While the announcement of US tariffs on aluminum and steel and the NAFTA negotiations disrupted the media sphere, the signing of the Global and Progressive Agreement for Trans-Pacific Partnership (CPTPP) went virtually unnoticed. Yet, the representatives of the 11 countries part of the CPTPP met to sign the agreement in Chile, on March 8.
But what does the CTTPP consists of and what does it mean for Canadian businesses?
The CPTPP replaces the Transpacific Partnership (TPP), which was aborted following the withdrawal of the United States. Once the CPTPP comes into force, it will remove all non-tariff barriers to trade and will also reduce or eliminate most tariffs among members. The PTPGP brings together 11 countries from both hemispheres making it one of the largest trading areas in the world comprised of nearly 500 million people and 13.5 % of global GDP.
This new free trade agreement means that Canada gained significant strategic and economic benefits with enhanced access to seven key Asian-Pacific markets. These gains are most significant in Japan as well as in Vietnam and Malaysia, two fast growing markets. These members are also countries in which no free trade agreements are currently in place.
Total trade value between Canada and other members of the CPTPP was $ 105 billion in 2016. Overall, the CPTPP will contribute to the long-term increase of Canadian GDP by $ 4.2 billion. The CPTPP also provides new preferential access to Canadian exporters, which are expected to benefit from annual tariff savings of $ 428 million, with 80 % of these profits coming from exports to Japan.
The CPTPP will benefit multiple sectors, including agriculture, fish and seafood, forestry, metals and minerals as well as financial services. Canadian exports to Vietnam are expected to grow the most, with an estimated increase of 16.8 %. These gains will be mainly concentrated on food products and chemicals. Exports to Malaysia will increase by 4.3 %, mainly due to the machinery and the automotive sectors.
On the other hand, the trade liberalization caused by the CPTPP will contribute to the decline in relative preferential access enjoyed by Canada with Mexico, Chile and Peru, countries with which FTAs are in effect. Therefore, a decrease in trade with these three partners is to be expected. Nevertheless, the overall gains are considerable and even higher than those expected with the TPP, since the withdrawal of the United States changed the dynamics of the calculation of economic benefits to Canada’s advantage.
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Learn more : https://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/index.aspx?lang=eng