U.S. President Donald Trump tried to kill it, but the Trans-Pacific Partnership wouldn’t stay dead.
Less than two years after the U.S. withdrew from the landmark Pacific Rim trade deal it once saw as key to an Asian trade strategy, six of the remaining countries have ratified it, enough to bring the revised Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) into force 60 days from now on Dec.30.
Australia became the sixth country to do so Wednesday, filing its official notice with New Zealand, the country that’s acting as the depository and keeping track of its implementation.
“The signal that it sends to the rest of the world that there’s a new rules-based order out there in the world that people can buy into if they want as an incredibly powerful signal at this particular time,” David Parker, New Zealand’s minister of Trade and Export Growth, told reporters.
Canada was the fifth country to ratify, filing its notice last weekend after Parliament approved its implementing legislation.
Earlier this week, International Trade Diversification Minister Jim Carr said it was important for Canada to be among the first six to ratify in order to have “first-mover advantage,” enjoying better access and lower tariffs in key Asian markets the U.S. will not have as a result of the Donald Trump administration’s decision to pull out.
“Canada is a trading nation,” Carr said in a statement. “The CPTPP will add nearly half a billion consumers to the growing list of places where Canadian businesses can compete and succeed on a level playing field.”
It’s also another way Canada hopes to diversify its trade, with a longer-term goal of less reliance on U.S. consumers for Canadian goods and services, particularly at a time when the U.S. is a less friendly trading partner than it used to be.
Japan, Mexico, New Zealand and Singapore ratified earlier this year.
The remaining signatories — Brunei, Chile, Malaysia, Peru and Vietnam — will not benefit or be bound by the deal’s measures until they finish their ratification processes. Some want to participate soon, however: Vietnam is expected to ratify next, in November.
Malaysia’s Prime Minister Mahathir Mohamad said he was still weighing its benefits.
Peru’s deputy trade minister Edgar Vasquez told Reuters he expects Lima will ratify the agreement before 2019.
Even without the U.S. involved, the 11 countries in the CPTPP represent about 13 per cent of the world’s gross domestic product. Should America reconsider and negotiate its re-entry down the road, the CPTPP bloc would be 40 per cent of global GDP.
The Americans originally intended the rules set up in the TPP to be a significant counter-balance to the trade might of China. Now, China has mused about signing on to the CPTPP group someday. The United Kingdom has also expressed interest in future talks with the group in light of its expected exit from the European Union.
An analysis completed last year for the Canada West Foundation found that countries like Canada and Mexico could benefit more from the CPTPP if the U.S. stays out.
Greatest benefits with Japan
“As protectionist moves strengthen across the world, the importance of free and fair rules is growing more and more,” Japanese Economy Minister Toshimitsu Motegi told a news conference in Tokyo Wednesday.
He added that Japan would continue be “a flag-bearer for free trade.”
Canada had been unable to negotiate a bilateral trade agreement with Japan before the TPP negotiations succeeded.
Once all the tariff reductions are phased in — some, for politically sensitive commodities like beef in Japan, ramp down over as long as 15 years — Canadian exporters could benefit from up to $428 million in savings, according to government estimates.
More than three-quarters of that — $338 million — could result from tariff reductions in Japan, based on expected volumes of trade between the two countries.
Before the CPTPP was signed last winter, the countries revised the deal to address outstanding concerns, particularly following the departure of the Americans.
The remaining 11 partners suspended some of the intellectual property provisions for pharmaceutical drugs that the U.S. had insisted on in the original negotiation, for example.
Canada also asked for side letters with each country to add protections for its cultural industries, in the absence of the kind of broad cultural exemption it negotiated in the North American free trade talks.
Automotive, dairy concerns
Questions remain about the compatibility of some of the CPTPP’s automotive measures with the newly renegotiated terms for the North American car industry in the not-yet signed and ratified U.S.–Mexico–Canada Agreement.
Canadian parts manufacturers in particular believe that the CPTPP is a bad deal, with Japan gaining relatively more access to Canada and Mexico’s consumers and supply chains than it gave up in its own heavily protected industry.
There are different automotive rules of origin in the text of the two deals, and different regional content thresholds that vehicles must reach in order to move across borders tariff-free.
In combination, however, the two deals are intended to help Canada and its partners retain strategic advantages for their supply chains over the increasing competitiveness of China’s industry.
Even after the U.S. left, the same level of access to Canada’s supply-managed agriculture markets remained in the CPTPP text: roughly 3.25 per cent, in the case of the dairy industry.
While shipping logistics may make it impractical for all of this new Pacific Rim quota to be taken up (fresh milk and eggs ship less easily across the ocean than nearby land border crossings with the U.S.), significant amounts of dairy products are expected to enter Canada under this deal — especially from New Zealand, where one massive player, Fonterra, has an effective monopoly on that country’s production and aggressively pursues global dairy markets.
Taken in combination, Canadian dairy farmers say that the CPTPP, USMCA and Canada’s trade agreement with the European Union amount to nearly 10 per cent of the Canadian market handed over to farmers from other countries. They warn their industry’s now at risk of “death by 1,000 cuts.”
The Canadian government has not announced any compensation for the dairy sector for what it’s losing once the CPTPP kicks in. Working groups have been formed to consider not only compensation but the future of the supply-managed agriculture business generally in light of the USMCA.