Trade with Asia has been occupying Ottawa’s attention for good and obvious reasons. Yet, in what’s turning into a rush to that continent, Canada risks stumbling into strategic blunders that will hurt the country in the future.
The most critical of these is a default to pursuing bilateral initiatives, which, while successful elsewhere, will be more difficult with a region that has little interest in Canada or, worse, sees the country as needy and, hence, an easy mark at the negotiating table. The second mistake is to think that the only alternative to the bilateral route is to take what the United States is offering in the Trans-Pacific Partnership.
Fortunately, thanks to measures already taken, deliberately or fortuitously, by the government, Canada has a better path to Asia, one that begins on this side of the Pacific.
In contrast to its frustration in making inroads to Asia, Canada has had great success in completing a series of trade agreements running the length of the Latin American Pacific coast, from Chile through Peru, Colombia, Panama and Costa Rica to Mexico. These also happen to be the most dynamic and fastest growing economies in the hemisphere, accounting for more than half of the region’s foreign trade and a third of its GDP, and all have booming middle classes. These are also countries blessed with serious governments not given to the histrionics and populist soap opera embraced by others in the hemisphere.
These are the types of countries you want as allies if you’re serious about getting ahead in the world – and they happen to be good friends of Canada.
These countries have recently banded together to form the Pacific Alliance to integrate their economies to better trade with Asia. And the countries of Asia have noticed.
The Pacific Alliance has set a blistering pace. It has linked its stock markets into a single bourse, opened joint trade offices abroad and is on track to eliminate visas among its members and implement a common electronic origin certificate by year’s end. As opposed to North America, where summits get cancelled because leaders can’t find time to meet, the Pacific Alliance leaders, including Mexico, have been holding teleconference summits. If one wants partners serious about advancing new trade agendas to face Asia, then the Pacific Alliance, not NAFTA, is the preferred club.
For Canada, this alliance would also be a crucial alternative to the U.S.-dominated Trans-Pacific Partnership. Obviously, any trade deals signed by the alliance would be smaller than those of the TPP, since the U.S won’t be a part. But smaller agreements without the Americans are actually a blessing. They’re easier to negotiate and they avoid the inevitable delays in awaiting the 67 votes needed for U.S. Senate ratification. (A quick glance at the current dysfunction in Washington underscores that point.)
Think of it as a bird in hand beating two in the bush. The TPP garners attention because of its enormous potential, but since no one has faith that the Americans can deliver, no one wants all of their eggs in the TPP basket, either. Mexico, for one, has already figured this out.
The Pacific Alliance is on track to begin negotiating with the Association of Southeast Asian Nations, a bloc of 600 million people in 10 countries. ASEAN includes Indonesia and Thailand, which are not part of the current TPP round. And more important for Canada, ASEAN doesn’t include the U.S. and New Zealand, two countries that are part of the current TPP round and that have issues with Canada’s dairy industry.
China has also stated its desire to open talks with the Pacific Alliance. And one thing the alliance members have realized is that negotiating with Beijing is a dark alley best not walked down alone. Canada can negotiate alone with China, as seen by the recently signed Foreign Investment Promotion and Protection Agreement. But for a broader agreement with more at stake, it simply makes sense to have leverage and allies, especially a small coherent group of serious countries with which Canada shares interests and values. Forging an agreement without the U.S. also means that U.S.-China security tensions and all the associated baggage are not present.
Parts of Asia and Latin America are booming, and Canada sits at the pivot between the two. Figuring out how to profit from this is the clearest path to long-term prosperity – and the Pacific Alliance is the ideal path to get there.
Canada has quietly campaigned to participate in the alliance and was rewarded with an invitation as a “special invitee” to the group’s last leaders summit, where Foreign Affairs Minister John Baird stood in for the Prime Minister. Moving from the group’s sidelines to full membership is the logical and crucial next step.
Carlo Dade is a senior fellow at the School of International Development and Global Studies at the University of Ottawa.