(Disponible en français : Le Partenariat transpacifique : situation actuelle et prochaines étapes pour le Canada)
With the North American Free Trade Agreement negotiations frequently in the news, that agreement may be uppermost in the minds of legislators and Canadians.
However, for Canada, gaining greater access to growing markets in the Asia-Pacific region would support efforts to diversify the country’s trading partners and to increase its economic growth. In that context, the future of the Trans-Pacific Partnership (TPP) is an important issue for Canada.
Establishing and Expanding the Partnership
In 2005, four countries formed the Trans-Pacific Strategic Economic Partnership or “the P4”: Brunei; Chile; New Zealand; and Singapore. The FTA concluded by the P4 included a clause containing a commitment to encourage accession to the agreement by additional countries.
Since 2005, other countries have joined the P4: the United States, Australia, Peru and Vietnam in 2008; Malaysia in 2010; Mexico and Canada in 2012; and Japan in 2013. These 12 countries became known as the TPP.
Negotiations among these 12 countries for a TPP agreement concluded in October 2015. To take effect, at least six countries that account for 85% of the gross domestic product of the 12 TPP countries collectively would need to ratify the draft agreement by February 2018.
Because of the threshold for ratification, the TPP agreement cannot come into effect if a country with a large economy, such as the United States or Japan, does not ratify it.
Reducing the Partnership to 11
In a memorandum to the U.S. Trade Representative on his first day in office, President Trump withdrew the United States from the TPP, thereby fulfilling a campaign promise.
The United States’ withdrawal was formalized on 30 January 2017 through a letter to the other TPP countries and to the TPP depositary, New Zealand’s Ministry of Foreign Affairs and Trade.
Moving Ahead Without the United States
During the negotiations among the 12 TPP countries, concessions were made in order to gain access to the U.S. market. Countries may want to re‑evaluate at least some of those compromises in the context of TPP 11 negotiations.
On 15 March 2017, the remaining TPP countries – known as the TPP 11 – met to discuss the future of the TPP. In a joint statement, they indicated that “high level representatives exchanged views on their respective domestic processes regarding TPP and canvassed views on a way forward that would advance economic integration in the Asia Pacific.” Since then, additional meetings have occurred.
For example, trade ministers from the TPP 11 countries met in May 2017 during an APEC meeting to continue their discussions about the TPP. According to Nikkei Asian Review, they agreed to present assessments on the future of the TPP when they meet for the APEC Economic Leaders’ Meeting on 11–12 November 2017.
Exploring Canada’s Alternatives
With uncertainty about whether the TPP 11 countries will conclude an FTA, or will pursue a series of bilateral and/or smaller regional FTAs, Canada is considering a range of options.
In May 2017, Canada’s Minister of International Trade indicated the country’s willingness to reopen FTA negotiations with Japan. However, to date, Japan seems to be focused on reaching an agreement among the TPP 11 countries.
Currently, Canada and Australia have a Trade and Economic Cooperation Arrangement, and the countries give each other preferential tariff rates on a range of products under the Trade Agreement between the Government of Canada and the Government of the Commonwealth of Australia.
Similarly, Canada and New Zealand grant each other preferential tariff rates on various products in accordance with the Agreement on Trade and Economic Co-operation between the Government of Canada and the Government of New Zealand.
Notwithstanding these existing agreements with Australia and New Zealand, Canada may wish to explore the possibility of negotiating comprehensive FTAs with those countries.
China is encouraging countries to participate in either the Free Trade Area of the Asia-Pacific or the Regional Comprehensive Economic Partnership. While Canada has not publicly indicated an interest in participating in either of those agreements, exploratory discussions have occurred about a possible bilateral Canada–China FTA.
Exploratory discussions are also underway about a potential Canada–Association of Southeast Asian Nations (ASEAN) FTA. Four TPP 11 countries are a part of ASEAN: Brunei; Malaysia; Singapore; and Vietnam. Canada does not have an FTA with any of them.
As well, exploratory discussions are being held regarding a possible Canada–Pacific Alliance FTA. Three Pacific Alliance members – Chile, Mexico and Peru – are TPP 11 countries. Canada already has a bilateral FTA with these countries and with Colombia, the fourth Pacific Alliance member. According to Global Affairs Canada, while the Pacific Alliance is a platform of commercial integration, it also shares best practices and develops common objectives in such areas as tourism, regulatory frameworks and climate change.
Canada’s trade agenda will continue to evolve as options are explored and further discussions take place. Following the 11–12 November 2017 APEC Economic Leaders’ Meeting, attention may be focused on any comments that are made about an FTA among the TPP 11 countries.
Related Resources
Australian Government Department of Foreign Affairs and Trade, Trans-Pacific Partnership Agreement negotiations.
Foreign Affairs and International Trade Canada, Canada and Asia-Pacific Trade.
Library of Parliament, Canadian Trade and Investment Activity: Canada–Trans-Pacific Partnership Countries.
Author: Daniel McBryde, Library of Parliament
Categories: Business, industry and trade