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Homepage 2017-01-21T20:54:17+00:00

Trade Agreements were Growing before TPP.

Prior to TPP

Before TPP, bilateral or regional trade agreements were the predominantly popular method of trade liberalization. An agreement as ambitious as the TPP, which covers 40% of the worlds GDP, is unprecedented.

Previous RTAs

North America

Before this, Canada’s trade relations were mostly focused on continental partners. NAFTA was signed in 1994 and was modeled as a successful regional trade agreement. Many of the provisions within NAFTA were planned to be incorporated into the TPP. A North American free market was seen as desirable due to the increasingly competitive global marketplace.

Europe

In addition, Canada has also been looking towards Europe where the Comprehensive Economic and Trade Agreement, or CETA, was recently signed in October of 2016. This agreement with the European Union was drafted but faced similar protests as the TPP. The main controversy surrounding this agreement is the investor-state dispute settlement mechanism, where companies have the ability to sue countries. This provision is also in the TPP and has been one of the main points of backlash.

Asia

Furthermore, Canada has increasingly grown their trade ties with Asia. For example, a FTA was signed with Korea in 2015. The Canada-Korea Free Trade Agreement, or CKFTA, demonstrates the importance that Canada places on relations with Asia.  With negotiations beginning in 2005, CKFTA was one of the major milestones of Prime Minister Harper’s legacy.

TPP’s Purpose

The Trans Pacific partnership consists of 12 countries; United States, Japan, Australia, Canada, Vietnam, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru and Singapore. These countries signed the agreement on October, 2015 opening a new opportunity for the international economy and society. The agreement has indicated that 75% of non tariff regulations immediately go into force and 99% will gradually be implemented. If ratified by all, its potential benefits indicate an increase in GDP of the member states by 1.1% by 2030.

However, in order for the TPP to enter into force all 12 countries must ratify the agreement. The stated purpose of the TPP was to  ” promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in the signatories’ countries; and promote transparency, good governance, and enhanced labor and environmental protections”, many see the real reasoning behind the agreement as a political maneuver.

Regulation

 Growth

Innovation

 TPP’s Few Benefits

 The United States is the key member of the TPP. Its gains would mostly derive from its large agricultural industry, allowing them to significantly increase their exports. However, its economic growths are estimated to be 0.4%, which is not as significant as the other members states. Moreover, the presidential election caused a big shift in the standing of the United States on TPP.

The major gain for Japan is in the automobile industry. As the tariffs become lower, exports for the automobile industry are estimated to increase by: However, concerns lie in the agricultural market. The large market of the United States will create an inflow of low priced agriculture. This will threaten the local food market due the to high competition. Asian countries are more strict on food regulations compared to the North American and Latin American regulations. Thus, another major concern lies in the difference between non-tariff measures and the food production regulations.

Similar to the United States, Canada also has major benefits in trade liberalization of agriculture. Its primary growth potential lies in beef and dairy. Additionally, alcohol such as ice wine is thought to have growth in exports. As Canada already has FTA’s with the United States its major benefits will come from the ties with Japan. Canadian consumers will be capable of buying automobiles at a lower price. However, many echo former Prime Minister Stephen Harper’s view regarding concern for the local markets.

Singapore is one of the founding members of the TPP. As one of the major ports for international shipping and trade the economy is largely based on foreign trade. The expansion through this agreement will increase Singapore’s external trade significantly.

However there were costs.

Unemployment

The TPP will introduce regulations in regards to international immigration, which will lower barriers for international cooperations across borders and expand their business. Such change include the ability to mobilize workers across countries. This indicates the ability for major corporations to bring and occupy labour forces in different countries. As a result, foreign workers in the member states are projected to increase, causing concern for a growth of unemployment due to increased domestic competition for jobs.

Trump

As the United States election has resulted in a shift in the standing of the US towards TPP, many leaders are questioning the likelihood of TPP to be ratified
by all countries. Most importantly, Donald Trump has already stated that he “will kill the TPP trade deal” once he is in office. In response to his statements, many leaders of the TPP countries are already showing concern. The Japanese Prime minister Abe Shinzo has expressed his doubts about the prospects of the TPP without the United States and identified it useless and unbeneficial.

Changes in labour of total income over baseline (% of GDP by 2025)

  TPP’s Four Faults

Transparency

According to APF’s 2015 opinion poll, Canadians have a decent but limited knowledge of the TPP. The most common response is “I don’t know” but for Canadians who have answered, the majority is correct in the first three questions. However, when asked if China is a TPP partner, 35% said yes, which is not true. Moreover, the polls show that Canadians are divided on the benefits and costs that TPP brings.

Sovereignty

One of the significant effects of TPP is its wide range of Non- Tariff measures. Such regulations include import license requirements, rules for customs valuations, food production regulations and as well as intellectual property rights. Most significantly, standards for labour rights are pushing countries such as Vietnam and Mexico to reconsider its domestic constitution to match the international standards. However, this raises the question of the state sovereignty and the role of international channels of enforcement

Unbalanced Trade

The benfits of the implementation of the TPP will undoubtedly be unequal. As such, some states are much more eager for the agreement to enter into force then others. For example, countries such as Vietnam who produce mainly low value goods are poised to benefit greatly from access to an untapped global marketplace. On the other hand, developed countries will face issues such as loss of jobs due to the increased competition from the cheaper labor that is available from less developed countries

Politics

Yet, as much as the economic benefits are being discussed many scholars identify the Trans Pacific Partnership agreement to have a vital role in political power. As this agreement does not include China, the second highest GDP in the world, many scholars identify this as an act of the United States aiming to gain economic power and political power in East Asia. Thus, although the economic effect is an essential factor of the agreement, its political impact will also an area that is influenced.

Regional Comprehensive Economic Partnership

A Possible Option for Asia and Canada.

“Covering the core areas of negotiation to include trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement and other relevant issues, RCEP is envisaged to be a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement.” (ASEAN). While TPP and RCEP are very similar agreements designed to lower barriers for trade, RCEP is far less restrictive.

Trade of Goods and Services

Both strive to eventually remove all tariffs. RCEP prioritizes tariff removal of goods which would most benefit the least developed ASEAN members, whereas TPP includes many clauses that take into consideration the following: Gradual tariff removal for goods of interest for specific economies, transparency measures like notification requirements, prohibition on export subsidy on any agricultural good.

Intellectual Property Rights

TPP is far more protective of IPR than RCEP, outlining: patents, trademarks, copyrights, industrial designs, geographical indications, trade secrets, and other forms of intellectual property as well as enforcement mechanisms. In contrast, RCEP touches the issue in a nonspecific manner stating: stating that “intellectual property in RCEP will aim to reduce IP-related barriers to trade and investment by promoting [IPR measures].” (Guiding Principles 3)

Treatment of SOEs

TPP’s treatment of SOEs is harsh compared to that of RCEP, forbidding SOEs from causing negative effects to participating members and prevents them from differential treatment of those same members. On the other hand, RCEP states no restrictions on SOE operations because it was an issue that never was included.

Final Thoughts on RCEP

Based on this analysis, the RCEP is not fully desirable for Canada because its lower standards of trade does not play to Canada’s strengths concerning high value added goods. These standard can also allow developing nations to take advantage of this trade deal through lower quality, cheap goods.

Free Trade Area of the Asia Pacific (FTAAP)

 The Free Trade Area of the Asia Pacific is a China-led initiative with the goal of creating a Free Trade Area that will promote greater economic integration with all 21 APEC members. The FTAAP will be an aggregation of all the regional RTAs in the region where  RCEP and TPP will form the foundation of the agreement. But with the failure of TPP, RCEP will form the foundation of FTAAP. The FTAAP is currently still a work in progress, with the goal of creating FTAAP by 2018. However, FTAAP may be delayed due to the mercantilist and nationalist approach trade policy adopted by President Trump and will most likely result in a delay for FTAAP or withdrawal of the United States from FTAAP

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