Time is right for trade deals with Asia-Pacific
Time is right for trade deals with Asia-Pacific
Neville Nankivell, Financial Post
Wednesday, March 15, 2006
With the world’s two big multi-country trade liberalization talks stumbling or moribund, our new government should fire up action on bilateral and smaller regional free-trade deals. The benefits won’t be nearly as grand as those from a new World Trade Organization pact or one involving all of the Americas, but there’s still much to gain from individual free-trade agreements (FTAs) that enhance business opportunities abroad.
While David Emerson’s appointment as Minister for International Trade has been politically contentious, he is especially well qualified to direct a fresh push on this front. He was industry minister in the last Liberal government. He’s a former top international business executive. And in the new government the Vancouver-based Emerson has also been named minister for the Pacific Gateway.
This gives him specific responsibility for promoting Canadian trade in the bustling Asia-Pacific area. His background should also give him an understanding of how important it will be to lessen restrictions on foreign business investments as part of any bilateral deal. More than ever, trade and investment go hand in hand in global business strategies.
Our government is committed to the worldwide trade talks of the 147-member WTO. But these are in trouble, mainly because of disagreements over heavily protected agricultural sectors. Canada has also backed resumption of negotiations aimed at a 34-member Free Trade Agreement of the Americas. But this is pretty much dead. Regional powerhouse Brazil is opposed. The United States seems indifferent.
Talks with the European Union on a promising Trade & Investment Enhancement Agreement were launched two years ago. Progress has been slow and tangible results are not visible yet.
Prime Minister Stephen Harper will address what he calls "the evolution of NAFTA" (the North American Free Trade Agreement) when he meets with U.S. President George W. Bush and Mexican President Vicente Fox in Cancun on March 30-31. This trilateral will likely focus mostly on security and border issues. And given the protectionist mood of the U.S. Congress, improving NAFTA from our point of view will be arduous — although still worth pursuing.
The time is right for new market openings in the high-potential Asia Pacific region. Asian economies are predicted to account for 45% of world GDP within the next decade, but our trade there has not kept up with the area’s growth.
The Liberal government formally launched free-trade negotiations last summer with South Korea. A "positive" third round of talks was completed in December. There’s abundant trade potential for us there, particularly in service sectors such as finance, insurance and eduction. Korea’s shipbuilding subsidies, though, could be a stumbling block to a comprehensive FTA. (Shipbuilding issues with Norway were the reason talks broke down on our attempts to do an FTA with the four-country European Free Trade Association.)
Japan, a key export market for us and biggest source of business investment from Asia, is now somewhat more open to bilateral FTAs than in the past. A year ago we opened talks on an innovative "economic framework" deal. Eventually this could be developed into a wider-based trade and investment pact with Japan. The economic benefits to us of pulling this off would be huge.
Fast-growing India also holds great potential as a trading partner, for service sectors as well as goods. Former Liberal trade minister Jim Peterson led a strong trade mission there last year. The Conservatives can build on this initiative.
China of course is the big economic story of the region. It’s now our second-largest trading partner, with nearly 2,000 Canadian companies doing some kind of business there. The Canada-China Business Council is spearheading efforts to improve needed legal protections for Canadian business investments and ways to resolve commercial disputes. The outcome will be crucial for the long-term outlook of our trade with China. Meanwhile, an FTA is not on the agenda. Nor should it be yet. We’re still trying to conclude an FTA with Singapore, while several other countries already have, among them the United States. These talks need a kick. Singapore is an important financial centre for Southeast Asia. Our financial firms are players there.
A year ago the United States also completed a free-trade deal with burgeoning Australia. This was helped by Australia’s support of U.S. involvement in Iraq. Still, considering our long trade ties with that country — our very first federal government trade commissioner’s office was opened there in 1895 — a Canada-Australia FTA is logical. It would fit with our government’s Pacific Gateway thrusts. Emerson, as the Aussies would say, should give it a go. Smaller New Zealand, which is FTA-open-minded, should be on our agenda too.
We are negotiating FTAs with some small countries and regional groupings in Central America, the Andean community and the Caribbean. The United States has put together FTAs in these areas. It’s time to complete ours and initiate others. Some years ago we did a successful FTA with Chile, fortunately in this case well before the United States. This pact is a good model for what could be accomplished in the region and elsewhere around the world.
