By Anna Barrera (Research Associate, Dawson Strategic)
Touted as one of the largest free trade agreements ever, the Trans-Pacific Partnership (or TPP) continues to make headlines on a regular basis and is a lightning rod for controversy. Proponents say it will boost Canadian economic growth and help businesses access new markets abroad. Others fear that we are giving up Canadian sovereignty by signing such a large agreement. No matter what side of the table you are on, the TPP is an agreement that has been negotiated, signed, and will have to eventually be presented to the Canadian Parliament. So the best thing to do now is to understand what the TPP is, what it says and maybe more importantly, what it doesn’t.
The TPP is an agreement between 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, who represent nearly 800 million people and a gross domestic product (GDP) of $28.5 trillion or roughly 40 percent of global GDP. Within this group, Canada already has trade agreements with Mexico, Chile, Peru and the United States.
However, the TPP did not start out as the 12-economy dynamo we know today. It began as the Trans-Pacific Strategic Economic Partnership (P4) between Brunei, Chile, Singapore, and New Zealand, coming into force in 2005. In 2008, the United States agreed to enter into talks with the P4, followed by Australia, Peru, and Vietnam in 2009; Malaysia in 2010; Canada and Mexico in 2012; and Japan in 2013. In 2011 the P4 was renamed the Trans-Pacific Partnership (TPP). Negotiations concluded in 2015 and all parties signed the agreement in February of 2016.
The pact aims to deepen the economic ties between the nations, slashing tariffs and fostering trade to boost growth, causing it to be called “the biggest trade agreement in a generation” and, if ratified, would create the largest free trade zone in the world.
The TPP is described as a 21st century trade agreement, meaning that it covers both traditional areas of trade agreements (e.g. National Treatment, Rules of Origin, Sanitary and Phytosanitary Measures) as well as new areas not covered in earlier trade agreements such as e-commerce, the environment, and cybersecurity. See Table 1 below for a list of the chapters in the TPP.
In terms of implications for Canada, a study by the C.D. Howe Institute finds that the TPP is expected to have only a “modest impact” on Canada. Foreign direct investment, agriculture, and meat products sectors stand to gain the most, while textiles and apparel, metal products, and the automotive sector have voiced opposition to the TPP as they expect to lose.
Of course, there is a big shadow hanging over the agreement: to actually take effect, the deal has to be ratified by February 2018 by at least six countries that account for 85% of the group’s economic output, meaning that both Japan and the United States will need to be on board. Both U.S. Presidential nominees have expressed anti-trade sentiment in the run-up to the November 2016 Presidential election. Given the current political climate in both Japan and the United States, the finish line for the TPP looks like a distant possibility.
Table 1: TPP Chapters
1. Initial Provisions and General Definitions
|11. Financial Services
12. Temporary Entry of Business Persons
14. Electronic Commerce
15. Government Procurement
16. Competition Policy
17. State-Owned Enterprises and Designated Monopolies (SOEs)
18. Intellectual Property
|21. Cooperation and Capacity Building
22. Competitiveness and Business Facilitation
24. Small and Medium-Sized Enterprises (SMEs)
25. Regulatory Coherence
26. Transparency and Anti-Corruption
27. Administrative and Institutional Provisions
28. Dispute Settlement
29. Exceptions and General Provisions
30. Final Provisions.
Note: The Chapters marked in RED are the chapters that are considered new to free trade agreements, using the North American Free Trade Agreement (NAFTA) as a baseline.
Source: “Summary of the TPP Agreement.” GAC. March 3, 2016. Accessed September 20, 2016. http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/tpp-ptp/understanding-comprendre/index.aspx?lang=eng.
- Ciuriak, Dan, Ali Dadkhah, and Jingliang Xiao. “Better in than Out? Canada and the Trans-Pacific Partnership.” C.D. Howe Institute. April 21, 2016. Accessed September 20, 2016. https://www.cdhowe.org/public-policy-research/better-out-canada-and-trans-pacific-partnership.
- “TPP: What Is It and Why Does It Matter?” BBC News. July 27, 2016. Accessed September 20, 2016. http://www.bbc.com/news/business-32498715.
- Kawase, Tsuyoshi. “The Trans-Pacific Partnership as a Set of International Economic Rules.” E15 Initiative. May 2016. Accessed September 20, 2016. http://e15initiative.org/blogs/trans-pacific-partnership-as-a-set-of-international-economic-rules/