OTTAWA, Dec 11, 2019, Business in Vancouver. The 11-nation Comprehensive and Progressive Trans-Pacific Partnership trade bloc – or CPTPP – has been championed by many in Ottawa in recent months as a ray of hope in an otherwise darkening global trade picture for Canada facing mounting challenges with the United States and China, Business in Vancouver reported.
But a recent report – although re-enforcing the idea that Canadian and B.C. companies need to re-double its efforts to expand in CPTPP markets in the coming years – also showed that the ambitious free-trade zone itself isn’t immune to fundamental deteriorations in the global trade environment if Washington-Beijing ties worsen.
The CPTPP Tracker, a report released by the Asia Pacific Foundation of Canada on Tuesday, shows that since the agreement went into effect on Dec. 30, 2018, Canadian exports to the other 10 countries in the trade zone actually decreased 3% in the first three quarters of this year (compared with the same period last year) to reach $19 billion in value.
Researchers who worked on the report said the results “must be analyzed within the context of the unrelenting trade war between China and the United States,” with trade deceleration in CPTPP markets like Japan and Mexico closely linked to downturns in the Chinese economy and American protectionist policies. Such a phenomenon means that, while China’s slowdown is putting the breaks on the rest of Asia Pacific’s exports, the U.S. market is not replacing that lost demand.
“The report really exposes the fact that CPTPP countries are heavily influenced now by the U.S.-China trade war,” said Grace Jaramillo, program manager at the foundation’s Business Asia team and a researcher on the report. “And that is causing sluggish economies across the Asia Pacific. It is slowing market demand across the board, and that’s why Canada’s performance has been sluggish within this new enterprise.”
The CPTPP Tracker for 2019 also showed that – despite the agreement being an 11-nation block connecting Canada to parts of East Asia, Southeast Asia, Oceania and Latin America – an overwhelming 82% of Canadian exports within the trade zone are with three countries: Japan, Mexico and Australia. Of those, Canada’s free-trade relations with Mexico stemming from NAFTA outdate the CPTPP by several decades, while Australia shares many similarities to the Canadian market owing to both being Commonwealth members. Japan, meanwhile, has already been among Canada’s top-three trade partners for decades.
There is some optimism for diversification, however; the report also shows Canadian exports are growing faster in other CPTPP markets like Malaysia, Vietnam and New Zealand, meaning that the distribution of Canada’s trade within the bloc may shift in the coming years if growth trends can be maintained.
Jaramillo added that, despite the results in Canada’s first year as CPTPP member not being optimal, it also highlights the opportunity for Canadian goods in these markets. For example, despite Canadian export still heavily skewing towards raw, primary products instead of value-added goods that embeds Canada deeper into global supply chains, machinery exports to the rest of CPTPP did rise by 10% in the first three quarters of 2019, by a total value of $213 million to reach $2 billion.
With primary products hard-hit by value-added sector slowdowns in other markets (the tracker showed Canadian base metal exports to Japan being cut in half so far this year because of the latter market’s automotive downturn), this presents a guideline for where Canadian officials should point their targets in the coming years to maximize benefits from CPTPP membership, Jaramillo said.
“Quite the contrary, we shouldn’t be looking less at CPTPP because of the data,” she said. “Because of what’s happening in the U.S. and China, we should look at these markets like New Zealand and Chile… Our goal here is to show the numbers to policy makers so that they can understand what the situation is, as well as how we can make in-roads into some of these markets.”
Tags: Australia, Canada, China, CPTPP, Japan, Malaysia, Mexico, New Zealand, USA, Vietnam
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