The Trans-Pacific Partnership has finally landed.
The 12 countries who signed on to the deal announced on Oct. 5 in Atlanta still have to ratify it, meaning lawmakers will review and debate the agreement in each signatory country, but the deal is all but signed and sealed.
Here are three things Canadians should keep in mind as we examine the TPP’s fine print.
First is that the agreement makes it easier for firms here—both big and small—to do business in other member economies.
Many large firms and their employees are well—poised to take advantage of the deal and the TPP will reduce barriers for small- and medium-sized businesses wishing to sell internationally.
For the vast majority of Canada’s farmers, food processors, high-tech manufacturers, and providers of technically advanced services—this is good news. Hundreds of thousands of Canadians will benefit.
The TPP is a major breakthrough in the Asia-Pacific area, where competitors like Australia are well ahead. It also keeps Canadian firms on as level a playing field as possible in the key U.S. market against Asia-Pacific competitors.
All told, the TPP gives Canadian producers better access to countries accounting for 40 per cent of global incomes. Significant emerging economies such as the Philippines are likely to join down the road.
Secondly, the extra competition that some currently protected sectors of the Canadian economy will feel from this agreement is also good news for the vast majority of Canadians.
Dairy is a prime example. The current supply management system raises prices for dairy products, costing Canadian families hundreds of dollars a year.
The TPP allows imports amounting to 3.25 percent of the Canadian dairy market—far from the disaster some predicted. The price of dairy products will fall with the increased supply but this will benefit Canadian consumers and restaurateurs who are suffering current high prices. Farmers can respond by making their operations more efficient, and expanding to markets abroad in due course—markets now closed to us because of supply management.
There were also worries that Canadian auto parts producers would face additional indirect competition from countries outside the TPP. The compromise that has been arrived at in the TPP is a decent deal because it creates additional competition for some, and expanded opportunities for others.
In general, competition is a good thing. It lowers prices for Canadians and and firms located here. This helps attract or keep talent and businesses here in Canada—the foundations of our future competitiveness.
The third thing that Canadians should keep in mind is that critics of the deal will use a well-honed “worst-case scenario” approach to argue that jobs will flee to some lower wage economies under this agreement, or that the agreement will prevent governments from enacting laws and regulating in the public interest.
Both propositions are false. Comparisons of Canadian wage levels with those of lower-income countries are meaningless when done in isolation.
Canadians will effectively compete on the basis of the skills, productivity, technology and investments that form the basis of our high-wage economy, not the skills, technology and investments prevailing in these lower-wage economies. The TPP will instead help Canadians benefit from complementarities with rapidly expanding emerging economies that are part of the TPP.
Critics have also enormously exaggerated the actual impact of provisions in earlier trade agreements allowing an investor to challenge a state before international tribunals.
The TPP agreement will not allow investors to sue governments simply for a reduction in expected profits that may result from government laws or regulations. Nor will it restrict governments from adopting any such measures as long as they do not discriminate against suppliers from another TPP country.
Canadians must remember that the country’s best jobs and growth potential are built on skills and investments that generate incomes primarily through international trade. The TPP expands Canadians’ ability to benefit from their brains, investments, and hard work. Canadians should enthusiastically support this new economic window opening towards the Pacific.
Daniel Schwanen is vice president of research at the C.D. Howe Institute. Originally published in the Financial Post.
