With TPP likely dead, NAFTA in question and the EU in turmoil, experts weigh in on whether Canada should pursue bilateral agreements over multilateral ones.
With hostility in the United States and beyond to global trade treaties, where does that leave companies with Canadian interests in terms of international trade?
“It’s too early to tell,” says Jake Dyson, whose family’s Britain-based Dyson Ltd. has 125 Dyson Canada employees across the country, with Dyson Canada’s head office located in Toronto. He is not overly concerned about what – if any – effect the changing landscape for global commerce will have on his family’s booming business.
“We’re just focusing on expanding our business, building our customer base globally. China is huge, Asia is important, North America, Europe; everywhere really,” he says.
Mr. Dyson is research and development director of Dyson Ltd. and son of the inventor of the company’s famous vacuum cleaner. He is launching a new series of long-lasting lighting products he has designed for home and large-scale use. The company’s products also include heaters, fans and hair and hand dryers.
Right now he does not anticipate much impact from the fast-changing political and regulatory structure for international trade on his company, which does 90 per cent of its business outside its British base. Any changes won’t really alter how Dyson Ltd. plans to manufacture and market its new lighting.
While Dyson may be calm, in Canada, the swift changes for world trade diplomacy are raising worries.
Canada may have to renegotiate deals with other countries and trading blocs. This raises the question of whether it is better to pursue regional agreements or to work one-on-one with individual countries.
Canada has already been put on notice by U.S. president-elect Donald Trump that he wants to talk about the North American Free Trade Agreement (NAFTA) – or he may rip it up. About 70 per cent of Canada’s trade is with the United States.
Meanwhile, the Trans-Pacific Partnership (TPP), a 12-nation agreement that was agreed to in principle last February, is effectively dead, after the incoming U.S. administration said it would not ratify the deal.
A third multilateral deal, the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union, takes effect in the new year after regional European leaders almost scuttled it.
But its significance may be precarious, too, because the 28-member EU faces its own stresses.
Europe is bracing for a long negotiation with Britain over Brexit – Britain’s decision, in its June 23 referendum, to leave the EU. Eastern Europeans are nervous as neighbouring Russia seeks to reassert power at its borders. At the same time, public opinion across Europe appears to be hardening against open borders, which affects labour mobility and trade.
While this may not matter to Canada if CETA works effectively to promote trade with Europe, if barriers go up around the world, striking new regional deals may be the only alternative – and a big challenge.
Reaching bilateral free trade agreements is possible – we have them with South Korea, Colombia and Peru, for example. But negotiating these takes time, and the importance of Canada’s relationship with each country is different.
Canada is in a frustrating but unavoidable situation, says Brian Kingston, vice-president, policy, international and fiscal issues for the Business Council of Canada.
“We still are in an enviable position in terms of our access to other markets, but Canada needs to rethink its trade strategy,” he says.
He sympathizes with trade negotiators who have worked on deals like the TPP and have worked successfully under NAFTA for years, suddenly to find the ground shifting under their feet.
But it is important for Canada’s trade policy to set priorities, fast, he says.
The first step should be engaging more actively with China, Mr. Kingston says.
“They’re our second-largest trading partner [after the U.S.] and clearly interested in negotiating with Canada.”
With the collapse of the TPP, Canada should also focus on working individually with Japan and India, “picking up where the TPP left off,” Mr. Kingston adds.
“The TPP would have particularly boosted our access into Japanese markets. We have had seven rounds of negotiation individually with Japan already, but Japan’s priority, understandably, was the TPP.”
Now that the 12-nation agreement is not happening, it is in both countries’ interest to sit down one-on-one. The same goes for India, where negotiations to open trade have been going on parallel to the TPP; it is time to put more attention on these ongoing talks now that we’re not sitting at a 12-country table, Mr. Kingston says.
There are also opportunities for Canada to negotiate with other ASEAN (Association of Southeast Asian Nations) governments, says Danielle Goldfarb, director of the Conference Board of Canada’s Global Commerce Centre.
“If the U.S. becomes less open [to easing trade barriers] then Canada is going to become a much more attractive partner,” she says.
It’s not the quantity of bilateral agreements that matter, but the quality of what we end up negotiating, says Angelo DiCaro, national researcher for Canadian private-sector union Unifor.
“Trade is important to Canada. But we need some more creative policy proposals that ensure our economy realizes some benefit from a trade pact,” he says.
“If you look at average annual growth in trade flows between Canada and the rest of the world, export growth is significantly higher with nations where there is no bilateral free-trade relationship.”
Another option, says the Business Council’s Mr. Kingston, is for Canada to simply lower its tariffs on its own, without negotiating with anyone.
“There’s research showing that our economy could generate an additional $61-billion a year by 2035 if we just said unilaterally that we’re getting rid of all our remaining tariffs,” he says of a study conducted for the Business Council.
“That’s four times the combined projected impact of CETA and the TPP.”Report Typo/Error
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