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Analysis

Canada should reject trade deal

Hey there, time traveller!
This article was published 9/2/2016 (502 days ago), so information in it may no longer be current.

Now that the full text of the Trans-Pacific Partnership has been released, academics and policy wonks have been busy assessing what it all means for the Canadian economy and the well-being of Canadians. Even before the text was released, most assessments had attributed little economic impact to the TPP.

The most widely cited mainstream estimate of TPP annual income gains by the Peterson Institute average only 0.5 per cent of GDP across the 12 parties (achieved by 2025), just 0.2 per cent more than global economic income gains (the background trend) over the same period. However, this mildly positive economic impact disappears when the unrealistic assumptions of perfect competition and full employment are replaced with a more dynamic econometric model.

A recent study using the United Nations global policy model database actually predicts mild economic losses for developed TPP economies (-0.04 per cent average annual GDP change) and insignificant growth for developing economies (+0.22 per cent average annual GDP change), and expects the loss of a total of 650,000 jobs for all TPP countries. For Canada, it expects negligible GDP changes (+0.03 per cent annually), but also predicts a loss of 58,000 jobs due to the TPP. The study also shows that income and wealth inequality is likely to increase as the share of GDP going to capital will rise and the share going to labour will decline. This link between ‘free trade’ and growing income inequality is now well established in the policy literature, as for example in a recent analysis of NAFTA’s distributional impact on Canada.

Bluntly put, the TPP does not align well with the new Liberal government’s commitment to rebuilding the middle class and addressing inequality head on.

However, economic stagnation and negative employment effects are not the only pathways by which trade and investment agreements can undermine the well-being of Canadians. Our recently conducted health impact assessment of the TPP also raises concerns about the changes that the TPP will bring to the intellectual property rights regime and how such changes will translate into additional costs to the health care systems of TPP member countries.

The TPP lengthens the time that life-saving drugs can be patented by allowing ‘patent term extensions’ for regulatory delays and making it easier for existing pharmaceuticals to be re-patented for new uses. The first time inclusion of biologics in a trade agreement, with eight years minimum market exclusivity, also raises public health concerns, as such drugs are increasingly important in the treatment of cancer and immune disorders. One estimate of similar intellectual property rights concessions in the signed, but not yet ratified CETA pegged those additional costs to the strained Canadian health care system at around $850 million annually.

Another widely shared concern is the role of Investor-State Dispute Settlement mechanisms in the TPP. The use of ISDS by foreign investors to sue governments over regulatory decisions that they believe have compromised the value of their investments has risen in the past decade. A 2013 review of ISDS claims found that 40 cases involved health or health-relevant environmental protection, including food safety, pharmaceuticals and tobacco control measures.

Moreover, waves of new corporate lawsuits from corporations within countries that are part of the TPP will likely create regulatory chill, with policy-makers avoiding adopting regulatory measures for health or other public goods because of the threat of potential lawsuits. ISDS clauses can also create policy lock-in effects, so that the re-nationalization of previously privatized government services can be difficult and costly.

Given the negligible economic impact of the TPP, and the policy, regulatory and health risks it poses, this is not a good agreement for Canada.

Much effort has gone into TPP negotiations, but without a transparent or evidence-based set of arguments for its necessity. In the context of the COP21 climate change agreement, and the UN sustainable development goals, this may be an opportune time for TPP countries to reject it as drafted, and rethink what should be the purpose of such agreements in light of (still) escalating wealth inequalities and fragile environmental resources — two of the most widely shared concerns of Canadians.

 

Ronald Labonté holds the Canada Research Chair, and Arne Ruckert a senior research associate, at the University of Ottawa.

 

 

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History

Updated on Tuesday, February 9, 2016 at 8:16 AM CST: Fixes byline

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