When it comes to trade agreements, David Adams says it appears that Canada is trying to adopt two different approaches at the same time
For decades, the concept of “trade” in Canada meant relations with the U.S. (or in more recent times that with Mexico as well). On the surface, our orientation toward the U.S. is understandable given that even today, the U.S. is by far Canada’s largest trading partner. In 2013, there was almost $800 billion in bilateral trade between the two countries, or to put it in another context, $1 million in trade for every minute of every day.
According to Canada’s Department of Foreign Affairs, international trade and development trade between the two countries has also doubled since NAFTA was implemented.
Additionally, the department indicates that about 2.4 million Canadian jobs are dependent on trade with the U.S.
GREATER INTEGRATION
Over that same period of time, we’ve seen the economies of both countries become increasingly integrated. From a vehicle manufacturing perspective, components of cars and trucks are built in both countries while the finished product is also assembled and sold on both sides of the border. In fact it could be argued that the automotive sector piloted integrated North American manufacturing when it signed the Auto Pact in the 1960s.
Given the nature of Canada’s trading relationship with the U.S., it clearly makes sense to try and remove inefficiencies, streamline and standardize border processes, as well as address differences in standards and regulations between both nations to reduce cost and complexity.
This would help explain why the Regulatory Cooperation Council (RCC), established in 2011 by Prime Minister Stephen Harper and President Barack Obama as part of a “Shared Vision for Perimeter Security and Economic Competitiveness,” has been focusing on making “Regulatory cooperation a routine, ingrained practice between Canadian and U.S. regulatory authorities,” as well as building a “Framework of more institutionalized commitments by U.S. and Canadian regulators.”
Since 2011, however, a lot has changed in the world of international trade. Last year, Canada and the European Union negotiated a Comprehensive Economic and Trade Agreement (CETA) while earlier in 2014, Canada finally consummated a free trade agreement with South Korea following nine years of talks.
Additionally, Canada and Japan are hard at work trying to finalize negotiations on an Economic Partnership Agreement, plus there’s also Canada’s involvement in the Trans-Pacific Partnership (TPP) negotiations with the U.S., Japan and a further nine countries.
DIVERSIFICATION
At the federal government level, there has been an emphasis on diversifying our trade away from the U.S. and towards other key markets and emerging economies. This is what I see as a bit of a “dual personality” in Canada’s trade policy. On the one hand we are working hard at trying to negotiate and finalize other bilateral and regional trade agreements that will give Canadian businesses a competitive advantage over their American counterparts in export markets, while reducing Canada’s dependence on the U.S. At the same time, under the rubric of the RCC, we are attempting to go down a path where Canada and the U.S. will develop regulatory standards together, further integrating the economies of both countries.
One thing that needs to be understood clearly is that trade and trade agreements are not necessarily about reducing tariffs as much as they are about standards and regulations that have the effect of creating non-tariff barriers to trade.
In this context, perhaps the RCC needs to broaden its scope. For instance, the Canada EU CETA agreement also has provisions within it for regulatory cooperation.
Given that Canada is one of the only developed countries with preferential access to the world’s two largest economies, it would seem to make sense that Canada would try to capitalize on its preferential
position with both the U.S. and European Union (EU).
Therefore we should be trying to ensure — at least in the automotive sector — that standards and regulations be harmonized both with the U.S. and other trading partners such as the EU (which traditionally have been very different).
However, if the focus of regulatory cooperation remains only with the U.S., it seems evident that only American companies and their Canadian subsidiaries will be the chief beneficiaries of such efforts to align regulations and standards. Given its unique circumstances, Canada can, and should, be more ambitious in the areas of regulatory cooperation. Given what we’ve accomplished on the international trade front there’s no reason why we should settle for anything less.
