Was the Prime Minister’s statement at the APEC Summit of Canada’s interest in joining the Trans-Pacific Partnership (TPP) negotiations a sign of a new export strategy focused on Asia or a move away from our close trading relationship with the United States in response to the delay of the regulatory approval of the Keystone pipeline? Does this signal a major reorientation in Canadian trade policy toward Asia and away from the United States?
To the contrary, Harper was showing solidarity with U.S. trade objectives in the Asia Pacific by expressing interest in joining the TPP talks. In opening the APEC Leaders’ Summit, President Obama emphasized that the U.S. is looking to forge closer economic relations with the Asia-Pacific, the area with the fastest economic growth in the world, in order to help lead U.S. industries and businesses out of the economic recession they are in today. Who would the U.S. want as its ally in building this free trade area of the Asia-Pacific? Who better than Canada, its close NAFTA partner, with whom it already has a longstanding, free trade relationship?
After all, it was President Obama who put forward the proposal at the 2010 APEC Summit for the TPP negotiations. The TPP is the top trade priority of the United States, aiming to be a 21st century, “ambitious, next-generation, Asia-Pacific agreement that reflects U.S. priorities and values”. The TPP is considered a precursor for an eventual Free Trade Area of the Asia-Pacific. An existing free trade agreement between four countries (Brunei, Chile, New Zealand and Singapore) constituted the original Trans-Pacific Strategic Partnership Agreement, which came into effect in 2006 and formed the basis for the TPP negotiations in 2010. The countries currently negotiating with the U.S. are Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam; of these, the U.S. already has bilateral free trade agreements with Australia, Chile, Peru and Singapore. The participants have had nine rounds of negotiations already, and at the 2011 APEC Summit they agreed on the broad outlines of an agreement. President Obama is eager to conclude this deal by 2012. While Canada, Mexico and Japan expressed interest at the APEC Summit in participating in the TPP negotiations, these decisions will be considered separately from the ongoing negotiations and will be decided by consensus of the existing participants.
Let’s be clear. Prime Minister Harper’s new interest in the Trans-Pacific Partnership negotiations is not going to find new markets in Asia for Alberta oil. Why? Because the key potential market for our oil and natural resources is China, which is not a participant in the TPP negotiations and will not be for a good long time to come. The reason for this is the comprehensive and ambitious scope of the subjects covered by the TPP negotiations. To meet U.S. objectives, the TPP will be a new-generation economic and trade agreement that will include ‘behind-the-border’ regulatory subjects such as intellectual property, regulatory convergence, labour, environment, investment, innovation and technology. It also will require parties to eliminate tariffs on all products, including agricultural products, which is a major issue for Canada’s dairy and poultry producers.
Australia and New Zealand should not have any trouble meeting these objectives, as they already have the ANZCERTA (a closer economic relations agreement creating an integrated market between the two countries), and Australia has a recent free trade agreement with the U.S.. Chile and Singapore have free trade agreements with the U.S. as well as with several other countries, and they are among the most open trading countries in the world, so they should not have difficulty agreeing to the TPP. Peru has recently signed free trade agreements with the U.S. and Canada, and has experience with trade agreements in South America, but its interests are very different from the developed country participants or from the Asian participants. Similarly, Vietnam’s and Brunei’s interests as developing countries are very different from the other TPP participants. The TPP is a unique, plurilateral and preferential trade agreement negotiation. It is complicated by the fact that it involves a mix of developed and developing country participants with diverse interests and objectives, and it is not confined to one geographic region (as it includes countries from South America, North America, Asia and Oceania).
President Obama knows that even though the TPP currently involves only nine countries, it will be difficult to conclude, and to fully achieve the stated U.S. objectives. By bringing Canada into the TPP negotiations, he may hope to garner support from his NAFTA partner at a critical time when the U.S. attempts to drive the negotiations towards a conclusion next year.
To be sure, diversifying our trade strategy is good for Canada as well. Like the U.S., we have come to recognize that Asia has been the engine for growth in the world economy for some time now, and that China, in particular, will increasingly be a market for our resources as well as a source of foreign direct investment in Canada. While this has been obvious for a while, the federal government has only recently begun to develop a coordinated policy strategy with respect to China. Canada is negotiating a comprehensive trade agreement with India, and foreign investment protection agreements with India and China. Preparatory work has begun on possible trade agreements with Japan and China. Negotiations on a free trade agreement with Korea have commenced, but appear to be on hold. In addition to these initiatives, the Prime Minister has now signalled an interest in participating in the TPP.
Earlier this year, there were hopeful signs of a strengthened Canada-U.S. trade relationship. Harper and Obama signed a Joint Declaration on Perimeter Security and Economic Competitiveness, and announced the creation of two new bilateral bodies: the Regulatory Cooperation Council and the Beyond the Border Working Group. When Obama and Harper meet next in Washington, let’s hope they announce new initiatives to streamline regulatory cooperation and improve border operations.