Canada’s Asian trade deficit daunt­ing

China at heart of dizzy­ing ar­ray of ‘global-span­ning’ agree­ments that threat­ens economies

The Hamilton Spectator - - COMMENT - TIM ARM­STRONG Tim Arm­strong, a lawyer and for­mer On­tario deputy min­is­ter of in­dus­try and trade, was Agent Gen­eral for the Asia Pa­cific Re­gion.

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.

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