Japan was the major market in the negotiations with which Canada did not already have a trade agreement—and thus was the real prize for Canadian businesses and workers. However, American withdrawal from the TPP has left the issue of Canada-Japan trade lingering.

Despite the apparent demise of the TPP, the Japanese market (the world’s third-largest) is too rich an opportunity to let pass by. Canadian leaders should make a trade deal with Japan a priority.

The Canadian and Japanese markets are complementary in many ways—for example, Canadians buy Japanese consumer electronics, and Japan needs our natural resources and food products. This complementary nature can be conducive to win-win trade negotiations with significant long-term benefits.

TPP laid the groundwork for the future

Despite long and difficult negotiations, the TPP trade deal fell through at the last minute, with U.S. President Donald Trump scrapping the deal before it was ratified. Though there has been movement to keep the TPP without the U.S., the outcome of these talks is far from certain.

With the TPP process having just wrapped up, there is a prime window of opportunity for Canada to negotiate a bilateral free trade deal with Japan. Due to the detailed negotiations it took to finish the trade pact, Canadian officials will have the market knowledge and connections needed to begin bilateral talks soon.

Canadian officials are already up-to-date on the latest market information related to Japan’s exports and trade agenda. Furthermore, trade officials in Canada have connections with the Japanese bureaucracy from the TPP negotiations. This knowledge, and the connections between our two bureaucracies, provide an opening to restart bilateral talks as soon as possible.

Natural resource-based industries would benefit most from a Canada-Japan FTA

Numerous Canadian industries and their workers will benefit from a Canada-Japan FTA. In 2016, Canada sold $10,575,158,000 worth of merchandise exports to Japan. The top three categories were oil seeds and miscellaneous fruits/grains (14.81% of exports); ores, slag and ash (14.56%); and meat/edible meat offal (11.40%). Together, these three, along with other natural resource and food exports, would benefit hugely from a free trade deal.

Is Canada in position to meet Japan’s energy needs?

In 2011, following the crisis at the Fukushima Daiichi nuclear power plant, Japan shut down and reviewed its nuclear energy system. Prior to the disaster, which is still affecting communities in Japan today, nuclear plants provided about 30% of Japan’s energy mix. While some reactors have come online since that review, most remain offline. As a result, Japan has faced, and will continue to face, a critical need for energy from abroad.

That includes liquefied natural gas (LNG) and oil, both of which Canada has the potential to export in large amounts. Canada’s oil industry is well-established, though there are questions from environmentalists, Indigenous peoples and local communities to be answered regarding pipelines. British Columbia has enormous potential for LNG exports to Japan, though the recent change in government at the provincial level makes the future of this industry unclear. With these domestic political uncertainties, the energy industry’s potential benefit from a Canada-Japan FTA is less clear.

Seafood will be another big winner

The Japanese diet is dominated by seafood, as one might expect from an island nation. Japan’s love for seafood has led to incredible export success for several provinces already.

For example, Newfoundland and Labrador’s herring roe is very popular in Japan. In 2016, the province sold $44 million worth to Japanese buyers. British Columbia has likewise seen seafood export success, selling millions of dollars’ worth of sea urchins to the country. An FTA would only expand these opportunities, while also reducing costs for those already engaged in this avenue of trade.

The future is bright

The future of Canada-Japan trade is bright. The two countries have shared values—democracy, the rule of law, free markets—and have complementary economies. Many Canadian industries and their workers stand to benefit from a free trade agreement with Japan. With the TPP pact likely over, Canada can seize the moment and hastily restart bilateral trade talks with the world’s third-largest economy.

The post Why Canada needs to seize the moment and start negotiating a free trade agreement with Japan appeared first on Trade Ready.

When we think of international trade, we tend to think of massive container ships moving goods across oceans. But what about the international trade in energy, specifically oil and gas?

At the end of World War II, the U.S. produced all the energy it needed domestically, and Canada imported most of its oil from the U.S. How things have changed since then.

Both countries remain top oil and gas producers, but Canada has become a large oil exporter to the U.S., even though Canada’s eastern provinces depend mostly on imported oil.

There is no doubt that the need for oil and gas has had an outsized influence in global geo-politics.

Would the United States have become so entangled in wars in the Middle East since the 1970s if not for oil?

Would Vladimir Putin have so much sway over the Europeans if not for his ability to cut off their natural gas supply at any time?

Would China have just completed a 771 kilometer pipeline through rugged jungle terrain in Myanmar (Burma) if it was not worried about assuring continued access for its oil imports?

The fracture factor

A recent development, which has radically changed the world energy scene, is the emergence of new technology which can extract natural gas and oil from massive shale formations in the U.S., the UK and Canada.

This technology, known as hydraulic fracturing or more commonly as “fracking,” has enabled the U.S. to increase its energy production dramatically and lower energy costs.

Fracking involves drilling and injecting fluid into the ground at high pressure to fracture the shale rock in order to release natural gas and oil inside. It is hugely controversial.

Proponents of fracking claim that fracking is an “economic and energy solution” and that it is “safely taking place in America.”

Opponents of fracking claim that: “Fracking for oil and natural gas is too dangerous: it threatens the water we drink, the air we breathe, and our health. It also accelerates climate change. That’s why we need to ban fracking now.

Currently, some states such as Vermont and New York have banned fracking within their borders, while traditional energy producing states like Pennsylvania, Texas and Oklahoma have embraced it. In Canada, Quebec has placed a moratorium on it.

On March 20, 2015, the Obama Administration issued the very first environmental regulations on fracking. Immediately, oil and gas interests went to court to stop their implementation, arguing that the regulations are both costly and unnecessary.

Fracking’s effect on trade

Readers may wonder what the debate over fracking has to do with international trade. The answer is that the emergence of new technologies like fracking, whether it continues to rapidly expand or is ultimately restricted, can be highly disruptive to existing international trade flows.

The fact that the U.S. is becoming energy independent is already having a huge impact on Middle East oil producers like Saudi Arabia, who worry about what will become of their largest market. If American petrodollars stop rolling in, will even more political instability in the region follow?

Meanwhile, the huge oil and gas reserves opened by fracking and the resulting price drops means far less emphasis will be placed by most consumers on energy conservation.

When energy is cheap, American and Canadian consumers simply use more of it. Will this increased use of fossil fuels mean less investment in renewable sources like wind, and solar and more negative impact on our climate?

Few international traders, outside of the most sophisticated energy company geologists and technologists, would have predicted the fracking revolution and how it is changing the “balance of power” in the world.

It is no coincidence that last fall Texas Governor Rick Perry made a trip to Poland, hoping to expand the export of liquefied natural gas from Texas to Eastern Europe.

In the meantime, as the U.S. has become more energy independent, Canadian producers have been looking for new markets for their LNG exports.

With international trade, nothing stays the same. This is what makes it so interesting and challenging to engage in. To be successful international traders, we have to be well informed “futurists” who can stay abreast of current global trends in business sectors generally, not just our own.

What is your opinion on the future of fracking and its influence on the global energy market?

Do you think the benefits outweigh the risks?

The post Like it or not, fracking is disrupting international trade flows appeared first on Trade Ready.