Canada doesn’t need the TPP in order to diversify from NAFTA

Tomorrow, the federal government is attempting to fast-track the Trans-Pacific Partnership through Parliament. Known now by the new and the unwieldy name Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), this will be today’s second order of business.

It will be framed as a matter of national urgency. The government and corporate Canada will claim that Canada desperately needs to pass this bill or our very economic security is in danger. Predictably, they will say that, with a question mark hanging over NAFTA, Canada needs to diversify its trade away from the United States.

Many people see trade agreements as vital in helping Canada export more. But that may not be what Canada needs.

Let’s take the case of CETA, the Comprehensive Economic and Trade Agreement between Canada and the European Union. It is now one year since the agreement was implemented. And no growth in European exports.

During that time, European imports have increased enormously, Canadian exports less so. The CBC’s Janyce McGregor broke down the statistics.

The relative success of CETA could be measured in many ways, but let's zero in on a big one: the growth of Canadian exports to the European Union.

A scan of the monthly Statistics Canada data for the years immediately leading up to CETA's provisional application shows modest growth even before the deal's tariff reductions took effect on Sept. 21, 2017.

But when comparing monthly data for Oct. 2017-July 2018 (the most recent available) with data from the same months the year before CETA, there are periods when Canada actually exported less than it did before the deal.

I also took a look at the Statistics Canada data. In the period before CETA, 2013-2016, Canadian exports to the European Union rose about 6.4 % per year. In 2017, after CETA, they grew 3.9%. In other words, without CETA, Canadian exports to Europe were growing modestly. After CETA, they grew less.

The Canadian government has argued that European firms are more aggressive and that there are too many barriers to trade for Canadian companies.

As I see it, European companies are more experienced in dealing with cultural, political and linguistic barriers to trade. Their geographical situation has led them to think more about varied external markets. With an English-speaking behemoth to the south, Canada is less adept at penetrating markets beyond the United States.

Canada’s surge in free trade agreements in recent decades hasn’t changed that. Canada has an unprecedented number of trade agreements, but exports have grown more quickly to countries not covered by such agreements. According to Jim Stanford, an economist and special adviser at Unifor, Canada’s largest private sector union, Canadian exports to South Korea actually declined after a bilateral trade agreement came into force. He adds that our exports have actually grown more with countries with which we don’t have trade agreements.

The Council of Canadians and others have long argued that trade agreements are less about tariffs than about rewriting rules in favour of corporations. The idea is that making corporations’ lives easier overseas will induce them to trade more, and it will be better for all us.

But the interests of corporations are not necessarily those of the country as a whole. When we look at the CPTPP for example, much of the actual agreement is about harmonizing regulations, making sure that business doesn’t have to overcome pesky environmental or safety regulations such GMO restrictions or tighter food labelling. It is about ensuring that public services can be privatized so that corporations can enter into those markets, undoing protections for farmers, and enabling investors can sue governments when the public interest or environmental policies get in the way of profits. For more on this, read What do trade agreements really do? by Harvard economist Dani Rodrick.

When trade does grow, most of the gains go to large corporations and not to workers. 

In the CBC article, Canadian companies complain that Europeans have too many barriers to trade that affect their ability to penetrate new markets. Let’s break that down. 

Europeans have robust health and safety regulations. They don’t allow genetically modified food. They don’t allow hormones in cattle. They don’t accept washing chicken carcasses with chlorine. They have extensive farm-to-table rules that protect animal welfare. This is the “red tape” that Canadian business wants to cut.

In the Canadian Cattleman, the beef industry magazine, editor Glen Winslow writes about how Canada cannot possibly meet the new beef quotas for sales to Europe because of the inability of the Canadian supply chain to meet higher standards. Canada has already challenged the EU’s beef standards at the World Trade Organization. And Winslow says European standards on chlorinated chicken are discriminatory against Canada.   Luckily for him but unfortunately for Europeans, CETA gives him and other industries a panoply of mechanisms to challenge those regulations.

But barriers to commerce often go beyond regulatory matters. There are linguistic, cultural and political barriers. All businesses deal with them: this amounts to understanding how things work in foreign markets. Canada should be working on that rather than on gutting regulations.

The CBC article listed the items Canada is exporting more of. I think it is pathetic: cranberries and maple syrup. And a hint at crude oil. With the exception of car parts, none of it is high-value-added stuff that will move the Canadian economy up the value chain. It’s all commodities.  Perhaps a little industrial policy is more in order.

With everyone distracted by NAFTA, there will be a huge push to pass the CPTPP without debate in the House of Commons, and then on to a rubber stamp in the Senate.  There has never been an independent economic analysis. We are never allowed to see what happens behind closed-door negotiations. We are just supposed to have blind faith in the agreements.

Please use this link to tell your MP and the Senate that the CPTPP needs a full debate.