Trans-Pacific Partnership

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Export Development Canada Feb 13, 2012

Get used to it, because it’s fast becoming a part of international trade language. Yes, there’s another acronym to learn, but it’s no fly-by night buzzword. The Trans-Pacific Partnership, or TPP, is here to stay, and it’s gaining momentum. What is it, and why does it matter for Canada?

For one thing, it is big. The Trans-Pacific Partnership (TPP) is a very ambitious regional free trade agreement touching the Americas, Asia, and Oceania. It took effect in 2006 with four charter members – Brunei, Chile, New Zealand, and Singapore. With no heavy-hitters on board, it failed for a long time to gain much traction. But more recently, the tide has turned, and momentum is building.

What is more, five others – Australia, Malaysia, Peru, the US, and Vietnam – are negotiating to join. Now Washington is aggressively promoting the TPP as a way to re-engage itself in Asia. Statements by President Obama at APEC and ASEAN regional summits last fall gave the TPP added significant profile. Japan and Mexico have also expressed interest in joining the TPP. Japan’s overtures are particularly notable, given how at odds Japan’s highly protected agricultural sector is with key TPP tenets. Add up the GDP of TPP-aspirants and it well outmatches the EU. If negotiations succeed on all fronts, this group would clearly be the largest and most powerful trading bloc in the world.

Another key feature is its construct. The TPP is being cast as a ‘next generation’ trade agreement, with higher standards than its predecessors. Objectives include elimination of tariffs on goods and services between participating countries as well as a stated intent to negotiate terms on several more complex issues. These include freer government procurement; beefed-up intellectual property protection; increased regulatory coherence; rules governing state-owned enterprises; treatment of SMEs; labour rights; and environmental protection.

Canada is also interested in the TPP. Last November at the APEC summit, Canada formally announced its interest in pursuing negotiations. This was welcomed by TPP members, and Canada will commence consultations with the nine other countries. At the end of last year, a round of broadly-based consultations commenced within Canada.

What’s in it for Canada? Our exports to the Asia-Pacific region, net of the Americas and Japan, grew by 10 per cent annually between 2000 and 2008. And netting out the effect of the global recession in 2009, the recent pace of growth is more like 15 per cent annually. At the same time, Canada’s traditional export growth barely budged. This aptly illustrates the nascent diversification of Canadian trade, which is steadily transforming Canada’s trade landscape. Not only does the TPP promise to enhance this trade, but protect it from the likely drop-off that exclusion would bring.

Other benefits include the opportunity to help shape the development of new Asian strategies; access to bi- and multi-lateral institutions that reshape regional and global trade and investment rules; and the further facilitation of existing government strategies like the Asia-Pacific Gateway initiative.

The bottom line?

Slow world growth could easily have ignited destructive neo-protectionism. Instead, we have major movement on a huge new trade initiative. It’s nice to know that Canada is engaged.

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