TPP destined for parliamentary approval

But bigger issue is passage in the U.S., writes Robert Wright.

The full text of the Trans-Pacific Partnership will not be made public for some weeks, but based on what are admittedly spin-doctored summaries by the Canadian government and other participants, it appears to be a significant achievement in trade and investment liberalization among the 12 signatory countries.

Given the election campaign, the initial Canadian focus has, not surprisingly, been on the potential costs, in particular in the dairy and the automotive sectors. But the dairy outcome is modest, to say the least. The New Zealand government and media have described the results as disappointing.

If, as reported, the result is only a 3.4-per-cent increase in dairy imports into Canada this, on its own, should not require any fundamental change in the Canadian supply management system. This seems to be confirmed by the government’s commitment to support dairy farmers’ incomes over the next 10 years rather than buy back production quotas, which is the only way really to change the system. We may have missed an opportunity to bring real reform to this politically sacrosanct system.

The change to the rules of origin in the automotive sector is probably more significant. Motor vehicles will need less Canadian content to qualify for duty-reduced and, ultimately, duty-free treatment. This could well accelerate the move of parts manufacturers out of Canada. I suspect the next federal government, and the provinces, will have to throw real money at this sector to keep them here.

The biggest prize is Japan. Prime Minister Shinzō Abe has seen the TPP as the means finally to force the domestic implementation of long-delayed import liberalization.

If this really results in the reduction and elimination of Japanese tariffs and other barriers to Canadian exports of resource-based products — agriculture, fish, forest products, minerals, etc. — then this could have a big, positive effect on exports to our third largest market. On the other hand, the Japanese government has a well-earned reputation for finding innovative ways to discourage imports. We will see.

But the TPP is a big step forward in securing a role for Canada in the region. We had to be at the table and part of the deal. Investment decisions in the region over the next years will certainly take into account membership in the agreement. Our participation will reinforce the message our continued economic prosperity is dependent on our Pacific trading relations.

The reaction of China, which is not a signatory to the TPP, will be interesting. Politically, they will see it as an extension of Western, U.S.-led influence in “their” region. In the short to medium term, they won’t show great interest and continue to negotiate favourable bilateral agreements with the same countries. Apparently, the agreement contains provisions on statecontrolled enterprises, which China would find difficult. However if its economy continues to slow and if the TPP leads to greater economic integration among members, China may want either to join or to try to create a counter-balancing agreement which it could lead.

Despite the predictable politicking associated with the election, we should expect the TPP will receive Canadian parliamentary approval. The bigger issue is whether the U.S. Congress, which is restricted under Trade Promotion Authority to an “up or down” vote, will approve it in an election year. According to reports, the U.S. did not get everything it wanted on intellectual property and data protection. U.S. Democratic presidential candidate Hillary Clinton has already expressed reservations about the deal. (Ironically, this may make it easier for Congressional Republicans to support the agreement.) Although the votes in Congress will be close, I suspect a coalition of trade-supportive Democrats and Republicans will see it through.

There will undoubtedly be surprises in the details of the agreement once it is made public, but we will have to wait and see.

The change to the rules of origin in the automotive sector is probably more significant.