Free trade with Europe and the Trans-Pacific Partnership grab most of the headlines.
But a proposed free-trade deal with Japan offers Canada the potential of an early and quick trade win, with a much shorter list of contentious issues than those dogging other negotiations, trade experts and industry officials say.
Talks with Japan began late last year and negotiators are scheduled to meet in Tokyo next week for a third round.
“Politically, if the federal government is looking for a win to close the deal, the Canada-Japan bilateral initiative would seem like a good way to go,” said David Worts, executive director of the Japan Automobile Manufacturers Association of Canada. “It certainly has more likelihood of being done before the [Trans-Pacific Partnership].”
Canada is engaged in 14 separate sets of free-trade talks involving dozens of countries, as well as an ambitious international services agreement with a select group of 22 World Trade Organization members. Compared with most, the proposed Canada-Japan Economic Partnership Agreement is relatively uncomplicated.
Because the Canadian and Japanese economies are largely complementary, the talks could move “rather quickly,” compared with the TPP, which now counts 11 members, including both Canada and Japan. Mr. Worts pointed out that traditionally thorny issues, such as Canada’s protected dairy industry and Japan’s closed rice market, aren’t a problem in a bilateral agreement because Canada doesn’t export rice and Japan doesn’t export dairy products.
“Both governments seem willing to try their hand at a bilateral trade deal,” agreed Lawrence Herman, a trade lawyer at Cassels Brock & Blackwell LLP in Toronto. “That may be because they see a bilateral trade deal as early pickings.”
But Mr. Herman warned that Japan’s recent entry into the TPP process muddies the waters. He said it’s still “unclear” how far the two countries are willing to go, with the TPP negotiations occurring simultaneously.
Norihiro Okuda, Japan’s ambassador to Canada, recently told iPolitics, an online political news site, that the TPP negotiations could complicate the bilateral deal.
Canadian officials said the two sides have made “good progress” since the last round of negotiations in April.
“Negotiations with Japan represent a landmark opportunity to deepen Canada’s trade and investment relationship with one of the world’s largest and most innovative economies,” said Rudy Husny, a spokesman for Ed Fast, Minister of International Trade.
Japan is eager to negotiate an end to Canada’s 6.1-per-cent tariff on imported cars. Vehicles and auto parts are Japan’s No. 1 export to Canada. Japanese auto makers shipped more than 188,000 vehicles to Canada last year.
The auto industry is also central in the Canada-EU and Canada-South Korea free-trade talks.
Mr. Herman pointed out that Japan has more leverage in pushing for an end to the tariff than does, say, Europe or South Korea, because it manufactures cars here. Both Toyota Motor Corp. and Honda Motor Co. Ltd. have assembly plants and extensive parts making operations in Canada. The two companies built nearly a million vehicles in Canada last year, the bulk of which were exported to the United States.
Canada, in turn, is anxious to expand exports of services such as financial services, which accounted for roughly 11 per cent of its $12.6-billion in exports to Japan in 2011. Canada’s main exports to Japan are coal, canola, meat and lumber.
Ottawa also wants to tackle non-tariff barriers and get better access to the government purchasing market.
A 2012 study by Canada and Japan estimated the potential gains of a free-trade deal at up to $9-billion (U.S.) for Canada and up to $4.9-billion for Japan.
The TPP schedule calls for completing negotiations this year. But most experts say that target is unrealistic, particularly because the Obama administration has not secured trade negotiating authority from the U.S. Congress – a process that can be drawn out and politically divisive.