TRADE UPDATE: Happy Birthday, trade deal

by Christian Siviere
Christian Sivière runs Solimpex and is an international trade
consultant and lecturer.

The CPTPP or Comprehensive and Progressive Trans-Pacific Partnership, turns two on December 30, 2020. Signed in Santiago, Chile on March 8, 2018, this free trade agreement includes 11 countries.

It came into effect for six of them – Australia, Canada, Japan, Mexico, New Zealand and Singapore – on December 30, 2018, following their internal ratification processes. Vietnam ratified it two weeks later, becoming the seventh CPTPP member country on January 15, 2019.

The remaining four countries, Brunei, Chile, Malaysia and Peru have not yet ratified the agreement. Brunei is a tiny market, and we already have separate Free Trade Agreements with Chile and Peru, so Malaysia will be the really interesting addition, when it comes on board.

After an FTA is agreed upon and signed, it often takes time to implement it, as it needs to be ratified in each country, following internal legislative processes. But the CPTPP has provisions that enabled it to be in effect in the countries that ratified it, as soon as six of them did so, hence the partial implementation date of December 30, 2018.

Diversification is crucial for our exporters.

The CPTPP eliminated customs duties or tariffs on most products immediately, opening great opportunities for Canadian businesses. Manufacturers and importers can source competitive raw materials, components, parts and finished products from that region. And exporters gain access to a huge new market, helping diversify our exports.

As the U.S. absorbs about 75 percent of our exports year after year, diversification is crucial for our exporters, so that we depend less on our next-door neighbours. In addition to tariff elimination or reduction on goods, the CPTPP created opportunities in services and public procurement.

Trade with Australia grew the most.

However, these provisions are not uniform and vary from country to country. In fact, this FTA stands apart from our other FTAs in that many of its provisions are country-specific. And there are also side agreements between countries on specific industries like agriculture, food, automobiles, etc.

Since the agreement came into force in December 2018/January 2019, let’s look at how Canada’s import and export trade with these six countries evolved between 2018 and 2019. We will not look at the 2020 trade figures, since the year is not complete and trade stalled for a good part of the year due to the pandemic.

As can be seen from the tables, our exports – except to Australia and Singapore – did not grow in the first year. On the import side, Vietnam seems to have benefitted the most, with electronics and textiles leading in commodities. Our trade with Australia, although relatively modest, grew in both directions, which is healthy. Our principal export there is in the machinery category and our main imports from Australia are uranium and aluminum oxide.

It is probably too early to draw conclusions, as the true impact of a Free Trade Agreement has to be examined over time. However, it looks like more promotion is needed to encourage Canadian businesses to look beyond North America for growth, and in particular to look West, where opportunities created by the CPTPP are tangible. This Free Trade Agreement, together with CETA, our FTA with the European Union, and CUSMA, our revamped NAFTA with the United States and Mexico, are ideal tools for our exporters to grow their markets and benefit from post-pandemic trade recovery.