The prime minister’s recent visit to India and the Philippines has drawn attention once again to the government’s new focus on trade and business ties with this dynamic region. Negotiations with two main partners in Northeast Asia illustrate both the promise and the disappointments that may await Canada’s negotiators.
On a promising note, Canada and Japan will sit down in Tokyo this week for the opening round of talks on an Economic Partnership Agreement (EPA). This broad type of agreement is one of several that Japan is working on, or has completed already, arising from its 2010 decision to move aggressively toward bilateral agreements and away from its traditional reliance on WTO negotiations as its preferred way of liberalizing trade with major trading partners.
A bilateral arrangement with Japan, which we have been pursuing on and off for a decade, makes a great deal of sense for Canada. Japan has long been one of Canada’s key economic and trade partners, and although China has surpassed it as an Asian export market, Japan is still our fourth largest destination by country for merchandise exports — mainly commodities but also industrial and high tech goods.
It is also a growing services market. And Japan has been a major and welcome source of foreign investment in Canada, from resources to automotive manufacturing.
With economic weaknesses at home, Japanese companies continue to expand aggressively as major investors, manufacturers and service-providers in China and other Asian countries. An EPA with Japan will thus enhance access for Canadian businesses to the region’s dynamic value chains through Japanese channels.
A Canada-Japan joint study released earlier this year estimates GDP gains of at least $3.1 billion for Canada from such an EPA, and forecasts our exports to Japan will grow by 67 per cent. Benefits for Japan also will be significant.
This deal should be relatively easy to do. We have many complementary economic interests, and each nation has a long-range positive vision of what the other means to its future. Agricultural access to Japan will be a difficult matter, but the agriculture lobby’s stranglehold on Japanese politics is not what it once was. In Canada, we will have to be prepared to open our market more fully to Japanese automotive products.
Japan is a country which appreciates its friends and is ready to make accommodations to ensure long-term benefits and dependability of supply. It seeks stability and trust in its friendships. If anything, recognition in Japan of its changing place in the global economy, its internal economic and energy challenges, plus the sobering realities of last year’s earthquake and tsunami, should have strengthened this sentiment. Given a positive Canadian attitude, the setting should be conducive to the kinds of “win-win” outcomes that are necessary to make any trade negotiation successful.
Contrast this picture of optimism to the current state of our stalled trade negotiations with Korea. Begun in 2005 amid great expectations, what should have been a natural agreement between largely complementary economies has become bogged down on the same two main issues we face with Japan: Canadian access for Korean automotive products, and Korean access for Canadian agricultural goods going the other way.
Has the Korean government lost its interest in finishing this deal? It is now moving on to negotiate an agreement with China, the big prize for Seoul, with Japan joining in for a possible trilateral arrangement. Korea has agreements now in place with the U.S. and the EU. Who needs Canada?
Canada is still interested in an agreement, but if we do not have a dance partner, we’ll have to move on to other negotiations, particularly with Japan. We also have just joined the Trans-Pacific Partnership negotiations (Korea is not there). And Canada still needs to decide whether to pick up the Chinese invitation extended earlier this year to the prime minister to negotiate an agreement with Beijing.
If the Korea/Canada trade and economic negotiation is not brought to an early conclusion, it will be a major opportunity lost, probably beyond recall. This would be unfortunate given all there is to gain for both sides.
Failure to conclude such an agreement also will undermine prospects for a broader strategic relationship between our two countries extending well beyond bilateral trade and investment.
Canada and Korea have much in common — in the size of our economies (Canada is ranked as 11th and Korea as 15th), the shape of our democratic political systems and our outlooks on international economic and security matters. We worked together in hosting back-to-back G20 summits in 2010. We also share a common interest in promoting a peaceful and stable security environment in Asia. Even the Arctic could be a place for cooperation given Korea’s expressed interest in observer status on the Arctic Council.
In 2013 we will be celebrating the 50th anniversary of our diplomatic relationship. Both governments are planning events to draw attention to what we’ve achieved together and look to the future. It would be sad indeed if this anniversary year began with a failure to put our future economic relationship on a solid footing of mutual advantage.
In the meantime, and despite similarities with the Canada/Korea negotiation, Japan is waiting for us to engage. Let’s hope the promise this time is rewarded with an early agreement. Given the broad approach each side is bringing to the table, the prospects look good.