Opinion: As the world sours on free trade, Canada’s Asia-Pacific pact seems a relic of a bygone era

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Jeff Mahon is director of geopolitical and international business advisory at consulting firm StrategyCorp and an executive-in-residence at the Canada West Foundation.

Trade ministers from across the Pacific were in Vancouver this week for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership ministerial meeting. It came at a precarious moment as the future of rules-based international trade is under pressure. With the incoming Trump administration threatening crippling tariffs, Canada cannot mask the risk that the CPTPP becomes a relic of a bygone era.

The CPTPP found its genesis in the neo-liberal era that stretched from Ronald Reagan to Barack Obama, during which a consensus tune guided the steady march of globalization. The values and principles that manifested in the CPTPP and other free-trade agreements found willing signatories in advanced liberal-market democracies and underdeveloped economies alike.

This provided for an interlocking convergence of interests as rules and provisions enabled attractive conditions for investment while securing access to international markets – heavily anchored by U.S. demand. For a time, this was deemed a win-win: Advanced-country consumers benefited from cheaper imports churned out by even cheaper labour while emerging countries could bank on export-led growth strategies to drive development.

The CPTPP exemplifies this logic. Britain is joining the ranks of signatories and a growing number of economies seek to follow. The market-access gains are real for Canadian companies and the promise of tried and tested export-led growth strategies will keep some of the less-developed members supportive.

But the CPTPP’s logic no longer fuels U.S. international economic policy. Indeed, given Canada’s need to align with the United States, which manifested in the electric-vehicle tariffs and recent tough talk on Mexico, it may not hold here either.

What makes the situation worse is that the CPTPP isn’t just about expanding the reach of global supply chains. There is also a geopolitical dimension. An underlying impetus was to beat China to the writing of the commercial rules in Asia. The idea was using the agreement to reconcile some of the perceived shortcomings of the World Trade Organization; China would be forced to make new commitments that would limit its ability to intervene in the economy should it seek to join the agreement and benefit from its terms.

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But whether or not the CPTPP is up to snuff in this task is another story. China’s socialist market economy has resisted other attempts to wrestle it into submitting to liberal-market rules. Without the United States to throw its weight around, signatories such as Canada, Japan and Australia are unlikely to tempt fate and consider China’s accession request.

Since the first Trump administration pulled out of the deal in 2017, the agreement has been left sputtering. This fundamental challenge remains: The U.S. is not there to anchor the deal. To paraphrase William Butler Yeats: When the centre cannot hold, things fall apart. The anarchy that has been “loosed upon the world” comes in the form of the emerging economic security regime and its emphasis on protecting the industrial base. The system is at risk of devolving into one where the law of the jungle prevails, and countries fight over productive investment and jobs.

Therefore, the CPTPP – and the broader rules-based trading system – seem to be at cross purposes with the ascendent world view of economic security. This creates a dilemma as the liberal-market democracy signatories want to hold onto the values and principles that the agreement enshrines despite being in tension with the realities driving trade and industrial-policy decisions. For the underdeveloped economies, they’re desperately seeking to keep open pathways to development in a world less friendly to this approach.

This potential breakdown need not be foretold. The values and principles behind the CPTPP and the broader rules-based trading regime still have an attractive appeal. However, Canada needs to think creatively about how to reconcile the demands of economic security with the benefits of rules-based trade in a manner that serves concrete Canadian interests. At a minimum, it’s only prudent to have a plan in case things fall apart further.

One approach could be to focus on sector-specific agreements that target market-access barriers for non-sensitive sectors and embed them within the nomenclature of economic security. For example, it could pursue “food security” agreements with key markets around the world – including China. The EV tariffs made clear that Canada will abrogate from the rules to protect the industrial base; this could tacitly signal that Canada is still open to co-operation in areas of mutual interest.

Canada must harness creative and subtle thinking to quit going down the path of Janus-faced policy making and get a clear-eyed view of the rough beast slouching toward us.