Carlo Dade is the director of the Trade and Investment Centre at the Canada West Foundation.
There are more questions than answers in the federal government’s developing Indo-Pacific strategy, which is designed to help Canada navigate a world where China is a dominant economic force. For Canadian businesses, the most puzzling question is probably why Ottawa is not aggressively pursuing the country’s only real competitive advantage in the region: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
The CPTTP is one of the very few areas where Canadian businesses are on par with its competitors in the Pacific Rim and ahead of U.S. companies that want but cannot have a real trade agreement in the region, as dysfunctional domestic politics prevent Congress from approving one. With enforceable rules, tariff cuts, dispute settlement and provisions to move skilled labour, plus 11 economies in the region and another eight queueing up to join, the CPTPP is the definition of competitive advantage. If expanded, the agreement could see, at a minimum, an additional $52-billion a year of Canadian trade protected by its stronger rules.
Rising trade irritants such as cuts to canola exports and steel and aluminum tariffs have now made gaining market access arguably less important than surviving it once it has been achieved. Real trade agreements with enforceable rules aren’t a panacea, but they are the best tool available to protect existing commerce and encourage firms to go abroad. The CPTPP is the best of what Canada has in the region to do so.
If the growth, protection and diversification of trade is the goal, then a good multilateral agreement with strong partners is simply the best path. Yet, for some reason, proactively expanding the CPTPP is not the priority focus of the trade part of Canada’s Indo-Pacific strategy. The plan makes only one mention of substance on the agreement, stating that the government will “work with partners to strengthen and expand the CPTPP and ensure that any form of expansion will be based on high standards and track records.”
The reality hidden in bland words is that Canada is taking a passive approach, waiting for countries to ask instead of aggressively evangelizing. This is the opposite of what is needed. Proactive outreach to persuade others to join is simply the singular best path for expanding, and equally important, protecting Canadian trade in the region. The two other priorities of Canada’s Indo-Pacific strategy – negotiating new bilateral agreements and joining the U.S. Indo-Pacific Economic Framework for Prosperity, or IPEF – are second best to CPTTP growth as a means to advancing our interests.
The advantages that Canada has under the CPTPP were won only because large economies such as Japan, Mexico, Singapore and Australia were at the negotiating table. It is hard, bordering on impossible, to see Canada, negotiating one-on-one, winning similar concessions from any country in a region that does not really need its small market. Our limited trade negotiating capabilities will produce a better return if applied to the resource-intensive process of adding members to the CPTPP rather than chasing weaker bilateral agreements.
The American business community’s response to its government’s IPEF has been to point to the CPTPP as its preference, reinforcing why growing the latter is a better path for Canada. A lack of enthusiasm from countries in the IEPF, from India refusing to join trade discussions to Australia not trumpeting its holding a round of talks, adds to the skepticism. And that the “America first” U.S. Congress is pushing to have a vote on any IPEF agreements makes it an even less likely path to grow Canadian trade. The sole reason for Canada to join the IPEF talks is just in case something of substance happens, not because anything is expected. Finally, an additional benefit of the CPTPP is that the Americans aren’t in it, giving Canadian business a leg up in the region.
The Indo-Pacific strategy is a critical opportunity for Canada for a host of reasons. But in pursuit of new opportunity, it is critical to not lose, or let languish, the one comparative advantage that the country already has.