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TPP: What it is and why it matters

Published by Derek Lothian on May 09, 2012

This article first appeared in the March-April edition of 20/20 magazine.

By James Careless

Like NAFTA, the Trans-Pacific Partnership (TPP) is an international free trade agreement that could have a major impact on the global success of Canadian manufacturers and exporters. Unlike NAFTA, however, TPP has failed to stoke the glowing embers of public imagination.

Signed in 2005 and implemented one year later, the original pact was signed by the nations of Brunei, Chile, New Zealand and Singapore. Since then, Australia, Malaysia, Peru, the United States and Vietnam have entered negotiations to join and shape the TPP. At the APEC summit held in Hawaii this past November, Canada, Japan and Mexico also threw their hats in the ring.

The addition of the latter three countries alone would bring total TPP representation to a market potential of more than 775 million people with a combined GDP of $25.7 trillion.

"We are indicating today our formal intention; we're expressing formally our willingness to join the Trans-Pacific Partnership," said Prime Minister Stephen Harper from Honolulu, November 13. "We will make an application and I am optimistic we will participate in the future."

The Prime Minister's comments were spurred, in part, by a CME-led campaign encouraging business leaders to express their written support of Canada's participation.

But why exactly does Canada need to be at the TPP table? According to Ron Watkins, president of the Canadian Steel Producers Association, it's a question of future competitiveness.

"Having access to Pacific Rim markets is extremely important to our future," explains Watkins. "If we are outside of a free trade deal that governs this region, we will be at a true competitive disadvantage - especially when the United States seems likely to be a TPP signatory."

The threat of China joining TPP talks is also a possibility that can't be ignored.

"As a result, if the TPP ends up being the dominant free trade agreement in Asia-Pacific, or if it leads to such an agreement being signed in the future, we need to be a part of it," says Watkins.

Jean-Michel Laurin, vice president of global business policy with Canadian Manufacturers & Exporters (CME), believes the TPP also provides the opportunity to resolve prickly Canada-US trade issues that were previously left out of NAFTA, including recurring ‘Buy American' policies that cut Canada out of US sales. Other countries taking part in negotiations are not likely to approve of such US measures, he adds; so the window to address these concerns bilaterally is one that may not come again.

American business leaders also want Canada to join the TPP process. In fact, 90 per cent of private business ­comments filed with the Obama administration support Canada's inclusion.

"The truth is that NAFTA has resulted in the integration of Canada and the United States into a single market," notes Calman Cohen, president of the highly influential Emergency Committee for American Trade (ECAT) in Washington. "It is to the benefit of all three NAFTA signatories to see this deal strengthened - and the TPP is an effective, if indirect, way for all of us to achieve this."

Now that Prime Minster Harper has formally stated Canada's intentions, the mainstream media is starting to pay - albeit limited - attention. Predictably, reactions have been split along historical pro- and anti-free trade lines, with the ‘anti' forces stating concerns that Canadian industry could be adversely affected by further liberalizing trade rules.

"There is no doubt that free trade negotiations come with a certain degree of risk," says CME's Laurin. "But the best way to deal with these risks is to be at the table negotiating the rules; not sitting aloof praying others who don't have our interests at heart will somehow protect us anyways."

But regardless, the potential of striking a deal may be too great for naysayers to ignore, he adds.

"The TPP could have as big, if not bigger, of an impact on our economic prosperity as NAFTA," says Laurin. "Perhaps most notability, a deal could open up new markets for Canada's customer-hungry resource sector, and expose new opportunities to expand and innovate."

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