Canada stands to win big from a TPP without the U.S.: report

JPEG - 91.1 kb

iPolitics | 13 June 2017

Canada stands to win big from a TPP without the U.S.: report

by BJ Siekierski

Canada actually would see greater economic gains from a Trans-Pacific Partnership that excludes the United States — the so-called TPP11 — according to a new report released by the Canada West Foundation.

As the remaining TPP signatories continue to seek a path forward following the U.S. withdrawal last January, the report, primarily written by former Department of Foreign Affairs and International Trade deputy chief economist Dan Ciuriak and Canada West’s Carlo Dade, shows Canadian economic gains would amount to C$3.4 billion under the TPP11, compared to only C$2.8 billion in TPP12 — the version with the United States.

Real GDP gains, meanwhile, improve to 0.082 per cent from 0.068 per cent.

JPEG - 45.8 kb

The study’s modelling uses a “dynamic version” of the Global Trade Analysis Project’s computable general equilibrium (CGE) model, incorporating things like foreign direct investment in its simulations.

“A TPP11 would actually be better than the original agreement for Canadian agriculture and agri-food, because this sector would no longer compete with the U.S. in TPP11 markets. Beef, in particular, would benefit from access to the Japanese market without having to share with the Americans,” the report says.

“The biggest prize for Canada in a TPP11 is gaining access to Japan ahead of the U.S. and on terms that Canada could not achieve in a bilateral negotiation.”

The dairy sector is the only Canadian sector that would be significantly worse off under TPP11, the modelling shows.

“Because the main global dairy producer, New Zealand, is geographically distant from Canada, the U.S. would have been more important competition to Canada in terms of fluid milk. Without the U.S., TPP11 may mean less pressure on fluid milk,” the report says.

“But generally under TPP11 there may still be a dampening of prices from competitive dairy products from other TPP countries, a reduction of Canadian supply, and a corresponding higher level of consolidation, particularly winnowing out more higher-cost producers than is already the case.”

Another controversial area for Canada in the TPP negotiations — the automotive sector — is neutral in the TPP11 modelling, but that comes with an important caveat.

Given the central role U.S. producers play in automotive supply chains, the impact of a TPP11 would depend on how the remaining parties renegotiate the deal’s rules of origin, which are used to determine the source of a product.

The original TPP deal, compared to NAFTA, significantly lowered the regional value content for automotive products to qualify for TPP preferences.

The authors acknowledge their report doesn’t consider the implications of where TPP11 would land on several other controversial issues — among them intellectual property, the mechanism for investor-state dispute settlement and the governance issues surrounding data flows.

Though the TPP, as signed, can’t go into force without the U.S., the report suggests the remaining partners could strike out the text requiring the U.S. to ratify and press on with a revived deal.

At a meeting of the Asia-Pacific Economic Cooperation (APEC) trade ministers in Vietnam in late May, ministers from TPP signatories put out a statement agreeing to launch a process to assess options to bring the agreement into force.

That assessment is supposed to be taken up when APEC leaders meet in Vietnam for a summit next November.

Complicating things, however, are the upcoming NAFTA renegotiation talks with the U.S. and Mexico — also a TPP member.

Global Affairs Canada announced the beginning of NAFTA consultations earlier this month, with submissions due by July 18. The talks could begin as early as August.

“The original TPP12 agreement promised to be a relatively modest deal when evaluated in traditional terms of trade, jobs and growth. However, when potential gains for agricultural and commodity producers over their U.S. competitors are factored in with the ability for Canada to catch up with, or stop losing ground to, key competitors in Asian markets, the case becomes compelling,” the report concludes.

“Added to this, the modelling cannot adequately capture potential gains for Canada and Mexico from trade deflection. If U.S. producers look to move production from the U.S. into a TPP country to take advantage of the agreement, this arguably should benefit Canada and Mexico.”

keywords:
source: iPolitics