Remarks to the House of Commons Standing Committee on International Trade regarding the Pacific Alliance

Mr. Chair, committee members, thank you for the invitation to take part in your study of a potential free trade agreement between Canada and the Pacific Alliance (PA).

The Business Council of Canada represents the chief executives and entrepreneurs of 150 leading Canadian companies, in all sectors and regions of the country. Our member companies employ 1.7 million Canadians, account for more than half the value of the Toronto Stock Exchange, contribute the largest share of federal corporate taxes, and are responsible for most of Canada’s exports, corporate philanthropy, and private-sector investments in research and development.

The Business Council supports Canada negotiating a free trade agreement with the Pacific Alliance.  With over 221 million consumers, the Pacific Alliance’s combined GDP makes it the world’s sixth largest economy. What’s more, PA members are experiencing strong growth and exhibit favourable demographic trends.

The Pacific Alliance is already an important market for many Canadian companies. Bilateral goods and services trade between Canada and Pacific Alliance members is valued at over $54 billion. lf treated as a single country, the Pacific Alliance would be Canada’s third largest trade partner, ahead of Japan and the UK. Investment flows are also impressive with two-way investment valued at $52 billion. Several Pacific Alliance member countries rank among the top destinations for Canadian foreign direct investment.

There are three reasons why it is important for Canada to negotiate with this bloc:

1. Diversification – Canada must do everything possible to find new customers for our exports and new economic opportunities for our citizens. The best way to do this is to position Canada as one of the world’s most open and global markets. This is increasingly important at a time when protectionism and inward-looking policies are proliferating.

The Pacific Alliance is an important component of Canada’s overall diversification efforts. As the bloc grows, Canada could gain new market access in member countries. Combined with the recently concluded CPTPP, CETA and a potential agreement with China, and Canada will be in an enviable positon with market access to some of the world’s largest and most dynamic markets.

2. Consolidation – Canada has a unique opportunity to both consolidate its existing trade agreements and set a high standard for subsequent bilateral agreements with the bloc. An ambitious and comprehensive outcome could enhance Canadian competitiveness in the region for many years to come.

While Canada already has separate trade agreements with all four Pacific Alliance members, each agreement varies in age and ambition. Harmonizing these agreements could facilitate a greater cross-border presence for Canadian companies already in the region. For example, agreeing to a common set of simplified rules of origin would allow for cumulation across Pacific Alliance members, facilitating the development of Canada-Pacific Alliance supply chains.

3. Modernization – As global trade and commerce rapidly evolves, there is a constant need to upgrade and modernize trade agreements to reflect the way business is conducted. Negotiating a trade agreement with the Pacific Alliance that improves the digital innovation environment and enhances labour mobility could be particularly beneficial.

Financial technology firms are innovating at a rapid pace, often posing a challenge to regulators. An agreement that facilitates cooperation among the parties’ various regulators could allow for faster commercialization of new technologies across a larger customer base.  At the same time, modernizing and harmonizing labour mobility provisions could broaden the regional talent pool and facilitate the movement of business travelers between markets. Other areas for improvement include transparency, ecommerce and regulatory cooperation.

With that I conclude my remarks. Thank you for the opportunity to address your Committee.