Sake-brewery workers combine steamed rice and mold spores to make koji, or mold, at a brewery in Kyoto’s Fushimi district. Japan is notorious for protecting its rice farmers, and the Fraser Institute believes that, if the Trans-Pacific Partnership can protect Japanese rice, it will also likely protect Canadian supply management.KOJI SASAHARA/The Associated Press
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The Trans-Pacific Partnership could increase Canada's GDP by almost $10-billion annually and swell exports by almost $16-billion. It would bring NAFTA into the 21st century and open new Asian markets to Canadian goods and services. And we wouldn't have to sacrifice supply management.
These optimistic conclusions anchor a new report released Thursday morning by the Fraser Institute, a Vancouver-based conservative think tank. The Globe and Mail was provided with a copy of the report in advance.
Whether a Trans-Pacific Partnership accord is ever concluded, whether it is ratified by the major signatories and whether the Canadian public is willing to support the agreement are all open questions.
But the Fraser Institute believes that possible gains outweigh the risks. And since the Conservative government fought hard to get itself invited to the TPP table, Stephen Harper clearly agrees.
The talks involve 12 diverse Pacific nations: large developed ones such as the United States and Japan; smaller developed ones such as Australia and New Zealand; and developing ones such as Malaysia, Peru and Vietnam. They have a combined gross domestic of more than $27-trillion, representing 35 per cent of global GDP and one third of global trade. The TPP would be the world's largest free-trade zone.
The TPP "will be Canada's first foothold into prosperous Asian markets," conclude Laura Dawson and Stefania Bartucci, who authored the report. But it will not be a large foothold, at first. Canada already has trade agreements with several TPP member; the rest account for only 4 per cent of Canada's total trade.
"Nevertheless, given the shifting dynamics of global growth to emerging markets, Canadian businesses must focus on market potential, rather than where markets are now," the authors maintain.
The greater benefit for Canada is that the TPP is really NAFTA 2.
The North American free-trade agreement between Canada, the United States and Mexico is 20 years old. It was negotiated in an era when trade meant exporting potash and importing shoes. But there are new challenges and opportunities, such as harmonizing regulations, protecting investors and their investments, preventing the theft of intellectual property, resolving disputes, safeguarding the environment and improving labour mobility.
To the extent that the Trans-Pacific Partnership harmonizes the rules in these and other areas, it will also serve to thoroughly modernize NAFTA.
The biggest concern for many Canadians is the push within the TPP talks to eliminate agriculture subsidies. That would mean dismantling supply management, which protects the dairy, poultry and egg industries. Supply management is a sacred cow and chicken that no federal party has been willing to challenge.
But Japan could provide an out. The recent arrival of the world's third-largest economy at the TPP table was a huge boost for the talks. But Japan is notorious for protecting its rice farmers. If getting Japanese agreement means protecting Japanese rice, the authors believe, then it will likely also mean protecting American sugar and Canadian supply management.
On the flip side, Canada may be able to influence the TPP talks in areas such as regulating investments by state-owned enterprises and in preventing "buy local" protectionism in government contracts.
The final advantage of the TPP could be the most important: Once it exists, China will be tempted to join, rather than risk seeing it turn into a form of economic containment by the United States.
In sum, "the TPP negotiations should help Canada to maintain its preferential trading status with the United States and provide an opportunity for it to formalize its trading relationships with new emerging market partners," the authors conclude.
It's a convincing argument – in the best of all possible worlds. In the real world, Canada is having trouble nailing down a similar agreement with the European Union. Getting 12 Pacific nations, some of them very disparate, to agree on a common set of rules is even more daunting.
The TPP talks have dragged on now for 3 1/2 years. The United States wants to conclude the negotiations before the end of 2013. Other countries doubt that deadline can be met. There are still big areas of disagreement, especially on the rights of corporations to take national governments to court.
Within the democracies, there are growing demands from opposition politicians and interest groups for greater openness. And no one can say for sure whether an agreement, once signed, will be ratified by the all-important U.S. Congress.
Still, the potential of the TPP to herald a new era in open global trade is enormous. If Canada can be part of such a landmark agreement, while still protecting dairy, poultry and eggs – well, what's not to love?
And here's a final, febrile, thought: If a Canada-EU trade deal does get signed, if the U.S.-EU free trade talks now underway lead to a similar treaty, and if the North American-EU agreements are similar to the TPP, then what is to prevent a super agreement that encompasses the members of the TPP and the European Union? And which nations, finding themselves excluded from such an enormous trade zone, would not scramble to join it?
A future too far, I know. But still …
John Ibbitson is the chief political writer in the Ottawa bureau.
John Ibbitson