Canada’s Asian trade deficit daunting
China at heart of dizzying array of ‘global-spanning’ agreements that threatens economies
Is the Brexit fiasco in danger of deflecting our attention from other trade-related issues of more urgent importance?
Where, for example, do we stand on the “pivot to Asia,” which both Justin Trudeau and Barack Obama have embraced?
Some are asking, are we in the West, particularly in the Asia Pacific Region under China’s increasingly aggressive leadership, slipping into comparative decline?
What about our recent record? Over the past three years Canada’s trade deficit with our three largest East Asian trading partners — China, Japan and Korea — has worsened by more than 50 per cent. With China, our export/import deficit in 2013 was roughly $30 billion. In 2015 it was $45 billion.
It seems that the Business Council of Canada believes that this downward trend will be reversed by the so-called “global-spanning” Trans Pacific Partnership (TPP), whose signatory countries are claimed to represent 40 per cent of global GDP.
The claim that the TPP represents a significant trade “pivot to Asia” is ludicrous. Apart from Japan, whose historic reluctance to receive much from North America other than natural resources and some services will not change, the only other TPP Asian signatories — Brunei, Singapore, Malaysia and Vietnam — constitute only 4.8 per cent of Asian GDP and less than 1 per cent of global GDP.
Aside from TPP’s limited Asian coverage — China, notably, is not a party — its substance has been widely criticized. Joseph Stiglitz, the Nobel Prize economist, calls it “the worst trade deal ever.”
Among the negative features is a provision permitting large multinationals to sue signatory governments for enacting provisions that curtail anticipated trade or investment revenues.
For example, raising the minimum wage, or adopting rules to prevent predatory lending practices.
The TPP’s “rules of origin,” Stiglitz contends, are particularly troublesome for the automotive sector. Under the TPP, a vehicle that was largely manufactured in, say, China and Thailand, could be imported into Canada, as a duty-free Japanese product. The TPP also reduces the existing NAFTA domestic parts production requirements for tariff-free auto imports.
At least the Trudeau government is not rushing to seek parliamentary approval of the TPP, having recently extended the deadline for receiving representations to its crosscountry consultations to Oct. 31.
Of arguably greater significance than the TPP and its potentially negative impacts are successful initiatives recently undertaken by China to establish an Asian-led economic zone.
In January, just over two years after the launch of negotiations by Chinese President Xi Jinping, the Asian Infrastructure Investment Bank (AIIB) was opened for business. Participating are 37 regional (i.e., Asian) and 20 nonregional members — including Australia, Austria, Denmark, Finland, France, Germany, Britain, Italy and Russia — but not Canada.
With capital of $100 billion, two-thirds the capital of the Asian Development Bank (ADB) and one-half that of the World Bank, the UN has enthusiastically heralded AIIB’s launch as significantly “scaling up” the potential for financing sustainable development throughout the region.
It is hoped that Canada will, albeit belatedly, be permitted to join this promising new institution.
Also important is Canada’s relationship with the 14 Asian countries, plus Australia and New Zealand, as they work to conclude their own new trade agreement, the Regional Comprehensive Economic Partnership (RCEP), which just two weeks ago held what is expected to be its penultimate round of negotiations in New Zealand.
It is estimated that the FCEP covers three billion people, 45 per cent of the world’s population and 40 per cent of world trade. Of the Asian participants, Canada already has an FTA with Thailand, is in negotiations with Japan and Singapore, and is said to have other individual targets, including China. At the very least, it is critical to know how these trade objectives will be affected by the RCEP as it moves to conclusion.
None of this is meant to detract from the continuing importance of our EU and other global trade connections. But not at the expense of inadequate emphasis on the growing Asian markets and the critically significant new Chinese-led initiatives described above.
From experience on the scene, I can attest to the urgent need to raise our trade profile in Asia, and counter the impression that we are really just a resource-based geographic adjunct to the U.S.
Over the past three years, Canada’s trade deficit with our three largest East Asian trading partners — China, Japan and Korea — has worsened by over 50 per cent. With China, our export/import deficit in 2013 was roughly $30 billion. In 2015 it was $45 billion, writes Tim Armstrong.