Book launch presentation by Stephen Tapp, Ari Van Assche and Robert Wolfe See more IRPP trade research here: http://irpp.org/research/trade/ Order the book here: https://store.irpp.org/products/redesigning-canadian-trade-policies-for-new-global-realities

1. Canadian Trade Policy
at a Critical Crossroad
Stephen Tapp
Research Director,
IRPP
Ari Van Assche
Associate Professor,
HÉC Montreal
Robert Wolfe
Professor,
Queen's University

2. Keep a long-run perspective
The elephant in the room
medium-term
empirical
analytical
international
interdisciplinary
Our approach to see
the forest for the trees

3. Many anxieties…trade deals a target
automation
precarious work
inequality
immigration
globalizationtechnological change
“middle class” struggles
trade
winner-take-most markets
lax corporate governance
offshoring
reduced worker bargaining power
secular stagnation
trade deals

4. Editors’ main recommendations
1. Develop more inclusive trade policy
Inclusive growth
Inclusive trade
education
competition innovationtaxation
labour
infrastructure

5. Editors’ main recommendations
1. Develop more inclusive trade policy
2. Facilitate resource reallocation

6. Editors’ main recommendations
1. Develop more inclusive trade policy
2. Facilitate resource reallocation
3. Promote international connectivity

7. Editors’ main recommendations
1. Develop more inclusive trade policy
2. Facilitate resource reallocation
3. Promote international connectivity
4. Build a stronger rules-based global
trading system

8. Share of Canada’s goods exports
(2015, percent of total)

9. Only the most productive firms can jump
over the fixed cost hurdle of exporting
(baseline Melitz model)
ExportersNon-exporters
Productivity
Profits
Don’t
produce

10. 9
Trade liberalization reallocates resources
towards more productive firms

11. How the Canada-US FTA raised
our manufacturing productivity
(Mechanisms’ estimated contributions to total)

12. How the Canada-Chile FTA
increased our exports
(Mechanisms’ estimated contributions to total)

13. Policy pillar:
Facilitate resource reallocation
1. Resource reallocation is the main
mechanism through which trade
triggers growth.
2. Targeted trade policies can lead to a
more inclusive resource reallocation
that favors smaller firms.

14. Global value chains in action
Sourcing of Boeing 787 parts

15. (percent of total)
Share of foreign value added
in gross exports, 1995 and 2011

16. 63.5
69.5 71.3
64.2
58.1
70.8
76.6 77.0
71.5
66.7
1995 2000 2005 2008 2011
Canadian value added exports consumed in U.S.
Canadian gross exports to United States
Canadian exports to the US
(percent of total)

17. GVC insights
• Local linkages embedded
in larger networks.
• Competition between
value chains, not firms.
• Connectedness is key to
our productivity.
• Strength in partnerships.
16

18. Canada’s share of services, by activity
(percent of total)

19. Canadian exports and foreign affiliate sales
(2014, billions of dollars)

20. Policy pillar:
Promote international connectivity
1.Liberalize exports and imports
2.Facilitate the transmission of goods, capital and
information
— at the border (trade facilitation)
— behind the border (regulatory cooperation)
3.Relax rules of origin
4.Protect foreign direct investment

21. Recalling that trade deals
have been a target
automation
precarious work
inequality
immigration
globalizationtechnological change
“middle class” struggles
trade
winner-take-most markets
lax corporate governance
offshoring
rent-seeking reduced worker bargaining power
secular stagnation
trade deals

22. NAFTA is front of mind…

23. …shouldn’t obscure the EU’s importance

24. …or overlook where trade growth is fastest

25. …the value in trade with dvlpg countries

26. …or the potential residual value of TPP

27. Policy pillar:
Work with other countries
1. Think and act multilaterally first
2. Maintain preferential North American
market access
3. Ensure CETA’s smooth implementation
4. Pay special attention to Asia: engage China,
but be cautious of further bilaterals
5. Make trade and dvlpt mutually supportive

28. Multilateral first
• Keep the lights on in WTO
–essential to succeed in Buenos Aires in
December
• Convene small groups to consider
emerging topics, use plurilaterals
(e.g. TiSA, EGA)
• Opportunity for joint action with China?Asia: engage
China, but be cautious of further bilaterals
1. Make trade and dvlpt mutually supportive

29. NAFTA renegotiation
• Make common cause with Mexico
• Protect North American value chains
– risk if NAFTA rules of origin become more restrictive
– enhance Regulatory Cooperation Council
– try supply chain councils?
• Start with TPP chapters (even supply management)
• Consider CETA standard on procurement
• How much would we pay to keep Chapter 19?eCETA’s
smooth implementation

30. Be cautious of further bilaterals
• Hard to conclude, harder to make work
• Stretched negotiating capacity
• But bilateral talks with China would help
both sides learn.
– may not lead to formal rules in a “trade”
agreement, might aid a progressive trade agenda
1. Make trade and dvlpt mutually
supportive

31. Policy pillar:
More inclusive trade policy
1. Support SMEs
2. Apply a gender lens to trade
3. Enhance public engagement
4. Study trade’s distributional impacts
5. Ensure trade is sustainable

32. How can we pursue this agenda?
• Central challenge for government’s progressive
trade agenda
– Environmental Goods Agreement only goes so far
– Environment and labour chapters not always
enforceable
• Much of it requires action at home not abroad

33. Can we have a progressive
trade agenda with China?
I'd love to be a fly on the wall when you break
the news to [China] that they have to include
gender parity in an agreement. I think that
would be an interesting discussion.
Hon. Gerry Ritz
Standing Committee on Trade, April 2017

34. Meanwhile in China, September 2016
• Reaffirms universality of the UN’s Sustainable
Development Goals (SDGs)
–universal, not Canadian, values
• Reaffirms collective interest in review of
progress
33

35. Implications
• Many countries accept principles of a
progressive trade agenda, but don't see it
as enforceable
• Transparency can be an alternative to
“binding” rules — monitor progress on
shared goals
• The jewel in the WTO crown may be its
committees, not the Appellate Body
34

36. 1. Resource reallocation within industries is a key driver of trade and productivity.
2. SMEs face long-standing challenges but have new opportunities.
3. Production processes are fragmented, collaborative and global.
4. Foreign affiliates and services are strong enablers of international commerce.
5. Emerging markets are now key players in production, trade and investment.
6. Global output and trade growth has slowed.
7. Anti-trade sentiment and economic anxiety have risen.
8. Trade talks are largely stalled.
New Global Trade Realities

37. • Support SMEs
• Apply a gender lens to trade
• Enhance public engagement
• Study trade's distributional impacts
• Ensure trade is sustainable
Develop more inclusive trade policy
• Project workers not jobs
Facilitate resource reallocation
• Make Canada a more desirable place to perform high-value-added tasks
Promote international connectivity
• Multilateral first
• Maintain preferential North American market access
• Ensure CETA’s smooth implementation
• Pay special attention to Asia, but proceed cautiously on further bilaterals
• Make trade and development policy mutually supportive
Work with other countries
Policy Priorities

38. Canada needs a trade policy agenda that:
• is more inclusive
• facilitates resource reallocation
• promotes international connectivity
• builds a better global trading system.
Conclusion