Flawed Trans-Pacific Partnership Lands in Justin Trudeau's Lap
It’s official. The Trans-Pacific Partnership trade and investment deal is bad for Ontario’s crucial auto industry.
In fact, it’s worse than expected.
The 12-nation pact, which ties together countries ranging from Canada and the U.S. to Vietnam and Malaysia, also promises other gloomy outcomes.
It will increase the price of certain cutting-edge drugs. It will restrict the ability of Canadian governments to protect health and other kinds of electronic data.
It will give companies from even more countries the right to challenge and overturn domestic Canadian laws that interfere with their profit-making.
It will reduce the federal government’s already limited ability to review large foreign takeovers.
Until Wednesday, all of this had been Stephen Harper’s political problem.
Now it belongs to Prime Minister Justin Trudeau.
During the lead-up to last month’s election, Trudeau walked a fine line.
He said he firmly supported the idea of the TPP.
But he also said he wanted to see the final text before making a formal decision.
Now that he and his trade minister, Chrystia Freeland, have seen it what are they going to do?
Released Thursday, the final text confirms most critics’ fears.
Certain kinds of new-generation prescription pharmaceuticals will receive enhanced patent protection. That means they will become more expensive — both for individuals and provincial drug plans.
“The Trans-Pacific Partnership is a bad deal for medicine,” said the aid group Doctors Without Borders.
Governments will find it harder to protect the privacy of Canadian citizens. If, for instance, a Canadian credit card company wants to store electronic information in cheaper data banks abroad, governments will be able to intervene only if they can prove a “legitimate policy objective.”
The dispute settlement system that already allows American and Mexican companies to challenge Canadian environmental and other laws before special trade arbitrators has been expanded to include all nations in the TPP.
The new pact will deviate from the existing North American Free Trade Agreement in that hearings held under this system will now be open to the public — unless the arbitrators decide otherwise.
Oh yes. And the threshold for reviewing foreign takeovers of Canadian companies has been raised from $600 million to $1.5 billion.
But the most immediate casualty of the new deal is the Canadian auto industry. Under NAFTA, only auto parts containing 60 per cent North American content could move duty-free between Canada, the U.S. and Mexico.
Earlier this fall, the Harper government admitted that the TPP would reduce this local content threshold to 40 per cent. The final text shows that for some crucial auto parts, the new threshold is even lower — 35 per cent.
What this means in practice is that auto makers operating within the TPP will be able to obtain up to 65 per cent of their parts outside the trade bloc — from cheap-labour countries like Thailand.
That’s grim news for workers in Canadian auto parts firms.
As well, Canada has agreed to remove its tariffs against Japanese-made autos over five years. The U.S., by contrast, can keep similar tariffs for up to 30 years.
So far, Canada’s new government has been coyly supportive of the deal.
Trudeau has promised a full debate in the Commons. Given that his Liberals hold a majority of seats there, that won’t mean much. If the prime minister wants the deal to go ahead, his MPs are sure to oblige.
And it seems he does. Last Saturday, according to Reuters, the Japanese foreign ministry issued a statement saying that Trudeau and Japanese Prime Minister Shinzo Abe had agreed on the telephone to push the TPP through.
Theoretically, the Liberal government could try to renegotiate all or part of the deal.
But that would work only if one or more of the 11 other members were willing to take part.
Regardless of U.S. presidential contender Hillary Clinton’s 11th-hour conversion into a free-trade critic, there is no indication that any of them is.
Finally, Canada could walk away from the pact, a move that would carry its own costs.
We shall see what Trudeau does. He has surprised before. But the odds are that this deal, however bad, is done.
Copyright 2015 The Toronto Star