Achi news desk-
Port of Vancouver on July 20, 2023.CHRIS HELGREN/Reuters
Paul Jenkins is a senior fellow at the CD Howe Foundation and a former senior deputy governor of the Bank of Canada, while Mark Kruger holds a senior fellow at the Yicai Research Institute, the Center for International Governance Innovation and the University of Alberta’s China Institute.
The global economy has become fragmented, and an important cause has been the inability of international trade institutions and financial governance to adapt to changing realities. However, Canada has a unique opportunity to help repair today’s global trading system.
This year, the country chairs the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Commission. The CPTPP is a free trade agreement between Canada and 10 other countries in the Indo-Pacific (Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam).
The commission’s role includes considering new applicants and setting the standards they must meet. As chair, Canada can help move the global economy back along a path toward a more open, rules-based trading system.
Efforts to renew existing global institutions to better reflect current economic realities are important. They are key to promoting the benefits of trade and investment among economies. Fostering new institutions like the CPTPP and promoting wide access to it are effective ways to counter the global economic fragmentation caused by the rapid increase in tariffs, restrictions and beggar-thy-neighbour policies in the last few years.
A “next generation” trade agreement, the CPTPP takes WTO rules a step further in key areas such as electronic commerce, intellectual property and state-owned enterprises, and expanding it would help strengthen rules global trade, deepening economic cooperation on trading and maintaining an open global trading system.
The benefits for Canada in particular are further diversification in the export market and increased connections to rapidly expanding markets in the Indo-Pacific region. Furthermore, helping the global economy today is a key opportunity that will carry over when Canada hosts the G7 summit in 2025.
Bottom line: Expanding the CPTPP offers the potential to greatly strengthen global governance and address common economic challenges for members and the global economy, while expanding Canadian markets.
Notably, half a dozen countries have applied to join the CPTPP. One of them is China, whose entry would boost global GDP by $600-billion annually, representing an increase in global income of more than 0.5 percent.
However, there is a catch. The challenge for Canada and subsequent chairmen of the commission is to ensure that China agrees to meet the high standards that members have upheld so far.
This high bar includes member countries eliminating or significantly reducing tariffs and other trade barriers; strong commitments to open up their markets; adhere to strict rules and protect foreign companies; and operate within, as well as help promote, a comprehensive, predictable framework in digital trade flows.
For acceptance, China would need to demonstrate that a socialist market economy can be consistent with fair trade. The applications of China and Taiwan are also a particularly challenging area to navigate, but not an insurmountable one given that they are both members of other organizations such as APEC.
If the US also joined the CPTPP, it would benefit from favorable access to the growing markets of the Pacific Rim, especially China’s services sector. But he would need to step back far from his current commercial mindset, which is in danger of getting worse. Therefore, it is better to consider the joining of China and the United States as long-term goals.
One of the most important goals for the Canadian chairmanship should be to clarify the admission rules, which would be a big step forward in maintaining the expansion of the CPTPP.
Canada should help promote and accelerate the inclusion of Costa Rica, Uruguay, Ecuador, and Ukraine, all of which have applied to the CPTPP. And it should help move talks forward with South Korea, Indonesia, the Philippines and Thailand, countries that have all expressed an interest in joining.
In short, as chair, Canada should promote discussion and understanding of the long-term goal of broad access to the CPTPP.
Open and inclusive institutions are central to ensuring that all economies can benefit from global economic integration, and the CPTPP is a milestone on the way forward.
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