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Jeffrey Simpson (Brigitte Bouvier For The Globe and Mail)

Jeffrey Simpson

(Brigitte Bouvier For The Globe and Mail)

JEFFREY SIMPSON

Canada risks being left empty-handed in Asia Add to ...

His recent visit to China might be called The Education of Stephen Harper.

Far from the truculent finger-pointing that once characterized his government’s attitude to China – an attitude it still displays elsewhere – Mr. Harper buried whatever criticisms he made of China’s terrible human-rights record in closed-door meetings. In public, it was all sweetness and light, trade deals and photo ops with pandas.

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The Chinese, almost in passing, mentioned perhaps an eventual free-trade deal, to which Mr. Harper correctly replied that the issue was way too complicated for any early decision.

The Chinese are keen on free trade in goods, where they enjoy a massive advantage, and on raw materials, for which they display a voracious appetite. They aren’t so keen on discussing intellectual property (stealing patents or insisting on getting them in joint ventures is endemic in China), government procurement, competition policy or anything else that might jeopardize the state-capitalist firms that dominate the Chinese economy.

So forget a Canada-China free-trade deal any time soon, which leaves Canada holding an empty bag in the Asia-Pacific theatre. For all the government’s talk about Asia’s importance, and despite the Prime Minister’s China trip, not much is happening on the trade liberalization front for Canada in the Asia-Pacific region.

Negotiations with South Korea have stalled, although the Koreans have opened up their market to Canadian beef exports after a long period of rejecting them on phytosanitary grounds. Ontario’s auto industry objects to a South Korea deal, saying the Koreans won’t give adequate domestic market access to cars made here.

South Korea has signed a free-trade deal with the U.S., so some Canadian exporters will be at a disadvantage in the Korean market. And having secured that big deal, Seoul would see any deal with Canada to be small beer.

Bilateral talks about maybe doing something with Japan are going nowhere fast. Japan is focused on joining the Trans-Pacific Partnership (TPP) negotiations rather than doing anything bilaterally with any country, including Canada.

The TPP is the best trade negotiating table in the Asia-Pacific region, except that Canada lacks a seat. The Harper government says it wants one – Canadian officials were in New Zealand on Tuesday – but some of the participants don’t want Canada there, as explained in a recent C.D. Howe Institute paper by Laura Dawson. The major reason is Canada’s protectionist supply-management system for certain agricultural products (eggs, poultry, dairy), shielded behind astronomically high tariffs.

The TPP started with four small countries. It has expanded to nine, including the U.S. and Australia. Japan and Mexico now want to join. The six countries of the nine in the TPP with which Canada lacks trade deals account for $4-billion in exports for Canada. Canada’s exports with Japan and Mexico amount to $14-billion.

By not joining the TPP, Canada largely forgoes a chance to export more to those countries. Not joining would also risk some existing Canadian exports being displaced in these markets, as will likely happen in South Korea. If the TPP takes off, other Asia-Pacific countries will want to join.

In the TPP’s early years, Canada considered a possible deal among four small countries of little interest but woke up when the U.S. joined. Even then, the government was all over the map. Ministers played down Canada’s interest, while Canadian diplomats were instructed to seek an invitation for Canada to join.

Then-trade minister Peter Van Loan kept saying last year that Canada was still pondering whether to join, whereas it wasn’t clear that Canada would even be invited. Now Mr. Harper has said publicly that Canada wants in.

Except the U.S. isn’t sure what’s to be gained by Canadian entry, even though the Harper government is counting on the U.S. to bulldoze our entry. New Zealand doesn’t want Canada if we insist as a pre-condition that protection for supply management remains untouchable. Australia, playing a smart game, keeps saying publicly it would like Canada present but would shed no tears if it didn’t happen.

Not for the first time, and likely not for the last, Canada’s national interests are being sacrificed to protect supply management.

 
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