With its new majority government, Mr. Harper's team will be inclined to move forward vigorously with its significant trade negotiations agenda. These negotiations will offer an important opportunity for Canadian businesses to press the government to address foreign barriers to trade that are hindering their business opportunities. They may also pose some challenges for Canadian businesses in the form of increased foreign competition in the Canadian marketplace. Now is the time for those who may be affected by these negotiations to determine their interests and to engage the government with a view to influencing these initiatives in their interests.
The Prime Minister's New Cabinet
Mr. Harper has appointed John Baird, one of his most reliable and effective ministers, to the foreign affairs portfolio. Mr. Baird will be positioned to provide strong support to the prime minister in respect of his participation in various international summits such as the G8 and the G20. More important for those engaged in Canada-United States business, Mr. Baird has the temperament and persona to energize and coordinate the Canadian side in the Canada-United States perimeter security and regulatory negotiations initiated in February by Prime Minister Harper and President Obama.
Mr. Harper has also appointed a new trade minister, Ed Fast, a former backbencher from Abbotsford, British Columbia. While untested in a cabinet position, Mr. Fast has a solid track record as a committee chairman and is well respected in government and cabinet. Mr. Fast, who comes from the Lower Mainland of British Columbia, has been made minister for the Asia-Pacific gateway, reflecting his strong interest in that region. He can be expected to bring fresh enthusiasm to the government's trade negotiations agenda and new emphasis on the Asia-Pacific region.
The Baird-Fast team has the potential to give new impetus to the government's international business agenda and to produce early results.
The New Parliament and Trade
The makeup of the new Parliament combined with global political-economic shifts will ensure that trade issues are more prominent in political debate than they have been at any time since Brian Mulroney was prime minister. The official opposition, the NDP, clearly does not share the government's approach to free trade and will no doubt make this very clear in Parliament. The economic importance of the partners with which Canada will be negotiating will also ensure that trade issues take on greater prominence. These negotiations will create adjustment challenges for some Canadian businesses. It is unlikely that the government's resolve to move forward will be weakened by this situation. Indeed, it is more likely that NDP opposition will help to galvanize the government into moving forward more vigorously. As trade becomes part of an ongoing political and public debate, it will be covered more prominently in the media. Business will find it difficult to avoid being caught up in this and should be considering how to position itself as this scenario unfolds.
Confirmation of Government's International Business Agenda
Last fall the prime minister had already made clear on his website that "the Canadian Government is moving ahead with a strong and ambitious Free Trade Agreement agenda. Freer trade is an essential contributor to Canada's productivity, growth and prosperity and ensures Canada's competitiveness in external markets."
In its election platform, Here for Canada, the Conservative Party highlighted the aim to complete the Canada-EU free-trade agreement by 2012 and the Canada-India free-trade agreement in 2013. The document also highlighted the importance of the Canada-US perimeter security and economic competitiveness agenda with the United States. These objectives were also personally endorsed by Mr. Harper during the election campaign.
Changing International Business Environment
The internationalization of business is a key feature of the 21st-century global economy. The development of supply chains that stretch across borders has helped generate a new business reality. A key feature of this new reality is the seamless connection between trade in goods, trade in services and investment. New rules to be negotiated by the government will determine the quality of access that Canadian businesses have to world markets for decades to come.
Traditionally, the GATT and then the WTO have set the basic rules of the road for international trade. However, that has changed as the WTO's Doha Round falters and the leading economic powers turn increasingly to bilateral and regional agreements for opening markets. These developments present both opportunities and challenges for Canadians interested in doing business outside Canada.
As Canada pursues new trade and investment agreements, it opens up opportunity for Canadian business. However, if Canada lags behind other countries in negotiating improved access, Canadian businesses may find themselves at a competitive disadvantage in foreign markets. The case of South Korea serves as an example. The free-trade agreement between the EU and South Korea will enter into force on July 1, and it seems almost certain that the U.S. Congress will approve the United States-South Korea agreement in the coming months. Canada has not yet completed negotiation of its FTA with South Korea. This creates an unfortunate situation in which South Korea will be eliminating barriers for the EU and the U.S. but maintaining them in place for Canada. Canadian producers of a range of products will soon be in jeopardy of being disadvantaged in the South Korean market.
Importantly for Canada, the range of issues being addressed in these negotiations now reach deeply into provincial jurisdiction. In 2010, for the first time Canadian negotiators were confronted by the demand from major partners that making provincial concessions an integral part of the final agreement would be a pre-condition of a deal. The government has adjusted to this development by working closely with the provinces and by inviting provincial officials to participate on the Canadian negotiating team when matters affecting their jurisdiction are under negotiation. Business will increasingly need to engage provincial governments, in addition to the federal government, to ensure that its interests are taken into account in the decision-making process.
In the months ahead, Canadian negotiators will need to make many detailed decisions that will set the terms and conditions for Canadians doing business in international markets. No group will be more affected by the results of these negotiations than business itself.
Canada's Free-Trade Agenda
Canada's first free-trade agreement was concluded with our most important trading partner, the United States, in 1987 and came into force in 1989. Subsequently, Canada entered the NAFTA negotiations and the free-trade area was deepened and extended to include Mexico. Clearly these agreements were of major economic significance for Canada.
Since then, in chronological order, Canada has concluded nine other free-trade agreements with: Israel, Chile, Costa Rica, EFTA (the European Free Trade Area including Switzerland, Norway, Liechtenstein and Iceland), Peru, Colombia, Jordan and Panama. The last three have not yet been implemented. Negotiations or discussions are also actively underway with Turkey, Morocco, the Caribbean Community, and Honduras.
While commercially useful, none of these agreements and negotiations are currently of major economic significance to Canada. However, before the recent election the government was conducting, or discussing entering, trade negotiations with a much more significant list of partners, including:
- the EU
- Japan, and
Senior government officials were also quietly discussing the possibility of entering trade negotiations with China and Mercosur (Brazil, Argentina, Uruguay, and Paraguay). The majority Harper Government now has greater flexibility to move forward more aggressively with these more recent initiatives, each of which will potentially open large markets for Canadian business.
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