TRADE DEAL A ‘MODEST’ PLUS
Think-tank dispues rosier forecasts
The Trans-Pacific Partnership would have a positive impact on Canada, but the economic gains would be modest, according to the C.D. Howe Institute.
In a report Thursday, the Toronto-based think-tank estimated the massive trade agreement would boost Canadian household income by $485 million in 2018, rising to roughly $3 billion by 2035 when the “full impacts” of the deal should be realized. That represents a boost to real GDP of just 0.02 per cent in 2018, and 0.08 per cent in 2035.
That is a far smaller impact than many of the TPP’s proponents are anticipating. A key problem, according to C.D. Howe, is that the TPP achieves only “limited and narrow” reductions to non-tariff barriers. It also noted that there would be additional costs for companies trying to access reduced tariffs in the agreement.
“The question we put to the TPP text is: show us the money,” the authors of the report said in a statement.
“There is some money in the TPP for Canada but the trade gains are relatively modest and the income and welfare impacts are commensurately modest as well.”
According to their research, ambitious trade deals like the TPP get “limited traction” as the global economy is already “highly open” and other processes are underway to remove “irritants” to trade and investment.
C.D. Howe said the key winners of this deal would be the United States, Vietnam and Japan. The think-tank believes they would account for the vast majority of export and import gains among TPP nations. It sees the deal as “slightly positive” for Canada, Malaysia and New Zealand and “essentially a wash” for all the other countries involved. Twelve countries are currently signed onto the deal.
The Canadian industries that would benefit most from the TPP are agricultural products, meat products and downstream food products, according to the report. There would also be some gains for business and financial services.
On the other hand, certain industrial sectors such as textiles, apparel, chemicals and metal products would experience a negative impact, the report said. Dairy and auto shipments would also decline, but the reductions are expected to be minor.
Canada signed on to the TPP in February, but has yet to ratify it. Just as C.D. Howe found that the gains from ratifying the deal are modest for Canada, it sees a very minor negative impact from walking away.