Canada is starting negotiations on a free-trade agreement with the 10-member Association of Southeast Asian Nations, a pact that could help expand and deepen Canadian business ties in the Indo-Pacific region beyond China.
International Trade Minister Mary Ng announced the decision to commence talks Tuesday following a virtual meeting with economic ministers representing countries that belong to the Association of Southeast Asian Nations (ASEAN). The biggest economies in this trading bloc include Indonesia, Thailand, Philippines, Malaysia and Singapore.
“This is a significant milestone in the renewal and deepening of Canada’s economic partnerships and commercial engagement across the Indo-Pacific,” Ms. Ng said in a statement.
She said a deal with ASEAN’s fast-growing economies could help diversify supply chains for Canadian companies, create new opportunities for Canadian exporters and reinforce a commitment in the region to “open markets and rules-based trade.”
Her announcement comes as the Department of Global Affairs is drawing up a new foreign policy strategy for Asia, a region that Ottawa is reframing as the Indo-Pacific. The strategy is being crafted in the wake of the worst rupture in relations between Ottawa and Beijing in half a century and while memories are still fresh on how China reacted to the arrest of a Huawei executive at the Vancouver airport. The country arbitrarily jailed two Canadians for more than 1,000 days and blocked sales of Canadian pork and beef for several months in 2019. It also drastically reduced canola seed purchases and two major exporters remain banned from selling to China today.
China, not a member of ASEAN, is currently the largest destination for Canadian exports in Asia – about US$19-billion in 2020 – and also the largest source of imports from Asia: About US$57-billion in 2020, according to the United Nations COMTRADE database on international trade. Japan is also an important trading partner.
Asked why Canada should diversify trade in Asia beyond China, a massive market of 1.4 billion people, Ms. Ng said ASEAN countries offer additional opportunities.
“I would also say that we pursue trade agreements based on values and on interests that are important to Canadians,” she said in an interview.
The biggest ASEAN member customer for Canadian goods today is Indonesia, which ranked 18 among export destinations in 2020, according to the COMTRADE database. Canada in June announced bilateral trade talks with Indonesia.
The economies of the 10-country bloc as a group would comprise Canada’s sixth largest trading partner, but this country already has access to four ASEAN members – Brunei, Malaysia, Singapore and Vietnam – through a 2018 Pacific Rim trade pact known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Jonathan Berkshire Miller, a director of the Indo-Pacific program at the Macdonald Laurier Institute, said signing a free trade deal with Southeast Asian Nations would demonstrate to the region that Canada is committed beyond the Trans-Pacific deal.
However, he said another trade agreement would not be sufficient to convince Canada’s allies in the Indo-Pacific that it’s ready to play a bigger role in the region. “It’s a great step but it’s not enough,” Mr. Miller said. He said trade and investment is only one pillar of foreign relations and has been the predominant move in “Canada’s playbook for the past 30 years.”
He said Canada as a Pacific Rim country must also play a bigger role in contributing to security, defence and government capacity building in Asia. “Nobody is expecting hundreds of millions of dollars in defence investment but without seriously thinking about security and defence contributions, it won’t be acceptable.”
Ms. Ng said she will table a Notice of Intent to enter into FTA negotiations with ASEAN, as well as Canada’s negotiating objectives, in the House of Commons when Parliament resumes. “I intend to have our negotiators in there as soon as possible,” she said of trade talks.
Asked whether the federal government is also looking to expand business in China, the minister said: “Our position on China right now ... we’re reflecting on it.” Ms. Ng added she will always support Canadian exporters trading with China. “Today what we’re talking about is a region of the world in the ASEAN bloc that has some real opportunities for Canadian exporters.”
Prime Minister Justin Trudeau’s Liberal Party in the 2021 election promised a new comprehensive strategy for Asia Pacific to deepen diplomatic, economic and defence partnerships in the region, including by negotiating new bilateral trade agreements.
Ms. Ng noted that ASEAN as a group represents the third largest consumer market in the world. A preliminary analysis by ASEAN and Ottawa on the merits of a free-trade deal estimated Canadian exports of goods and services to the bloc could go up by 13.3 per cent, valued at US$2.67-billion.
With a report from Canadian Press
Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.