Last week, U.S. President Barack Obama formally extended an invitation to Canada to join the Trans Pacific Partnership negotiations, a proposed trade deal that includes the U.S., Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam (Mexico was also added last week). Supporters have lauded the TPP as potentially the world’s most important trade pact and the Canadian government spent months crossing the globe to lobby for an invitation.
Yet dig beneath the heady promises and the benefits for Canada are hard to identify. The price of admission was very steep – Canada appears to have agreed to conditions that grant it second-tier status – and the economic benefits from improved access to TPP economies are likely to be relatively minor since we already have free trade agreements with four of the ten participants.
Given those conditions, why aggressively pursue entry into the negotiations? The reason stems less from gaining barrier-free access to a handful of relatively small economies and far more about using the TPP as a backdoor mechanism to promote regulatory changes in Canada.
Given Canada’s late entry into the TPP process, the U.S. was able to extract two onerous conditions that Prime Minister Stephen Harper downplayed as the “accession process.” First, Canada will not be able to reopen any chapters where agreement has already been reached among the current nine TPP partners. This means Canada has already agreed to be bound by TPP terms without having had any input. Since the TPP remains secret, the government can’t even tell us what has been agreed upon.
Second, Canada has second-tier status in the negotiations as the U.S. has stipulated that Canada will not have “veto authority” over any chapter. This means that should the other nine countries agree on terms, Canada would be required to accept them.
This condition could be used to stop Canada from joining forces with another country on a tough issue during the late stages of the negotiation. For example, Canada and New Zealand both have copyright terms that last for the life of the author plus an additional 50 years. The U.S. has proposed that the TPP mandate a term of life plus 70 years. While Canada and New Zealand might be able to jointly block the extension, the U.S. could pressure New Zealand to cave on the issue and effectively force Canada to accept the change.
These tough entry conditions might be worth it if Canada stood to benefit significantly from new market access. However, Canada already has free trade agreements with the U.S., Mexico, Chile, and Peru. That leaves just six countries, which currently represent less than one percent of Canadian exports, as the net gain. In fact, there has been recent speculation that Chile is prepared to drop out of the negotiations precisely because it already has a free trade agreement with the U.S. and sees little upside in making major concessions in order to gain better access to the remaining TPP markets.
With Canada already surrendering negotiation leverage and few important markets at stake, our participation is less about other TPP countries and much more about us. Business groups such as the U.S. Chamber of Commerce applauded Canada’s entry into the TPP, expressing the hope that it would force further changes to Canadian intellectual property laws less than 24 hours after Bill C-11 passed in the House of Commons.
For the Canadian government, the TPP offers cover for major reforms to supply management, the combination of tariffs, quotas and price supports that increase costs for dairy, eggs, chicken, turkey and broiler hatching eggs. The system has been politically untouchable for decades, but using a backdoor approach of mandating change through trade agreement might provide the mechanism to garner the necessary popular support.
While backers maintain that the TPP will open up new markets to Canadian companies, the reality is that the agreement’s biggest impact is likely to come from major domestic legislative reforms that would otherwise face considerable opposition and serious political risk.
Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at email@example.com or online at www.michaelgeist.ca.