By Carlo Dade and Naomi Christensen
In Policy Options
December 13, 2017
With the North American Free Trade Agreement (NAFTA) on shaky ground, Canada’s participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, previously known as TPP11) even more precarious, relations with Japan in trouble and talks with China likely to be long and arduous, one thing is clear: Canada needs trade options — new, or really of any sort — in Asia.
One promising option starts on this side of the Pacific. This fall, Canada quietly launched formal trade negotiations with the Pacific Alliance, a trade integration group made up of Chile, Colombia, Mexico and Peru. This followed a little-noticed event in July: Canada’s elevation to associate membership in the alliance, along with three other countries, Australia, New Zealand and Singapore. These four countries were chosen from among more than 50 alliance observer countries.
Just as the nature of trade is evolving away from simply moving goods, services and digital goods toward deeper economic integration, so is the way nations seek to work together to facilitate trade. The Pacific Alliance is a prime example of this. The group has been hailed by the Economist and by trade publications as the most exciting development on the trade front. And for good reason, given the generally glum trade news globally and recently for Canada.
As a trade integration group, the Pacific Alliance builds on existing bilateral trade agreements among its members to remove barriers to trading with each and to make the bloc, as a unit, more competitive for trade with Asia.
Building on bilateral agreements is essentially what NAFTA did — at least until now. After implementing NAFTA, we made additions to enhance our ability to trade with NAFTA partners and with the rest of the world. For example, the NEXUS Trusted Traveler Programs and FAST, the Free and Secure Trade Program, were created to improve the movement of business people and commercial goods into the US. Canada and the US established the Regulatory Cooperation Council to align regulations to better expedite the movement of goods.
Canada already has bilateral agreements with each of the four Pacific Alliance members. An agreement with the alliance as a whole will give Canada another crack at building on bilateral agreements. This is something Canada has lost, with NAFTA teetering and our reputation among CPTPP members in shreds. The western provinces lost it with the decline of their New West Partnership trade integration agreement, which is stagnant.
The Pacific Alliance has now picked up the torch and is running with it, building on bilateral agreements to a greater extent than North America ever did. The alliance focuses on measures far beyond what can be achieved through a traditional trade agreement: it has integrated regulations, is working on a one-stop-shop initiative for foreigners looking to do business with countries in the alliance, has created a common stock market and shares embassy and trade offices. If we want to regain traction and positive attention in Asia, joining the alliance is the fastest way to do it. As the NAFTA renegotiation stumbles on, the prospect that we will take part in a next-generation trade agreement within North America is looking less and less likely. Participation in the alliance — of which Mexico is a full member — is one way for us to pick up this trade agenda again.
The alliance is a particularly good fit for Canada because the group’s goal is not to increase trade just for the sake of it, but to become more competitive to enable it to increase its trade with Asia. And after Prime Minister Justin Trudeau’s actions at the Asia-Pacific Economic Cooperation summit in November, Pacific Alliance countries have a much better reputation in Asia than Canada does. Entering into a multilateral agreement with the alliance — which will also allow us to maintain our associate membership — will signal to the rest of the world that Canada is serious about trade with Asia. And that is a message we desperately need to convey.
Ottawa’s nonbinding progressive trade agenda demands shouldn’t impede our negotiations with the Pacific Alliance, as the alliance is arguably ahead of Canada on the so-called progressive trade agenda. The group established formal working groups on gender equality long before Trudeau came into office.
The Pacific Alliance is our best short-term chance at becoming more competitive in trade with Asia. And if the NAFTA renegotiations break down, it will also be the only forum where we can take advantage of next-generation trade integrations.
Carlo Dade is the director of the Trade & Investment Centre and Naomi Christensen is a senior policy analyst at the Canada West Foundation. They are the authors of The Pacific Alliance: Why it’s (still) important for western Canada