How the Prairie Provinces Can Benefit from an Improved Trans-Pacific Partnership

Commentary, Economy, Alexandre Massaux

The Trans-Pacific Partnership was one of the world’s most ambitious trade deals. The agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States was signed on February 4, 2016. Its goal was to enhance economic relationships among members of a large geographic area: the Pacific Ocean. From Asia to North America and from South America to Oceania, these countries bordering the Pacific agreed to combine their economic initiatives. Most of them are allies of Canada and the U.S.

However, with the election of Donald Trump, the new and more protectionist U.S. administration withdrew from this treaty. This led to a new treaty without the U.S., called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). All the other signatories remain in this treaty. Canada can play an important role in the pact, and the Prairie Provinces can benefit from it.

As The Diplomat reports: “The total combined gross domestic product of the CPTPP would be $13.5 trillion or 13.4 percent of global GDP.” It is less than NAFTA ($20 trillion) or the European Union ($19 trillion) but more than the MERCOSUR (Southern Common Market) in South America ($3.5 trillion) or the Association of Southeast Asian Nations Free Trade Area ($2.5 trillion). If the U.S. joins the CPTPP, it will represent a combined $28 trillion and 36 per cent of global GDP, making the trade agreement the biggest in the world. 

It’s possible the U.S. will return, since China has applied to join the CPTPP. Thus, the CPTPP could become a masterpiece among trade agreements, considering the Pacific’s dominance in world trade.

Like most trade agreements, the CPTPP reduces trade barriers. As the Canadian government states: “Through the elimination of tariffs and non-tariff barriers, Canadian exports will increase and expand across a wide range of sectors, including agriculture (beef, pork and vegetable oils), and non-agriculture (forestry, industrial machinery, heavy equipment, and services).” Moreover, once the agreement is fully implemented: “94% of Canada’s exports of agriculture and agri-food products to CPTPP countries will be duty-free, representing an average of $7.8 billion in exports from 2015 to 2017.” The same thing will apply to industrial products, with $21 billion in exports from 2015 to 2017, 99 per cent duty-free.

Moreover, the CPTPP will make Canada the only G7 country to have a free trade agreement with all the other members of the G7. This will allow Canada to become a world trade hub. Ironically, the protectionist trend in the U.S. could benefit Canada by making it the champion of free trade.

According to  the government of Canada’s numbers, Alberta’s top export to the Asia-Pacific for 20152017 represented $2.1 billion of  agricultural products followed by $415.4 million of metal and minerals. We can see a similar situation for Manitoba, which exported $1.2 billion of agri-food products (representing more than three-fourths of its exports) and Saskatchewan with $2.1 billion of agri-food products.

The Prairie Provinces produce a lot of primary resources in the agri-food and fossil fuel areas. Some members of the CPTPP are developing countries, so their need for these resources is essential. Thanks to this deal, the tariffs will be mostly eliminated. The CPTPP will give greater predictability to the Prairie Provinces’ business in some key countries and open new markets; for example, mining-related services in Chile, Brunei, Malaysia and Singapore. Moreover, “the CPTPP will provide improved market access commitments for the temporary entry of high-skilled Canadian business professionals,” according to the federal government.

Finally, trade development in the Pacific region could lead Canada and the Prairie Provinces to greater economic heights. If the U.S. continues its protectionist stance, it will be up to Canada to reinforce its own position in the world trade arena. It will need a pro-free market policy in Ottawa and among provincial governments.

 

Alexandre Massaux is a research associate with the Frontier Centre for Public Policy.

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