accrue to importing entities; that is, ultimately, consumers. This is also the case for goods from the other CPTPP nations Canada trades with (at a deficit, usually), especially the biggest economy, Japan.  Other middling economies in the agreement include Mexico, Chile, Australia, Peru, Vietnam and Malaysia. While Canadian trade with these nations may grow faster under CPTPP, it is likely that the investment and commerce protections, legal codification of rules of origin and rights of importers, exporters, and investors will have the most impact.  

Canadian firms are active in mining and other investment and trade in all these nations. New products, services, and categories of same are also recognized and grappled with in the language and clauses of the agreement.  This will make it harder to discriminate against importers and exporters. Legitimate import and export restrictions are spelled out. There are also long lists of export taxes from some nations, notably Malaysia and Vietnam.  There are far fewer import restriction categories, but some of those are quite large. There is no discussion of loosened residency or immigration laws.

Canada is heavily trade dependent (2017 exports were 30.5% of GDP) with the US (75% of total exports), making our much smaller economy more vulnerable to the gyrations of the larger one – and the whims or ire of Washington or its lobbyists.  So, although it makes a lot of sense to try to diversify Canadian trade and investment opportunities, it takes a huge increase in trade with other nations to offset tiny US trade fluctuations. Less than 5% of our trade is with other CPTPP members; even with Mexico.  

Yet on the plus side, crucially, it gives Canada and the other members a bargaining chip in dealing with other large players, such as China and the US, as there is some strength in numbers, and in precedent and incumbency. Both nations will likely have to accept many of the protocols and provisions in the current treaty.  If other large nations such as Indonesia or India, sign on, it will give even more weight to the whole agreement. Hence, the CPTPP has an important pioneering and invigorating spirit to it.

Sadly, Ottawa again put too much emphasis and bargaining capital on our cosseted ‘cultural’ industries, the dairy lobby, and the usual progressive suspects:  environmental, labour, indigenous and human rights, gender equality and other things that are difficult to define, let alone monitor or determine positive goals or outcomes.  However, on the whole, the treaty could bring more co-economic benefits than are currently projected, and, with the Canada-European Trade Agreement, make a needed counter-assault against the tides of protectionism that is endangering prosperity planet-wide.