Economic Impact of Canada’s Potential Participation in the Trans-Pacific Partnership Agreement

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Global Affairs Canada Sep 20, 2016

1. Introduction

The Trans-Pacific Partnership Agreement (TPP) is the most significant regional trade agreement that Canada has negotiated since the North American Free Trade Agreement (NAFTA) concluded nearly two decades ago. The twelve countries in the TPP form one of the largest trade areas in the world, accounting for nearly 40 percent of global Gross Domestic Products (GDP). For Canada, the TPP countries as a group would be Canada’s largest trading partner, with more than 70 percent of Canada’s trade and investment flowing through the TPP region. Three of Canada’s top 5 trading partners are located in the TPP area (the US, Mexico and Japan). Moreover, the TPP region includes many partners in the dynamic Asia-pacific region, a region which, for several decades, has been the driving force of global economic growth.

Canada already has free trade agreements with several TPP members including the US and Mexico under the NAFTA, as well as Chile and Peru under the Canada-Chile and Canada-Peru FTAs. The TPP Agreement establishes new FTAs with seven Asian-Pacific countries—Australia, Brunei Darussalam, Japan, Malaysia, New Zealand, Singapore, and Vietnam. Canada’s bilateral trade with these seven partners, including both goods and services, is substantial, at approximately $50 billion annually, and greater than Canada’s current trade with its third largest trading partner—Mexico. The bulk of Canada’s trade with these members is accounted for by trade with Japan—the third largest economy in the world.

This study assesses the potential economic impact of the TPP Agreement on Canada and other members in terms of income gains and new trade and investment opportunities based on the final negotiated outcomes of the TPP Agreement, which was concluded in Atlanta, GA in October 2015. It highlights the projected economic impact that Canada faces if it chooses to be a party to the Agreement, as well as the potential economic impact if Canada opts out of the Agreement, and the 11 other TPP countries are part of the Agreement.

The assessment was carried out using a dynamic computable general equilibrium model to address several liberalization measures under the TPP Agreement: tariff reduction or tariff elimination; services trade and investment liberalization; the establishment of TPP rules of origin in the automotive and textile sectors; and market access under Canada’s supply-management regime.

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