This week, 11 pacific nations including Canada came to an agreement on a new version of the Trans-Pacific Partnership (TPP) – now called The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). You might remember the TPP from its vulgar branding as “a rape of our country” by Trump on the campaign trail. When the President came into office, one of his first acts was to pull the US out of the Obama-era deal. Since 2016, Canada and the 10 other Pacific rim countries returned to the negotiating table to iron out a deal without the US. During this week’s negotiations in Tokyo, Japan, that deal has now become a reality, with a signing ceremony set for March 8 in Chile (Bloomberg).
According to insiders, the deal looks much the same as it did with the US, with some changes on dispute settlement mechanisms (National Post). Despite his earlier comments, this led President Trump to suggest at the World Economic Forum in Davos this week that he would be open to re-joining the TPP if it became “a substantially better deal” (Independent).
This is the second trade deal to become all-but-final under the Trudeau administration, after the Canada-EU Comprehensive Economic and Trade Agreement (CETA) in the fall of 2016 (Globe and Mail). Though both deals were originally negotiated under the Harper government, they are not the only free trade deals on the agenda of the current administration. The Trudeau government has sought to start free trade negotiations with China, and is well under way with NAFTA negotiations, the sixth round of which began this week (Globe and Mail). This has led to speculation whether Canada is becoming a leader in the new global trade order, filling the void left by the US. For more on this, see this Atlantic article.
But why is it that free trade is being promoted on both sides of the aisle in Canada? The Conservatives and Liberals consider free trade to be good for business and for consumers. It opens up the market to competition, which generally spurs innovation and lowers prices. In turn, this drives the economy.
Additionally, trade agreements have the benefit of ensuring that the trading countries play by the same rules. They seek to create fair treatment of industries, with regard to government support, for example, and create fair and streamlined processes for solving disputes. In our increasingly globalized world, international trade will continue to grow, and having these rules established up front will benefit Canadian industries. Interestingly, the TPP’s lack of membership from the two biggest world and Pacific Rim economies, China and the US, means they are no longer party to the creation of many of those rules.
Not everyone trusts in the benefits that free trade agreements bring. It is true that increased competition can reduce or eliminate certain industries in one country, replacing them with exports from a more efficient or cheaper industry in another country, costing jobs and business. But, we believe that the overall economic benefits outweigh these concerns, and are eager to see what the Canadian government does next with the trade portfolio.
P.S. In case you missed last weeks announcement, we’re trying something new with our weekly news posts for 2018. Instead of rounding up each week’s top stories, we’ve decided to choose one major news story each week and write a brief critical reflection on the context and situation. As always, we would love your feedback. Please comment below with any thoughts or questions!
Image Source: Christopher Katsarov / The Canadian Press