Many countries are stepping up efforts to conclude new trade agreements with key commercial partners as forecasters continue to downgrade their near-term projections for the global economy.
In just the past four months, the United States has announced that it wants to reach a free trade accord with the European Union, Japan has joined the discussions taking place under the rubric of the Trans-Pacific Partnership (TPP) and work on trade liberalization has accelerated among the members of the Association of Southeast East Asian Nations.
The backdrop for these regional negotiations is both a soft world economy and an ever diminishing prospect of finalizing a major new global trade deal through the long-stalled World Trade Organization talks.
The WTO process has essentially broken down, overwhelmed by the complexity of the contemporary multilateral trade agenda and the inherent difficulty of achieving consensus among the more than 150 countries that comprise the organization’s increasingly fractious membership.
Where does Canada fit within this evolving global commercial policy landscape?
Canada is part of the ongoing TPP process, among other pending agreements. However, the most significant trade negotiation in which Canada is currently engaged is that with the EU to establish a new Comprehensive Economic and Trade Agreement (CETA).
At a time when parts of Europe are mired in recessionary gloom, one might ask whether developing an agreement with the EU ought to be a priority for Canada. Yet there are several reasons why CETA is a worthwhile goal for Ottawa to pursue.
For one thing, the 27-member EU still ranks as the world’s biggest regional market, with a combined gross domestic product exceeding $17 trillion, compared to $15 trillion for the United States.
It’s also a notably affluent place, being home to many of the world’s richest economies. CETA would give Canadian businesses improved access to a market of more than 500 million people.
Also, the region is characterized by well-established labour and environmental standards because most EU member states are prosperous and highly developed.
This should ameliorate any concerns that entering into a trade agreement with the EU would exert downward pressure on regulatory standards in Canada.
As well, it’s well understood that Canada needs to diversify its trade and investment relationships and reduce over-reliance on the U.S., which is still the destination of three-quarters of Canada’s exports.
Also, the U.S. has started working toward its own bilateral trade agreement with the EU. Canada has spent more than four years in deliberations with the Europeans, and recent reports suggest the two sides are close to the finish line.
It’s crucial that Canada is able to get a deal done with the EU before we are displaced and potentially bypassed by the U.S.
As well, CETA is expected to boost Canada’s economy by reducing EU barriers to its exports, fostering more two-way investment and leading to more competitive markets. Some studies estimate that an ambitious trade agreement with the EU would lead to a $12 billion increase in Canada’s GDP, equivalent to $1,000 per Canadian family.
True, there are a number of politically sensitive issues in the Canada-EU talks, including market access for certain agricultural products, the extent to which government procurement will be opened up to suppliers based in the other party, rules governing foreign investment and harmonization of intellectual property standards.
However, while these may be tough nuts to crack, none should be deal killers.
After all, in a strategic sense Canada has more to gain than lose from achieving better access to a market that is approximately 11 times bigger than its own economy.
Jock Finlayson is executive vice-president of the Business Council of British Columbia. This column was distributed by Troy Media and edited for length.