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Not joining TPP will cost Canada billions in economic growth: report

International Trade Minister Chrystia Freeland has been seeking public feedback on TPP and has said it’s not her job to persuade anyone that the accord is a good deal.

Qilai Shen/Bloomberg

One of the Canadian government's own top economists has just published a paper advising the Trudeau Liberals that failure to sign onto a massive Pacific Rim trade accord would cost this country billions of dollars in economic growth.

André Downs, chief economist at the department of Global Affairs, says that joining the Trans-Pacific Partnership would generate long-term gains for the Canadian economy, expanding output by $4.3-billion. This would primarily come from better access to traditionally shuttered markets such as Japan.

Ottawa has remained noncommittal on the TPP, clinched while Stephen Harper was still in office, saying it wants to consult before taking a stand. International Trade Minister Chrystia Freeland has been seeking the views of Canadians since assuming her post in 2015 and has said it's not her job to persuade anyone that the accord is a good deal.

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The chief economist at Global Affairs says that remaining outside the TPP trade group would cost Canada an estimated $5.3-billion in lost economy activity. This would result from lost trade as other countries gain preferential access to major Canadian trading partners such as the United States and Mexico and steal some of Canada's market share. This would still happen if Canada was party to the TPP but the losses would be offset by new trade access to other markets, the Office of the Chief Economist said.

This forecast, however, is notably less rosy in the current Liberal government era than what the department of Global Affairs served up in terms of predictions during the Conservative era about a year before the deal was clinched. A 2014 report on the department's website, which credits the same Office of the Chief Economist as the source of economic modelling, cites predictions of economic gains of $6.5-billion (U.S) for Canada.

Ms. Freeland's office gave no indication that the latest report from her own department would persuade her to support the TPP, suggesting it will be some time before the Liberals adopt a position. A Commons committee chaired by Liberals has yet to complete a study on it.

"With rising protectionist sentiment around the world, our government stands by our commitment to consult Canadians on the Trans-Pacific Partnership. Many Canadians still have important questions or concerns," Alex Lawrence, press secretary to Ms. Freeland, said in a prepared statement.

The Global Affairs report's estimates about the impact on Canada are based on the assumption that the United States, the biggest player in the TPP talks, as well as all 10 other negotiating parties, ratify and are part of the deal.

That's far from certain though. Both major candidates for the U.S. presidency, the Democrats' Hillary Clinton and the Republicans' Donald Trump have expressed considerable doubts about the Trans-Pacific Partnership and neither has expressed an interest in the United States ratifying the agreement.

The TPP poses risks for Canadian auto parts makers because it would eliminate tariffs on Japanese vehicles and make it easier for manufacturers to use offshore parts. It would be a boon for low-wage Asian suppliers of parts, but a challenge for Canadian firms. Mr. Downs's report, however, warns that remaining outside the TPP could discourage U.S. companies from using Canadian auto parts because they would have to meet rules for sourcing parts from countries that are members of the Trans-Pacific Partnership.

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The Global Affairs report does not make any value judgement on whether the gains are significant or middling.

This past April, the C.D. Howe Institute, which benefits from signficant support from corporate Canada, published a TPP analysis that predicted the deal would have a "modest impact" on Canada with a $3-billlion (Canadian) increase in household income by 2035.

The Canadian Centre for Policy Alternatives said the Downs report estimates only modest gains and ignores the extra costs to Canadians that will accrue from signing the TPP including, likely, billions of dollars in compensation for farmers as well as bigger price tags for copyrighted goods and patented medicines.

"The meagre benefits projected by the study will be washed out by these costs to Canadians," said Scott Sinclair, senior trade researcher at CCPA.

Proponents of the deal, however, have urged Canada's participation in the TPP on primarily defensive grounds, arguing this country cannot afford to be outside a trading network where other countries are gaining better access to the U.S. market – the largest customer for Canadian exports – and greater inroads into Asian markets.

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About the Author
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

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