Canada’s Asian Trade Strategy & the Trans-Pacific Partnership

By Thomas H. Au, Staff Writer

Critics concerned that key Canadian interests in intellectual property, pharmaceuticals and agriculture were impaired by ‘sitting out’ of Round 14 of the Trans-Pacific Partnership (TPP) are focused on a relatively insignificant scene within a much larger mural. Rather, the issue is whether the TPP compliments other Canada trade agreements, or if it conflicts with the function and purpose of other bilateral agreements. Only then can we determine whether the TPP is part of a cohesive, beneficial trade strategy in Asia, or a fractured approach that will create confusion for Canadian businesses operating overseas.

First, this piece outlines the calls for a more aggressive Canadian trade strategy in Asia. Second, it discusses the implications of Canada’s lacking a true seat at the TPP negotiating table in Round 14. Third, it addresses other potential bilateral trade agreements with China and Japan. It concludes that the TPP functions as a baseline to expand trade, upon which other more specific trade agreements can be built, such as those with Japan or China.

Calling for a More Aggressive Asian Trade Strategy

In the last six months, there have been increasing calls for Prime Minister Harper to adopt a more aggressive Canadian trade strategy in Asia.[i] The underlying impetus appears to be a perception that “Canada must negotiate solid, ambitious trade agreements...to help replace declining trade with the USA.”[ii] However, individual initiatives, including the TPP and bilateral trade agreements with China and Japan have received harsh criticism from political opponents[iii] and interest groups.[iv] These mixed messages create a challenging political environment where leaders can be faced with what appears to a “no-win” situation in domestic Canadian politics.

Looking Back at TPP Round 14 and Forward to TPP Round 15

Initially, Canada’s so-called “absence” raised the important question of whether it will “lose” by sitting out Round.[v] At the heart of this issue is Canada’s agreement to abide by the texts that have already been negotiated and agreed upon by the nine current TPP members.[vi] However, this absence has not harmed Canadian interests on key issues including intellectual property, pharmaceuticals, and agriculture.

Canada’s “absence” is simply explained by the fact that each negotiating country must first ratify Canada’s participation through their own internal, domestic processes. This process was only completed on October 9, 2012.[vii] Now that Canada has formally joined negotiations, the key is to look forward towards Canadian goals and aspirations for what the TPP should look like in the end.

TPP: A “High Standard” Trade Agreement In Canada’s Interests? 

Some Canadians have raised concerns that not only is the TPP mostly beneficial to the U.S., but that the TPP is redundant in light of other Canadian trade agreements.

First, many consider the U.S. to be the driving force behind the TPP’s most restrictive obligations.[viii] Of the nine countries currently negotiating the TPP, the United States has some of the ‘highest’ levels of regulation across a number of economic sectors. Likewise, the United States is well known for viewing the TPP as a vehicle for a “state-of-the-art” or “high standard” trade agreement.[ix] While not confirmable, the inference that could be drawn is that the United States may attempt to use the TPP either to develop unique “high standards” (think not of NAFTA-2, but more likely something akin to a next generation Paris[x] or Berne Convention[xi] or to conform the rights and obligations available in other nations with those available under existing U.S. law. This has created political friction in Canada. Critics are concerned that participating in a “high standard” agreement means radical changes in Canadian policies, ranging from “drugs [pharmaceuticals], copyright, [to] environmental and public health rules.”[xii]

Second, some dispute that the TPP actually adds any benefit that Canada does not already receive through NAFTA or other bilateral trade agreements (consider Chile and Peru).[xiii] Simply, NAFTA already includes the United States and Mexico, which “make up the lion’s share of the TPP” in terms of market size and trading power.[xiv] This leads to a legitimate question: “How much more free access can yet another [multilateral] free trade agreement provide?[xv]

While the draft texts of the TPP are not public, official statements from the United States do not suggest that any extensive agreements were reached on the issues most pressing for Canadians. For instance, the United States Trade Representative’s press release on the Leesburg Round noted “progress” on issues including market access, customs, rules of origin, technical barriers to trade, sanitary and phytosanitary standards, cross border services, telecommunications and government procurement.[xvi] However, the release only reported a “continued focus” on intellectual property issues.[xvii]

If more extensive agreements had been reached on intellectual property rights, it is likely that these issues would have been listed in the first “progress” or “mov[ing] forward” statements. This suggests that no major agreements were reached regarding intellectual property rights. On the other hand, it is not clear from this statement what types of agreements where reached regarding key Canadian agricultural products, such as dairy, grain, and (loosely defined) lumber. Again, while pharmaceuticals were not directly mentioned, it is unlikely that any significant progress was made on these issues. However, pharmaceutical issues are frequently addressed as a component of intellectual property rights, or even investment or manufacturing (depending on how one wishes to address these issues). This should relieve Canadian concerns, indicating that Canada still has time to make its positions clear and exert significant influence over the outcome of the TPP.

TPP Negotiations: Multilateral, Bilateral, or Other? 

On September 24, 2012, the Office of the USTR held a hearing regarding Canada’s entry into TPP negotiations.[xviii] While seen as a forum for discussing specific interests and objectives,[xix] what is peculiar about the hearing is the official silence from the Canadian government. In fact--during, immediately prior to, and immediately after the 14th Round (as well as the USTR’s public hearing on Canada’s entry into the TPP), there were no official news releases on the subject from Prime Minister Stephen Harper, Foreign Affairs and International Trade Canada (Canadian Ministry), or the Embassy of Canada in Washington, D.C. One would think that participation or comment on these proceedings would give Canada the opportunity to publically advocate for its most important values (for both domestic and international audiences) as well as exert pressure just before Round 15.

In fact, on the eve of Canada’s official joining to the TPP, Ed Fast, the Canadian Minister of International Trade and Minister for the Asia-Pacific Gateway only released a short statement, remarking that “[o]pening new markets and increasing Canadian exports to fast-growing markets throughout the Asia-Pacific region is a key part of our government’s plan to create jobs, growth and long-term prosperity.”[xx]

Canadian Bilateral Trade Agreements with China and Japan 

In Canada’s view, Japan and China are two markets that have remained largely untapped. In 2011, the Canadian-Chinese trade relationship was valued at approximately $46.8 to $65.6 billion USD.[xxi] Similarly, a joint study concluded that a bilateral free trade agreement between Canada and Japan could add $4.4 to $4.9 billion to Japan’s GDP and $3.8 to $9.0 billion to Canada’s GDP.[xxii] While Canada has had a tepid response to Chinese calls to begin a bilateral trade negotiation,[xxiii] Canada and Japan have announced that their first round of negotiations in support of a bilateral trade agreement will commence on Nov. 26, 2012.[xxiv]

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[i]Don Campbell, Paul Evans & Pierre Lortie, A Coherent Strategy Towards Asia Needed (Sept. 12, 2012), http://www.asiapacific.ca/editorials/canada-asia-viewpoints/editorials/coherent-canadian-strategy-towards-asia-needed.

[ii] Peter Clark, TPP Negotiations Present Far More Questions Than Answer, iPolitics (Oct. 12, 2012) http://www.ipolitics.ca/2012/10/12/peter-clark-tpp-negotiations-present-far-more-questions-than-answers/.

[iii] CTVNews Video, Opposition Grills Harper Over China-Canada Trade Deal,

http://www.theglobeandmail.com/news/news-video/video-opposition-grills-harper-over-china-canada-trade-deal/article4796558/.

[iv] Heather Scoffield, Investment Deal with China Would Leave Canada a Resource Colony: Opponents, Canadian Business (Oct. 30, 2012), http://www.canadianbusiness.com/article/104651--investment-deal-with-china-would-leave-canada-a-resource-colony-opponents; Sheila Harrington, Trade Agreements Costly for Taxpayers, Canada.com (Nov. 2, 2012), http://www.canada.com/Trade+agreements+costly+taxpayers/7487585/story.html.

[v] See, e.g., Inside U.S. Trade, Canada, Mexico To Join TPP Talks In October After Leesburg Round, World Trade Online, August 31, 2012, available at http://insidetrade.com/Inside-Trade-General/Public-Content-World-Trade-Online/canada-mexico-to-join-tpp-talks-in-october-after-leesburg-round/menu-id-896.html.

[vi] CBC News, What Is the Trans-Pacific Partnership? CBC News World, June 20, 2012, available at http://www.cbc.ca/news/world/story/2012/06/20/f-trans-pacific-partnership-explained.html.

[vii] Press Release, Honourable Ed Fast & Foreign Affairs and International Trade Canada (Oct. 9, 2012) available at http://www.international.gc.ca/media_commerce/comm/newscommuniques/2012/10/
09a.aspx?view=d.

[viii] Peter Clark, TPP Negotiations Present Far More Questions Than Answer, iPolitics (Oct. 12, 2012) http://www.ipolitics.ca/2012/10/12/peter-clark-tpp-negotiations-present-far-more-questions-than-answers/ (“The TPP could result in extra-territorial application of U.S. laws, particularly in the Intellectual Property area including criminalization of non-commercial infringement.”).

[ix] See, e.g., USTR, FACT SHEET: The United States in the Trans-Pacific Partnership: Increasing American Exports, Supporting American Jobs, June 19, 2012, available at http://www.ustr.gov/about-us/press-office/fact-sheets/2012/june/us-tpp-increasing-american-exports-supporting-american-jobs; see generally, Banyan, Parners and Rivals, Another Ambitions Trade Agreement Gets Bogged Down, Sept. 22, 2012, http://www.economist.com/node/21563292.
[x] World Intellectual Property Organization, Summary of the Paris Convention for the Protection of Industrial Property (1883), WIPO.int, http://www.wipo.int/treaties/en/ip/paris/summary_paris.html (last visited Nov. 13, 2012). 

[xi] World Intellectual Property Organization, Summary of the Berne Convention for the Protection of Literary and Artistic Works (1886), WIPO.int http://www.wipo.int/treaties/en/ip/berne/summary_berne.html (last visited Nov. 13, 2012).

[xii] Brent Patterson, NEWS: Council Critiques Canada’s Entry into the Trans Pacific Partnership Talks, Council of Canadians, June 20, 2012, available at http://canadians.org/blog/?p=15828; but see UPS, Canada Using Global Trade to Grow Economy, Says UPS COO (June 19, 2012) available at http://pressroom.ups.com/Press+Releases/Archive/2012/Q2/ci.Canada+Using+Global+Trade+to+Grow+Economy,+Says+UPS+COO.print.

[xiii] John Hancock, The Wrong Trade Agreement, Canadian Int’l Council, June 21, 2012, available at http://www.opencanada.org/features/blogs/roundtable/the-wrong-trade-agreement/.

[xiv] Id.

[xv] Id.

[xvi] USTR, Progress Continues in Trans-Pacific Partnership Talks, USTR.gov, Sept. 15, 2012, available at http://www.ustr.gov/node/7751 (emphasis added).

[xvii] Id.

[xviii] USTR, USTR Holds Public Hearing on Canada and the Trans-Pacific Partnership, USTR.gov, Sept. 24, 2012, available at http://www.ustr.gov/about-us/press-office/press-releases/2012/september/USTR-hearing-Canada-TPP.

[xix] See, e.g., John Kelly, Clay Hough Testifies on Canada Joining TPP Talks, IDFA.org, Sept. 26, 2012, http://www.idfa.org/key-issues/category/global-markets/details/7689/.

[xx] Press Release, Canada Formally Joins Trans-Pacific Partnership, Foreign Affairs & International Trade Canada (Oct. 9, 2012), http://www.international.gc.ca/media_commerce/comm/news-communiques/2012/10/09a.aspx?view=d.

[xxi] Economic Partnership Working Group, Canada-Chinese Economic Complementaries Study. 3.4.1, Foreign Affairs & International Trade Canada (Oct. 29, 2012), http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/china-chine/study-comp-etude.aspx?view=d#cn-tphp.

[xxii] Randall Palmer, Canada, Japan to Start Trade Talks Next Month, Reuters (Oct. 29, 2012), http://ca.reuters.com/article/domesticNews/idCABRE89S19320121029.

[xxiii] Paul Vieira, Canada Trade Min: Committed to Deeping Trade/Investment Ties with Canada, WSJ (Oct. 1, 2012), http://online.wsj.com/article/BT-CO-20121001-708453.html.

[xxiv] Plamer, supra note 20. 

The Race for Arctic Resources: American Ambivalence, Russian Rhetoric, and a Canadian Comeback

By Gene Puerta, Staff Writer

The layer of ice that covers the Arctic Circle is melting, causing the nations that border it (Canada, Russia, Norway, Denmark, United States, Iceland, Sweden and Finland; all members of the Arctic Council) to tap the Arctic’s natural resources. But there are other factors at play: For some, this race is partly fueled by national security concerns; and for others, a chance to stake long held territorial claims.  In a race for resources, all of these Arctic nations are doing their best to achieve the pole position by granting companies’ rights in territory already claimed, advancing scientific findings, or by conducting military operations in the Arctic Ocean region. Even China, a nation that does not even border the Arctic, wishes to participate in this race, arguing that the resources under the North Pole are “the inherited wealth of all humankind.”

The race begins. A recent search for “Winning the Arctic Race” on Google (as of 20 September, 2012) offered just over 68 million results.  Upon investigation, this plethora of search results indicates that there is a race for resources under way in the Arctic Ocean and that, depending on the nationality of the information source, Canada is either in the Arctic Race to win it (by annual displays of military strength) or lags behind Russia and the United States.  The articles vary widely on the state of the race for resources in the Arctic, with Der Spiegel (quoting a USCG Admiral) that the United States is dead last in the Arctic race; while other sources like Forbes's Matthew Hubert, think that the U.S. is in a better position than Russia because U.S. oil companies are “sitting pretty” when the time comes for natural resource extraction.  Moreover, various news articles report that even China, a non-Arctic nation, is clamoring for a spot before the starting gun goes off.

According to a 2011 report by the Wall Street Journal, Canada is warming up for an aggressive display of control over the Arctic Circle.  Canada’s Arctic push, propelled by displays of military capability, is feasible only as long as Canada can back up its intent with the considerable financial resources needed to build infrastructure in the Arctic’s remote and challenging environment.  The economic value of the Arctic Circle can be found by companies willing to venture into an area that requires not only a particular technical know-how, but extensive financial investment as well.  Companies that are willing to undertake such investment have a losing track record when it comes to extracting the various non-renewable resources under those cold waters (just ask Russia’s nationally-owned Gazprom or publicly-traded Shell Oil).  But the Arctic's harsh environment, which offers up polar ice caps that shift dramatically with the changing seasons, sheets of ice that drift along with the tides, and extreme operating temperatures, mean the costs of merely preparing to tap the Arctic's energy resources can go into the billions.  And then there are concerns over the region lacking the major seaports necessary to both spur further Arctic development and contain spills similar in scope to Deepwater Horizon (the most recent oil leak off the coast of Louisiana).

US takes the lead and stumbles.  As of September 2012 the current US efforts have been stalled by ice floes, fall whale hunts, and underwater dome repairs.  Shell Oil has invested a total of U.S. $4.5 billion into developing the Chukchi Sea region (just north of Alaska).  Shell's investment in the American Arctic shows that the United States plans to use corporate partners to take the lead in the Arctic race, even though not one drop of oil has been extracted.

The Russian and Canadian long game.  The view of the Russian Foreign Ministry, U.S. oil companies and the expanding domestic American shale oil market may be beating Russian nationally-owned corporations in the Arctic race.  But Russian claims to significant swaths of Arctic territory matter most, in the long run, to the success of Russia’s Arctic strategy. Russia believes that territorial claims are more valuable than a company exerting its economic actions over an area.  Canada seems to be, literally, left out in the cold with regards to its efforts to develop the Arctic’s remote and challenging climate, efforts which require major infrastructure upkeep costs.  But Canada is trying to make up for this through a beefed up military presence, a noticeable omission from a recent Forbes article written by Matthew Hulbert.  Mr. Hulbert concludes that because the big oil corporations (like Italy’s ENI making its presence known north of Norway) and nationally owned companies (owned primarily by China and Russia) are doing their best to position themselves in the Arctic, the U.S. has the gold, Europe the distant silver, and Asia the bronze in the Arctic race.  Russian claims to the Arctic and Russian Tu-95 bomber flights aside, it seems that Russia owning a bigger share of the circle will not be enough for Putin and Co. to compete in the Arctic race.  Though, in the long run, Canada and Russia may actually have the upper hand.  Russia's icebreakers and territorial claims will likely serve as a force multiplier.  And Canada’s increased military presence will protect any investments in their vast territory of Nunavut.

An uncertain Arctic finish.  There are several opinions (stretching back to 2009) that predict that the end result in the Arctic has already been decided:  big Arctic players (the United States, Canada, and Russia) have “agree[d] to disagree” about certain boundaries in the Northwest Passage, while the smaller players (Denmark, Norway, and economically, Russia) stake their continental shelve claims to the United Nation’s Convention on the Law of the Sea:

There is no ‘endgame’ in the Arctic. Cooperation – not conflict – is the more accurate paradigm. With the exception of Hans Island, there are no sovereignty disputes over land in the Arctic. The unresolved differences concern a) coastal state jurisdiction over shipping in the Northwest Passage, b) the delimitation of maritime boundaries in the Barents, Beaufort and Lincoln Seas, and c) the extent to which each of the five Arctic Ocean countries has sovereign rights over the continental shelf more than 200 nautical miles from its shore.

There is no great cause for concern. Canada and the US have “agreed to disagree” over the Northwest Passage while cooperating on maritime surveillance and pollution prevention. They – along with Denmark, Norway and Russia – have also agreed that overlapping continental shelf claims will be resolved according to the rules in the UN Convention on the Law of the Sea.

Canadian resolve pushes forth a militaristic footing.  Does Ottawa have what it takes to secure its Arctic claims?  Canadian Prime Minister Stephen Harper thinks so.  His three day “arctic sovereignty tour” is aimed at quelling any Russian claims in the Arctic Ocean.  And just last month, Canadian Foreign Minister Peter Mackay stated Canada's intent to placed in the Arctic race's pole position:

"There is no question over Canadian sovereignty in the Arctic. We have made that very clear. We have established, a long time ago, that these are Canadian waters and this is Canadian property," said Mackay. The Canadian prime minister's trip, which involves stops in half a dozen communities in Canada's far north, is intended to reinforce Ottawa's claim to more than 1.2 million square kilometers of Arctic seabed.

Prime Minister Harper does not intend to lose the Arctic race; rather, he intends to win the Arctic race by using a three prong approach:  (1) making territorial claims according to the UN Convention on the Law of the Sea, (2) highlighting scientific findings that find Canada’s continental shelf extends far into the Arctic Circle and (3) launching Canadian expeditions such as Operation Nanook.  Since 2010, Canada has been participating in annual “sovereignty operations” such as Operation Nanook in the Arctic to show the international community that Canada has an interest in maintaining control over the Arctic Circle, an interest Ottawa has also expressed by not placing a moratorium on oil exploration.

A lumbering start.  For an area of the world that is literally heating up, the marathon race for Arctic resources is off to a slow start.  With non-renewable energy sources becoming more scarce and subject to hikes due to war, demand, and natural disasters, the Arctic Circle has become a focal point for resource hungry nations.  However, the race for natural resources is not without projected environmental risk.  Furthermore, only the nations that are willing to put forth the considerable military, infrastructure, and other financial investments can hope to win the Arctic resources race.  The Russian and Canadian Arctic strategies seem to rest upon how far their continental shelf extends and how many military operations they can execute until they have the capital necessary to fortify their Arctic infrastructure.  This is especially true of Russia, where companies are either experiencing cost overruns or simply waiting to see how Shell performs north of Alaska.  Despite the setbacks experienced by Shell Oil, the U.S. is currently leading the way, albeit by nary a hair, for not one well has been tapped by the U.S.-based subsidiary in the cold waters of the Northwest Passage.