Imagine a chess exhibition where a grandmaster simultaneously takes on multiple opponents, and you have some idea of the convoluted web of trade negotiations Canada has on the go.
Throw in all the other proposed bilateral and regional trade agreements in the world, and the possible moves are head spinning.
Why, for example, would Canada put its best dairy offer on the table in the European trade talks when it knows the U.S. and New Zealand will be gunning for it in the Trans-Pacific Partnership talks?
France and Ireland, similarly, are reluctant to open their markets to more Canadian beef because they fear the U.S. will want even more in a future U.S.-European Union deal.
“The more you have these [trade negotiations] going on simultaneously, the more complicated and multidimensional the chess game gets,” acknowledged Matthew Kronby, who was Canada’s lead lawyer in the European free-trade talks before joining law firm Bennett Jones last year.
When the Doha round of multilateral trade talks stalled in 2008, countries wanting to expand trade more rapidly looked elsewhere. It spawned an explosion of proposed trade deals.
Canada alone is now 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. In some cases, Ottawa is simultaneously negotiating with the same countries in multiple venues.
The hope is that all these efforts will collectively break down trade barriers and get a little closer to the ultimate goal of global free trade.
It’s not at all clear that’s happening. The very real danger is that all these overlapping negotiations, paradoxically, make signing deals less likely and freer trade more elusive.
Countries are loath to give up too much in the short term, fearing they’ll lose leverage in future negotiations that may offer richer rewards.
The players at the table in any one set of talks may not reflect real world trading patterns. The vaunted Trans-Pacific Partnership, touted as the gold standard of free-trade deals, spans the globe, but doesn’t involve either China or Europe – two of the most important players in world trade.
Canada learned the hard way that, as a relatively small player, it can easily become a pawn in a trade chess game dominated by larger players. South Korea, for example, stopped negotiating with Canada in 2008, realizing it had virtually everything it needed after wrapping up a deal with the United States.
Unless Ottawa can complete negotiations soon with the European Union, Canada risks being big-footed again as the U.S. and Europe begin negotiations.
Bilateral and regional trade deals can also complicate existing trade flows.
Consider Canada’s 6.1-per-cent tariff on cars and auto parts, which has become a significant issue in both the European and Korean free-trade talks. Japan looks at these negotiations and says: “What about us?” Korea and Europe stand to get preferential access to the Canadian market when, unlike the Japanese, they don’t even make cars or invest heavily here.
Meanwhile, Canada has begun free-trade talks with Japan. Japan is also poised to join the Trans-Pacific Partnership negotiations, and it has already sketched out a tentative agreement with the U.S. on the thorny and politically sensitive issue of cars.
As neither Korea and nor the European Union are involved in the Trans-Pacific Partnership, it is unclear where, or when, Canada should bargain away its auto tariff.
Some chronically sensitive sectors, such as rice or dairy products, are not controversial in the context of Japan-Canada talks because Canada isn’t a rice producer and Japan doesn’t export dairy products. But those same products are certain to be tricky in the Trans-Pacific Partnership, where rival countries compete in those markets.
Adding to the complexity of all these deals is a more practical problem – the shortage of trade-negotiating expertise. With so much going on, the federal government’s bench is stretched thin. There are only so many experts capable of negotiating investment rules, customs procedures and the like. The same labour shortage is affecting other countries too.
Prime Minister Stephen Harper is anxious to secure a trade victory for Canada.
But negotiating fatigue and gridlock are threatening to deny him the win.