TPP window may be closing

by Robert Arnason (feat. Hugh Stephens)

Western Producer
January 10, 2018

When it comes to free trade agreements, timing is nearly everything.

The right politicians and political parties must be in power. As well, economic conditions must be right so citizens support the deal.

That’s why Canada must act quickly to get a trade deal with Japan, says a distinguished fellow with the Asia Pacific Foundation Canada.

“It’s a perfect time to do it with the Americans sitting on the sidelines,” said Hugh Stephens, who worked 28 years for the federal government in the foreign affairs and international trade department, including five postings in Asia.

“If we don’t lock in (Japan) now, we’re not going to get it…. It’s got to be done in the next six months.”

Stephens, who also spent eight years with Time Warner as senior vice-president of public affairs in Asia Pacific, now lives in Victoria. The trade deal he’s talking about is the Comprehensive Progressive Trans Pacific Partnership (CPTPP), better known by its previous acronym TPP.

One year ago, when U.S. President Donald Trump pulled the United States out of the agreement, many observers assumed the deal was dead.

But led by Japan, the remaining 11 Pacific nations pushed ahead. They came close to signing a revised deal in November at a meeting in Vietnam, but Prime Minister Justin Trudeau hesitated and actually missed a key meeting in Danang.

In the end, the 11 countries reached a provisional agreement in Vietnam with plans to negotiate a few key issues before a final agreement is complete.

One of those critical issues is automobiles.

Unifor, which represents Canadian auto workers, has loudly criticized the new TPP, saying it will destroy Canada’s auto assembly and auto parts industries.

Original language in the TPP said vehicles exported into North America must have at least 45 percent of content made in a TPP member country. In comparison, under NAFTA, 62.5 percent of a vehicle must be made in North America to enter the marketplace tariff-free.

The 45 percent number will change where Japanese cars are made, partly because the U.S. is not part of the new TPP, said Unifor president Jerry Dias.

“Vehicles that have been assembled in Japan with predominantly non-TPP parts, including from China, means it would be cheaper to build a car in Japan and ship it to Canada than to build it in Canada,” Dias told the Toronto Star in December.

“A major question you have to ask yourself is why would the Japanese auto makers ever invest one more nickel in Canada with this deal? The fact is they won’t.”

Ontario’s auto sector may oppose TPP but western agricultural groups are rallying behind the deal. Eliminating tariffs on canola could increase annual exports to Japan and Vietnam by $780 million, says the Canola Council of Canada.

Japan is also a massive market for Canadian pork, representing more than $1 billion in annual sales.

The TPP debate is more than East versus West, but those competing interests are a large part of the discussion, Stephens said.

“I think it’s fair to say that there are greater potential gains for Western Canada than (for) the Ontario manufacturing sector,” he said.

“But that’s not to say there aren’t segments and niches in Ontario that will do quite well out of this.”

Canada’s TPP dilemma is further complicated because Canadian negotiators have also pushed for changes around issues such as the environment, workers’ rights and gender. On top of that, Canada is in the middle of negotiations with the U.S. and Mexico over NAFTA.

Japan has grown increasingly frustrated with Canada’s reluctance on TPP, and there are reports that Japan may proceed without Canada.

Stephens said Trudeau and the federal government may have legitimate concerns about the trade deal and they are dealing with NAFTA, but they have played their hand poorly on TPP.

“We haven’t been very adroit in how we handled (it) and we ended up pissing off the Japanese, big time,” he said.

Stephens remains hopeful that the federal government learned from its misplay and will resolve the tension with Japan. He’s heard that Canadian and Japanese representatives are talking about the auto issue.

“I understand there are some negotiations going on, quiet negotiations, to get this auto stuff done.”

Still, such talks can’t drag on because Japan wants a deal as soon as possible.

“It’s a strategic option for them and something that’s very close to (Prime Minister) Abe’s heart,” Stephens said.

“If it gets pushed out much beyond the end of this year, then probably the momentum is going to evaporate.”

Reports from Japan suggest it may need to happen much sooner. The Asian Review has reported that Japan is pushing for an early March signing of the new TPP at a meeting in Chile.