Canada: In 2014 Trade Policy, All The Action’s In Asia

Last Updated: January 31 2014
Article by Len Edwards

Here comes that old cliché again: What a difference a year makes.

This time last year, the Harper government's efforts to score some wins on the trade policy front were in trouble. Negotiations with Europe seemed to be dragging on interminably. The Korea talks were stalled by Korean disinterest. The Doha Round looked to be more or less dead.

Meanwhile, the government was jumping into two other negotiations — looking for a bilateral Economic Partnership Agreement (EPA) with Japan and belatedly joining the Trans Pacific Partnership (TPP) talks as the 11th participant.

Today, the picture is decidedly more upbeat. Like our Sochi hockey team, trade team Canada is going for gold over the coming weeks.

In September, Prime Minister Stephen Harper and European Commission President José Manuel Barosso announced an agreement-in-principle on a Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union. The fact that negotiators have been hard at work since — dealing with a large number of outstanding issues — hasn't gotten the same publicity. But apparently there are no real deal-breakers left and the work should be completed over the next few months.

While the many translations, legal "scrubs" and ratifications will still take another two years, the CETA is a major achievement. It brings substantial economic benefits to Canada, gives our trade credentials a huge shot in the arm and leaves us with more leverage in our other negotiations.

But the good news should not stop with CETA. The negotiations with Korea — Canada's seventh-largest export market) — came back to life following Mr. Harper's plain talk with South Korean President Park Geun-hye in Bali in October. Korea also needs Canada's agreement if it is to join the TPP talks, which Seoul now wishes to do. Expect an announcement of a deal shortly.

Meanwhile, the complex TPP negotiations are reportedly moving along well. Despite the huge challenge of having to fold Japan into the process since last August, expectations are running high that a conclusion among the current 12 participants is possible by the end of March.

Even the World Trade Organization has shown signs of life, with a modest deal among trade ministers in December focused on trade facilitation (improvements in customs and port clearance processes). While it was oversold in the media, this deal shows that the WTO can still get something done — even if all the real action is happening elsewhere.

The timing of these positive developments and prospects could not be better for the Harper government's political fortunes, with an election now no more than 20 months away.

For that reason, the prime minister has been 'running the power play' and directing negotiators. While Mr. Harper is politically quite cautious (some would say too cautious) he has been ready to take on a few sacred cows that have prevented progress in the past — such as opening markets further in dairy and in the automotive sector — and has gotten good results in return. He'll have to keep doing that if he wants to close more deals.

While the PM and his government rightly take political credit for this strong performance, a skilled team of trade negotiators is serving the Harper government with distinction — bringing intelligence, energy and hard work to bear across simultaneous negotiations and serving as a reminder of the excellence of Canada's public service.

The other good news is that Canadians generally appear to have turned a corner in their attitudes toward open markets and trade agreements. While saying they want to see the final text, both the NDP and the Liberals have generally welcomed progress on CETA.

With several trade deals now apparently in hand, where can the government go next in 2014? Are there more medals to be won?

The first priority must be Asia — specifically Japan. Tokyo has been preoccupied with its TPP negotiations but, once they conclude, Canada should seek a bilateral agreement which would be TPP-plus in priority areas. With the Korean deal in place, and with the warmer economic climate it will bring, Tokyo will not want to fall behind a tough competitor for Canadian markets and for long-term access to our energy and other resources.

Canada's wobbly trade talks with India will need to be re-energized once the Indian election is over mid-year — and assuming the winners show more enthusiasm about opening the Indian economy than we've seen so far. Canada also should engage Southeast Asian countries — but particularly that other Asian giant, Indonesia, where a new president will be elected in July.

The big unknown is China. It's been two years since Chinese leaders invited the prime minister to negotiate an agreement with Beijing. Because of a subsequent and severe case of political cold feet (and possibly anxiety about the size of the task), we have missed the opportunity to win some "early mover" advantages. China is probably not going to repeat the offer.

In any event, China has a more important strategic consideration now on its mind: engaging the U.S. more directly on trade. Signs are the Chinese have shifted their position in favour of joining the Trade Pacific Partnership, even if it must now negotiate its way into an established agreement. This is probably Canada's best route to negotiate with China now.

While opportunities will come along elsewhere, Asia is where the government's trade focus should be in 2014. We need to lock down trade deals with key countries in the region that will lead global growth through much of this century.

But once we have the Asian situation in hand, it may make sense to shift back to the familiar. This month's 20th anniversary of NAFTA has been a timely reminder that our North American 'garden' probably needs some tending — particularly as the U.S. economy revives and as Mexico, one of the key emerging markets, shows new growth potential under a reformist president.

Maybe our gold medal trade team can start sticking closer to home for a while.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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