Eric Dalke is a policy analyst, Carlo Dade is the director of the Trade & Investment Centre and Daniel Pietikainen is a research intern at the Canada West Foundation
If Canadian trade negotiators and exporters didn't have enough on their plate, Japan just delivered a sobering reminder of why Canada must be proactive in expanding our exports, particularly in today's charged global trade environment.
Surging U.S. beef exports caused Japan to invoke an emergency tariff on frozen beef imports from all countries, including Canada. The Japanese tariff is not uniform to all exporters. While Canada and the United States face a significant 50-per-cent charge, countries such as Mexico and Australia are subject to drastically lower tariffs because they have trade agreements with Japan.
While our major competitors such as Australia, Mexico and Chile have trade pacts to protect their interests in Japan and the growing Asia-Pacific region, Canada remains woefully behind, with only one trade deal in effect with an Asian economy and none being negotiated.
The beef example shows that delay has consequences. Japan is a top-five destination for Canadian exports, including beef. The tariffs will hit more than $70-million in exports including significant lost market share. The important point is one that the Japanese have been making: The 50-per-cent beef penalties would not be an issue for Canada if it ratifies the Trans-Pacific Partnership trade agreement (TPP).
It's true, the TPP was designed to provide cover in trade spats such as these. For example, beef tariffs were set to decline to 9 per cent over the life of the agreement. By providing relatively tariff-free access to Japan and other growing Asian markets such as Malaysia and Vietnam, Canadian producers and exporters were set to make huge gains. These gains increased after the United States pulled out of the agreement and handed their market share to Canada, Australia and others.
But despite the huge opportunity, Canada has remained flat-footed on TPP. It appears the government has been so busy worrying about developing a "progressive" trade agenda that it's forgotten about the "trade" part. The agreement is negotiated, signed and other countries are moving to ratify without the United States. But Canada remains silent, and Western beef farmers feel the pain, as the government prepares to enter the 18th month of public consultations.
There's no reason for delay, as TPP is an overall win for Canada. For example, Canadian beef exporters would see more than $500-million in increased exports with a 60 per cent increase to TPP countries. Fruit and vegetable exports would increase more than $300-million, a whopping 141 per cent increase. Pork and poultry, machinery and equipment manufacturing, wood products and food-product sectors would also see more than $200-million in additional exports.
What's more, U.S. reluctance should not dictate trade policy north of the border. The Americans are in a tough spot, with nearly half of their $1.5-billion in bilateral beef trade with Japan now at risk. But there is no reason that Canada should be in the same boat. As the Japanese have pointed out, with uncharacteristic bluntness, TPP is a win for those that sign on.
Not only would ratifying the TPP increase Canadian exports to Asia, it would also protect Canadian exporters from events such as this week's sudden tariff on beef. Canada and the rest of the signatories would also be leaving the Americans to fend for themselves in a world that they have made hostile for open trade.
Canada has a tremendous chance to make good on a strategic advantage in Asia by signing this deal. With the recent nudge on beef, the Japanese could not be clearer that they want the deal done. Japan and New Zealand have ratified – Canada should be the third. TPP will benefit farmers, manufacturers and exporters in all regions of the country. It's time we step up to the plate and get it done.