Trans Pacific Partnership (TPP) closer to reality

As of Monday, October 5, Canada concluded negotiations as one of 12 partners in the most ambitious trade deal in history. The Trans Pacific Partnership (TPP) founding members include: New Zealand, Brunei, Chile, Singapore, Australia, Peru, Malaysia, Vietnam and the U.S., Japan, Mexico, and Canada. This trade bloc represents a market of 770 million people, not including Canada, and will significantly reduce existing tariffs and provide preferential access to some of the world’s largest and fastest growing markets.

TPP expected to benefit Canadian agriculture and agri-food

The agreement, once ratified, will provide new market access opportunities for many products for which Canadian producers are renowned globally. As a global leader in exports of pork, beef, pulses and pulse products, grains, cereals, processed grain, foods and beverages, Canadian agriculture and agri-food will enjoy increased market access and preferential tariffs relative to competitors outside the partnership.
Negotiations are expected to provide market access for Canadian wheat, canola, barley and other crops that is equal to that of the United States and Australia, Canada’s main competitors. The agreement should also increase market access for Canadian canola oil, malt and other processed grain products.

For example, Japan offered market access to feed barley and feed wheat upon entry into force. 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. The elimination of tariffs in Japan and Vietnam over five years could serve to add up to $780 million per year in additional exports of canola oil and meal according to the Canadian Canola Council.

The red meat sector will also benefit from market access. When the TPP comes into force, the current 38.5 per cent tariff on Canadian beef in Japan will be cut to 27.5 per cent and further reduced to 9 per cent in 15 years. The deal will provide the means by which Canada can compete with Australian beef into Asia.

It could also open up markets, such as Vietnam and Malaysia for Canadian pork exports. Both markets are projected to show impressive GDP growth in 2016 (5.8% in Vietnam and 4.9% in Malaysia). The OECD-FAO 2015-2024 Agriculture Outlook has projected increased consumption of pork that will greatly exceed the expected world growth of 10%: Malaysia will see 18% growth and Vietnam 29% growth.

Canadian exports of processed food and non-alcoholic beverages to TPP countries totaled on average $8.2 billion between 2012 and 2014. The vast majority of these exports (95 per cent) have gone to the U.S. market where we already have free trade. TPP will offer an opportunity to diversify our markets for exports of baked goods, processed grain and pulse products, and sugar and chocolate confectionery products.

Market access concessions in Canada’s three supply-managed sectors granted to foreign exporters are accompanied by programs designed to compensate income losses and smooth the transition to the new era of enhanced international trade. Additional dairy imports from TPP member countries amount to 3.25 per cent of current production, while chicken, turkey and egg additional imports amount to a little over 2 percent of current production.

The trade deal must be ratified by each government of the participating countries – a process that will likely take at least two years. As this happens, look back here for reports on developments and opportunities related to the TPP.

Martha Roberts, Economic Research Specialist