The Final Push: Canada and the Trans-Pacific Partnership Trade Deal

The Final Push: Canada and the Trans-Pacific Partnership Trade Deal

By Arne Ruckert, Ronald Labonté and Ashley Schram

The Trans-Pacific Partnership is nearing the end game of negotiations, creating a market of 800 million people with a combined economic clout of US$28-trillion annually. After the U.S. Congress granted fast-track authority to President Obama, a final agreement among the 12 Pacific-rim countries involved in the trade deal is now within reach. So what’s at stake for Canada?

Agricultural market access remains a sticking point for some of the TPP’s prospective members. Media coverage of the TPP in Canada has been dominated by Canadian supply management in dairy and poultry, which limits market access in these products for other countries. Canada is under pressure in the press and from some TPP countries to dismantle supply management if it wants to remain part of the final negotiations.

Ultimately, there is no point in signing on to a free trade agreement that represents little economic benefit to the Canadian economy, but has major political and social implications including the potential to hamper Canada’s sovereignty and undermine its regulatory autonomy.

Yet Canada has participated in past free trade deals without dismantling supply management, as recently noted by Canada’s Minister of International Trade Ed Fast. There are good public policy reasons for why Canada would want to continue with supply management, including guaranteeing a safe and stable stock of dairy and poultry products at an affordable cost. A reasonable compromise for Canada would be maintaining its supply management but making some concessions in terms of increasing market access for other TPP countries in these products.

Other areas of the TPP overlooked in most media discussions have potentially much stronger and more lasting impacts. Foremost are Investor-State–Dispute Settlement (ISDS) provisions, which will grant multinational corporations the right to sue TPP governments over public policy decisions perceived as damaging to their investments and business operations. Canada is already the most-sued developed country in the world because of NAFTA’s ISDS process, and the TPP will significantly increase the number of foreign investors eligible to sue. Strong civil society and academic critiques of ISDS have recently led to greater caution about how they are included within new trade treaties. The Transatlantic Trade and Investment Partnership (TTIP) now under negotiation between the U.S. and the EU also contains an ISDS chapter, with concerns about its provisions being voiced on both sides of the ocean.

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Rather than reject ISDS outright, European parliamentarians in July passed a compromise amendment which calls for replacing the ISDS system “with a new system…subject to democratic principles and scrutiny, where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism, where…the jurisdiction of courts of the EU and of the member states is respected, and where private interests cannot undermine public policy objectives [our emphasis].” The EU amendment appears to address many of the critics’ concerns with ISDS, and the Canadian government should push for the TPP to adopt a similar position. Investor protection would be strengthened, but so would government policy space to pursue new public policy objectives.

The TPP also proposes to extend intellectual property rights (IPRs) with implications for drug costs, whether paid for publicly or privately. This is particularly relevant for Canada, which already has the second-highest drug prices in the world. A recent leak of the TPP’s IPR chapter shows that the major outstanding disagreements over IPR relate to ‘patent linkage’ and expanded protection of biologics. Patent linkage prevents the registration and authorization of generic medicines until after the expiry of patents, considerably delaying generic market entry.

Although Canada already has a patent linkage system in place, the TPP is the first time this system would be written into trade treaty obligations, likely interfering with future cost-saving reforms and weakening the vibrant Canadian generic pharmaceuticals industry which is now responsible for the production of two out of every three prescription drugs in Canada. Recent analysis of the draft intellectual property chapter of the TPP suggests that the U.S. has been advocating for patent linkage to extend to biologics, along with a request for longer periods for data exclusivity. Many TPP member states have been opposed to extended IPRs, which would provide Canadian negotiators with a platform from which to limit any extension of IPRs in pharmaceuticals beyond those already present in the World Trade Organization’s TRIPS agreement.

Finally, TPP provisions for regulatory coherence and transparency have received relatively little mention. As with all recent free trade agreements, the TPP is only marginally about trade, and more about harmonizing regulations (financial, health, and safety standards, etc.). The leaked regulatory coherence chapter clearly outlines various expectations, including the obligation generally to encourage the use of regulatory impact assessments (RIAs), as already practiced in the United States. The proposed regulatory model contains numerous pro-market factors that governments should consider when making domestic regulations. The obligations outlined in the regulatory coherence chapter are explicitly linked to states’ obligations in the transparency chapter. The transparency chapter (which has not been leaked) is expected to confer rights to affected commercial interests to participate in regulatory processes.

See also:

The two chapters together will essentially impose high-level behind-the-border disciplines on governments through market-centric norms; an ideologically-driven commitment to light-touch regulations, whose detrimental effects are best seen in the global financial crisis of 2008; and a structured role for private (and especially corporate) interests to shape domestic regulations and policy-processes. Some TPP countries, especially those with developing country status, have raised concerns about these two chapters; Canada should align with these concerns and support their resolution within any final agreement.

Canada should be courageous enough to stand up to the United States (the main force behind these negotiations) and to form coalitions with TPP member countries that have similar concerns about these remaining TPP issues. Ultimately, there is no point in signing on to a free trade agreement that represents little economic benefit to the Canadian economy, but has major political and social implications including the potential to hamper Canada’s sovereignty and undermine its regulatory autonomy.

Arne Ruckert is a Senior Research Associate in the Faculty of Medicine and a part-time Professor in the School of Political Studies. Ronald Labonté is Canada Research Chair in Globalization & Health Equity, and Professor, School of Epidemiology, Public Health and Preventive Medicine. Ashley Schram is a PhD candidate in Population Health at the University of Ottawa studying the health impacts of international trade and investment agreements.

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