Latin America Advisor

A Daily Publication of The Dialogue

Will the TPP Win Approval in Ottawa and Washington?

Trade, including the Trans-Pacific Partnership, was high on the agenda when U.S. President Barack Obama and Canadian Prime Minister Justin Trudeau met at the White House on March 10. Both the United States and Canada were among the TPP’s signatories on Feb. 4, but the accord’s ratification by lawmakers in Washington and Ottawa remains uncertain. What is the outlook for the TPP’s ratification by Canada’s Liberal government and during a U.S. presidential election year? How have public perceptions of the benefits of trade agreements changed in recent years? How productive were the broader discussions on trade that Obama and Trudeau held during the Canadian prime minister’s visit?

Barbara J. McDougall, former Canadian secretary of state for external affairs: "Entering into the Trans-Pacific Partnership would be Canada’s most ambitious trade expansion ever. The scale of the combined economies—$28 trillion, spanning four continents—opens markets that now present impossibly high hurdles for the entry of most Canadian goods. Former Prime Minister Harper, when he signed the accord prior to last October’s election, was motivated by two factors, beyond the size of the market itself. The first was securing an enduring beachhead in Asia, particularly in Japan, beyond the free-trade agreement he had already signed with South Korea. The second was to continue to build on his modest start to further participation in the economic future of our own hemisphere. Prime Minister Trudeau has not yet endorsed the TPP by agreeing to bring it to Parliament for ratification. His trade minister is seeking further consultation with various interest groups before taking any additional steps, although the benefits of the agreement are widespread throughout the Canadian economy, and the negatives small by comparison. In addition, the prime minister’s new best friend, President Obama, wants the agreement to go through. Canada’s signature would be helpful to him, at least in a small way, as he faces the travails of congressional approval and the disavowal of the accord by presidential hopefuls, even in his own party. The Achilles heel of the TPP is further competition for high-wage North American industries from lower wage Asian countries, but with appropriate transition strategies, the future for our workers under the TPP would be bright."

Celeste Drake, trade and globalization policy specialist at the AFL-CIO: "The TPP has surprised many in the political class by its prominence as a presidential campaign issue. In response, many Washington insiders have gone to great pains in attempts to convince American voters that they’re better off now than they were before NAFTA and permanent normal trade relations with China. But 2016 just might be the year that voters demand that Washington add a healthy dose of economic reality to neoliberal economic theory. As The New York Times’ Eduardo Porter recently explained, angry voters do have a point. As U.S. workers’ productivity increased by 74.4 percent from 1973 to 2013, hourly compensation rose by only 9.2 percent. Nothing in the TPP is poised to change this stark discrepancy. Nor can TPP backers explain how the TPP will reverse the falling labor share of GDP that affects not just U.S. workers, but those in Mexico, Japan and other countries—or why the U.S.-Mexico wage gap has grown under NAFTA. While neoliberal trade rules that provide powerful property rights for pharmaceutical companies and foreign investors but only weak protections for ordinary workers are not the only contributors to growing inequality and weak demand, the TPP provides a powerful call to action for working families. Trudeau had no hand in negotiating the TPP, but he has not yet rejected its terms, even those that will certainly harm the Canadian auto industry. In the United States, the trade debate is likely to continue into the general election, and may well force us to face questions about why the TPP and similar deals are negotiated in the interests of corporations that use the United States as a flag of convenience instead of in the interests of the American economy writ large."

Pablo Heidrich, adjunct research professor at Carleton University: "The outlook is mostly negative for a Canadian ratification of the TPP. The government is currently conducting a series of public consultations, sort of theme-specific town-hall meetings, headed by the minister of international trade, Chrystia Freeland. In these open consultations, unions, public advocacy groups for consumers and environmentalists have so far carried the most weight with strong arguments as to how different clauses of the TPP affecting Canadian domestic regulations would further the interests of foreign corporations over local communities, workers or consumers. Even leading industrialists such as the founder of RIM (Blackberry) have come out strongly against patent rules of the TPP. Traditional business organizations have in contrast campaigned in favor, but not as strongly as one would expect if they were really trying to win a battle. Given the patter of Canadian politics, it seems the theater play is already being set up by government, opposition, civil society and businesses to refute the TPP and just move on. But that process will be long and thorough to produce the impression that everyone’s voices were heard and all relevant arguments considered. Nonetheless, the conclusion already seems determined. Public perceptions of NAFTA were originally very negative in the 1990s, but as Canada’s fortune inside the agreement went well up to the late 2000s, opinion turned to a mild positive. On that pro-free trade evolution, Liberal and then Conservative Canadian governments pursued an aggressive policy of signing other bilateral free-trade treaties mostly with Latin American countries, the European Free Trade Association, South Korea and the European Union. The higher complexity of the latter agreements and the deterioration of public opinion about free trade in Canada since the Great Recession of 2008-2009 eventually stunted government ambitions on further trade liberalization. Continued sluggish growth in the 2010s and overvaluation of the Canadian currency until 2014 also impeded much enthusiasm for trade liberalization. Obama and Trudeau are natural partners in ideological terms. But current bilateral trade issues, such as different positions on TPP and the soft-lumber trade dispute, are obstacles in their wider political relationship."

The Latin America Advisor features Q&A from leaders in politics, economics, and finance every business day. It is available to members of the Dialogue's Corporate Program and others by subscription.