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.

For most who work in international trade, a free-trade agreement between the United States and the European Union makes sense. The EU, after all is the United States’ largest trading partner. In 2017, the United States imported $417 billion in goods from the EU, while exporting $270 billion in goods to the bloc.

The Transatlantic Trade and Investment Partnership (TTIP) has been seen as a way to further open trade between the United States and the EU. For the United States saw the partnership as a way to close the trade deficit, while European leaders hoped it would further bolster trade. On both sides of the Atlantic, TTIP proponents said the partnership could spur further economic growth and add trade and manufacturing jobs.

Amid the Brexit vote and contentious elections in Europe and the United States, TTIP negotiations came to a halt in October of last year after 10 negotiating sessions that spanned three years. With the election of Donald Trump and his outspoken, negative views on free trade, most assumed that the TTIP was a dead deal.

But suddenly, trade leaders in the United States and Europe are discussing resuming TTIP talks, and touting the benefits of a trade deal between the United States and the EU.

Trade leaders on reviving TTIP

On the U.S. side, the first indication that TTIP discussions could resume came in a Sunday morning news interview with U.S. Commerce Secretary Wilbur Ross in May.

It’s no mistake that, while we withdrew from [the Trans-Pacific Parternship trade negotiations], we did not withdraw from TTIP,

Ross stated. “The EU is one of our largest trading partners, and any negotiations legally must be conducted at the EU level and not with individual nations.

“Thus, it makes sense to continue TTIP negotiations and to work towards a solution that increases overall trade while reducing our trade deficit.”

U.S. Trade Rep. Robert Lighthizer more formally addressed resuming TTIP negotiations in June during a U.S. Senate Finance Committee hearing in June. During the hearing, Lighthizer told U.S. legislators that TTIP is currently being reviewed by members of his team, and so far, there is a positive view on moving forward with U.S.-EU trade negotiations.

Lighthizer said he had spoken with EU Trade Commissioner Cecelia Malmström about resuming talks on negotiating an EU-U.S. trade deal.

“On TTIP, we certainly agree that that’s an important negotiation,” Lighthizer said of his discussions with Malmström. “I’ve talked to her about bilateral issues and co-operative issues. I’m not here to make any announcement about it, but it is something that we certainly realize the importance of.”

There’s a lot of momentum behind [a trade deal]; there are a lot of reasons to do it. On the other hand, it wasn’t accomplished, so there are obviously problems.

Lighthizer said any discussions on resuming TTIP would likely be put off until after Germany’s elections in September.

Meanwhile, EU officials have been relatively quiet on TTIP since Trump’s election, though they have cautioned the U.S. against protectionist trade policies and expressed an eagerness to resume U.S.-EU trade talks on several occasions. At the same time, the EU has been adopting similar free trade agreements with other countries, including Canada and Japan, and has expressed a desire to strike more agreements.

What TTIP could accomplish

TTIP aims to iron out a lot of details in European-U.S. trade. The agreement would make trade more transparent and easier for businesses in both countries, according to U.S. Trade Rep. Lighthizer’s office. It also would better lay out environmental, health and safety protections. Previously, one of the sticking points of TTIP negotiations was language on Investor-State Dispute Settlement (ISDS). Detractors have said ISDS procedures were too secretive, but in other trade deals, the EU made steps to create a more transparent ISDS process.

Businesses trading between the EU and the United States could see a big drop in tariffs if TTIP were to pass. While the average tariff for all products traded between the two is 1.6%, there are still tariffs as high as 25%. One leaked TTIP document showed that the agreement would lower tariffs by 97.5%.

In the end, it seems that both sides realize that the strong EU-U.S. trade relationship calls for a new trade agreement. While TTIP talks look like they are likely to resume, it stands to be seen whether EU leaders can balance their desire for free trade with the current tone of U.S. trade politics.

The post Will we see a revival of TTIP negotiations? Trade leaders say, ‘yes.’ appeared first on Trade Ready.

To get a sense of the types of changes to expect we can look at the contrasting the viewpoints held by incoming U.S. Trade Representative Robert Lighthizer with those of his predecessor, Michael Froman.

The two men take nearly opposite approaches to trade: According to Lighthizer, American jobs and businesses must be protected from what he views as unfair global competition, while Froman has expressed that negotiating free trade deals helps America to set the standards for international trade policies that benefit American economic growth.

Their differences are illustrated by their past statements on trade, along with their stances on two major trade issues: Renegotiating NAFTA and reducing the trade deficit with China.

Protectionism vs. globalism

Lighthizer is a well-known trade attorney who served as the United States’ deputy trade representative under Pres. Ronald Reagan. He has long cautioned Republican lawmakers against free trade and encouraged protectionist policies as a way to spur economic growth. He has also been an outspoken supporter of Trump’s protectionist trade policies since his unsuccessful 2012 run for president.

“The recent blind faith some Republicans have shown toward free trade actually represents more of an aberration than a hallmark of true American conservatism,” Lighthizer wrote in a Washington Post piece voicing his support for Trump in 2011.

Since accepting the nomination to serve as Trump’s Trade Representative, Lighthizer has reinforced his support for Trump’s anti-trade “America First” policies.

Froman, a former treasury department chief of staff, assistant to the president and deputy national security adviser for economic affairs for both Clinton and Obama, had served as trade secretary since June of 2013 and actively worked toward free trade agreements. Froman has said that establishing free trade agreements allows U.S. industries to profit from their surpluses, and it allows businesses to offer their services globally. At the same time, Froman has said, free trade agreements help level the global playing field for U.S. businesses.

Renegotiating NAFTA

Lighthizer: Just days he was approved as U.S. Trade Representative, Lighthizer sent a letter to the U.S. Congress announcing his intention to reopen NAFTA negotiations. While the letter did not include details of the goals of the renegotiation, or mention Trump’s previously stated objectives in renegotiating the treaty, Lighthizer has said NAFTA has benefitted U.S. agriculture and investment services, but has harmed manufacturing.

Additionally, he said:

The 23-year-old trade agreement needs to be modernized to address digital trade, intellectual property rights, the rules for state-owned ventures, regulatory practices and environmental and labor regulations.

Froman acknowledged that NAFTA needed to be updated, but he said provisions in the Trans-Pacific Partnership addressed NAFTA’s blind spots. With Mexico and Canada on board for the TPP, issues left out of NAFTA, such as energy, investor protections and intellectual property rights, would have been hashed out. The now-abandoned TPP made renegotiating NAFTA irrelevant, according to Froman.

Addressing trade with China

Lighthizer: When it comes to challenging China on trade, Lighthizer has been known to use strong language. He has said that U.S. policy allows China to “rig trade in its favor” to support a $270-billion trade surplus with the United States. Lighthizer has accused China of currency manipulation, intellectual property theft and employing unfair trade subsidies. To address this, Lighthizer has said he will appeal to the WTO to use its laws to address Chinese trade violations. Trump, meanwhile, has threatened a 45% tariff on Chinese imports as a way to lessen the trade deficit.

Froman largely viewed the TPP as a strong stance against Chinese trade dominance in Asia. By negotiating the TPP, Froman said, the United States would be able to set trade standards for the region. Withdrawing from TPP would have “broad and deep consequences, both economic and strategic,” Froman has said, as it leaves China to create its own trade bloc within the region.

Withdrawing from the TPP “would be the biggest gift any U.S. president could give China,” Froman stated.

Of course, Trump announced U.S. withdrawal from the agreement as his first executive action after being sworn into office in January, 2017.

Can we expect a tempered approach?

While Lighthizer is unabashedly protectionist on his approach to trade, many trade industry experts, including those who know him personally, have said Lighthizer could be the force needed to temper Trump’s aggressive “America First” policies. After all, Lighthizer has spent his career as a trade attorney, putting trade theory into practice, and he does have experience under Reagan negotiating bilateral trade agreements. That means that while the United States’ current trade rhetoric is a marked change from the past, U.S. trade in practice may continue to be one of globalization, albeit more measured.

The post FACEOFF: How does a new U.S. Trade Representative shift the country’s approach to trade? appeared first on Trade Ready.

Although the RCEP has been in negotiation for several years, its significance has increased sharply following the decision by President Trump to pull the United States out of the Trans-Pacific Partnership on his third full day in office.

The TPP was signed on February 4th, 2016, involving 12 nations including the United States. However, there was a major disagreement between the Obama administration and the Trump administration about whether or not the TPP is favorable for America.

The result is that America has now pulled out of the TPP. Following America’s exit from the agreement, the RCEP has the potential to replace it as the dominant trade deal in the Asia-Pacific region.

Who would be included in the RCEP?

While the deal has not been finalized yet, the following nations are all said to be potential members of the RCEP.

South Korea                             Singapore

Japan                                        Brunei

China                                        Thailand

India                                          Indonesia

Myanmar                                  The Philippines

Vietnam                                    Australia

Cambodia                                 New Zealand

These 16 nations have a combined population of 3.27 billion people, or 46% of the world’s population, and a GDP of approximately 19.2 trillion dollars – 24% of global GDP.

What are the most significant implications of the deal?

One of the most significant implications of the RCEP is that the world’s two most populous nations, India and China, would be involved in a large trade bloc. Neither of these nations are a part of the TPP.

The RCEP is set to cover trade in goods, services, and investments, intellectual property issues, economic and technical cooperation, dispute settlement, competition, and a number of other concerns. This deal would be a landmark trade development in the western Pacific region.

The RCEP covers many of the same issues as the TPP, but does not contain as stringent protections for human rights, labor, and the environment as the former agreement.

Ultimately, the RCEP could create one of the largest free trade zones ever enacted and lead to an unprecedented amount of trade activity between member nations. However, both workers and the environment may not enjoy the same protections as they would have had in deals like the TPP.

China and America are moving in opposite directions on free trade

The greatest driving force behind the RCEP appears to be the fact that the leader of the United States believes that it is not beneficial for the country to be involved in enormous multilateral free trade deals, unlike China.

In fact, President Trump campaigned on a platform of opposition to both the TPP and NAFTA, a free trade agreement between the United States, Canada, and Mexico. President Trump even went as far as to call NAFTA “the worst trade deal the U.S. ever signed.”

Trump’s primary opposition to free trade deals is that he believes American workers are losing too many jobs to cheap outsourced labor. In other words, he wants to keep more jobs inside the U.S. Trump has also accused China of currency manipulation, and has stated that the U.S. needs to be reimbursed more for the security it provides around the world.

A combination of all of these things means that the world of international trade could see some major shifts. The U.S., the nation with the world’s largest economy, looks likely to take a much more protectionist stance on trade in the near future.

Perhaps because many jobs flow there due to cheap labor, China appears to be very open to free trade. China has the world’s second largest economy, with a GDP of $15.26 trillion (2016). Considering that Japan has the third largest, and India has the seventh largest, a trade deal involving all three of these nations could be very powerful.

What does this mean for the future of international trade?

The RCEP has not yet been formally signed, but there is a good chance it will go through. In fact, Ganeshan Wignaraja, an advisor with the Asian Development Bank, said “An RCEP agreement seems probable in 2017 due to intensified negotiations.”

So, in the near future, the Pacific region could be dominated by a free trade haven that connects India and Australia with China and many other Asian nations, while the United States adopts increasingly protectionist measures on the other side of the Atlantic.

Countries who wish to trade with the United States in this new era could find themselves facing a new barrage of tariffs, taxes, and duties. It may also be significantly more difficult for American companies to outsource jobs to Asian countries, as the Trump administration looks for continued ways to protect American jobs at the expense of new multilateral trade deals, which would have the potential to create new jobs both in the U.S. and in other countries.

Whether or not other Pacific nations such as Mexico and Canada will ever join the RCEP is yet to be determined. However, if Trump also pulls the United States out of NAFTA, then these two nations may be eager to seek new free trade deals and look to the RCEP in its place.

By pulling out of the TPP, President Trump claims to be doing what he believes is in America’s best interest. However, it was estimated that the TPP could have brought the country an extra $77 billion in revenue per year. So, in order for America to make up this lost revenue, it will have to bring in a substantial amount of money from tariffs, and keep a   jobs in the country.

The tectonic plates of the international trade world are shifting. Once key decisions are made about the RCEP and NAFTA, the trade landscape could be entirely redefined, creating a whole new set of parameters for companies to consider as they do business internationally.

The post What is the RCEP and how could it affect global trade? appeared first on Trade Ready.

To some degree, that answer has to be yes; but not entirely.

Washington goes bilateral

For decades, trade policy has been led by Washington. No other capital has had a bigger influence on global commerce. Being the largest economic, military and geopolitical power certainly means that any major shift in U.S. trade policy will impact global trade policy as well.

This is seen most clearly with the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP). President Trump has already withdrawn from the TPP, though that doesn’t mean the deal is wholly dead (more on that below). If we extend his logic on the TPP to the TTIP, as investors would be wise to do, that agreement between the U.S. and the E.U. is likely at the end of its road as well.

Under President Trump, Washington has indeed gone bilateral. Trump decries multilateral trade deals as bad for America. His focus, he says, will be on establishing bilateral trade relations and negotiating from a position of strength. He thinks the U.S. can get better deals for its workers that way.

After all, the U.S. is the biggest economy in the world, and it can easily overpower many other countries in bilateral talks. The U.S. negotiators will have an enormous amount of leverage in bilateral negotiations, even with other major economies. By contrast, American bargaining power often decreases when it is negotiating with multiple countries, as was the case with the TTIP and the TPP.

NAFTA’s future is more certain than either the TTIP or the TPP, since it is an existing, entrenched trade deal. With established links and interests, it will be much harder to nix the regional pact. However, a renegotiation is almost certainly going to occur. Donald Trump’s re-election depends on it—he won office because of votes in the Rust Belt, and those voters feel passionately that NAFTA should be scrapped or renegotiated.

NAFTA renegotiations will be an historic challenge for Ottawa. While America’s sights are largely set on trade with Mexico, Canada needs to brace itself for what could be a rough ride as well. Though trade with Canada almost never made its way into a Trump campaign speech, complacency will not serve our policymakers.

Is the TPP dead?

There were two major players in the TPP negotiations—the U.S. and Japan. It was commonly believed during the negotiations that if either of those two countries failed to ratify it, the deal was dead. While Japan ratified the pact, the U.S. will not.

However, that doesn’t mean the TPP is dead per se. Australia is pushing for the deal to continue without the U.S., though this is unlikely. Even if the deal doesn’t get ratified and the TPP is gone in name and country make-up, many of the innovations that came from it may find their way into future trade deals. The TPP was often heralded as the new gold standard for trade—these ideas don’t go away with the end of the pact. Expect to see some of those processes replicated in future deals.

Is the world following the U.S. to bilateral trade?

As Washington pivots away from decades of multilateral trade policy, will the rest of the world follow? To some degree, they will be forced to. Countries that want a trade deal with the world’s largest market will be forced to negotiate bilaterally with the U.S. This includes Japan and the U.K.

However, there is no evidence yet that the rest of the world will only negotiate bilateral deals with other countries.

In Asia, China is still pushing the Regional Comprehensive Economic Partnership (RCEP), which consists of 16 Asia-Pacific countries. Furthermore, ASEAN countries are continuing their economic integration.

Multilateral trade isn’t dead in Europe either. After Trump’s election, Canada and the E.U. ratified the Comprehensive Economic and Trade Agreement (CETA). The United Kingdom, too, is keeping a multilateral E.U. trade deal on the table in its Brexit negotiations.

Nevertheless, there are still storm clouds for multilateral trade in Europe. While the TTIP has not been officially abandoned, anyone who took in Trump’s rhetoric on the TPP cannot imagine he supports the E.U. deal.

The TTIP is further complicated by an E.U. election calendar which is not favourable to the agreement. Over the coming years, France and Germany (the major E.U. players) will both have elections in which populist candidates are either leading in the polls or rising in popularity. The result is that French and German mainstream leaders will be forced to make concessions. While they are unlikely to abandon the TTIP altogether, they may have to tamp down enthusiasm and make some changes. Of course, the victory of right-wing populists in either country could kill the deal as well.

There is no doubt that Donald Trump’s election will change world trade, marking a break from the multilateralism that has become popular in recent decades. However, there is currently no evidence that the rest of the world will shift its policy framework just yet, placing the U.S. at odds with many other countries over the future of international free trade.

The post Does the Donald Trump era mark the end of multilateral trade? appeared first on Trade Ready.

Global trade is not your great-grandfather’s trading post anymore. Sure, we’ve always had trade. In fact, we’ve been trading for as long as we’ve been civilized. But up until more recently, there were a lot more of what I call “gentlemen’s agreements” (informal agreements between countries) than formal FTAs like CETA and NAFTA.

In today’s global trade environment there are also government policies to grapple with; and if that’s not enough to navigate, there are the near-constant changes in government that also affect trade agreements.

Changes in government, such as the outcome of the recent U.S. election, can also bring major shifts in policy, like President Trump’s rejection of the TPP free-trade deal.  Now, we know change isn’t always a negative thing, as sometimes it can bring opportunity. But sometimes it can also bring uncertainty, which is not a good scenario for those engaged in expanding their markets.

Imagine, people running around aimlessly making ill-informed decisions, decisions made out of fear and panic. DON’T PANIC.

So, what does this mean for North American businesses?

U.S. companies are looking for clients in their own domestic market, because of the uptake in the “buy local” movement and uncertainty elsewhere. Conversely, companies in other markets, such as Canada, are looking to diversify their markets, and quickly, in order to protect their revenue stream.  After all, at $350 billion in exports, the U.S. is Canada’s biggest trading partner by a landslide (Canada’s second biggest trade partner is the EU at a distant $40 billion). If they’re not buying, we must quickly find who is, to sustain our economy.

Take Atlantic Canada, for example. If the U.S. steers sharply to the “buy local” movement, who is going to buy our steady demand of seafood, lumber, agri-food, oil/energy, metal ore, and manufactured goods?  If we can’t export across a land border, because of new duties or restrictions being imposed, what does that do to the cost of exporting across an entire ocean?

Even for agreements that have not been squashed, such as CETA (between Canada and the European Union), the phasing out of tariffs will take several years. Our major industries will have to figure out how to restructure themselves quickly to rely less on the movement of exports across U.S. borders.  And it’s not just the movement of exports that is affected, but also the movement of people and labour.

Yet, as we concern ourselves with our volume of exports, with an aim to increase that volume to create jobs, we also need to think about the volume of imports.

Ideally both will be increasing, because an expansion of two-way trade means that we are nurturing not only our own job-creating industries, but also our consumers, whose standards of living are improved when they have a wealth of affordable imports to choose from.

Protectionism only hurts those it aims to protect

Falling back into a mode of protectionism is a bad idea.  First of all, who pays the cost of any tariffs we impose on imports?  It is our own consumers who are punished with higher costs.  Secondly, if we are depending on making imports pricier (or on making our currency cheaper) to support an increase in export manufacturing, we must remember that we are also increasing the prices that our manufacturers must pay for any imported inputs into their production process.

The interplay of global trade in supply chains has become so important that we should be careful not to shoot ourselves in the foot as we attempt to give ourselves a boost up.

On the other side of the Atlantic, the Brexit disrupted global markets, including currencies, and caused the British pound to fall to its lowest level in decades. On the bright side for Canada, this could create an opportunity for Canadian exporters to fill the void in the EU left by Britain’s exit. Assuming that the EU boycotts Britain’s exports, currently valued at £130 billion (compared to Britain’s exports to non-EU valued at £170 billion), this may also open a door for Canada to grow their exports to the EU.

In times of uncertainty, stay balanced

It seems clear we are entering what may be a difficult era in global trade, perhaps even of trade wars and currency wars, where many economies are convinced they must export their way to prosperity.  But danger lies in the fact that rewarding protected industries and their employees may involve punishing the citizens at large, with higher prices and fewer choices.

It is a complex balancing act, one often oversimplified by politicians and economists alike.  And any balance is subject to dramatic shifts as oil and commodity prices rise and fall, exchange rates shift, potential recessions and financial crises loom, and robotics and technology take their toll on some traditional jobs.

The post Today’s shifting global business environment – a view from Atlantic Canada appeared first on Trade Ready.

1. Take the China trade talks seriously

The Chinese market is the second largest in the world, and the country’s growing middle class ensures that firms with market access could strike gold. China watchers were therefore delighted when International Trade Minister Chrystia Freeland announced she would hold meetings with Chinese officials to explore a free trade agreement (FTA) between our two countries.

This is a great opportunity, but we have to keep our eye on the ball—talks will take a long time and the Chinese are known to be tough negotiators. Furthermore, with the world at Beijing’s doorstep looking for business, other markets are competing for China’s attention. We need to constantly show Beijing that we mean business on trade.

Canada can do that by devoting serious attention from senior leaders. Minister Freeland needs to be actively engaged in the process. That means regular meetings in Ottawa, and regular trips to China. Frequent high-level meetings in Ottawa will help us flush out our negotiating position and ensure we are adequately prepared for intense discussions.

Regular visits to China will show Beijing that we are serious about trade with the world’s second-biggest economy. It will demonstrate that an FTA is at the top of our bilateral agenda, and that it should be at the top of theirs as well.

That being said, there is only one person in Canada who can give the real symbolic credibility that the free trade talks need—Prime Minister Justin Trudeau.

The prime minister will need to “own” the China trade talks in the same way that Brian Mulroney took ownership of NAFTA.

The PM will need to meet regularly with ministers and public servants, passionately communicate the potential of such a deal to Canadians, and keep in touch with Chinese leaders on the subject.

Prime ministerial ownership will provide real benefits to the talks. It will speed them up by giving them CEO-style leadership that will demand accountability from ministers and public servants, while bringing in a broader strategic view that only the head of the Cabinet can provide. But prime ministerial ownership will also be highly symbolic—Beijing will notice and take Canada seriously in the negotiations.

2. Advocate for the TPP

A large part of the Canadian trade discussion since the Great Recession has been about diversification away from the U.S. market. The Trans-Pacific Partnership (TPP), the mega-trade agreement between Canada and eleven other Pacific Rim countries, was an integral part of that strategy – but it now faces an uncertain future.

The agreement’s two major economies, the U.S. and Japan, are at odds over its implementation. Despite domestic opposition, Japanese Prime Minister Shinzo Abe is still pushing for the trade deal.

With the election of Donald Trump, the American position on the TPP is uncertain. Though President-Elect Trump has stated his opposition, TPP leaders still hope he will change his mind.

Though Canada’s federal government has not confirmed whether it will implement the TPP, Minister Freeland did sign it last year, indicating the government is not wholly opposed to the FTA. Canada can still join Abe and other TPP leaders in putting pressure on the Trump Administration to back the deal.

With Donald Trump already reversing some of his campaign pledges—such as the Muslim immigration ban and the undocumented immigrant mass deportation force—there is a chance he could change his position and support the TPP (though he would likely have to seek modifications in order to save face with his base). It is by no means certain, or even likely, but it is distinctly possible that the TPP could still be a reality in 2017. Canadian leaders should push for it.

3. Re-start trade talks with Japan

As mentioned above, the TPP could still be implemented, but it is very far from certain. The Canadian government should resolve to defend our interests in the event that the TPP is not implemented. And that means going after the big gem among the TPP signatories: Japan. Canada already has a free trade agreement with the U.S., so the prize for Canadian businesses in the TPP is access to the Japanese market, the third-largest in the world.

If the TPP falls through, Canadian leaders, including the prime minister, need to utilize all that Canada has gained from the TPP negotiations, and apply these assets to immediate free trade talks with Japan.

These assets—contacts between officials, goodwill from negotiations, knowledge of the Japanese market gained through the talks, corporate contacts, etc.—are only good for so long. Officials retire or get shuffled, and agenda items get moved down the priority list as time moves on. The Canadian government needs to utilize its public service and business contacts in Japan now.

While any bilateral FTA talks will clearly be different in substance than the multilateral TPP talks (in which Japan was admittedly more focused on the U.S. than Canada), the foundations are there and the connections are too. Talks have stalled in recent years, but the potential demise of the TPP could provide a boost to bilateral efforts.

Canadian leaders should take advantage of this window of opportunity in 2017 and begin negotiations for a bilateral FTA that gives Canadian businesses access to the large and developed Japanese market.

If the government makes these three resolutions, it can deliver market access for Canadian businesses and growth for the Canadian economy.

The post 3 New Year’s resolutions for Canada on Asian trade appeared first on Trade Ready.

A new year means three things: lots of people are going to sign up for gym memberships they won’t use in three months, others will keep writing the wrong year on all their correspondence, and of course there are a plethora of new trends and predictions to look out for in the year ahead.

We’re going to focus on the last of the three.

What should you look out for or expect in the international business world in 2017? Let’s take a look and see what could be dominating the headlines you read over the next twelve months.

1. The future of the EU

The outlook for the EU is grim for 2017. UK Prime Minister Theresa May is expected to trigger Article 50 to begin the formal process to leave the EU, and Italy’s recent referendum has brought the country’s support for the union into question.

France and Germany also both face elections in 2017, which could result in new anti-EU governments who may want to follow the UK’s example.

If the UK, Italy, France and Germany are all led by Euro-skeptics by the end of 2017, the entire future of the EU will come into question.

2. U.S. trade under Trump

During the 2016 election, Donald Trump’s claims for his presidency ranged from refusing to sign the TPP and leaving NAFTA, to setting prohibitive tariffs on imports from China and Mexico.

While many have speculated that some of his proposals, most notably the sizable tariffs on China and Mexico, would be illegal according to WTO rules, it remains to be seen how closely his rhetoric will match his actions on trade.

Whatever he does, positive or negative, will affect countless American and international businesses.

3. Technical innovations in agile manufacturing and last-mile delivery

The ability to create manufacturing parts or entire products with nothing more than a computer and a 3D printer gives companies far greater agility in their manufacturing efforts, and offers opportunities for rapid innovation.

Drones are offering the possibility of rapid delivery to customers. While most tests have been focused on home delivery, some have even experimented with using GPS tracking to deliver directly to people based on their phone location, wherever they may be at the time.

Both technologies, as well as several others, are still in their infancy, so 2017 could be a year of major breakthroughs.

4. Big mergers between major trade companies

While 2016 did not match 2015’s extraordinary number of massive mergers and acquisitions (three mergers and acquisitions deals worth over $100 billion USD were completed in 2015), there were still several notable deals. These included chemical company Bayer’s purchase of Monsanto for $66 billion USD, pharmaceutical specialists Shire buying Baxalta, and Microsoft’s recent $28B purchase of LinkedIn.

2017 is expected to match 2016’s rate of M&As, with pharmaceutical/healthcare, telecoms and finance among the industries that are most likely to see big deals. Will any of them affect your business or your industry competitors?

5. Blockchain in trade finance

Blockchain could be a true game changer in the world of international trade, allowing buyers and suppliers to make online transactions accurately and securely without involving middlemen.

While it has so far been used mainly for Bitcoin transactions, it has the potential to transform supply chains, and revolutionize trade finance.

If corporations begin to use the technology more frequently throughout 2017, it could be the beginning of a new era of global trade transactions.

6. Thinking smaller

Micro-targeting in marketing efforts, product adaptation, and market entry has been an increasingly hot trend over the past couple of years, empowered by the collection, analysis and optimization of oodles of data.

Thinking small comes from a customer-centric approach to business, focusing on building experiences for customers that are as personalized and responsive as possible. These efforts can really pay off in client satisfaction, leading to repeat business and brand loyalty, and can increase purchasing frequency.

As analytics, customer management software and automation get more sophisticated, we will see this trend grow into 2017.

7. The future (or lack thereof) of free trade agreements

2016 was a big year for free trade agreements, with major developments in deals that have been in negotiations for years.

The Trans Pacific Partnership (TPP): The 12 member deal, officially signed by all parties on February 4, 2016 will go into force once ratified by all signatories by February 2018. However, incoming U.S. President Donald Trump has said he will not ratify the TPP and has also threatened to tear up or renegotiate NAFTA, throwing the future of both FTAs into question in 2017.

The Transatlantic Trade and Investment Partnership (TTIP): In negotiations for almost a decade, this FTA between the U.S. and EU has met fierce opposition from American and European citizens. The U.S. considers the deal a companion to the TPP, and with President-Elect Trump coming into power early in the new year, and the EU going through some major upheaval, this deal is also being thrown into question.

Comprehensive Economic and Trade Agreement (CETA): Canada’s Minister for International Trade, Chrystia Freeland made headlines in October 2016 after she arrived in Belgium to sign the Canada-EU treaty, only to be informed that the EU could not sign due to opposition from the region of Wallonia. The intra-Belgian disagreement was quickly resolved and the agreement was signed on October 20, 2016. CETA is now awaiting ratification from all parties over and could begin to be implemented early in the new year.

WTO Trade Facilitation Agreement: The TFA contains provisions for expediting the movement, release and clearance of goods, sets out measures for effective cooperation between customs and other authorities on trade facilitation compliance issues and contains provisions for technical assistance and capacity building among signatory nations. Negotiations concluded on the WTO TFA in 2013 and 103 nations have now signed on to the agreement, most recently Canada on December 16, 2016. With only seven more nations needed to ratify the agreement before it is officially implemented, we could see some new developments in 2017.

8. The growing world of e-commerce and drop shipping

According to analysts, online sales will increase from $335 billion in 2015 to over $523 billion in 2020, a rise of almost 10% per year, though the current annual growth rate is actually closer to 14%.

Brick and mortar retailers’ worlds have been rocked by the skyrocketing success of online shopping. E-commerce leaders are making strides in optimizing their strategies and will continue to do so into 2017. Many are predicting the end of frenzied buying on traditional shopping holidays such as Black Friday and Cyber Monday, as an increased focus on real-time customization takes over.

We’ll have our eye on the blossoming arts of predictive data analysis, the Uber-ization of shipping and an increase in the use of artificial intelligence in this area into 2017.

9. Future of ocean shipping

More than 90% of internationally traded commodities are transported over an ocean. In 2017, we expect to see strides being made in the use of automated “smart ship” technology, major increases in port capacity and changes to global shipping routes.

2016 has been a year of turmoil and challenges for the shipping world, with mergers, bankruptcies (Hanjin is still fresh in of our memories), port strikes and trouble filling ships to capacity. But into next year opportunities abound for innovative shipping companies.

10. The importance of professional certification

The trend of increasingly competitive job markets is one that won’t be going away in the year ahead. It will continue to be important to stand out from the crowd of applicants seeking work in 2017. According to Credforce, studies show that 94% of HR professionals will make some form of professional certification for specialized personnel, making skills validation through designations more than just an asset next year.

In the past year we have seen an increase in employers and government departments increasing funding available for employees to gain certification and this is a trend we see sticking around.

The post 10 global trade trends we’ll be watching in 2017 appeared first on Trade Ready.

Following the global trend for political change, the United States elected a candidate Tuesday who has promised to shakeup both the political and economic fabric of the country. Donald Trump has promised to reform his country’s approach to global trade, claiming that he can revive the American economy by bringing back jobs that America has, for decades, exported to other countries. In consequence, those looking to enter the U.S. market may find protectionist measures which will create challenges in bringing their products into the country.

Here are five ways Trump is expected to change the landscape for global importers and exporters:

1.     Pulling out of NAFTA

Trump has said that one of his first targets for reform upon taking office would be the decades-old North America Free Trade Agreement. In fact, Trump’s plan for his first 100 days in office lists the dismantling of NAFTA as a priority.

Ripping up NAFTA could have a serious effect on companies that trade across the Canadian, Mexican and U.S. borders. Since NAFTA was enacted in the 1990s, trade between the United States, Mexico and Canada has tripled, growing faster than the U.S. trade with any other country.

Should NAFTA be eliminated or reformed under the Trump administration, North American exporters in the agriculture, automotive or textile industry will find themselves navigating a new terrain as they work to keep their business models thriving while facing additional trade barriers.

Some have speculated that repealing NAFTA would still leave the Canada-U.S. Trade Agreement (CAFTA), NAFTA’s predecessor, in place. However, it remains to be seen whether this would be the case, and whether Canadians may still continue to enjoy freer trade across the U.S. border.

2.     A pull-back on other trade deals

NAFTA isn’t the only trade deal the President-elect has promised to go after once in office. Trump has said he will reject other trade deals the United States is considering, such as the hotly contested Trans-Pacific Partnership (TPP) and TTIP.

That means that companies importing and exporting across the Pacific will be looking for alternatives to the trade paths that would have been created by the 12-nation deal. Even if they maintain current plans, they will face greater obstacles than expected and may have to revise their business and financial plans accordingly.

In recent decades, companies have enjoyed a global environment that’s been favorable to trade. Borders have been opened to allow goods to flow more freely and easily between countries. If Trump, as president, takes the strong stance against trade deals he has promised during his campaign, companies who do business globally may need to re-evaluate their current plans for international markets and expansion.

3.     Change in the overall global trade environment

Trump has promised to challenge countries whose trade practices are questionable. That could include countries that are subsidizing exports or dumping high volumes of goods into the market. An aggressive approach to international trade compliance by the United States would mark a change that stands to disrupt the entire global trade system.

The U.S. government has largely turned a blind eye to such practices since the 1980s, when Pres. Ronald Reagan took a hawkish approach to international trade. Since then, most administrations have failed to confront countries or companies for such practices because it can be hard to prove and put a strain on diplomatic relations.

When countries take an active stance against one another on trade, it ensnares the companies trading between those nations in the disagreement.

When Pres. Obama imposed tariffs on Chinese tires, China retaliated by enacting heavy tariffs on American automotive parts and poultry entering the country. When faced with unfavorable trade positions by the U.S. government in the past, China also has penalized U.S. automakers and Boeing by favoring their European counterparts.

For countries that trade in markets that are likely to face challenges from the new U.S. government, particularly China, it may be time to start considering risk mitigation. Researching which companies or industries were involved in previous disagreements could also be a helpful step to determine whether your company may be affected.

4.     Stagflation and recession

Since trade is tied so closely to the U.S. economy, measures that make exporting and importing more difficult could have a negative effect, leading to a lack of economic growth and even an eventual recession.

Seven percent of U.S. jobs and 14 percent of the United States’ GDP depend on exports, according to a Morgan Stanley report. Therefore, a shakeup of U.S. trade deals could put these American jobs, as well as corporate bottom lines, at risk.

Lawrence White, an economics professor at New York University’s Stern School of Business stated:

Mr. Trump’s anti-international trade posture would be not good for the financial prospects of probably the 1000 leading companies in the U.S.

Economists have said that Trump’s rejection of trade deals could also lead to a higher cost of goods within the United States. That inflation could lead to higher interest rates and other economic woes that will ripple across the country and could lead to a recession.

Currency declines could create an opportunity for U.S. exporters to present more competitive prices, but if countries implement retaliatory measures in the form of tariffs, both importers and exporters could face a hard time in the years ahead. Preparations to face these times, including greater monetary reserves, slower expansion strategies, and more risk-averse trade finance strategies, are strong options for businesses concerned about their long-term viability.

5.     Uncertainty in the first 100 days

Markets never fail to falter when there’s an air of uncertainty. Perhaps the biggest difficulty in trade that Trump’s election will cause is the degree of disruption caused by his promise to shake up U.S. trade deals.

In the near future, importers and exporters might struggle to make new business deals from and with the United States. America’s international businesses may have trouble selecting new suppliers or forging new trade routes, as the global trade landscape transforms during Trump’s first 100 days in office.

How has this historic election affected your business plans?

The post 5 ways importing and exporting will be more challenging in Trump’s America appeared first on Trade Ready.

I come from a long lineage of autoworkers. Approximately half of my family works for one of the Big Three automotive manufacturers in Canada (GM, Ford and Chrysler).

As a result, I have long heard about how free trade agreements are detrimental to manufacturing workers and how beneficial the Auto Pact (signed by Canada and the U.S. in 1965) was for everyone.

Whenever my dad would mention the Auto Pact, I would roll my eyes and claim union brainwashing on his part. My response was always something along the lines of, “Well, the WTO deemed it illegal so obviously it wasn’t that great!” In 2001 they ruled that the pact unfairly hindered efforts by European and Asian automakers to sell their vehicles in Canada.

The Canadian Big Three labour contract negotiations began again this past September. Once again, talks about the Auto Pact began making its way into social media posts from autoworkers fed up with the race to the bottom.

I had never stopped to look at the Auto Pact or trade agreements from the viewpoint of someone that wasn’t involved in the trade industry. It would be very difficult to have almost two decades of international trade experience, as I do, without being pro-trade.

It was time to take a more detailed look into the Auto Pact and see why this was so favourable to autoworkers. I also wanted to try to understand why they view trade agreements as the downfall to their livelihood and how this can be changed.

What was the Auto Pact, and how did it impact trade today?

The Auto Pact guaranteed duty-free imports and exports of vehicles produced by the Big Three manufacturers across the Canada-U.S. border, so long as specific criteria were met.

For every import of a certain class of vehicle into Canada, a vehicle of the same class had to be manufactured in Canada to maintain the same production ratios as before the Pact. The ratio was 1:1 for passenger vehicles, 0.75:1 for trucks, and 0.55:1 for buses.

The vehicles also required a minimum amount of Canadian Value Added (CVA) in its local production to count as being made in Canada. These amounts were 60% for passenger vehicles, 50% for trucks and 40% for buses.

This agreement worked well for all involved. The Big Three companies could import and export their products across the Canada-U.S. border duty free, and the auto assemblers knew that for each vehicle that was imported, they would be manufacturing a vehicle of their own for export.

No matter what you think of it, free trade is on the rise

I began to examine job losses and gains in both Canada and the United States since the implementation of NAFTA. NAFTA superseded the Auto Pact, which was already on its way to being deemed illegal by the WTO.

There have been approximately 540,000 manufacturing jobs lost in Canada and 682,900 lost in the United States since NAFTA went into force. Although there have been significant gains in employment, most of the high paying jobs that were once available in manufacturing during the height of the Auto Pact have been replaced by precarious service industry jobs with much lower rates of pay. It does not take an international trade consultant to tell you that many of these once high paying manufacturing jobs have gone.

Many people have blamed the loss of these jobs on free trade agreements like NAFTA. This is because a significant portion of the jobs have been moved to countries with which Canada has a free trade agreement, such as Mexico.

Canada currently has trade agreements with 15 countries, and is concluding negotiations or awaiting ratification with the European Union (CETA), the TPP and Ukraine. The Canadian government is currently in negotiations with another seven countries for trade agreements, and an additional seven countries have begun exploratory discussions with Canada.

Despite the many arguments made against these agreements by workers and others, it would appear that the Canadian government is aiming to be a part of as many trade agreements as possible.

Who benefits from free trade most, and is it worth it?

From a business standpoint, I encourage trade agreements and believe they are beneficial to our economy. After all, it is how I make a living. But at what point does the cost of trade agreements for some outweigh the benefits for others?

There are many new facets to trade agreements that go much further than the simple elimination of trade barriers between countries. In my opinion, however, that is all that a trade agreement should encompass: the eventual elimination of barriers to trade.

Unfortunately, what we have seen more and more in these agreements is that, as Martin Khor, Executive Director of the South Centre describes it, “trade measures have become a vehicle for big corporations and social organizations in promoting their interests.”

Governments are giving corporations and lobbyists too much stock in consultation of trade agreements, while those working in manufacturing in North America often do not have the same consultation opportunities and are largely ignored. Lines seemed to have blurred between government and big business, which is one of the first things that needs to be changed.

A simple solution to end the “race to the bottom”

After the regional value content requirements in the Auto Pact, other trade agreements like NAFTA and the TPP have included similar language. However, the required regional value content requirement amounts are getting further and further from responsible trade tactics that benefit both consumers and manufacturers.

All of this has brought to mind a simple solution to the issues that stem from trade agreements and the “race to the bottom” for workers. Those who oppose trade agreements argue that inequalities between countries abound in these agreements, such as companies exploiting cheaper labour, less stringent standards and laws, and the loss of good manufacturing jobs.

My solution seems rather simple when stated but I believe it would be beneficial to all countries involved in trade agreements; start a Global Manufacturing Pact. It would be very similar to the Auto Pact, but allow manufacturers from all around the world to benefit.

This would hold companies who outsource and offshore responsible for keeping manufacturing jobs local. It would also prevent less developed nations to be taken advantage of by developed nations, and eliminate the race to the bottom as there would be no direct competition between the same workers in different countries.

While corporations have benefited greatly from free trade in recent decades, the Auto Pact illustrates that there are ways to enable freer trade while also building a more fair and equitable system for those without corporate lobbyists or shareholder requirements. It is time to make sure that free trade benefits everyone, whether they are a consumer, a corporate professional or even a manufacturing worker.

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