Trans-Pacific Partnership: A few questions

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The Harper government currently lists 18 different sets of free trade negotiations "in play." (See my recent post on this.) The government recently announced (from the G20 meetings in Mexico): Canada has been invited to join the Trans-Pacific Partnership talks. The TPP negotiations were initiated several years ago by a number of smaller Pacific countries. The Obama government jumped on board in 2009, arguing that it could be a "new kind" of trade deal, one that supposedly embodies more "humane" founding principles (side deals on labour and environment, and all that claptrap). This is window dressing, of course; it's clear that (with a couple of exceptions noted below) this deal will be very much founded on the NAFTA template: investor rights and mobility, protections for intellectual property, and disciplines on state interventions. Mexico has also now been invited to join the talks. Reporters already breathlessly refer to this invitation as a big "prize," like we're being admitted to an elite club.

Let's take a breath and ask a few concrete questions about the whole TPP process:

N.B.: In writing the first version of this post I forgot that Canada already has a FTA with Peru, as well as with the U.S., Mexico and Chile. I have corrected the discussion below accordingly; thanks to Scott Sinclair for pointing this out. Check out the Council of Canadians' comprehensive brief on TPP from February.

Who's involved?

They refer to this as a "blockbuster" pact, but that's really stretching it. There are 10 other countries (other than Canada) in the talks. We already have FTA relationships with four of them (U.S., Mexico, Chile and Peru), so there will be no significant change there. What about the other six? Australia, Brunei (???), New Zealand, Malyasia, Vietnam and Singapore.

What's our current trade pattern?

Our combined trade with those six potential new free trade partners is small and highly unbalanced. 2011 merchandise exports to the six of them were worth a total of $4.2 billion (under 1 per cent of Canada's total exports). Our imports equalled $7.4 billion. Trade deficit is $3 billion. Among those six new partners, our biggest trade deficit is with Malaysia; with Australia, we enjoy almost exactly balanced trade.

What will we sell them?

Our trade with the six new TPP partners reflects the same quantitative and qualitative imbalances as our trade with almost everyone in the world (other than the U.S., with whom our trade is much more favourable on both grounds). Quantitatively, we import much more than we export. Qualitatively, we export resources while importing value-added manufactures. Based on past experience, free trade can only accelerate this deindustrializing trend: we will sell them more stuff dug out from the ground under our feet, and we will buy more value-added manufactures.

What about the Southeast Asian connection?

The qualitative imbalance in the composition of our TPP trade is most acute with the three Asian "tigers" represented in the group (Singapore, Malaysia and Vietnam). With those three countries alone, Canada incurs a $4-billion manufacturing trade deficit. That would get much bigger under a free trade deal, since all three of those countries are pursuing aggressive export-led trade strategies in the Asian tradition (premised on generating domestic demand and employment through the maintenance of large, ongoing trade surpluses). Free trade with Malaysia and Vietnam (two countries with dynamic export sectors, low wages and iffy labour freedoms) would certainly pose real challenges to Canadian labour standards -- accentuating the pressure that is being felt across tradable industries by the continuing migration of investment to Mexico.

Will Canada be a full negotiating partner?

Media reports based on leaked material indicate that Canada and Mexico may in essence be "second-class citizens" in the negotiations. We have been "invited" to participate, but may not have the right to either alter draft text that has already been agreed to, nor to veto future clauses. That means we may have to basically take or leave what the others negotiate. This opens some dangerous scenarios, where Canada accepts inferior or damaging provisions (like the abolition of supply management in agriculture) under pressure of being booted out of the talks altogether.

Will the TPP have a Chapter 11?

It is interesting that some of the TPP partners are presently led by left-wing governments (including Australia, Peru and Vietnam), which will not be amenable to some of the traditional neoliberal provisions of trade agreements. Australia refused to accept a NAFTA-style Chapter 11 (investor-state dispute settlement provision) in its FTA with the U.S., and is unlikely to accept one here. Some other provisions regarding pure national treatment or other protections for investors might be non-starters with some of those governments. It will be interesting to see how those tensions play out. At the WTO stage, a similar difference in approach between northern neoliberals and southern "structuralists" (led by Brazil) have led to a complete stalemate in trade liberalization.

Would anyone notice?

The TPP talks fit into the Harper government's overall push to cement as many free trade deals as possible, no matter how marginal the trade flows involved, while it enjoys the authority of a majority government. Expect proponents of the TPP to argue vociferously that Canada can't afford to be left on the sidelines as this trans-Pacific pact is assembled. But in practice joining a TPP would make no measurable difference to Canada's export potential; only 1 per cent of our exports is affected, and we've already seen from other FTAs (especially those with developing countries which follow the export-led model) that free trade has no measurable positive impact on our exports (and may in fact slow down our exports). It will certainly lead to faster import penetration and continuing downward pressure on Canadian labour markets (especially in our relations with the three Asian tigers in the group). Which raises the final question...

Why is the government doing this?

It fits with the political optics of "being seen to be busy" on the economic portfolio, and with the general ideological strategy associated with "free trade." It will give the government an excuse to end supply management in agriculture (something they want to do anyway, as evidenced by their actions with the Wheat Board). It will give corporations an opportunity to tighten up rules (including intellectual property) above and beyond what's already written into the NAFTA.

Jim Stanford is an economist with CAW. This article was first posted on The Progressive Economics Forum.

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