The emperor has no clothes.
This is the conclusion of trade expert Peter Clark and his colleagues at Grey, Clark, Shih & Associates in Ottawa after examining the Trans Pacific Partnership and the outlandish claims being made for its importance.
The proposed trade agreement, which would embrace 11 countries, including the U.S., Mexico, Australia, Vietnam, Chile, New Zealand, Peru and Malaysia, as well as Canada, is being hailed as a “gold standard” trade deal, a “21st century” trade agreement that would serve as the launch platform for a massive trade deal eventually embracing all of Asia, including China, and which would open massive new opportunities for Canadian exporters.
Clark and his colleagues have done Canadians a huge favour because the TPP negotiations are probably the most secretive trade negotiations in history.
The original TPP was launched in 2005 by four countries — New Zealand, Chile, Brunei and Singapore — but in 2008, the U.S. applied to join, as did four other countries.
In November 2011, Canada and Mexico applied as well.
But by this time the U.S. had seized control of the project and forced Canada and Mexico to go through extensive pre-negotiations, followed by Congressional negotiations and public submissions before Canada and Mexico were allowed to join, in October of this year.
What Canada had to agree to in these pre-negotiations is still a government secret.
In Clark’s view, the TPP negotiations have now become an attempt by the U.S. to remake “its trading partners in its own image,” pushing U.S. commercial interests and practices on other countries while shielding its own interests through a long list of exclusions.
For example, highly protectionist policies of the U.S. on cotton, sugar, beef, clothing and textiles and Buy American rules and set-asides for U.S. small-, minority-, aboriginal- and women’s-owned businesses in government procurement are excluded, as are policies pursued by U.S. states.
Yet at the same time, the U.S. is demanding sweeping changes from other countries, including trying to force other TPP countries to adopt U.S. rules on intellectual property, the Internet and investment, and state-owned enterprises, as well as measures employed by other countries to protect their cultural industries.
In addition to retaining Buy American provisions, the U.S. “is not proposing to discipline locational subsidies that steal Canadian jobs.
If Gov. Romney can say that China steals U.S. jobs, can we not say that Canadian jobs at Caterpillar, Electrolux and other Canadian factories were stolen with the help of U.S. state subsidies,” Clark asks. “The workers who have been displaced would not disagree.”
But state subsidies are off the table, the U.S. says, as are state-level policies on investors’ rights.
“Why did Hyundai and Kia locate in Georgia and Alabama? Because local governments contributed over $650 million towards the companies’ $3 billion investment in creating what was expected to be more than 5,000 jobs. Why consider Ontario,” Clark asks.
Likewise, “the State of Tennessee paid Electrolux $188 million to build a $190 million plant, which moved jobs from L’Assomption, Que., to Memphis. A sweet deal for Electrolux. How does Quebec compete with this?”
Effectively, “there is nothing in the TPP to discipline or limit domestic subsidies in the U.S. to agriculture and to manufacturing,” says Clark, yet Canada’s greatest competition for manufacturing investment in autos and other sectors in North America comes from the U.S. and Mexico (which also offers generous subsidies). This, as Clark points out, is not free trade or fair trade.
Clark’s overall conclusion is that the TPP will not do much for Canada. We already have trade agreements with many of the TPP members and the countries where we don’t have an agreement together account for just one per cent of Canada’s total trade.
Indeed, since Japan is not in, Canada “will likely be a net loser.”
So why is Canada so eager? One reason, as Clark says, is defensive, to be inside the tent and share new preferences rather than losing markets to preferences enjoyed by others.
But that is a weak argument.
Surely, there should be much more open discussion on what the TPP is all about.
Trade Minister Edward Fast should give Parliament, through its committee on international trade, a full — and honest — briefing on what Canada would really gain and what price we would have to pay in TPP negotiations — as well as the price we may already have paid to the U.S. just to be allowed into the negotiating room.
Economist David Crane is a syndicated Toronto Star columnist. He can be reached at crane@interlog.com.