Budget 2024

Tax and spend fiscal plan will inhibit growth

As published in The Globe and Mail

When U.S. President Joe Biden launched the Indo-Pacific Economic Framework for Prosperity (IPEF) back in May, many were surprised Canada wasn’t among the economic agreement’s founding members. Canada, like the United States, is a Pacific nation with strategic interests in the region. Ottawa and Washington have also committed to working together to strengthen rules-based global trade.

The federal government downplayed Canada’s absence, arguing we already have a regional trade agreement – the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) – and are negotiating bilateral deals with other Pacific countries. But there’s hope the government will reconsider its position and Canada will formally apply to join this new U.S.-led initiative.

That would be a positive development. Given the high degree of interdependence between the U.S. and Canadian economies, our country must seize the opportunity to help define the emerging global trade landscape. If Canada is serious about prioritizing the Indo-Pacific and expanding this country’s reach in the region, it’s clearly in our interest to be in as many regional efforts as we can.

Granted, IPEF isn’t perfect. By the Biden administration’s own admission, it remains a work in progress. All the more reason, then, for Canada to join at an early stage and help shape it. After all, the agreement is intended to promote trade facilitation, supply chain resiliency, progress on digital trade and environmental standards – all of which are Canadian priorities.

To be sure, the CPTPP offers benefits IPEF doesn’t, but these deals are not either/or propositions. Canada can be part of both, just like Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam. Joining IPEF would also strengthen our links to other Pacific countries that aren’t parties to the CPTPP: India, Indonesia, Korea, the Philippines, Thailand and, yes, the U.S.

I’m currently in India following the release of a joint report from the Business Council of Canada and the Canada-India Business Council that makes the case for greater economic ties between our two countries. My meetings here with public and private sector leaders have reinforced my belief that, to be taken seriously, Canada needs to be more active in regional forums.

I felt the same way following a trip to South Korea earlier this year. I heard government officials and business leaders lament Canada’s comparative lack of engagement in the Indo-Pacific and question why we’re not part of a growing list of U.S.-supported regional arrangements including IPEF, the Quadrilateral Security Dialogue and the AUKUS trilateral security pact.

Prime Minister Justin Trudeau has suggested the Biden administration wouldn’t need IPEF if the U.S. were part of CPTPP. But all acknowledge the U.S. joining CPTPP is extremely unlikely – even impossible – given the current political mood in America. Mr. Biden, despite having been an early proponent of the Trans-Pacific Partnership, as it was formerly called, is showing no signs of reversing his predecessor’s decision to walk away.

The CPTPP exemplifies why Canada should join IPEF. Canada wasn’t originally part of the TPP, the key to Barack Obama’s pivot to the Pacific. When Donald Trump pulled out of the talks, Canada and the remaining TPP countries salvaged a deal. That wouldn’t have happened if the U.S. hadn’t used its convening power to bring those countries to the brink of a breakthrough.

It’s worth recalling that Canada’s initial reluctance to join the TPP was defended on the basis that this country already had a “gold standard” trade agreement with the U.S., the North American Free Trade Agreement, and that we were in the process of negotiating bilateral deals with other Pacific countries. That argument didn’t age well for the TPP, and it won’t age well for IPEF.

Critics take the wrong lesson from the TPP. They worry Washington’s interest in IPEF will wane after the U.S. midterm elections or the 2024 presidential election. Even if that proves to be the case, the TPP experience suggests we might still salvage something worthwhile. In truth, we don’t know what the future holds, except that Canada won’t be at the table when IPEF ministers meet next month.

In the end, that’s the greatest risk – that Canada will be left on the outside looking in, and that our closest economic partner will negotiate new trade standards and secure new regional commitments with which we’ll have to comply but over which we’ll have had no say. It is vital for us to be aligned with the U.S. on the future of international trade, and that means being part of IPEF.