Pacific Rim trade agreement a win for the West

Canada was able to secure better deal once U.S. withdrew, writes Carlo Dade.

Finally, unequivocal good news for the West and for Canada: What is arguably the most important trade agreement for future growth — the Comprehensive and Progressive Agreement for Trans-partnership (CPTPP) — has been ratified by Parliament.

While the U.s.-mexicoCanada Agreement (USMCA) is of clear importance, its greatest advance turned out to be making concessions to simply hold on to what we already had. The CPTPP, on the other hand, is about opening new and growing markets, and better ways to increase and diversify trade.

For Asia-facing Canada (that is, the West), where trade with Asia is important, the CPTPP gives exporters preferential access in 10 markets that rim the Pacific Ocean, six of them in Asia, including Japan, Vietnam and Malaysia. Given that Canada has only one trade agreement in Asia, gaining the equivalent of six new agreements at once is in itself a huge win. For Canadian businesses, this represents hundreds of millions in potential tariff savings alone. It also puts exporters on the same playing field as competitors in Australia — and ahead of the Americans, who are not part of the pact.

This agreement is about much more than cattle and canola; it is also an agreement with huge benefits for smaller businesses. With one set of rules for 10 markets, it allows companies to accumulate inputs from any member of the agreement to make products alone or with companies in other member countries to sell anywhere inside the agreement.

This one set of rules is what made the original NAFTA so special. But, with more members, the CPTPP improves on what Canadian firms have had in North America by offering more sources of inputs and more markets into which to sell. And, unlike the USMCA, the CPTPP will grow even larger as new countries join.

China is reportedly suddenly showing interest in joining the CPTPP. If true, this would give Canada a much needed, and much better, alternative than negotiating one-on-one with China or worse, negotiating alongside the Trump administration. Instead, we could negotiate as part of a team with Australia, Japan, Chile, New Zealand and Singapore that actually wants more in trade and better agreements.

Speaking of the Americans, one benefit of the CPTPP is the lack of American competition. When U.S. President Donald Trump withdrew the U.S. from the original transpacific agreement, the TPP, he essentially put U.S. market share in these countries on the table for Canadian firms. And thanks to the Americans having been part of the original negotiations, there was more market share on the table as countries made concessions with the Americans at the table that Canada never would have gotten negotiating on its own.

All of this seems like a nobrainer for Canada to join; but it has been anything but. When the Americans pulled out, business, governments and especially unions in Ontario and Quebec said the agreement was dead, no benefit remained for Canada, and participating in the trade deal would harm negotiations for a new North American trade pact. None of this was true.

The Canada West Foundation modelled economic effects of the agreement without the U.S. and, to no one’s surprise, found that Canada did better with the Americans out of the agreement. But the government and reportedly the prime minister, appeared ready to join the U.S., and leave.

It took years and a long, persistent and uphill fight by producer associations, agricultural-export groups and organizations like the Canada West Foundation to make the case. The Trudeau government, to its credit, went from almost pulling out and causing the agreement to collapse, to reversing course and shepherding the agreement through Parliament in record time.

Dealing with the Trump administration may have facilitated the government’s change of heart. But it was also hard behind the scenes work by groups working to defend western and Canadian interests. Either way, ratification is a rare and needed win for the West. As we prepare for the hard work to gear up to take advantage of the agreement, and the Canada West Foundation has prepared an upcoming guide for western business on how to do this, we also need to remember the effort it took to get this good news. Hopefully we can also gain confidence that there is still room in Canada for the West to win on things that are important to Canada.

Dade is director of the Trade & Investment Centre at the Canada West Foundation