The Trudeau government wants a new trade pact with Southeast Asia. It won't be easy26/11/2021 10
In search of an Asia-Pacific strategy that doesn't rely on China, the Trudeau government has revived its push toward preferential trade with the 10 countries of the Association of Southeast Asian Nations (ASEAN).
Landing a deal that isn't off-brand with the Liberal "progressive" trade agenda won't be easy. This club includes several countries not so much embraced by Canada as barge-poled for their human rights records.
Nevertheless, when the House of Commons returns this week, International Trade Minister Mary Ng will table the government's notice of intent to reach a trade agreement. It's part of the more "transparent" approach to international treaty negotiations Liberals agreed to in the last Parliament after Opposition MPs complained about rushing through bills implementing deals they couldn't fully review.
If you're reading this and wondering what an "ASEAN" is, you're not alone.
Prime Minister Justin Trudeau may be aware his government is about to spend its political capital negotiating with a bloc unfamiliar to many.
Canada, Asian bloc to begin free trade talks in effort to diversify from China
Taking audience questions about his foreign policy strategy at the Wilson Center in Washingon, D.C. Wednesday, Trudeau asked Ng to explain what was agreed to at her virtual summit with ASEAN leaders the night before — but then seemed to realize there could be people listening who couldn't list its members, let alone grasp its significance.
"It's going beyond just, you know, Japan and South Korea," Trudeau said, citing four ASEAN members — Indonesia, Singapore, Malaysia and the Philippines — "for people who are following along at home."
The other six ASEAN members are Brunei, Cambodia, Lao People's Democratic Republic, Myanmar, Thailand and Vietnam.
Trudeau, his ministers and diplomats are trying to formulate and articulate a coherent strategy that counters China's influence in the Asia-Pacific. Closer trade ties with ASEAN, a market of 600 million people, could help.
But building political influence in this region has been complicated.
Getting to the table, 3 years later
The times seemed simpler when Trudeau attended the ASEAN summit in Singapore in 2018 as a "dialogue partner" and suggested negotiations could start the following spring.
Back then, Canada had a reputation to repair with Pacific Rim partners like Japan and Australia after the bumpy ride to ratification of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) without the U.S.
Simultaneously, Canada was scoping out a trade negotiation with China itself — an idea that's now thoroughly on the back burner.
Huawei executive Meng Wanzhou hadn't been arrested in Vancouver yet. Canadians Michael Kovrig and Michael Spavor were still free and living their lives in China.
Things have changed, to say the least. But Canada's interest in an ASEAN trade pact persists.
"Deepening our ties with ASEAN economies and diversifying trade across the Asia-Pacific will play a crucial role in our recovery," Trudeau said in a videotaped speech to ASEAN representatives last month, re-pitching the notion of a "win-win" deal "for all of our businesses and all of our people."
Canada already has preferential trading terms with Singapore and the hot Vietnam market under the CPTPP. (The other two ASEAN members who are CPTPP signatories, Brunei and Malaysia, have yet to ratify the deal.)
To isolate potential net gains from an ASEAN deal, the other six economies are key.
Canada agreed to bilateral talks toward an "economic partnership agreement" with Indonesia last June, suggesting it's eyeing the potential of that market of over 270 million people in more than one way.
It's not clear whether the modelling and public consultations prepared ahead of Trudeau's 2018 push still hold, but they provide at least some historic insight into Canada's rationale.
Canada's Office of the Chief Economist predicted growth. But the projected gains for Canada's GDP were small fractions of one per cent.
Meredith Lilly, who served as a trade adviser to former Conservative prime minister Stephen Harper, agrees the economic impact of an ASEAN deal would be "likely quite marginal" for Canada.
"This is about a bigger geopolitical message, versus a trade message," she said.
That's not to say there aren't specific (and politically significant) sectors that stand to gain.
Who wants this?
Canadian negotiators rarely disclose their offensive and defensive goals — what they hope to gain and what they hope to protect — except in private consultations with priority stakeholders.
But most talks with Canada rise or fall on resource exports, and ASEAN countries are hungry for those.
Even without a trade deal, Canadian agri-food exports to the bloc — including wheat, soybeans, pork, canola oil, potatoes, seafood and animal feeds — have risen exponentially over the last two decades.
Across ASEAN countries, growing populations, rising urbanization and an increase in middle class consumers boost the demand for high-value farm commodities.
But Canada's export-oriented agriculture sectors face a price disadvantage in this region, as well as a geographic one.
Some of its top agri-food competitors already have deals with ASEAN to cut their tariffs: China, India, Japan, South Korea, Australia and New Zealand.
Negotiators will set out to level this playing field for Canada. But 21st-century trade negotiations do more than cut tariffs on goods.
In a 2020 report, the Canada-ASEAN Business Council identified labour mobility — the difficulty of getting visas for each other's businesspeople — as a key barrier to economic recovery on both sides.
In an interview with CBC News this week, Ng said the opportunities for Canada in digital services are growing.
"Businesses have talked to me and our government about how important it is to be able to access those particular markets, but also to be able to attract investments into Canada from the ASEAN as well, as we build our economy," she said.
The massive size of this market is attractive, but here's the rub: ASEAN has never agreed to a trade deal with labour or environmental standards.
Doing a deal without "progressive" elements would be seriously off-brand for these Liberals.
Raising ASEAN's standards
"Canada's free trade agreements are high-standard agreements," Ng said this week. "They have provisions around labour, they have provisions around the environment, they have provisions that provide greater access to small- and medium-sized enterprises."
(That's opposed to, say, the large corporate interests populist critics accuse global trade negotiations of favouring. Although the words in her ministerial title keep flipping around, Ng likes to remind people she's the minister for small business as well.)
Part of the reason starting these talks took so long, she said, was that Canada made sure it was proceeding in a way that would pursue high standards to the benefit of both partners.
If Canadian negotiators succeed, it will be ASEAN's highest-standard agreement to date.
Other partners that share "progressive" trade goals, like the European Union, have tried but have found it hard to make progress.
For example, the European Parliament banned the use of palm oil in biofuels over concerns that it incentivizes deforestation. Malaysia, which along with Indonesia produces most of the world's supply, considers that ban discriminatory, protectionist and a form of "crop apartheid" that hurts its small farmers.
So how will Canada approach palm oil in its ASEAN talks, particularly after the deforestation agreement it signed onto at COP26?
Would it suffice for Canada to require palm oil imports be certified as sustainable? Negotiators will have to reconcile sensitive issues like this.
And progressives have other reasons to feel uncomfortable about ASEAN partners.
'Capacity building' or compromised?
Earlier this month, UN investigators reported evidence that Myanmar's military rulers committed crimes against humanity against its ethnic Rohingya population.
The UN's Office of the High Commissioner for Human Rights is also highly critical of the human rights situation in the Philippines, where critics of President Rodrigo Duterte have been threatened, attacked and killed.
In the Papua and West Papua regions of Indonesia, human rights groups like Amnesty International report unlawful killings and other serious violations by security forces, as well as violations across Indonesia of the rights of women and LGBT people.
"Capacity building" with things like chapters on gender, labour and environment standards will be one of Canada's goals in the ASEAN negotiation, Ng said, adding the talks will be "guided by what is important to Canadians."
Trudeau is fond of reminding potential trading partners of Canada's progressive reputation. If Canada's too willing to open its market to human rights abusers, it might jeopardize that reputation.
Negotiating leverage in doubt
Carlo Dade, the director of the trade and investment centre at the Canada West Foundation, said the Trudeau government has to demonstrate progress on its Asia-Pacific strategy.
But doing a "progressive" agreement with Myanmar? That risks Canada being hoisted with its own petard, Dade said.
"It makes no sense, and it undercuts the importance of the CPTPP," he said. "Canada's reputation is still in the doghouse."
Rather than encouraging ASEAN countries to join the CPTPP — a high-standards agreement that's already in force to counter Chinese influence in the Pacific Rim — Canada's proposing a second set of regulations and tariff schedules, adding more paperwork and bureaucracy for businesses, he said.
Lilly agrees that Canada should promote the agreement it already has — not compete with it.
If another ASEAN country were to seek entry to the CPTPP, its 11 signatories have a lot of leverage to insist on high standards.
If a country doesn't want to meet those standards, Canada should ask itself if it really wants a partner that lacks that ambition, Lilly said.
In Canada's new talks with ASEAN, the negotiating dynamic will be one country against ten.
"It's hard to negotiate bilaterally with ten countries," she said. "You're the odd one out."
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