UNDERSTANDING CANADA S NEW FREE TRADE DEALS

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1 WHITE PAPER UNDERSTANDING CANADA S NEW FREE TRADE DEALS TPP and CETA are set to give Canada unprecedented free trade opportunities worldwide.

2 White paper Understanding Canada s new free trade deals TPP and CETA are set to give Canada unprecedented free trade opportunities worldwide. The pending passage of the Trans-Pacific Partnership (TPP) and the recent finalization of the Comprehensive Economic and Trade Agreement (CETA) are set to make Canada the only country in the world with free trade agreements with Europe, Pacific Asian countries and North America. But what are the implications of such a historic feat? Trailing the TPP There has been much discussion and controversy concerning the Trans-Pacific Partnership (TPP), which involves a mixed-bag of issues ranging from free trade, intellectual property rights and foreign investment rules, to labor standards, procurement policies and financial regulations. Touted as one of the biggest trade deals in history, the proposed deal is an international trade agreement being negotiated among a dozen countries, including Canada, the United States, Mexico, Australia, Japan, New Zealand, Malaysia, Singapore, Vietnam, Chile, Peru and Brunei, whose collective GDP makes up 40 percent of the world s global economy - estimated at more than $27 trillion. Negotiations have been ongoing since 2010, but appear to be drawing to a (very near) close. When implemented, the agreement would eliminate most tariffs on nearly $2 trillion in goods and services, ranging from cars to food products, exchanged across the Pacific Rim. The Trans-Pacific Partnership has been regarded as giving Canada a place at the premier table for the 21st century. Intellectual property included There s also one other small detail: the inclusion of regulations for non-trade elements such as the Internet, intellectual property, the environment, medicine and more. This makes the TPP especially unique from trade agreements of the past. Full details of the agreement remain scarce - adding to the controversy - but proponents of the deal maintain that the TPP will render barriers to trade obsolete, while stimulating production and supply chain development among participating countries. Indeed, unobstructed trade allowances have been shown to increase per capita income, thus improving standards of living. And there s also talk about how the deal is prepared to address and improve policy issues such as labor practices, and elevate environmental standards around the world. Critics take aim at poor transparency But critics are not quite as optimistic. Global health advocates, environmentalists, Internet activists and trade

3 unions are among the most skeptical. Chief among their concerns is the lack of transparency enshrouding the negotiations, the endangerment of environmental protection standards and what they see as restrictive intellectual property laws that threaten users freedom of speech, right to privacy and due process, and hinder peoples abilities to innovate. Opponents are also criticizing the absence of sectorial impact studies to substantiate the claims made by backers of the deal. Whatever the case is - or may be - what stands true is the Canadian government s strong support of the deal. Seen as an attempt to extend trade ties in the Asia-Pacific region CETA is set to increase cooperative trade in goods and services between Canada and the EU by 23%, or $36.8-billion, and deliver an anticipated $12 billion annual boost to Canada s economy. while strengthening already established bonds in the Americas, this deal has been regarded as having a place at the premier table for the 21st century. In following, proponents point to growth in exports and the creation of jobs, as well as lower prices at the check-out counter for the everyday consumer. Benefits to various industries, through increased access to TPP markets, including the fish and seafood, forestry and wood products, industrial goods, agricultural and agri-food sector, have all been cited. However, there is some apprehension surrounding the impact of this deal on the latter, as dairy and poultry farmers have expressed concern about the vulnerabilities that may be exposed on their tightly controlled system of governance - currently, the prices of milk, cheese, eggs and poultry are carefully regulated in Canada through the monitoring of domestic production and the imposition of high tariffs on imports.

4 The CETA pact builds on a history (beginning in 1976) of bilateral economic partnerships - shaped by established agreements and ongoing negotiations - between Canada and the EU, highlighting the two parties commitment to economic integration, stimulation of trade and investment flow. For the Canadian government, this deal is of high-priority, as the EU represents the nation s second largest trading partner in goods and services. And government officials have outlined a number of benefits that the agreement promises to deliver. At its core, the CETA is expected to generate more trade and two-way investment, while stimulating growth and job creation. Sounds pretty familiar. To allay these fears, the government has vowed to defend the supply management system during deliberations. In all, TPP advocates have taken a stance that the benefits of being an influential player on Team TPP far outweigh the costs. Advocates cite increased and privileged market access for Canadian goods, services and investments in a fast-growing region; the potential to shape and preserve effective public policy objectives; and the maintenance of a strong North American production platform as justification for this pursuit. CETA: A comprehensive approach Much like the TPP deal, the Comprehensive Economic and Trade Agreement (CETA) between Canada and the 28-nation European Union (EU) has been pegged as historic. Launched in 2009 and slowly gaining approval since, the accord is being heralded as Canada s biggest cross-border deal, superseding the 1994 North American Free Trade Agreement (NAFTA) in scope and substance. Trade up, tariffs down Specifically, once the deal is fully implemented, it is expected to increase cooperative trade in goods and services between Canada and the EU by 23%, or $36.8-billion. Further, a $12 billion annual increase to Canada s economy is anticipated, translating to the economic equivalent of adding $1,000 to the average Canadian family s income, or almost 80,000 new jobs to the Canadian economy. Along with these benefits, government officials have pointed to the elimination of tariffs on almost all (98%) Canadian primary (mineral and agricultural products) and manufactured goods as further proof of the deal s viability. The elimination of tariffs is projected to make Canadian products more competitive, thus resulting in increased exports and yielding higher sales, with eventual and lasting rewards for Canadians and businesses that stand to benefit from lower operating costs and fewer regulatory constraints. CETA and TPP are poised to position Canada as the only country in the world with key access to three strategic global trading partnerships with North America, Europe and Asia.

5 Additionally, Canadian consumers are expected to enjoy lower purchase prices for scores of European products. Investor-state dispute settlements at issue However, much like the controversial TPP, the CETA deal is not without its critics, albeit to a lesser degree. Notions of perceived loss of state authority, criticism of the investor-state dispute settlements (ISDS) clause of the document - which is said to encroach on domestic labor and environmental protection laws - as well as significant impacts on the dairy, drug and automotive industries are all sources for debate. All told, in the shadow of lingering controversy, the CETA and TPP deals are poised to position Canada as the only country in the world with key access to three strategic global trading partnerships with North America, Europe and Asia. Canada is heralded as a strong supporter of free trade, and these agreements are instrumental in promoting investment opportunities, stimulating job creation and driving overall growth and prosperity for the nation. It remains to be seen who next will follow suit. Contact Livingston Have questions about free trade agreements? Contact your account executive, write to us at: simplify@livingstonintl.com or give us a call at Sources

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