CANADA ECONOMICS
CPTPP
Global Affairs Canada. Feb 20, 2018. Minister Champagne welcomes release of full text of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership
Ottawa, Ontario - Trade helps strengthen the middle class by attracting job-creating investment to Canada and expanding export opportunities for Canadian businesses to large, fast-growing markets.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) takes a large step toward this goal. The CPTPP represents 495 million people with a combined gross domestic product of CAD $13.5 trillion – a full 13.5% of global GDP.
Through the CPTPP, Canada will soon have preferential access to half a billion consumers in the world’s most dynamic and fast-growing market – a move that will strengthen Canadian businesses, grow the economy, and create more well-paying jobs for middle class Canadians.
Today, the Honourable François-Philippe Champagne, Minister of International Trade, announced that after translation and legal review of the text across 11 jurisdictions, the full text of the new CPTPP has been published. The full text of the bilateral side-letters are expected to follow as soon as possible.
The Minister also released the projected economic impacts of the CPTPP and both are now posted to the Global Affairs Canada website. Ministers of all 11 member countries will officially sign the CPTPP on March 8th in Santiago, Chile.
Together, the 11 member countries of the CPTPP form one of the largest trading areas of the world. The Government of Canada continues to engage with Canadians and stakeholders across the country to promote the benefits of the Agreement.
Quotes
“We wanted a good deal, and that’s what we got for Canadian workers and their families. Canadians from coast to coast to coast will have preferential market access to one of the largest trading blocs in the world. More trade means more growth and more growth means more jobs for the middle class.”
- François-Philippe Champagne, Minister of International Trade
Quick Facts
- The CPTPP will be one of the largest trading blocs in the world, with 11 member countries, 495 million people and a combined GDP of $13.5 trillion.
- In 2016, Canada’s bilateral trade with the 10 other CPTPP countries amounted to $105 billion.
- The CPTPP will provide significant economic benefits to Canada and is projected to increase Canada’s gross domestic product by $4.2 billion.
- With the CPTPP, Canada will have a free trade agreement with each G7 country.
Global Affairs Canada. February 16, 2018. Economic Impact of Canada’s Participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
By Office of the Chief Economist
1. Introduction
This analysis assesses the potential economic impact of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) for Canada, based on the CPTPP negotiation outcomes concluded in Tokyo, Japan, on January 23, 2018. It highlights the projected economic gains of Canada’s participation in the CPTPP, and compares these to a scenario based on the original Trans-Pacific Partnership (TPP) agreement that included the United States.
The eleven countries that are party to the CPTPPFootnote 1 form one of the largest trading areas in the world, accounting for nearly 13.5% of global GDP.Footnote 2 The CPTPP countries as a group are Canada’s third-largest trading partner. Bilateral trade between Canada and other CPTPP countries, including both goods and services, amounted to $105 billion in 2016, accounting for 8.1% of Canada’s total trade. Two of Canada’s top 5 trading partners, Mexico and Japan, are CPTPP countries. Bilateral foreign direct investment between Canada and CPTPP countries amounted to $122.2 billion in 2016.
Canada already has free trade agreements (FTAs) with three CPTPP countries: Chile, Mexico and Peru. The CPTPP will establish new FTAs with seven additional Asia-Pacific countries: Australia, Brunei Darussalam, Japan, Malaysia, New Zealand, Singapore and Vietnam. In 2016, Canada’s bilateral trade with these seven partners totalled $71.3 billion. This is collectively greater than Canada’s current trade with its third-largest bilateral trading partner, Mexico. The bulk of Canada’s trade with these countries is accounted for by trade with Japan—the world’s third-largest economy.
On January 30, 2017, the United States gave notice of its intent not to ratify the TPP, which prompted the eleven remaining members of the TPP to pursue a new agreement, the CPTPP. The absence of the United States from the TPP significantly changes the dynamics of the economic benefit calculation. Canada is expected to benefit considerably more from the CPTPP relative to the TPP for two main reasons:
- Unlike the TPP, the CPTPP will not result in any erosion of Canada’s preferential access to the U.S. market established under NAFTA. Under the TPP, the United States would have liberalized its trade with other TPP countries, which would have eroded the relative degree of preference accorded to Canada under NAFTA. This could have resulted in a displacement of Canadian exports to the United States. This displacement effect in the U.S. market would have been significant because of the size and importance of the U.S. market for Canada’s trade. While the erosion of Canadian preferences in the U.S. market could have been partially offset by the newly created preferences in other TPP countries, it is unlikely that these gains would have been significant enough to completely offset the losses in the U.S. market.
- In the absence of U.S. competition, Canada will enjoy better market access to other CPTPP countries than U.S. competitors, enabling Canadian exporters to capture larger market shares in these countries.
On the other hand, the absence of the United States from the CPTPP will likely result in smaller potential gains for Canada as compared to the TPP in a few sectors where TPP outcomes would have provided Canada with better access than it currently has under NAFTA. For example, Canada’s expected TPP export gains in sugar and professional services that would have resulted from U.S. commitments in these sectors will not occur under the CPTPP. Also, if the United States had joined the TPP, the resulting increase of U.S. GDP would have translated into greater Canadian exports to the United States. Since the United States is not a party to the CPTPP, this extra boost on Canadian exports will not materialize.
2. Modelling and data framework
The economic impact assessment of the CPTPP is based on simulations with a dynamic computable general equilibrium (CGE) model of global trade. This model follows the structure of the Global Trade Analysis Project (GTAP) model developed and supported by Purdue University.Footnote 3 This model allows users to assess the potential impact of a trade agreement by examining interaction among different sectors as a result of trade liberalization, capturing the economy-wide effect of the agreement on the national economy.
To assess the economic impact of the CPTPP, this analysis compares the economic performance of all CPTPP countries between a baseline scenario (prior to implementation of CPTPP) and a post-liberalization scenario (following full implementation of the CPTPP). The baseline scenario simulates the evolution of the global economy to 2040 in the absence of the CPTPP, based on the projected macroeconomic benchmarks and demographic changes provided by the International Monetary Fund and other international organizations. The baseline scenario incorporates the existing tariff schedules under most-favoured nation (MFN) treatment along with all bilateral FTAs among CPTPP countries, as well as any unilateral tariff liberalization made by countries.
The post-liberalization scenario models the impact of the CPTPP on Canada and the other countries, as well as on non-CPTPP countries. Therefore, the net effect of the CPTPP can be quantified as the difference between the baseline and post-liberalization scenario expressed in terms of changes in GDP, exports and imports. This approach ensures that all other macroeconomic forces affecting the economy, such as macroeconomic fluctuations, employment changes, exchange rate shifts and technological developments, stay the same for both the baseline and post-liberalization scenarios, thus isolating the effects of the CPTPP.
Source: Office of the Chief Economist, Global Affairs Canada
The data used for this modelling exercise is based on the GTAP database version 9, which benchmarks all bilateral trade flows, trade protection and domestic support to 2011. To better represent the current environment, however, tariff data have been updated to reflect current levels of protection in all CPTPP countries. Since 2011, a number of bilateral FTAs have been concluded and implemented among CPTPP countries, such as the Japan-Australia FTA, as well as certain unilateral liberalization initiatives undertaken by some CPTPP members, including Canada.
For the purpose of this study, the global economy is disaggregated into 57 sectors and 19 regions/economies. In addition to the 11 CPTPP countries, the United States, China, Indonesia, South Korea, Taiwan, Thailand and the European Union are separately identified, along with an aggregate for the rest of the world.
Finally, as a note of caution, the modelling results should be considered in the context of both the advantages and limitations of the CGE model being used. The CGE model can reflect only the expansion of trade in products already traded in a given bilateral trading relationship; it cannot predict the creation of trade in new product areas. This limitation is particularly important when the existing trading relationship is fairly narrow. Hence, the assessment can be expected to underestimate the gains from liberalization.
3. Modelling CPTPP liberalization measures
The CPTPP is a trade agreement that covers digital trade, intellectual property rights, state-owned enterprises, non-tariff barriers, regulatory coherence, labour and environment as well as traditional areas such as goods, services, investment and government procurement. Due to the limitations of the model, only non-tariff barriers are taken into account in the model. In addition to tariff reduction and tariff elimination, this study models the effects of services trade and investment liberalization, the establishment of new CPTPP rules of origin in the automotive and textile sectors, and new CPTPP market access under Canada’s supply-management regime. As such, there could be some under- or over-estimation of the size of the gains for Canada and other countries resulting from the CPTPP.
Tariff reductions and eliminations with new FTA countries
The CPTPP tariff commitments comprise more than 100,000 tariff lines and more than 200 pages of tariff-rate quota (TRQs) commitments for agricultural products. These tariff lines and TRQs were incorporated into the GTAP model.
Canada has overall lower levels of tariff protection than most of its CPTPP partner countries (see Figure 2). Hence, holding other conditions constant, liberalization under the CPTPP would be expected to provide a net advantage for Canada. While tariffs are already low on average for most CPTPP countries, there is still considerable room for liberalizing Canada’s trade with the seven countries with which Canada does not already have an FTA and for liberalizing some agricultural products in all CPTPP countries. For instance, Vietnam’s simple average applied tariff is 10.6%, while Japan’s tariffs on fresh/chilled and frozen beef are 38.5%.
Source: World Trade Organization
The liberalization of tariffs results in a loss of government revenue, but benefits consumers and producers. More importantly, liberalization also reduces economic inefficiency (known also as deadweight losses) resulting from market distortion, allowing for greater economic gains. The new preferential market access under the CPTPP is projected to provide Canadian exporters with tariff savings of $428 million per year, with the bulk coming from exports to Japan ($338 million), Australia ($47 million) and Vietnam ($25 million) (see Figure 3). More specifically, Canadian exports to Japan are expected to see tariff savings of $167 million on wheat and barley exports, $51 million on pork products, $21 million on beef and $32 million on wood products.
These figures are estimates of accrued tariff savings for Canadian exporters as a result of the CPTPP. The estimate was calculated by applying CPTPP tariff reductions (on the basis of full implementation of the Agreement) to current Canadian exports to partner countries. This methodology does not take into account the dynamic effect, i.e. the expected increase in exports over time as a result of improved market access, and therefore represents a conservative estimate.
These tariff savings give Canadian exports an extra cost advantage relative to exports from non-CPTPP countries. In addition, tariff elimination under the CPTPP will provide a level playing field with export competitors that are also parties to the CPTPP; some of which have existing FTAs with other CPTPP countries. For example, Australia already has an FTA with Japan that provides preferential access for several agriculture products that compete directly with Canadian exports, which face higher duties.
Source: Global Affairs Canada
For some countries and sectors, CPTPP outcomes could be different from the existing bilateral tariff preferences under existing FTAs. For these sectors, the best bilateral outcomes were used to replace the CPTPP outcomes, as businesses will choose the most advantageous tariff treatment available to them to maximize their commercial interest.
Tariff reductions and eliminations with existing FTA countries
Since Canada already has FTAs with Chile, Mexico and Peru, liberalization of trade in Canada’s existing FTA partners with other CPTPP countries erodes the relative degree of preferences currently accorded to Canada. This would result in a displacement of Canadian exports to existing Chile, Mexico and Peru.
Similarly, liberalization of Canada’s trade with other new FTA partners will displace imports from existing FTA partner countries in Canada. As a result, Canada’s imports from existing FTA partners are expected to decline as a result of the CPTPP.
Liberalization of services trade and investment
The CPTPP takes a broad approach to cross-border trade and investment in services, with services covered unless specifically excluded or listed in a country’s schedule of non-conforming measures (i.e. a negative list approach). Measures include enhanced obligations to secure current and future levels of liberalization in the services sector. Moreover, the CPTPP ensures that commitments by members are locked-in based on their current domestic regime and therefore cannot become more restrictive.
This study focuses on evaluating the locking-in, or binding effect, of services commitments. The extent of service commitments is assessed by comparing the actual CPTPP offers in services against commitments under the WTO General Agreement on Trade in Services (GATS) of 1995, or the best bilateral offers. This comparison provides an assessment on the extent of commitments for each sector by each country in relative terms. To quantify the economy-wide effect of these commitments, we associate these commitments to potential savings in trade and investment costs in services, which reflect the transaction costs involved in international trade and investment in services.
Overall, quantifying the effect of services commitments and market access is much more challenging than is the case for goods. Economic gains from services and investment commitments are modelled as trade cost savings resulting from enhanced regulatory certainty and transparency, which contribute directly to productive efficiency gains. In other words, economic gains in services are modelled as direct productive efficiency gains resulting from replacing previously scheduled obligations with new obligations.
Rules of origin
In a regional trade agreement like the CPTPP, rules of origin ensure that a share of the production of a finished product is performed within the free trade area. Only products that meet the rules of origin are considered as “originating” within the free trade area and, therefore, are eligible for preferential tariff treatment under the free trade agreement. The aim of this policy measure is to provide an incentive to local producers to source parts and labour from within the free trade area, thereby ensuring that both production and the benefits of the preferential tariff treatment accrue primarily to member countries.
In this analysis, two rules of origin issues have explicitly been accounted for:
- Automotive products: Under the NAFTA, assembled vehicles must have at least 62.5% of their content from the region to qualify for NAFTA preferences. Under the CPTPP, 45% of content needs to be from a CPTPP country. Had the United States remained in the TPP, assemblers would have had an incentive to source more parts from non-TPP countries, such as China. More than 90% of Canadian auto production is exported to the United States and benefits from preferential market access under NAFTA. As the United States is not a party to the CPTPP, Canadian automotive products must continue to adhere to NAFTA rules of origin in order to continue benefitting from NAFTA preferences. Thus, the establishment of new rules of origin under the CPTPP is not expected to have a direct effect on the production patterns and sourcing decisions of the Canadian auto industry. Based on current sourcing and production patterns, and without the ability to accumulate U.S. materials under the CPTPP, Canadian vehicles cannot meet the CPTPP regional value content requirement (45%). However, except for Australia, Malaysia and Vietnam, Canada has duty-free access to all CPTPP countries, either on a MFN basis or through FTAs already in force. Canada has secured side letters with Australia and Malaysia that establish a rule of origin with a lower regional value content requirement, which will allow Canadian-made vehicles to benefit from preferential treatment.
- Textiles and apparel: The CPTPP includes “yarn forward” rules of origin for textile and apparel products. These rules require that production of specified yarns and fabrics used in textile and apparel production, as well as associated cutting and sewing, must occur in a CPTPP country in order for a product to be eligible for preferential treatment under the Agreement.In this analysis, based on the existing production and trade patterns, we assume that Canada would not be able to meet the rule of origin requirement for textiles and wearing apparel products under the CPTPP. Therefore, Canada is not expected to gain increased access to markets in other CPTPP countries despite reductions of textile tariffs in these countries.
4. Quantifying economic gains of the CPTPP
Joining the CPTPP is expected to provide a net advantage to Canada resulting from increased market access and greater regional economic integration with Asia-Pacific countries. The CPTPP is projected to boost Canada’s GDP by $4.2 billion in the longer term (i.e. by 2040). This is significantly higher than the GDP gains of $3.4 billion that were projected under the TPP that included the United States. This increase in GDP is driven by increases in exports of goods and services, and by increases in investment.
Canada’s export gains in the CPTPP would be significantly greater than they would have been under the TPP. Under the CPTPP, total Canadian exports to other CPTPP countries are projected to increase by $2.7 billion or 4.2%, compared to export gains of $1.5 billion under the TPP.
Total exports to all countries increase by around $2.0 billion, as there is some shifting of exports away from non-CPTPP countries toward now more lucrative CPTPP markets. Nonetheless, this is significantly more than the $285-million increase under the TPP. In addition to the increase in exports, investment in Canada increases by $810 million, as a result of both greater foreign direct investment as well as more investment by domestic businesses.
Exports to new FTA partner countries
The central benefits for Canada from the CPTPP are the preferential market access to new FTA partner countries through tariff elimination and reduction. Canadian exports to these new FTA partner countries are expected to expand by $3.2 billion, with the largest gains coming from Japan, Australia, Vietnam and Malaysia. Among these markets, the most noticeable gain for Canada is with Japan. Under the CPTPP, total Canadian exports to Japan are expected to increase by $1.8 billion or 8.6%, compared to $1.3 billion under the TPP; exports of pork and beef products should benefit most from the absence of the United States:
- Canadian pork exports to Japan are projected to increase by $639 million or 36.2% under the CPTPP, vs. $400 million under the TPP. Under the CPTPP, the Japanese safeguard measure for pork imports will be eliminated within 10 years after the entry into force of the Agreement; therefore, the Japanese safeguard measure for pork imports should not affect the potential for Canadian pork exports to Japan.
- Canadian beef exports to Japan are projected to increase by $378 million or 94.5% vs. $228 million under the TPP. The projected increase in Japan’s beef imports under the Agreement from all CPTPP countries are not expected to trigger the beef safeguard measure in Japan because the specified volume is sufficiently large that any increase in exports resulting from the CPTPP should not trigger the safeguard.
Other Canadian exports to Japan projected to increase are wood products, by $226 million (or 15.8%); non-ferrous metals, by $54 million (or 7.1%); and chemical products, by $51 million (or 7.1%).
| TPP countries | CPTPP countries | |||
|---|---|---|---|---|
| Change | % | Change | % | |
| U.S. | -652 | -0.1% | -286 | -0.1% |
| Australia | 664 | 11.2% | 689 | 11.6% |
| Brunei | 1 | 1.2% | 1 | 1.3% |
| Chile | 13 | 0.5% | 19 | 0.8% |
| Japan | 1346 | 6.6% | 1767 | 8.6% |
| Malaysia | 234 | 5.0% | 200 | 4.3% |
| Mexico | -504 | -2.8% | -418 | -2.3% |
| New Zealand | 110 | 10.8% | 123 | 12.1% |
| Peru | 1 | 0.0% | 7 | 0.4% |
| Singapore | 92 | 0.9% | 99 | 0.9% |
| Vietnam | 206 | 12.8% | 271 | 16.8% |
Canadian exports to Malaysia are expected to increase by $200 million or 4.3%. Canadian export gains would be concentrated in machinery and equipment ($91 million) and automotive products ($17 million).
Canadian exports to Vietnam are expected to increase by $271 or 16.8%. Leading Canadian exports to Vietnam include food products ($52 million) and chemical products ($33 million), though these export gains all start from very low bases.
Canadian exports to New Zealand would increase by 12.1% or a net increase of $123 million. Machinery and equipment ($39 million) and food products ($14 million) dominate total Canadian export gains to New Zealand.
Imports from new FTA partners under the CPTPP are also projected rise by $6.9 billion. The increase in imports from new FTA countries is led by motor vehicles and chemical products from Japan and labour-intensive products such as textiles, apparel and leather products from Vietnam. This will largely come at the expense of lower Canadian imports from China and other non-CPTPP countries.
Trade with existing CPTPP FTA partners
The export gains for Canada resulting from new access under the CPTPP will be partially offset by a $392-million decline in exports to Canada’s existing FTA partners, namely Chile, Mexico and Peru, largely due to an erosion of NAFTA preferences in Mexico.
Similarly, imports by Canada from the existing FTA members would fall by $447 million, mainly due to a decrease in imports from Mexico resulting from erosion of Mexico’s preferences in Canada.
Trade with the United States
Under the CPTPP, Canadian exports to the United States are not expected to change significantly as the United States is not party to the CPTPP. However, there would be a decline in imports by Canada from the United States, resulting from erosion of U.S.’s NAFTA preferences in the Canadian market. Total Canadian imports from the United States are projected to fall by $3.3 billion, led by a decline in automotive products imports.
Trade by sector
Overall, Canada’s exports to the world would expand in the sectors of beef, pork, vegetable oils, wood products, motor vehicles and parts, machinery and equipment, and services. Increases in imports would be dominated in the sectors of apparels, leather products, chemical products and machinery and equipment.
| Exports | Imports | |||
|---|---|---|---|---|
| Change | % | Change | % | |
| Wheat, cereal grains, other crops | -36.0 | -0.24% | 16.8 | 0.50% |
| Vegetables, fruit, nuts | 27.0 | 0.39% | 17.6 | 0.20% |
| Oil seeds | -65.3 | -0.51% | 4.6 | 0.52% |
| Live animals | -17.9 | -1.07% | 3.6 | 1.67% |
| Other animal products | -1.3 | -0.04% | 12.8 | 1.37% |
| Other agriculture | 0.2 | 0.22% | 1.3 | 0.18% |
| Forestry | -12.2 | -0.38% | 4.4 | 0.63% |
| Fishing | 5.7 | 0.24% | 4.2 | 0.35% |
| Coal | 6.4 | 0.05% | 2.0 | 0.12% |
| Oil and gas | 77.1 | 0.08% | 34.7 | 0.14% |
| Other minerals | -4.7 | -0.01% | -3.2 | -0.03% |
| Beef | 380.5 | 9.49% | 18.5 | 0.83% |
| Pork | 625.1 | 10.07% | 87.2 | 1.84% |
| Vegetable oils and fats | 42.2 | 0.52% | 12.8 | 0.66% |
| Dairy products | 3.5 | 0.43% | 135.1 | 13.08% |
| Sugar | 37.0 | 7.88% | 7.8 | 0.58% |
| Other food products | 24.2 | 0.12% | 56.0 | 0.23% |
| Beverages and tobacco products | 13.5 | 0.47% | 14.7 | 0.16% |
| Textiles | 18.5 | 0.71% | 69.4 | 0.57% |
| Wearing apparel | 19.0 | 1.69% | 294.3 | 2.75% |
| Leather products | 36.9 | 15.47% | 127.8 | 3.06% |
| Wood products | 167.7 | 0.82% | 93.2 | 0.58% |
| Paper products, publishing | -89.0 | -0.21% | 30.9 | 0.18% |
| Petroleum, coal products | 5.9 | 0.03% | 75.4 | 0.23% |
| Chemical, rubber, plastic products | -28.8 | -0.03% | 160.6 | 0.15% |
| Other mineral products | 0.9 | 0.03% | 20.4 | 0.20% |
| Ferrous metals | 15.3 | 0.11% | 23.4 | 0.11% |
| Other metals | -99.2 | -0.13% | -5.4 | -0.01% |
| Metal products | -4.5 | -0.04% | 95.6 | 0.43% |
| Motor vehicles and parts | 255.9 | 0.23% | 84.3 | 0.07% |
| Other transport equipment | 97.5 | 0.29% | 61.0 | 0.29% |
| Electronic equipment | -12.9 | -0.12% | 50.8 | 0.13% |
| Other machinery and equipment | 128.6 | 0.22% | 176.7 | 0.13% |
| Other manufactured goods | 0.7 | 0.04% | 36.0 | 0.26% |
| Services | 338.2 | 0.20% | 288.3 | 0.19% |
| Total | 1,955.7 | 0.21% | 2,113.3 | 0.24% |
As noted above, although there is a slight increase in imports of motor vehicles and parts from the world as a result of the CPTPP, this is offset by a small increase in exports. Overall, production in the automotive sector is expected to rise very modestly, by $206 million.
The reason for the modest impacts on automotive imports is twofold. First, as noted above, the lower rules of origin requirements under the CPTPP do not provide an incentive for Canadian assemblers to use more parts from non-CPTPP countries, such as China, because production is geared to NAFTA rules of origin.
Second, while inputs of assembled vehicles from Japan (the only country among new CPTPP partner countries that produces cars) rise modestly, this is largely offset by lower imports from other countries, principally the United States, as well as Mexico and the European Union.
It should be noted that the increase in exports is likely an underestimate, as Canada has secured, as part of the CPTPP, a legally binding and enforceable side agreement with Japan on auto standards and regulatory measures. However, this is not modelled in the analysis.
An independent studyFootnote 4 on the potential impact on the Canadian automotive industry of Canada’s trade agreements with Asian countries such as Japan and South Korea also suggested that the effect of tariff reductions under an FTA with Japan on the Canadian automotive industry would be very limited.
5. Conclusion
The economic analysis conducted by the Office of the Chief Economist at Global Affairs Canada concludes that the CPTPP would generate long-term economic gains for Canada totalling $4.2 billion. The gains are driven by increases in goods and services exports and investment.
The increases in exports are driven primarily by new preferential access for Canadian businesses to the markets in which Canada does not already have an FTA, such as Japan, Vietnam, Malaysia and Australia. The gains for Canada cover a broad range of sectors across the Canadian economy, including some agricultural products such as pork and beef, wood products, machinery and equipment, and transportation equipment. The impacts on the automotive sector are slight, with a small increase in output and exports.
The CPTPP gains are greater than the $3.4 billion gain expected under the TPP, due to improved market access for Canadian business to other CPTPP countries in the absence of U.S. competition. The results are consistent with estimates by the Canada West Foundation, which reports that Canada’s GDP gains would improve to $3.4 billion under the CPTPP, compared to $2.8 billion under the TPP.Footnote 5
Footnotes
- The 11 CPTPP countries are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
- Based on 2017 merchandise trade data
- “Global Trade Analysis Project,” Purdue University, https://www.gtap.agecon.purdue.edu
- Van Biesebroeck, Johannes, Hang Gao and Frank Verboven, “Impact of FTAs on Canadian Auto Sector,” June 29, 2012, downloaded from http://www.international.gc.ca/economist-economiste/analysis-analyse/studies-etudes/studies-etudes-01.aspx?lang=eng
- Dade, Carlo and Dan Ciuriak, “The Art of the Deal,” June 2017, downloaded from http://cwf.ca/wp-content/uploads/2017/06/TIC_ArtTradeDeal_TPP11_Report_JUNE2017.pdf
FULL DOCUMENT: http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/impact-repercussions.aspx?lang=eng&utm_campaign=cptpp&utm_source=news&utm_medium=mailout_en
Global Affairs Canada. January 23, 2018. Statement by Minister of International Trade on successful conclusion of Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Statements
Ottawa, Ontario - The Honourable François-Philippe Champagne, Minister of International Trade, today issued the following statement:
“Strengthening Canada’s economic relationship with countries in the large and economically fast-growing Asia-Pacific region to support prosperity and create jobs for our middle class is a priority for Canada.
“Today, I am pleased to announce that Canada and the 10 other remaining members of the Trans-Pacific Partnership concluded discussions in Tokyo, Japan, on a new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). We are happy to confirm the achievement of a significant outcome on culture as well as an improved arrangement on autos with Japan, along with the suspension of many intellectual property provisions of concern to Canadian stakeholders.
“Canada has always said that we would only agree to a deal that is in Canada’s best interests. To that end, Canada has been working very hard on the new CPTPP, from spearheading the first meetings of officials in May 2017 to proposing several suspensions and changes to secure better terms for Canadians throughout this burgeoning region.
“Over the past year, we have also worked collaboratively with our partners to make the necessary changes so that the agreement builds real prosperity and creates opportunities. We said from the beginning that we didn’t want just any deal; we wanted a good deal for Canada and for Canadians. Canada went to great lengths to ensure to reach a progressive agreement that will benefit Canada and Canadians for decades to come. These involved a whole-of-government approach and direct engagement at the highest levels. The agreement reached in Tokyo today is the right deal. Our government stood up for Canadian interests, and this agreement meets our objectives of creating and sustaining growth, prosperity and well-paying middle-class jobs today and for generations to come.
“Canada has shown that it can and will work hard to set the terms of trade so the middle class can compete and win on the world stage.
“Canada successfully concluded an agreement with hard-fought gains for Canadians, thanks in large part to a dedicated and hard-working negotiating team and Canada’s special envoy Ian McKay.”
See also
- Text of the agreement: http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/text-texte/index.aspx?lang=eng&utm_campaign=cptpp&utm_source=news&utm_medium=mailout_en
- CPTPP Frequently asked questions (FAQ): http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/tpp-ptp/faq.aspx?lang=eng&utm_campaign=cptpp&utm_source=news&utm_medium=mailout_en
- Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): https://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/index.aspx?lang=eng&utm_campaign=cptpp&utm_source=news&utm_medium=mailout_en
CHARLOTTE GREENFIELD, WELLING
TONAND COLIN PACKHAM, SYDNEY
The final version of a landmark deal aimed at cutting trade barriers in some of the Asia-Pacific's fastest-growing economies was released on Wednesday, signalling the pact was a step closer to reality even without its star member the United States.
More than 20 provisions have been suspended or changed in the final text ahead of the deal's official signing in March, including rules around intellectual property originally included at the behest of Washington.
The original 12-member deal was thrown into limbo early last year when U.S. President Donald Trump withdrew from the agreement to prioritize protecting U.S. jobs.
The 11 remaining nations, led by Japan, finalized a revised trade pact in January, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It is expected to be signed in Chile on March 8.
The deal will reduce tariffs in economies that together amount to more than 13 per cent of the global GDP – a total of $10-trillion. With the U.S., it would have represented 40 per cent.
"The big changes with TPP 11 are the suspension of a whole lot of the provisions of the agreement. They have suspended many of the controversial ones, particularly around pharmaceuticals," said Kimberlee Weatherall, professor of law at the University of Sydney.
Many of these changes had been inserted into the original TPP 12 at the demand of U.S. negotiators, such as rules ramping up intellectual property protection of pharmaceuticals, which some governments and activists worried would raise the costs of medicine.
The success of the deal has been touted by officials in Japan and other member countries as an antidote to counter growing U.S. protectionism, and with the hope that Washington would eventually sign back up.
"CPTPP has become more important because of the growing threats to the effective operation of the World Trade Organisation rules," New Zealand Trade Minister David Parker said on Wednesday.
Last month, Trump told the World Economic Forum in Switzerland that it was possible Washington might return to the pact if it got a better deal.
However, Parker said on Wednesday that the prospect of the U.S. joining in the next couple of years was "very unlikely" and that even if Washington expressed a willingness to join CPTPP, there was no guarantee that the members would lift all the suspensions.
Parker said the deal would likely come into force at the end of 2018 or the first half of 2019.
Governments were quick to tout the economic benefits of the agreement.
"The TPP-11 will help create new Australian jobs across all sectors – agriculture, manufacturing, mining, services – as it creates new opportunities in a free trade area that spans the Americas and Asia," said Steven Ciobo, Australia's minister for trade in an e-mailed statement.
New Zealand's government expected the CPTPP to boost the island nation's economy by between NZ$1.2-billion ($881.40-million) to NZ$4-billion a year, with beef and kiwifruit exporters among the top beneficiaries of the deal.
The 11 member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
CANADA - INDIA
PM. Itinerary for Thursday, February 22, 2018 Ottawa, Ontario - February 21, 2018
Note: All times local
Itinerary for the Prime Minister, Justin Trudeau, for Thursday, February 22, 2018:
New Delhi, India
9:30 a.m. The Prime Minister and Ms. Grégoire Trudeau will visit the Jama Masjid Mosque.
Jama Masjid Mosque
Note for media:
Open coverage and pooled photo opportunity
10 a.m. The Prime Minister and Ms. Grégoire Trudeau will visit the Sacred Heart Church.
Sacred Heart Church
Note for media:
Pooled photo opportunity
11:30 a.m. The Prime Minister and Ms. Grégoire Trudeau will visit a cricket pitch.
Note for media:
Open coverage
3 p.m. The Prime Minister will deliver remarks at the Canada-India Business Summit.
Taj Diplomatic Enclave Hotel
Note for media:
Open coverage
Innovation, Science and Economic Development Canada. February 20, 2018. Helping women entrepreneurial leaders establish a business presence in India
Mumbai, India - It can be challenging for start-up companies to establish contacts in new markets and understand how best to operate in other countries. That’s why we are committed to creating opportunities to help start-up companies expand beyond Canada’s borders.
Thanks to a partnership between the Government of Canada and the Government of India, up to 100 companies—50 from Canada and 50 from India—will benefit from a two-year pilot project that will promote women’s empowerment and entrepreneurship in both countries.
During a visit to the Ryerson Futures facility at the Bombay Stock Exchange, the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, announced a $500,000 contribution from the Government of Canada for this two-year pilot project.
Ten women-led software start-ups from Canada and 10 from India will be selected each year to participate in the Zone Startups India program, a partnership between Ryerson Futures Inc. and the Bombay Stock Exchange. The program aims to help them overcome globalization challenges and establish relationships in the Canadian and Indian marketplaces.
In total, 20 Canadian start-ups will be selected to go to Mumbai over the course of the two-year project, while 20 Indian start-ups will be selected to come to Toronto. The women leading these start-ups will benefit from access to mentors and advisors, invitations to local start-up events and meetings with Indian and Canadian government officials to learn about the process of setting up and running a business in their host country.
Each year, Zone Startups will also offer intensive two-day seminars in both Toronto and Mumbai for 30 additional firms that are interested in collaboration between the two countries. This will benefit an additional 60 firms in both countries over two years.
Quotes
“Innovation is about finding solutions, and great ideas can come from anywhere and anyone. We cannot ignore half of our world’s population as we strive to find solutions to the problems of today and create the jobs of tomorrow. Canadian companies are increasingly exploring India as a destination for investment, and we are proud to participate in a partnership that will help even more start-ups expand beyond Canada’s borders.”
– The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development
“Women entrepreneurs and business owners represent a significant source of untapped talent and potential for greater economic growth and new jobs in Canada and abroad. Unlocking this potential is a priority of our government. That is why we are supporting this program and helping women start and grow businesses by improving access to financing and promoting women in international trade.”
– The Honourable Bardish Chagger, Leader of the Government in the House of Commons and Minister of Small Business and Tourism
Quick Facts
Established in 2013, Ryerson Futures Inc. is a start-up accelerator currently operating multiple programs in Canada and India. It helps developing software companies validate their market and identify potential customers and sources of funds.
The Government of Canada’s contribution represents half of the cost of the pilot project. The remainder will come from the Government of India.
NAFTA
The Globe and Mail. 21 Feb 2018. For Canada’s steel exports, Trump stands in the way of the facts. Yakabuski: Crackdown on steel, aluminum imports all about catering to Trump’s base
KONRAD YAKABUSKI
The last time a U.S. administration invoked Section 232 of the Trade Expansion Act … more U.S. jobs were lost than gained.
Everyone agrees that Canada is not the “bad actor” the Trump administration seeks to punish by skirting international trade rules and slapping sanctions on U.S. steel and aluminum imports.
That would be China. But if Canada gets hurt in the process, the decider says, well, too bad. When a bipartisan group of senators last week warned Donald Trump about the impact on Canada of invoking “national security” motives to limit metal imports, the President snapped: “Canada has treated us very, very unfairly when it comes to lumber. … And they have not been easy when it comes to Wisconsin and our farmers. … It’s a very double-edged sword.”
Three days later, the U.S. Commerce Department presented its recommendations to Mr. Trump for cracking down on steel and aluminum imports that “threaten to impair the national security.”
Under a rarely used section of U.S. trade law, the White House now has until mid-April to decide whether to impose tariffs and/or quotas on billions of dollars worth of imports.
The last time a U.S. administration invoked Section 232 of the Trade Expansion Act to crack down on imports of commodities deemed critical to national security – on steel products under George W. Bush in 2001 – the measure backfired badly. Prices soared, hurting U.S. consumers of steel, especially in the construction and auto industries. In the end, more U.S. jobs were lost than gained.
What’s more, the Commerce Department repeatedly heard from experts and industry representatives that steel and aluminum imports do not constitute a threat to national security. The U.S. defence industry has ample domestic supply to meet its needs. And Canada, a staunch ally, is the biggest foreign supplier of both commodities, accounting for 43 per cent of aluminum and 17 per cent of steel imports.
But don’t expect Mr. Trump to be moved by the evidence.
“I want to keep prices down, but I also want to make sure that we have a steel industry and aluminum industry, and we do need that for national defence,” Mr. Trump told senators in last week’s
White House meeting. “If we ever have a conflict, we don’t want to be buying the steel from a country that we’re fighting because somehow that doesn’t work very well.”
Unless Mr. Trump is considering declaring war on Canada, that is unlikely to ever be the case.
But of course, this is not really about national security at all, but about Mr. Trump’s desire to show laid-off steel and aluminum workers that he is standing up for them. If placing blanket tariffs and quotas on steel and aluminum leads to the creation of a single new job at a U.S. steel plant or aluminum smelter, the President can claim he is doing what he was elected to do.
While Canada has plenty of friends on Capitol Hill and in U.S. industry pressing the administration to exempt the United States’ northern neighbour from any Section 232 tariffs, U.S. Commerce Secretary Wilbur Ross suggested that Canada could at the very least face a quota capping its exports to the United States at 2017 levels. That would prevent Canadian steel and aluminum producers from increasing exports to fill the gap left if other foreign producers are shut out of the U.S. market.
“While the United States has many allies that produce steel, relying on foreign-owned facilities outside the United States introduces significant risk and potential delay for the development of new steel technologies and production of needed steel products, particularly in times of emergency,” the Commerce Department said in its report to the administration.
Commerce noted that 10 U.S. steel plants have closed and 35 per cent of steel-industry jobs have disappeared in the past two decades, as global capacity has more doubled. While China is identified as the main culprit in creating a global steel glut, most of its imports reach the United States indirectly through other Asian countries.
Canada, meanwhile, shipped 5.4 million tonnes of steel worth $5.9-billion across the border in 2016.
More than a dozen U.S. aluminum smelters have closed in the past decade, while only two of the five that remain are operating at capacity levels. Employment fell by 58 per cent in the three years to 2016 alone. Canada exported $9.3-billion worth of aluminum products to the United States in 2017, including 2.2 million tonnes of primary aluminum.
Anglo-Australian metals giant Rio Tinto and U.S.-based Alcoa Inc. have invested heavily in their Quebec smelters in recent years and count on low-cost hydroelectricity to provide them with a cost and environmental advantage over U.S. competitors. And in 2015, Rio Tinto completed a major modernization of its Kitimat, B.C., smelter, doubling capacity to 420,000 tonnes.
But persuading Mr. Trump to exempt Canada from any actions against steel and aluminum imports may prove no easier than saving the North American free-trade agreement.
REUTERS. FEBRUARY 20, 2018. Canada province considers law to retaliate against 'Buy American'
TORONTO (Reuters) - Ontario’s Liberals, the ruling party in Canada’s most populous province, introduced legislation on Tuesday that would give officials authority to retaliate against U.S. states that institute “Buy American” procurement policies.
The Fairness in Procurement Act would give Ontario’s government authority “to take responsive action to address unfair government procurement practices” such as those being adopted in New York and Texas, Ontario’s government said in a statement.
The legislation gives officials in the province, home to Canada’s manufacturing heartland, authority to implement retaliatory measures “in proportion” to any restrictions that U.S. states impose on public procurement, the press release said. Ontario procurement agencies would be required to exclude companies from the U.S. state.
Ontario’s Liberals, who have ruled for almost 15 years, face a tight challenge from conservatives in June elections.
New York Governor Andrew Cuomo in December signed “Buy American” legislation mandating the purchase of U.S.-made steel and iron products for public road and bridge construction. Texas implemented a similar law came in September.
Reporting by Anna Mehler Paperny; Editing by Jim Finklel; Editing by Cynthia Osterman
BLOOMBERG. 21 February 2018. White House Signals New Trade Deals Must Help Those Left Behind
By Andrew Mayeda
- Trump’s economic advisers say trade has hurt some Americans
- U.S. still believes it can benefit from expanded trade
The White House signaled President Donald Trump will pay close attention to the fate of workers left behind by globalization as a new benchmark for negotiating trade deals around the world.
While trade may be good for America, it hasn’t necessarily helped all Americans, the White House Council of Economic Advisers said Wednesday in its annual economic report to the president.
The council, led by chairman Kevin Hassett, cited recent economic research highlighting portions of the U.S. population that have been hurt by foreign competition. It pointed to the decline in manufacturing as a byproduct of freer trade, a trend the president has tried to reverse by imposing tariffs on washing machine and solar panel imports.
“Even if fair and reciprocal international trade as a whole leaves the U.S. better off in the aggregate, this does not necessarily mean that the benefits of expanding trade flows leave all Americans better off,” the council said. “No longer will we tolerate unfair and nonreciprocal trade practices that impoverish our workers.”
The administration is focused on improving trade agreements in a way that benefits U.S. businesses and workers across a range of sectors, in particular energy and agriculture, the council said. Despite some drawbacks of trade, the U.S. “stands poised to capitalize on opportunities to reap the gains from trade that it has historically enjoyed,” the advisers said.
Trade Gaps
Trump has repeatedly complained about the growing U.S. trade deficit -- which was the widest last year since 2008 -- and his administration is seeking to overhaul trade relationships around the world. Negotiators will meet next week in Mexico City for the seventh round of talks on a new North American Free Trade Agreement, and the U.S. is in talks with South Korea on an updated deal between the two nations.
The 562-page report lays out the case for the administration’s economic policies, from the tax cuts passed late last year to Trump’s plan for new spending on infrastructure.
The council estimates gross domestic product will expand by 3.1 percent this year, and 2.8 percent over the long term. The unemployment rate will fall to 3.7 percent by the end of next year, while inflation will rise to 2 percent by 2021, the council said.
A chapter on infrastructure estimates that a 10-year, $1.5 trillion investment could raise average annual real GDP growth by between 0.1 and 0.2 percentage point. Trump has proposed a plan to generate $1.5 trillion by allocating $200 billion in federal funds, mostly as incentives to spur spending by states, localities and the private sector.
States and localities own and finance most U.S. infrastructure, so the federal role should focus on encouraging that spending, supporting private financing and streamlining permitting, the report said. It encourages local tolls, water charges and other user fees to help generate needed revenue.
Hassett told reporters in a conference call that the administration is considering several options for paying for the upkeep of the nation’s infrastructure, including changes to the gas tax system.
“It points out for example, the problems we have with the gasoline tax that was designed to fund roads, highway repair and so on at a time when the fuel economy was much lower, and the idea that a big share of the potholes of the world might be created by cars with electric engines,” he said of the report. “In that kind of world, the gas tax needs to be re-thought.”
— With assistance by Katia Dmitrieva, Mark Niquette, Steve Matthews, and Toluse Olorunnipa
BLOOMBERG. 21 February 2018. As Food Trade Ballooned Under Nafta, So Did Mexican Waistlines
By Shelly Hagan
- Surge in obesity is linked to U.S. food imports, study shows
- Mexico now has highest share of overweight people in OECD
Avocado toast and juice bars are all the rage for American hipsters, foodies and millennials.
And they have Nafta to thank -- at least in part. The accord has brought an abundance of fresh produce to U.S. grocers. Mexico shipped $10.5 billion of fruit and vegetables to its northern neighbor in 2016. And food trade has boomed in the other direction too. But, at least when you measure in terms of nutrition rather than dollars, Mexicans appear to be getting the worse end of the deal -- and gaining weight as a result.
That’s the finding of a study by Lorenzo Rotunno and two fellow economists published by VoxEU. They examined the effects of trade on dietary habits in Mexico, and found a direct correlation between worsening public health indicators and the growing quantities of foods such as corn, soybean, pork and dairy products imported under Nafta.
Diet Destroyers
“The exposure to unhealthy foods coming from the U.S. has been an important determinant in the rise of obesity in Mexico,” Rotunno, an assistant professor of economics at Aix-Marseille University in France, said in an interview.
The economists found that growth in imports of unhealthy foods is faster than for healthy ones. They made the distinction by applying the guidelines published by the U.S. Department of Agriculture, which advises Americans to increase consumption of some foods and cut back on others.
Mexico’s trade opening dates back to the 1980s, and accelerated when the North American Free Trade Agreement came into effect in 1994. The recent study found that in about two decades since then, Mexico has seen obesity rates rise some 15 percent. The research is mostly based on data for adult females, because it’s more complete than for other population groups.
And during the Nafta years, Mexico has overtaken the U.S. to seize an unwanted crown. It now has more overweight or obese people, as a share of the population, than any other member of the Organisation for Economic Co-operation and Development, a club that includes more than 30 major economies.
Tipping the Scale
Food trade is among the many sticking points in negotiations to overhaul Nafta, the latest round of which is due to start in Mexico City next week.
President Donald Trump’s main focus has been on manufacturing: he blames the accord for lost factory jobs. But Trump has to keep one eye on America’s farmers too. Many of them backed him in the election -- and they’re solid supporters of Nafta. Withdrawal from the pact would be “catastrophic for farmers, based on the fact that Mexico is our number one export market for corn,” Iowa Republican Senator Chuck Grassley said last week.
So the U.S. is pushing for new terms that would enable it to expand agricultural exports to Mexico. Meanwhile in Mexico, one politician is loudly demanding less of them.
Leftist presidential candidate Andres Manuel Lopez Obrador regularly hits out at the terms of food trade with the U.S., saying impoverished Mexican farmers have been driven from their land. He’s calling for a rethink of the national diet, so that Mexicans eat more food from their own country.
It seems to be working. Amlo, as he’s known, is ahead in almost every poll for the July vote -- so it’s possible he could be the man who has to sign off on any new Nafta.
— With assistance by Nacha Cattan, and Andrew Mayeda
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LGCJ.:
