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End of rocky road for the Trans-Pacific Partnership?
When President Donald Trump pulled the United States out of the Trans-Pacific Partnership (TPP) in January 2017, the 12-nation deal appeared to be dead. But, after months of Japan-led negotiation among the remaining signatories, the pact has a new name and a pulse.
However, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) remains in fragile health. Perhaps nothing illustrates this better than the diplomatic drama that unfolded last November in Da Nang, Vietnam, when Canadian Prime Minister Justin Trudeau failed to attend a meeting with other pact leaders. Canada then appeared to torpedo the announcement of an agreement in principle with some eleventh-hour demands.
A “core elements” agreement was reached the next day, averting disaster. But Canada’s actions “grated on Japanese sensitivities,” and “soured [bilateral relations] to a considerable degree,” according to Sadaaki Numata, former Japanese ambassador to Canada and CCCJ Honorary Board of Advisors chairman.
As Numata went on to explain, it was little wonder that this discomfort was “felt at the highest level.” the Canadian no-show put Japanese Prime Minister Shinzo Abe in an awkward position, and jeopardised a core element of Japan’s trade policy beyond the deal expected that day.
For now, Japan’s Economic Revitalisation Minister Toshimitsu Motegi revealed on January 23 that an agreement is set to be signed between the 11 members in March in Chile, without the United States. This comes after talks among trade officials in Tokyo to resolve some of the contentious issues that some nations have with the final agreement.
The deal certainly has its upsides. The Canada West Foundation’s June 2017 report on the CPTPP’s expected impact states, “The remaining 11 signatories are better off with a TPP11 than without,” and has projected a 2.34 percent increase in exports among member states, a real GDP boost of 0.074 per cent across the bloc, plus “economic welfare benefits of about C$22 billion by 2035.”
The foundation predicts the deal will even generate a 0.23 per cent rise in exports from CPTPP parties to non-members, “due to businesses outside the trade bloc moving production to a TPP11 country to take advantage of the agreement.”
For Japan, the CPTPP is armour. The priority for Tokyo in trade terms is fending off the bilateral trade deal advances of the “America First” Trump administration, which Japanese officials believe would demand far greater concessions than those already given under the TPP. Further, it appears that Japan wishes to use the TPP terms to protect politically and economically sensitive sectors such as agri-food.
For Canada, the CPTPP is one of three major deals that could potentially go sideways. The EU-Canada Comprehensive Economic and Trade Agreement (CETA) has been concluded, but has yet to be ratified by all the EU member-state legislatures. Meanwhile, Reuters reported on January 11 that two Canadian government officials have said that Ottawa is “increasingly sure” that the North American Free Trade Agreement will be scrapped, and “is now planning for Trump to announce a (US) withdrawal.”
The shifting sands have made the CPTPP a necessity in the eyes of prominent members of the Canadian business community. In a November 23 Globe and Mail op-ed column, John Manley, president and CEO of the Business Council of Canada and former foreign minister called the deal “another arrow in our trade-diversification quiver when the future of NAFTA is in doubt,” adding that “to be stranded outside the CPTPP while the United States negotiates a bilateral agreement with Japan would be the worst possible outcome for Canada.”
Canadian Chamber of Commerce (CCC) President Perrin Beatty told The Canadian that his organization supported the original TPP for reasons including “preferential market access to Japan” and “geopolitical and economic strategic realities.” He added: “Overall, our assessment is that continued engagement in a Trans-Pacific agreement is crucial for Canada over the long term.”
Major bilateral trade players are also looking forward to getting the CPTPP signed for strategic reasons. The Japan Automobile Manufacturers Association of Canada (JAMA Canada) has stated, “Completing the CPTPP will … send a strong signal to the international community that multilateral or regional trade agreements are alive and well.”
Though Japanese makers built more than one million vehicles in Canada in 2016, David Worts, JAMA Canada executive director points out that “our members are at a disadvantage due to Canada’s trade agreements with South Korea and the EU which give preferential treatment to imports from those countries” — a disadvantage the CPTPP would rectify.
Meanwhile, the Canadian forestry products industry is looking at the CPTPP as part of an interlocking trade framework. Shawn Lawlor, Canada Wood Japan’s director, notes that a big concern for his sector is that, without a trans-Pacific deal, Canadian producers could be disadvantaged by a Japan–EU Economic Partnership Agreement as they seek to diversify their foreign markets in light of Canada–US lumber disputes.
The priority for Tokyo in trade terms is fending off the bilateral trade deal advances of the “America First” Trump administration.
A positive Numata also noted, “Given the commitment on [Japan’s] side, and given the commitment that is shared to a large extent by the other partners in the TPP11, I am reasonably optimistic” about a deal being finalized.
For Japan, the CPTPP is a gold standard trade pact; a defence against greater concessions in the future. For Canada and Canadian industry, it is a vital leveller and a hedge against the risks of a suddenly uncertain trade future.
That said, the deal has the same core vulnerability that all nascent multilateral trade pacts do: it would only take one party to derail it. These factors should concentrate attention in the halls of government, as the livelihoods of their people and the shape of their economies are at stake.
