This discussion on Trans Pacific Partnership. This presentation will look at Trade, Government Policies, comments from media, trade association as well as government leaders.

1. By: Paul Young, CPA, CGA
Date: November 27, 2016
Trans Pacific
Partnership–
November 27, 2016

2. • This presentation looks at the Trans Pacific Partnership Trade Agreement
- TPP
Presentation

3. • What is TPP
• Wages / Trade
• Exports
• Exports and FDI
• Trump comments
• Agriculture / Canada
Agenda

4. • Trump may stop TPP - http://www.businessinsider.com/heres-why-
trump-hates-the-trans-pacific-partnership-so-much-2016-11
Summary

5. Why are Trade Deals important?
• Trade agreements are treaties signed by two or more nations to
encourage the free flow of goods and services between the members.
These agreements, which can be bilateral or multilateral, reduce or
eliminate trade barriers such as tariffs and quotas. As such, they lead to
the creation of new markets for businesses, facilitate the production of
high-quality goods and enhance economic growth.

6. Wages / Trade
• As the United States and Mexico share expanded trade across their border, both countries have also
experienced a waning connection between trends in economic productivity and wages. Productivity has gone
up as trade has expanded, but wages have stagnated or even declined.
• By 2011, productivity in the United States had risen to about 170% of what it was when the North American
Free Trade Agreement was instituted. But the average U.S. worker has not reaped much benefit from this
improvement in the productivity of the economy. Real hourly compensation for American workers rose by
only about 16% in the same period.
• In Mexico, the relationship has been even more disappointing. By the time the North American trade
agreement was implemented in 1994, Mexican manufacturing wages had been declining for more than a
decade — they were 30% below what they had been in 1980. To counter domestic opposition to the agreement,
Mexican politicians relied heavily on claims that more trade with the United States would reverse the prior
wage deterioration.
• We now know that, like President Clinton’s promises about job creation, the arguments from Mexican trade
supporters were based on the false assumption that trade expansion would automatically lead to rising wages.
Expanded trade certainly helped stimulate new investment, and the adoption of more advanced
manufacturing technologies in Mexico helped, in turn, to generate increases in productivity. Labor
productivity in Mexican manufacturing rose by 76% between 1994 and 2011. However, when adjusted for
inflation, typical hourly compensation for Mexican manufacturing workers did not improve. As a matter of
fact, in 2011 wage compensation was 20% below what it was at the start of the North American Free Trade
Agreement — not at all what had been projected by boosters of the pact

7. Wages / Impact
• Public Sector vs Private Sector compensation
• Pension Funding
• Benefits
• Salaries
• Other perks
• Skills
• Skill level
• Education level
• Government Policies
• Payroll Taxation
• Healthcare tax
• Workers’ Compensation
• Income Taxation
• Market Price
• What will the market pay for work of equal value

8. Countries involved in TPP
Source – Stats Canada, IMF and Scotiabank Economics

9. Exports / Canada
• Exports are $525B
• Each $1B exports generates 5,500 jobs
• Export jobs pay on average $1,200/week
• Exports drive taxation like personal and corporate taxation
• Exports drive FDI
• Exports can reduce both the balance of payments and/or create trade
surpluses

10. Issues with Trade
• Many countries put controls into how much capital can leave the country, i.e.
profits. China wants the hard currency, why? China wants to control the flow
of money such can influence the supply of money which then impacts
currency rates.
• Many Countries put heavy tariffs on goods as way to protect industries that
may not be cost competitive in their country. Trade deals remove tariffs
which should in theory reduce the price of goods for the consumer
• We have growing economies in the world that will exceed 6%+ as such
Canadian companies need to expand to those markets as way to diversify
beyond the USA. $1B in exports creates 5,500 jobs. Export jobs pay in general
$1,200/week.
• We need fair deals when it comes to trade.
• Canada needs to get its house in order in terms of development of the
resources. We need to reduce the environmental assessment and move
forward with projects that will expand export capacity

11. • Comments on TPP:
• Elimination or reduction of tariffs on a broad series of products including pork, fruits,
wines and spirits, canola, barley, machinery, minerals and forestry products. As one
example, the beef industry expects to see exports triple to Japan, with a multi-year
phase-out in tariffs there from 39 per cent to nine per cent.
• More foreign car parts likely entering Canada, likely benefiting producers and
consumers but hurting some auto workers. Cars will be allowed without tariffs as
long as they have 45-per-cent content from the TPP region. That's significantly down
from the 62.5 per cent regional-content provision under NAFTA, which mostly kept
out pieces from places like China and Thailand. But the formula is more complex than
that: the government says it will "encourage" producers to use Canadian ingredients,
parts and materials when making goods exported to other TPP countries.
• Canada's protected dairy sector remains mostly intact. Currently, 10 per cent is set
aside for foreign products. Now another 3.25 per cent share of imports would be
allowed. An even smaller rate of imports will be allowed for supply-managed sectors
including eggs, chicken and turkey.

12. • Farmers will be compensated for losses under the TPP and the recent Canada-EU deal, through a
multibillion-dollar series of programs. The most important will see farmers paid up-front annually over
10 years to maintain 100 per cent income protection, and the program would taper off the five following
years. The program is worth $2.4 billion. Smaller programs apply to quota-protection, modernizing
equipment, and marketing assistance.
• Buy American provisions won't disappear. The deal does not eliminate buy-local provisions for state-
and municipal-level infrastructure projects. But it does simplify bidding for contracts with six regional
U.S. power authorities, and also addresses sub-national procurement with some smaller countries.
• Better labor mobility for some high-skilled and business workers.
• Next-generation pharmaceuticals, including cell-based biologics, will have patent-style protections for
eight years. That's in line with Canadian policy, but will disappoint some countries who declared
anything beyond five years would be unacceptably expensive for patients and taxpayers.
• Rules protecting the digital economy, and practices likes cloud computing. It would prevent national
governments from cutting off data flows, by limiting laws that require local storage of data.
State-owned enterprises will face more regulation. Companies backed by governments will have new
transparency requirements and rules when competing with private companies. The government says
cultural exemptions would protect the CBC and Telefilm Canada.
• New workers' rights, including rules on child labor, forced labor and discriminate
Support and/or Issues facing TPP

13. • China
• According to Sylvain Charlebois, a food policy expert at the University of Guelph, it is not entirely
negative for Canada if the TPP is dead. “Let’s not kid ourselves: the TPP was never about Canada. It was
about Washington’s desire to undermine China, and increase its commercial footprint in the East Asian
region.”
• Indeed, the TPP has long been touted by critics as a grand American plan to plant their flag in East Asia
and counter the perceived economic threat that is China, by getting first dibs in trade negotiations with
key growth markets in Asia-Pacific like Australia, Brunei, Vietnam, and Malaysia.
• Labor and Agriculture
• Trump’s beef with the TPP is that he claims it will hurt American workers and undercut US companies.
His stance on trade is protectionist: he believes that the average American farmer and auto worker has
lost out from the fact that labour is cheap in developing countries like China, Vietnam, and Malaysia.
Trump comments
Source - http://www.businessinsider.com/heres-why-trump-hates-the-
trans-pacific-partnership-so-much-2016-11

14. Who supports the deal
• CME - https://www.youtube.com/embed/nWmCM2Oelt0
• Chamber of Commerce - http://globalnews.ca/video/2258873/tpp-is-
leveling-the-playing-field-canadian-chamber-of-commerce

15. Highlights of Canada’s market access gains through the TPP include:
• Beef
• • In Japan, tariffs of 38.5 percent on fresh/chilled and frozen beef, as well as tariffs of 50 percent on certain offal will
be reduced to 9 percent within 15 years.
• In Japan, tariffs of up to 50 percent on processed beef and most offals will be eliminated within 15 years.
• In Vietnam, tariffs of up to 31 percent on fresh/chilled and frozen beef will be eliminated within two years.
• In Vietnam, tariffs of up to 34 percent on all other beef products will be eliminated within seven years.
• Pork
• • Japan will eliminate the over-gate price tariff of 4.3 percent on fresh/chilled/frozen pork cuts and pork offal within
10 years, and reduce the under-gate price tariff of up to 482 yen/kg to an amount of 50 yen/kg within 10 years.
• The over-gate price and below-gate price tariffs will be eliminated within 10 years for preserved and processed
pork.
• Tariffs of up to 20 percent on pork products, including sausages, in Japan not currently subject to the gate price
system will be eliminated within 10 years.
• Preferential imports of most pork products into Japan will be covered by 10-year transitional volume-based
safeguards.
• Tariffs of up to 27 percent in Vietnam on fresh/chilled and frozen pork will be eliminated within nine years.
• Tariffs of up to 31 percent on all other pork products, including sausages, in Vietnam will be eliminated within
nine years.
Agriculture / Canada - TPP
Source - http://www.cfa-fca.ca/hot-topics/trans-pacific-partnership

16. Highlights of Canada’s market access gains through the TPP include:
• • In Japan, feed wheat will be duty-free, quota-free upon entry into force.
• In Japan, Canada will also have access to a Canada-specific quota for food wheat which starts at 40,000
tonnes and grows to 53,000 tonnes within six years. Mark-ups within this country-specific quota will be
reduced by 45 or 50 percent.
• In Vietnam, tariffs of up to 5 percent on all wheat will be eliminated upon entry into force.h
• Barley
• • In Japan, food and feed barley fall under a quota system with mark-ups. Feed barley in Japan will be
duty-free, quota-free upon entry into force.
• Mark-ups applied to the price of food barley by Japan will be reduced by 45 percent within eight years.
• Canada will also have access to a TPP-wide quota for food barley which starts at 25,000 tonnes and
grows to 65,000 tonnes within eight years.
• Canola
• • In Japan, tariffs on canola oil of up to 13.20 yen/kg will be eliminated within five years.
• In Vietnam, tariffs of 5 percent will be eliminated within five years.
Agriculture / Canada - TPP
Source - http://www.cfa-fca.ca/hot-topics/trans-pacific-partnership

17. • Contact: Paul_Young_CGA@Hotmail.com
Q & A