Where did the TPP come from?
The Trans-Pacific Partnership is unique among free-trade deals because it was created, not primarily to break down trade walls, but as a gold standard to which countries could aspire. The agreement was born in 2005 out of the achingly slow progress towards freer trade within the cumbersome 21-country collective known as the Asia-Pacific Economic Co-operation forum, or APEC. Progress was so plodding that insiders disdainfully called APEC “four adjectives in search of a noun.”
That all changed when the deal’s founding four members – New Zealand, Brunei, Chile and Singapore – completed a deal, then known as the Trans-Pacific Strategic Economic Partnership Agreement. What the so-called P4 have in common is that they are all small, trade-oriented economies with relatively few barriers between them. In 2008, the United States, Australia, Peru, Malaysia and Vietnam joined. The agreement was later renamed the TPP, soon becoming a top priority for the Obama administration. The nine partners want a deal by year end, but that timetable is almost certain to slip, especially now that Canada and Mexico have joined the party.
Why Canada wants a seat
The TPP is the state of the art of free-trade deals. Think of it as NAFTA 2.0 for the fast-growing Asia-Pacific region, with strong provisions on intellectual property (copyright, patent protection and the like) and harmonizing regulations. It’s also specially designed to be open to an ever-expanding number of new members.
It’s also seen as a major way to boost trade with Asia. The initial prize isn’t China, which isn’t a member and likely won’t be any time soon. But the TPP does include some of the most dynamic Asian economies, including Vietnam, Malaysia and Singapore. And by this time next year Japan may join the talks, creating a monster trading bloc.
For Mr. Harper, the TPP is as much about keeping pace with U.S. exports in this increasingly vital part of the world as it is about diversifying trade beyond the United States. Canada has already slipped behind the United States, which recently completed a free-trade deal with South Korea. Canada doesn’t have a single free-trade deal in Asia. The backdrop to TPP hoopla is that global free-trade talks – known as the Doha round – have stalled. Trading countries such as Canada, Australia and the United States see the agreement as a way to keep the free-trade momentum going, while preventing a backslide to protectionism.
An invitation to the table isn't the same as negotiations. And Canada hasn't yet conceded anything to the other TPP members, and vice-versa. Nor has it taken anything off the table.
To secure a TPP invitation, Ottawa has signalled that it's willing to put some important cards on the table. Those cards include lifting the protective-tariff wall that shields the roughly 15,000 dairy and chicken farmers - something sought by the United States, Australia and New Zealand.
Canada will also have to make concession on copyright reform and intellectual property - two of the most important trade demands sought by powerful U.S. industries, including drug makers, technology companies and the music and movie industries. The Harper government was quick to highlight publicly this week that it is poised to pass long-delayed copyright legislation. Copyright reform has taken 15 years, prompting the United States to repeatedly paint Canada as an IP laggard. Opening up government purchasing markets is also likely to be an important part of the agreement. But it's not clear how far Canada will have to go - or wants to go - in areas such as supply management.
Behind the last- minute scramble
Stephen Harper likes to exude coolness on the world stage. But Ottawa’s last-minute scramble to get into the TPP bordered on desperation.
Mr. Harper parachuted in Nigel Wright, his trusted chief of staff and former Bay Street deal maker, to plead Canada’s case to the Obama administration. And there were numerous delegations to Washington, with promises that Canada would be an “ambitious” partner. That’s code for a willingness to come to the table with major concessions.
Ottawa also warned of dire consequences to the integrated supply chains that dominate the North American economy if it were left out. By last week, it looked as though all that lobbying had paid off. Ottawa was sending industry lobbyists signals that Canada and Mexico would get in. But over the weekend, something went wrong as the nine existing members insisted that Canada and Mexico give up veto rights on key items already negotiated. Canada initially balked, which delayed by a day its formal invitation. It’s unclear if they made that concession.
By the numbers
Yesterday - 0.4 per cent: While the Harper government has ongoing negotiations with major markets such as the European Union, Japan, India and South Korea, it has completed only six free-trade deals since coming into office. All told, those six agreements amount to less than $1.5-billion worth of Canada's annual exports - around 0.4 per cent. The United States accounted for more than 70 per cent of Canada's $475-billion in worldwide exports during 2010. .
Today -76 per cent: The current nine members of the TPP negotiations cover economies with 510 million people and make up 28 per cent of global GDP, or $17.6-trillion. Most important, these members comprise 76 per cent of Canada's total export market. With Canada and Mexico added, the TPP area would grow to a market of 658 million people and about $20.5-trillion in economic activity.
The Future - 85 per cent: APEC makes up 54 per cent of global GDP and more than 40 per cent of global trade. Only members of APEC can join the TPP, and the idea is to eventually bring all into the tent, a few at a time. Should all join, the TPP would account for more than 85 per cent of Canada's exports.