Are Grand Trade Pacts Doomed or Merely Mistimed?

Published in the Embassy newspaper:

By delaying its judgment on the TPP, the new Liberal government could avoid unnecessary criticism and drama at home.

Prime Minister Justin Trudeau in St. Andrews By-The-Sea, New Brunswick, Jan. 18. (LPC photo)

The dream of a Free Trade Area of the Americas fizzled in 2005, as did the OECD’s Multilateral Agreement on Investment before it. The WTO’s Doha Development Agenda, initiated in 2001, has been stalled since 2011, as have other continent-wide initiatives.

With these setbacks, countries turned their attention to more modest undertakings. Literally hundreds of bilateral and regional trade pacts have been signed and ratified throughout the world, as well as foreign investment promotion and protection agreements. 

Besides WTO accords, Canada itself adheres to 12 bilateral and regional free trade agreements, including NAFTA, and over two-dozen FIPAs (an accord with Ukraine is awaiting ratification). Furthermore, separate bilateral trade negotiations are presently underway between Canada and Japan, India and five other countries, and exploratory discussions are being held with South America’s MERCOSUR, Turkey, the Philippines and Thailand, according to Global Affairs Canada’s own website, with China next in line. Another two dozen bilateral FIPAs are at different stages of completion.

Given these numerous yet limited successes in terms of countries, and each agreement’s unique set of industrial sectors and provisions covering trade barriers, labour mobility, intellectual property, and/or investment—a regulatory nightmare—continued attempts to negotiate new, larger trade deals was inevitable. 

Enter three of the largest trade pacts ever attempted outside the WTO: the United States-European Union Transatlantic Trade and Investment Partnership presently being negotiated, the Canada-European Union Comprehensive Economic and Trade Agreement concluded in 2014, and the Trans-Pacific Partnership trade pact clinched on Oct. 5, 2015.

All three will need to be ratified by their required parliaments before becoming law, which is far from certain given mounting resistance and instability. 

Driven by national governments, large corporations and their supporters, the agreements are opposed by a growing number of credible centrists, political candidates and parties left and right of the mainstream, civil society organizations, and the voting public. 

In Europe, opposition is coming first and foremost from anti-establishment political parties that have made substantial electoral gains, benefiting from dismay if not anger at incumbents inability to solve problems related to employment, income, immigration, inequality and debt. They are joined by intellectuals, CSOs, trade unions, and nationalists who have always been opposed to, and distrustful of, the neoliberal trade agenda. 

In the US, similar frustrations in the rank and file of both the Democratic and Republican parties have led to statements of opposition to the TPP in particular, by all the presidential candidates polling in double digits this primary season, save for Marco Rubio who is “now reconsidering” his support of the deal. Whether such disapproval is maintained after the presidential nominations have been secured, or the election won, remains to be seen.

The trade pacts detractors in Canada have not been nearly as vocal lately for two main reasons. Firstly, the previous Conservative government, who negotiated the deals, offered billions of dollars in compensation to the auto, dairy, fish-processing and other affected industries. Secondly, the Liberal Party of Canada never came out officially for or against either CETA or TPP before or after the Oct. 19 general election, committing instead to a thorough review process of both. 

While Prime Minister Justin Trudeau is an avowed free trader, resistance in Canada from multiple sectors and potential rejection of the transpacific and transatlantic accords by the Europeans or Americans make it nearly impossible for the Liberals to endorse or reject the treaties before they do.

If the European Parliament eventually ratifies the less contentious CETA, or appears it will, then it is likely the federal government will sign on as well. 

The Pacific Rim treaty is another matter since it is conditional on a minimum of six signatories, including the Americans and Japanese, ratifying the 12-nation TPP to come into effect. The Liberals may very well prefer to delay any decision until the US Congress and Japanese Diet vote on the TPP agreement, whether or not they plan to endorse the treaty. 

Canada’s decision will have little sway on the US and Japan should it try to lead on this issue. By delaying its judgment, the new Liberal government would avoid any unnecessary criticism and drama at home should it accept it, and the TPP later fail to gain the minimum requirements to come into force. 

If, on the contrary, Canada concluded it would be best to reject TPP in its present form, postponing such an announcement would avoid any blame for the pacts demise, should it occur.

Periods of economic and political uncertainty such as the present one are unconducive to trade liberalization and openness. Isolationism and protectionism may be harder to avoid than in 2008-2009. As it stands, avoiding another financial and economic meltdown, improving global governance, and reducing systemic risk are higher priorities. They also have a far greater chance of success in the short term than the grand trade pacts being proposed and opposed.

Robert M. David teaches at the School of International Development and Global Studies, University of Ottawa, and was a federal Liberal candidate in 2009 and 2011.