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Japan might push through TPP without Canada

Diplomat presses B.C. leaders to reconsider trade deal after Ottawa’s cold feet at APEC summit
Japanese Prime Minister Shinzo Abe wants a reconfigured Trans-Pacific Partnership – with or without Canada | Frederic Legrand – COMEO/Shutterstock 

Japan's top diplomat in Western Canada is urging B.C. government and business officials to reconsider the merits of the newly re-formed, 11-member Trans-Pacific Partnership (TPP-11), despite Ottawa’s controversial decision to back out of a document signing in November that would have formally relaunched the pact.

Meanwhile, a Vancouver-based Asia-Pacific researcher who just returned from a visit to Japan noted Tokyo officials are “very upset” with Ottawa over what was perceived as a last minute back-out on the part of Canada at the signing, adding that there is now the potential for the remaining countries in the pact to go ahead with a “TPP-10” if Canada does not change its position quickly.

Yves Tiberghien, director emeritus at the University of British Columbia’s (UBC) Institute of Asian Research, spoke with a number of ministry officials and academics during a visit to Japan this month. Tiberghien said Japanese perception of Canada undoubtedly took a hit after Prime Minister Justin Trudeau declined to attend a TPP-11 agreement signing at the Asia-Pacific Economic Cooperation summit in Vietnam in November, and the mood in the bilateral relationship is now in a chill not often seen in Ottawa-Tokyo relations.

“I think, no matter what happens with TPP, Canada needs to spend a little bit of time with their Japanese counterparts after what happened,” Tiberghien said, noting some Tokyo officials have said that Japan has already cancelled at least one bilateral meeting. “Canada has a very high reputation in Japan and is usually seen as a key ally on many issues, so this was very frustrating and puzzling to the Japanese.”

Asako Okai, consul general of Japan in Vancouver, did not comment on the specifics of the TPP negotiations in Vietnam, but noted the benefits of the agreement would go beyond tariff barriers and extend into having a Canadian voice in the rule-making process for future cross-Pacific trade and investment. So it makes a lot of sense for B.C. to support the deal, she said.

“The rule-making part, which facilitates the removal of barriers that may pose challenges for B.C. businesses and companies, is very important,” Okai said. “It took four years of intensive negotiations to reach the agreement between the 12 countries of the [original] TPP, and it’s so important not just because of the tariff issues, but also the 21st-century rule-making process.”

She said the standards being set out are the highest ever “on an economic agreement this comprehensive,” adding that it’s “very strategically important to keep this market open in the Asia-Pacific.”

Japan is now the biggest market in the new TPP, a proposed free-trade bloc that includes countries in Southeast Asia (Vietnam, Malaysia, Singapore and Brunei), Oceania (Australia and New Zealand), South America (Peru and Chile) and North America (Canada and Mexico). The United States withdrew its participation in January after Donald Trump came to power in Washington.

But despite speculation that the controversial free-trade block would fall apart without U.S. participation, Tokyo has spearheaded efforts to keep the deal alive because the TPP has been touted as a central cog of Japan’s economic revitalization plan – dubbed “Abenomics” after Japanese Prime Minister Shinzo Abe – since 2013.

“I think Ottawa did not fully understand how important the TPP is to Mr. Abe,” Tiberghien said. “Canada tends to look at TPP pragmatically, as one of many things going on with international trade. For Abe, the TPP is about as central as it comes.… It encompasses domestic economic reform, international leadership, establishes multilateral rules in global commerce, and in some way, the Canada-Japan relationship now hangs on this one issue.”

A report in The Diplomat by Aurelia George Mulgan, a professor of Japanese politics at the University of New South Wales in Australia, also indicated that the strategic value of the TPP to Japan goes well beyond the country’s domestic economic situation. The TPP, Mulgan argues, gives Tokyo an avenue to counterbalance the growing influence of China, Japan’s chief rival in the East Asia region.

Tiberghien said the Abe administration is so keen on getting a TPP deal officially in the books that many expressed a willingness to move on without Canada if there are further delays from Ottawa.

“A lot depends on how many issues remain,” he said. “The sense I get is that it’s a matter of months, maybe six months or less. Tokyo is confused and surprised by the last-minute nature of what happened, especially since they believe Canada has already won some concessions in the new agreement.”

Okai said B.C.’s heavy trade relationship with Japan – the province lists the country as its third-largest trade partner, versus a fourth-place ranking when looking at trade with  Canada as a whole – means that it especially behooves the West Coast to look at the opportunities available under TPP-11.

“It would mean a lot for B.C. and Canada, I think,” Okai said. “It’s of critical importance for Canada, and of especially crucial importance for B.C…. Japan is no longer an economy in stagnation. Heavy investments will be made in places like AI [artificial intelligence], robotics and IoT [the Internet of Things], and major shifts are happening in our economic system. There will be opportunities for Canada to capture that momentum.”

In a report last July, the Canada West Foundation released an economic analysis that showed that the TPP will remain beneficial to Canadian imports, exports and gross domestic product, despite being less so after the United States pulled out. The report said the TPP-11 pact would generate a 2.43% boost in exports among member states – an increase of $22.7 billion based on 2017 export prices. The report also noted Canada (and Mexico) could benefit from U.S. companies relocating north or south to take advantage of the TPP-11 market area.

The deal has also generated significant opposition, notably from labour groups and officials in the auto manufacturing industry. Reports from Vietnam indicated that Canada was keen to add more progressive chapters on labour and environmental issues to the deal after concessions were made when the United States was a party to the talks.

UBC Institute of Asian Research Prof. Paul Evans said that Ottawa’s move on TPP-11 in Vietnam can best be characterized as a “fumble,” despite Canadian officials attributing the missed attendance as a scheduling error.

“There was clearly some miscommunications around it, that’s for sure,” Evans said. “But beyond the miscommunication, it was pretty clear that Canada does not yet have an integrated strategy for what it’s going to do in trade policies, as we are trying to work with the Americans on NAFTA [the North American Free Trade Agreement].”

Evans added that uncertainty about the future of NAFTA might be contributing to Ottawa’s unclear positions, which may have already affected how the federal government deals with the TPP and with the other high-profile deal in Asia that Trudeau is working on – the China-Canada bilateral free-trade agreement.

Asia Pacific Foundation of Canada vice-president Eva Busza said that while it is clear TPP proponents like Japan were unhappy about Ottawa’s position to renegotiate, there’s also the risk that renegotiations can quickly bog down in more dissent from other member states, she said, which would make the talks drag on even longer and potentially scuttle the whole initiative.

“The challenge is if you start reopening the details of a trade deal that has been so difficult to negotiate, it could start unravelling other parts of the deal,” Busza said. “That’s the danger. That being said, a lot of consensus was built in the last year, and there are reasons people were interested, because they saw it as a benefit to their economy.”

Okai noted that the 11 states have at least agreed to TPP-11’s core principles, so she remains hopeful that Canada will be part of a quickly relaunched TPP bloc. She also noted that trade relations with B.C. remain robust, regardless of what happens with the TPP. •