By Carlo Dade & Deborah Elms
January 31, 2017
The Trans-Pacific Partnership trade agreement is dead. Which means now is the time for Canada to ratify it.
As counterintuitive as it might seem, the blow that President Donald Trump delivered last week to the TPP by pulling out — simultaneously thwarting Canada’s path to catch up with competitors in Asia — creates a new imperative for Canada to ratify the massive Pacific trade deal.
President Trump’s actions show he will carry out his plans to radically reshape U.S. trade policy — away from seeking mutual benefits with trading partners, towards imposing policies that benefit only the United States. His trade decisions, including his withdrawal from the TPP and now the forthcoming NAFTA renegotiation, have extinguished any hope that the reality of assuming office would temper an aggressive unilateral agenda.
The U.S. withdrawal from the TPP also signals its withdrawal from Asia, leaving a vacuum on trade that will be filled by China — and leave Canada on the sidelines. The region already has a trade agreement alternative to the TPP under negotiation — the Regional Comprehensive Economic Partnership (RCEP) — and several other regional initiatives that have China at their centre. But Canada is not party to any of these and has no path to join.
There are other paths forward for Canada on Pacific trade. One is to move quickly to sign bilateral agreements with other TPP countries. Another is to join those calling for the removal of the U.S. from the current TPP agreement and carry on without the Americans.
On the bilateral front, Japan — the biggest prize for Canada in the TPP — makes a logical starting point. But Japan has already made it clear that it will not resume trade talks, put on hold when both countries joined the TPP negotiations, until after Canada ratifies the current TPP agreement.
Ratification of the current agreement may seem symbolic and, as such, a waste of time to Canadians, but it’s clearly important to our potential partners. The importance of symbolism in Asia as a sign of commitment is generally overlooked in Canada.
Ratifying the TPP would send an unequivocal message that Canada is worth time and attention as a trading partner because it can negotiate and, more importantly, get agreements approved by its Parliament. In an Asia overwhelmed by the rush to adjust to the Trump era, this is a crucial asset for a country trying to cut through the competition for attention.
But negotiating bilateral agreements, even with former TPP partners, won’t be a swift process. Trade negotiations, even based on a comprehensive template like the TPP, are time-consuming and difficult to get approved.
A better option for Canada is join Australia, New Zealand, Chile and other TPP signatories in salvaging the agreement without the Americans. The agreement can be amended — without opening the entire thing to new negotiations — to strike the requirement for U.S. ratification to allow it to come into force. Anything else U.S.-specific in the document could simply remain dormant.
Taking the lead on rescuing the agreement without the U.S. would help remake Canada’s reputation in Asia. It also would give Canadian companies opportunities to grow, add jobs and take advantage of new business that is likely to flow.
Firms that want to seize an advantage in buying and selling goods and services in the TPP have to be located inside TPP countries, like Canada. North American firms wanting to stay close to home in an English-language environment and still take advantage of these advantages to sell to Asia can do so … from Canada. As a bonus, selling to Asia would not run afoul of any new U.S. border adjustment or import taxes.
Ratifying the agreement is also good politics. Recent polling by the Asia Pacific Foundation shows that Canadians support the agreement — support that should rise after President Trump’s withdrawal of the U.S. from the deal.
Finally, ratification sends an even more important signal — that Canada stands apart from the new American trade agenda. The TPP was an agreement of give-and-take among 12 countries to benefit 12 countries. The new U.S. trade agenda is a direct repudiation of this, replacing mutual benefit with unilateral U.S. benefit on terms that are dictated, not negotiated.
By ratifying the TPP, Canada can show that it remains a globally competitive and engaged country, committed to Asia and willing to defend and expand its own economic interests for the future.
Carlo Dade is the director of the Centre for Trade & Investment Policy at the Canada West Foundation. Dr. Deborah Elms is executive director, Asian Trade Centre in Singapore.