The first point to understand is that the TPP is by no means “a done deal.” It has to be ratified by the Canadian Parliament and we have at the moment no way of knowing which political party will be form the next government or whether majority support for the new agreement will be easily found. The TPP also has to be ratified within the next two years by all other 11 countries it covers and that ratification may face an uphill battle in several of them. This is likely to be especially the case in the United States where a fractious Republican Party seems determined to block any initiative that comes from a Democratic President. Even if the necessary ratifications are obtained, a number of the provisions of the TPP – from what little we know about them – will only take full effect over quite a period of years. Indeed, Dan Ciuriak, a former deputy chief economist in Canada’s trade department, estimated that the TPP will boost Canada’s economy by 0.1% of Gross Domestic Product (GDP), as compared to a loss of 0.5% of GDP if we had stayed out of the agreement. These are hardly massive swings in either direction.
Canada is no stranger to free trade agreements
The second point to bear in mind is that Canada has long been involved in trade agreements, beginning way back with the Commonwealth preference treaties with Britain. Since 1948 it has been a member of the General Agreement on Tariffs and Trade (GATT), now known as the World Trade Organization. In 1965, Canada entered into an Auto Pact agreement with the United States and in 1998 it signed a Free Trade Agreement with the U.S. This was followed by an agreement between Canada, the U.S. and Mexico (the North American Free Trade Agreement or NAFTA), creating the largest trading area in the world at that time, representing nearly 30% of the global economy. The new TPP covers 12 countries with over 800 million people and represents about 40% of the global economy. Canada is also part of the yet to be approved Comprehensive Economic and Trade Agreement (CETA) with the European Union and involving 29 countries.
The primary rationale for a country entering into a free trade agreement has always been to gain access to the larger market represented by the populations of the other countries that form part of any such agreement. As the number of such agreements has increased, concerns are raised that countries that fail to sign on will find themselves “on the outside,” with more limited access to these larger markets. In the case of the TPP, Canada clearly did not want to be left behind if the United States was going to become part of a new trading agreement including Japan and other increasingly important Asian economies.
More than free trade is covered by these agreements
I have no problem with the general concept of expanding our trading opportunities. My concern arises from the fact that the various free trade agreements are not so much about rules governing free trade as a bill of rights for multi-national corporations. (The discussion in this section is based on my text A Citizen's Guide to Government, Chapter 10.) A very good (bad) example is found in the Chapter 11 provisions of NAFTA which give companies the right to sue governments for compensation under a very broadly defined category of expropriation – one that essentially extends to any government action that might deprive the company of immediate or even future loss of profits. For example, when the Canadian government attempted to ban the gasoline additive MMT, a product that allegedly posed a significant health hazard, the manufacturer (Ethyl Corporation of the USA), launched a $251 million dollar lawsuit against the government, claiming that it had expropriated future profits by this ban. The federal government retreated and withdrew the ban.
Even greater concerns arise in connection with the actions of the World Trade Organization (WTO), which has almost 150 member countries, accounting for 90% of world trade. Trade agreements under the WTO range far beyond rules governing the movement of raw materials and goods across borders. They extend to investment measures, trade related intellectual property rights (TRIPS), every type of domestic regulation, and services. The main focus of the WTO appears to be establishing detailed rules that prohibit a wide array of government regulations that might interfere with the actions of large corporations. Some of these prohibitions relate to regulations or programs that might only indirectly influence trade, such as recycling regulations, energy efficiency standards, or banning toxic substances.
All of these WTO rules, coupled with a very strict enforcement regime, can make it very difficult for a national government to take actions deemed necessary or desirable for its residents. A study of the 167 contested trade issues brought to the WTO as of March 1999 found that in every case in which an environmental, health, or food safety law was challenged, these laws were declared illegal barriers to trade.
The TPP will impose further international constraints on our decision making
There is no doubt that the TPP will include provisions for resolving disputes between member counties and also provisions that allow private companies to challenge government decisions. Here again, we don’t yet know the details, but apparently the dispute resolution provisions in the TPP are similar to those in NAFTA. This is not at all reassuring for those who prefer to see a national government free to take action on behalf of its citizens without fear of legal action from multi-national corporations that claim such actions infringe upon their right to make profits. Since Stephen Harper is devoted to reducing the role of the federal government and constraining its ability to undertake new initiatives, restrictions imposed by a free trade agreement may not trouble him at all, but they should bother the rest of us.
Premature to draw conclusions about the TPP
In summary, at this point it is premature to evaluate the positive and negative aspects of the new TPP, especially since almost all details about the new trade agreement were kept secret until the necessary signatures were obtained in early October. Given the extremely important nature of an agreement such as this, it is unfortunate – and arguably inappropriate – that Canada’s commitment to it was given by a governing party in the final two weeks of a federal election campaign. But it was also probably unavoidable unless Canada was to step aside and let the other 11 countries proceed without it.
There can be no doubt that the Conservatives were very anxious to have this agreement approved so that they could use it to promote their claim to be wise managers of the economy. It is far too soon, however, to know the real impact of the TPP. It seems beyond dispute that the dairy and auto sectors will be adversely affected, since the government has already announced plans to provide them with financial support. But job losses in these sectors may be offset by new jobs created through expanded exports to the additional markets opened by the TPP. Whatever its ultimate impact on the Canadian economy, I am more concerned about the impact the TPP will have on the autonomy of our national government. In our preoccupation with ever more free trade agreements we seem far too willing to cede authority over decisions by our national government to a series of international dispute resolution tribunals.