The powerful softwood lumber lobby in the United States is suggesting it could thwart Canada's efforts to join a Pacific free trade zone if its neighbour refuses to address long-standing irritants.Jacques Boissinot/THE CANADIAN PRESS/The Canadian Press
Membership in the Trans-Pacific Partnership could increase the size of Canada's economy by as much as $9.9-billion (U.S.) or 0.5 per cent of annual gross domestic product by 2025, according to research on the fledgling Asian trade pact.
Canada's economic gains, however, would be much smaller than those derived by many of the other member countries in the proposed agreement, according to a research paper co-authored by Peter Petri, a professor at the Brandeis International Business School and Michael Plummer, a professor of international economics at the Johns Hopkins University.
After months of intense lobbying, Canada, along with Mexico, this week were invited to join the TPP negotiations. The group currently includes nine members; Brunei, Chile, New Zealand, Singapore, Australia, Malaysia, Peru, Vietnam and the United States. (Japan has also indicated a strong interest in joining the TPP).
If successful, trade liberalization and tariff reductions achieved by the TPP could yield global income gains of $295-billion by 2025, including $78-billion for the United States, according to the paper. The paper suggests the TPP could boost Canadian exports by $15.7-billion or 2.6 per cent by 2025. U.S. exports would rise by 4.4 per cent under the same scenario.
Many trade policy experts believe a successful TPP agreement could eventually set the stage for a comprehensive free-trade agreement among all Asia-Pacific countries, including China, the world's second largest economy. The potential gains from an Asia-Pacific-wide free-trade agreement, are "especially striking, leading to a 12-per-cent increase in world trade," the paper said.
A successful TPP agreement would see some member countries fare better than others. Mexico stands to gain slightly more than a full percentage point increase in its annual GDP by 2025 compared with 0.5 per cent for Canada. A full free-trade agreement between all Asia-Pacific countries would raise Mexico's annual GDP by 3.38 per cent compared with 1.32 per cent for Canada.
"Because of the international stalemate with Doha we have had very little progress on international trade in the past few years. The TPP now has momentum. It could begin to build a fairly serious trade group around itself and at the same time it could stimulate other trade liberalization efforts in Asia and could eventually reignite the world trade round," said Peter Petri, one of the study's co-authors.
Despite the fact that Canada's economic gains from a TPP agreement will likely be less than many other member countries, Mr. Petri believes a potential agreement will offer substantial opportunities for Canadian business, particularly in areas such as financial services.
"Canada will have lots more access to these markets in service sectors. Canada is an important producer of services. It probably won't do much for Canada's resource exports because they don't face much protection abroad," he said.
A successful TPP is also likely to increase the amount of Canadian investment into Asia as well as the amount of foreign investment into Canada.
"Foreign investment is typically more productive than domestic investment so that will mean additional income and returns for anybody in Canada who holds assets," Mr. Petri said.