Canadian Prime Minister Justin Trudeau attends the World Economic Forum annual meeting in Davos, Switzerland, on January 25, 2018. Photo: Reuters / Denis Balibouse
Canadian Prime Minister Justin Trudeau attends the World Economic Forum annual meeting in Davos, Switzerland, on January 25, 2018. Photo: Reuters / Denis Balibouse

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, aka TPP-11, was proclaimed as a great “victory” by Canada after a deal was struck on the pact in Tokyo this week. Prime Minister Trudeau, in his speech at the World Economic Forum, implicitly warned the United states that the CPTPP would be an alternative if the US did not back down on its NAFTA (North American Free Trade Agreement) demands.

US Commerce Secretary Wilbur Ross was unamused at the pressure and made it publicly known when he arrived at Davos, Switzerland, for the WEF.

Recall that in November, on the eve of a trip to China to secure the formal opening of negotiations for a Canada-PRC free-trade deal,  Trudeau and his minister of international trade, Francois-Philippe Champagne, sabotaged the TPP-11 signing ceremony by raising major last-minute objections.

At that time, Canada felt it had an alternative to both the TPP and NAFTA by rapidly concluding a free-trade deal with China. When that effort collapsed, Trudeau had to return to the TPP hat in hand, with very little goodwill left among the other parties to the pact.

Fortunately, Trudeau was able to send Ian McKay of the Vancouver Economic Commission to head the Canadian delegation to Tokyo in lieu of Champagne for TPP-11 negotiations this time. That helped Canada make a much-needed fresh start.

Back in November, Canada had demanded “progressive elements” such as labor rights, environmental provisions, aboriginal rights, and gender equality to be added 20 minutes before the signing ceremony, abruptly terminating the consensus, which could have set back the revised TPP by years. Subsequently, the TPP-11 co-chairs Australia and Japan worked miracles to rescue the deal while grappling with Canadian demands to enable the agreement to be ready for signing on March 8 in Chile.

‘Progressive’ agenda questioned

The Trudeau government’s “progressive” agenda, especially its purported commitment to racial equality, is questionable, especially when looked at through East Asian eyes. While Trudeau boasted that his first cabinet in 2015 “looks like Canada” in terms of ethnic and gender make-up, several major groups – including Chinese-Canadians – remained unrepresented. The situation only marginally improved after several Cabinet shuffles. 

Not surprisingly, Canadians’ demands for their flavor of “progressive” did not go down well with TPP officials, most of whom were from East Asia. Nor did they play well in China.

Canada’s demands were viewed by TPP nations as enhancing long-standing racist practices by its governments. In the end, these demands were readily brushed aside and ended up as flowery statements in the new deal’s preamble that have little substance. The “victories” on labor and environmental issues touted by the Liberals were already in the original TPP as negotiated by the previous Conservative government of Stephen Harper.

Another so-called victory for Canada in the new agreement is the inclusion of a binding dispute-settlement mechanism for non-tariff barriers in a bilateral deal between Japan and Canada. However, this may end up surprising Canada as a double-edged sword when this issue surfaces.

Maintaining protection for culture is touted as a major accomplishment despite Canada’s demand for protection of cultural industries coming as an afterthought. The issue ended up being left to “legally binding” side letters to the CPTPP agreement. The side letters are apparently being negotiated individually with each nation and their content is currently not public.

The issue of Canada demanding that the intellectual-property chapter be suspended is a null issue, as it would almost certainly be reinstated as a condition of the US joining TPP, which despite President Donald Trump’s rhetoric is under consideration once NAFTA is renegotiated.

Veto is history

Perhaps the biggest and most dangerous concession by Canada is that for the first time in recent memory save for the expulsion of Russia from the Group of Eight conference, an ironclad rule of international organizations – that they operate by consensus – has been abandoned by a major industrialized democracy. That is to say, Canada has lost its ability to veto the TPP agreement.

Japan announced that Canada’s accession was no longer required for the deal to move forward. If an intractable Canadian problem arises as it did in November, Canada will simply be dropped and the other parties move ahead without it at the March 8 signing ceremony in Chile.

What this means in practice is that all the changes Canada is talking about, including the cultural-protection side letters, are entirely discretionary concessions by other CPTPP parties. Canada cannot withhold consent to the entire agreement as before and use that as leverage to get concessions. This, more than anything else, ensures that few meaningful concessions will be given to Canada “on the side.”

For Canada to accept the humiliation of losing its veto as the price to join the TPP-11 is a clear, unambiguous signal as to how low the country’s reputation and credibility have fallen. This also sets the stage for the US unilaterally to impose a NAFTA successor agreement on Canada and Mexico when negotiations fail.

Danny Lam is an analyst based in Canada. The opinions expressed are personal views and do not represent any organization the author may be affiliated with. At the time of publication, there are no known conflicts of interests unless expressly disclosed: The author does not hold a position in any securities mentioned at the time of publication, though this may change at any time after publication.

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