TPP - A March Toward Trouble for Canada

*Whispering in the Wind (WITW 101) December 16, 2015

One of the more controversial topics discussed (debated) during the 78 day federal election campaign was trade and specifically, the Trans Pacific Partnership (TPP) agreement.  As it stands, the TPP is an “economic” agreement between 12 Pacific Rim nations that still requires legal review and ratification from individual member-country governments.  From a Canadian perspective, the proposed agreement has a complicating twist – the TPP was negotiated over a seven year period under the supervision of Stephen Harper and his Conservative government.  The TPP is now being reviewed by Justin Trudeau’s Liberal government for ratification.  The details of the “more than just trade” agreement was agreed to on October 5, 2015 and made public on November 5, 2015.   Mr. Trudeau’s position on the TPP during the election campaign was that he wouldn’t comment on an agreement that he hadn’t seen.  When the agreement was made public (after the election) Prime Minister Trudeau said it would be appropriately analysed and considered by his new government.  It is still under review and rightly so, the consequences for Canada are huge. 

The TPP is a Big Deal!

The Trans Pacific Partnership (TPP) agreement is just one of the latest efforts to offer greater discipline and control over the economic affairs of member states.  The 12 participating states (Brunei, Chile, New Zealand, Singapore, Australia, Canada, Japan, Malaysia, Mexico, Peru, United States, and Vietnam) have tentatively agreed to an economic agreement that encompasses about 40 percent of the world’s output.  Three other Pacific Rim nations (Indonesia, the Philippines and Thailand) have expressed interest in joining the partnership and should that occur, over 50 percent of the world’s output will be guided by TPP principles and rules.  Important to point out, United States’ President Barack Obama is the lead advocate of the TPP while China and India are on the side lines watching how the TPP agreement unfolds – the Chinese and Indians have their own plan for how trade and commerce should be conducted in the 21^st century.

What the TPP Offers     

The TPP is a massive 30 chapter agreement encompassing a wide range of elements and conditions.  The aim of the TPP is to offer freer, more disciplined trade in goods and services within the 12 member trading bloc.  At the same time the agreement incorporates measures that will restrict some government policy initiatives and limit national (sub-national) governments from operating in the public’s interest.  In summary, the TPP advances the interests of global corporations and at the same time, restricts governments from acting in the national, public interest when it comes to the environment, technology and investment – and that’s not good news for Canada and Nation Building.

TPP’s Impact on Canada

In the early days, Canadians were viewed as a nation of “hewers of wood and drawers of water” with the nation operating at the behest of the great empires of Europe.  Today, things are different and an independent Canada is exporting much more than just lumber, fish and beaver pelts.  The Trans Pacific Partnership (TPP) is just one example of how nations like Canada are reacting to a drastically changing, globalized framework.  Following are a few points Prime Minister Justin Trudeau might consider prior to offering the TPP agreement to Canada’s parliament for ratification:

1.    Canada has trade treaties with four of the larger members of the TPP (Peru, Chili, United States and Mexico) where tariffs are already low and a dispute settlement procedure in place that is functioning.  For the other seven TPP members, Canada is running a trade deficit of $5-8 billion annually – Canada is buying more than we are selling.  80 percent of Canada’s exports to these seven countries are raw or semi-processed goods (beef, coal, lumber), while 80 percent of Canada’s imports are high value-added goods (autos, machinery, computer, electronic components).  Analysts have suggested that the impact of the TPP on Canada’s overall economy will be minimal in terms of GNP growth, but most likely will further erode Canada’s manufacturing sector. 

2.   A good number of the rules embedded in the TPP agreement appear to be modeled after existing United States trade law and that could mean trouble for Canada.  One element embedded in the technology chapter of the TPP is healthcare and drugs which could prove to be a disaster for Canada and its efforts to control healthcare and pharmaceutical drug costs.

3.   Possibly the most controversial issue facing Prime Minister Trudeau and Canada’s participation in the TPP will be the environmental component of the TPP and how it might be “re-drafted” – a result of the Climate Change Conference and the goals set last week in Paris.  How the 12 member states re-state their environmental goals and specific targets on greenhouse gas emissions is without doubt going to be intense and lengthy process.  For Canada, Prime Minister Trudeau has promised to meet with Canadian Premiers within 90 days to start the discussion on setting emission targets and how to achieve them – it will take time.  Does it mean that ratification of the TPP will be held up – probably?  Does it mean opening up further negotiations on other aspects of the TPP – an open question? 

Overall, the Trans Pacific Partnership agreement is likely to be held in limbo for some time, possibly years – and that’s good news for Canada.  As the country awaits Mr. Trudeau’s assessment of the TPP, the haunting, historical statement remains; will Canada return to be simply “hewers of wood and drawers of water”?