More on Prime Minister Trudeau’s trade bungles

There is a useful, albeit highly critical article in Policy Options that is headlined: “The APEC summit and Canada’s reputation in Asia ~ Five take-aways from the Trudeau government’s actions at APEC and what they mean for Canadians.” The author, Carlo Dade, who is director of the Trade and Investment Centre at the Canada West Foundation and is also a senior fellow at the School of International Development and Global Studies at the University of Ottawa, says “As the remaining Trans-Pacific Partnership 11 countries (TPP11) prepare to move on, without not just the US but, according to rumblings coming out of Asia, possibly also Canada, the costs of the Trudeau government’s shenanigans on the world stage are becoming clear. The first cost is losing out on the immediate economic gains from a rapid coming into effect of a revised Trans-Pacific Partnership agreement without the US. The second is the reputational damage caused by Trudeau’s decision to play coy on the deal, stand up his fellow heads of state, and torpedo Canada’s best and only chance to catch up in the Asian trade race. And all for what? To protect a few narrow domestic interests from a trade agreement — the TPP — that in fact offers better terms for the dairy and auto sectors than what’s currently on the table in NAFTA.

There are, Mr Dade says, four key losses for Canada and one additional one for Western Canada. The four are:

  • First, the dollars-and-cents facts of the deal. Economic modelling done for the Canada West Foundation makes it clear that Canada would do better under TPP11 than under an agreement that includes the Americans. This modelling merely quantifies what is common sense. Gaining tariff and other advantages over the Americans in Japan, Vietnam and other markets will lead to trade diversion, as Asian importers switch to cheaper Canadian goods, and US exporters possibly move production to Canada to take advantage of TPP11 benefits (we have seen this in the past, but this time it would be accelerated). Persistent commentary that TPP11 was not a good deal is demonstrably false.” That directly contradicts what Jim Balsilie said a few days ago.
  • From the outset of the TPP negotiations Canada scored big, because we joined a group of nations that were willing to make concessions to gain the “prize” of access to the US market. Canada also stood to benefit from the advantages that would flow from a new trade bloc with one set of rules for 12 economies. This is significant, and it now stands as a major competitive advantage over the US, which is seeking to advance a series of disjointed bilateral agreements requiring separate paperwork for each country. Under TPP11, Canadian exporters would have one set of paperwork for 10 economies, from which they could use inputs from any economy to sell to the others, something not available to US firms under the Trump administration’s approach … [but] …  the more immediate benefit for Canada is that the concessions that Asian countries ceded to gain access to the US market were largely left in place after the Americans dropped out, which gives Canada the best of both worlds. We got better access to Asian markets than we could ever hope to negotiate on our own (would any country make the same concessions to gain access only to Canada?). And, now the US has pulled out, Canada would not have to worry about competitors gaining better access to the American market. The possibility of replicating this outcome under any bilateral scenario is inconceivable … [and] … Under the Trudeau government’s “progressive” trade agenda, it is hard to see Canada getting a better deal than what was achieved under the TPP.
  • Trudeau’s undercutting of Japanese Prime Minister Shinzo Abe and Canada’s trade minister at the APEC summit will harm future efforts to negotiate in Asia. Even though he took measures to limit embarrassing Abe by scheduling a last-minute sidebar meeting, acting so late was problematic, for two reasons:
    • First, Trudeau let Japan go ahead with preparations when he could have provided a much earlier heads-up that there were problems, instead of waiting until everyone else was ready to go ahead; and
    • Second, his reasons for not going ahead were vague and could have been resolved much earlier; now they have left the other TPP countries confused. There was consensus to move ahead among the leading economies and Canada’s allies. Part of this consensus was Canada’s International Trade Minister François-Philippe Champagne, who was undercut literally at the last minute by Trudeau … [but] …
  • Beyond embarrassing Abe by disrupting his highly choreographed moment in the leadership spotlight, Trudeau’s actions have led some Asian nations to question who speaks for Canada on trade issues, and Australia to question how reliable a partner Canada is in Asia. The anger in the region is understandable: governments spent valuable political capital and took electoral risks back home to push the agreement, only to watch the Canadian Prime Minister waltz in and yank the rug out from under them at the last minute. Trudeau had close to nine months of TPP11 negotiations to raise issues, and he had plenty of time leading up to the APEC meeting to alert his allies and avoid embarrassing anyone. Waiting until after his trade minister had agreed to a deal and every other leader was exposed to announce his objections looks like a political stunt; the type of stunt that Donald Trump would pull.
  • The idea that anything agreed to in the TPP imposes conditions on Canada and Mexico in the NAFTA negotiations is risible. If the Americans want something that was in the TPP included in NAFTA, then they have to make an offer. Simply because Canada and Mexico agree to something in one trade deal does not mean that they have to make the same concessions, outside of tariffs, in another negotiation. If the Americans want TPP provisions on copyright or intellectual property in NAFTA, they have to offer something in exchange. When the Americans left the TPP, they left those provisions behind. And with the US not part of the agreement, any damage to Canada from these provisions will be lessened, if not eliminated … [but] …  Had Canada not equivocated in going ahead with the TPP11, Canadian companies would have had access to the IP and copyright provisions that US companies wanted. This would have helped Japanese negotiators drive home to US interests the costs of walking away from win-win multilateral agreements. This message was severely undercut by Trudeau’s actions. In fact, by almost scuttling the agreement, Trudeau came within a hair’s breadth of handing Donald Trump the single biggest trade and foreign policy win of his term so far … [and] … On autos, there is also a strong and obvious case to be made that rules of origin and content under TPP11 are far better than what the Trump administration has on offer in the NAFTA talks. This sounds like a win for Canada.

So what has Justin Trudeau got to show for himself on the trade front?

Well, he has one victory: he signed the CETA with the EU … but that was, 100%, Prime Minister Stephen Harper’s trade deal; Team Trudeau just signed after all the heavy lifting had been done.

NAFTA, arguably our most important trade relationship, by far, appears to be headed for the scrap heap. I suspect that Team Trudeau understood this going in … that’s why the nonsensical virtue signalling is OK. Donald Trump seems quite determined to scrap NAFTA so the PMO can play partisan, 2019 campaign politics while it collapses.

The TPP is, now, on the ropes, and that is 100% Justin Trudeau’s doing. Japan qould have been a HUGE free trade prize for Canada … according to John Manley, on CTV News, Justin Trudeau screwed the pooch on that one.

And then there’s free trade with China … it also appears to be going nowhere. But there are many, including Andrew Scheer,  Terry Glavin in the National Post and the Globe and Mail‘s editorial board, who think that may be a blessing in disguise. But John Ivison, also in the National Post, suggests that a deal may be very close if our pretty prime minister took away the right messages from his meeting with Xi Jinping: principle amongst them, I suspect,  is that negotiating is a serious, adult business and one does not propose sophomoric changes at the last moment. Bloomberg calls it Canada’s latest trade stumble.

As I see it, as a committed free(er) trader, Prime Minister Trudeau is “oh for four,” on trade, as they say in baseball … he, quite clearly, does not belong in the big leagues. Oh, well, in 2019 we have a chance to send him back to the minors ~ the opposition back benches ~ where he belongs.

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