The Deal of the Century: An Interview with Ed Fast, Former Canadian Trade Minister
The Trans-Pacific Partnership (TPP) is the largest trade agreement ever, made between 12 nations comprising 40% of the world’s economy. In an article written by Barack Obama, who championed the agreement, he claims the TPP will “write the rules of the road for trade in the 21st century”. On February 4, 2016, after seven years of negotiations, the document was finally signed.
To get an in depth perspective on the deal, which has stirred much controversy in the legal community and beyond, I reached out to Edward D. “Ed” Fast, Member of Parliament, former Trade Minister, and Canada’s representative throughout much of the TPP negotiations.
John: The TPP’s slogan is “high quality, twenty-first century”. Has the final version of TPP lived up to this goal, particularly in terms of its intellectual property (IP) rules?
Ed: Absolutely. The future we want is one in which there are clear and strong rules protecting IP. When the partners of the TPP got together, they had one common objective: to establish 21st-century trading rules for the Asia-Pacific region. I think we have done that, understanding full well that there is a broad diversity of economic maturity amongst the partners.
What we have done is land on outcomes that reflect a commonly shared understanding of not only the trade rules that will prevail, but also an understanding of the value of IP. Much of our future will be driven by the knowledge economy. We have to ensure that we have are tough rules in place that will protect the efforts of our innovators.
J: My research turned up a lot of comparisons between the TPP and NAFTA (North American Free Trade Agreement). Care to comment?
E: Well, the TPP is a different kind of agreement. NAFTA was primarily a goods only agreement. It primarily focused on tariff elimination. The TPP goes far beyond that. It addresses in a far more comprehensive way, non-tariff barriers to trade. It is the first time Canada has signed a trade agreement with a chapter dedicated to small and medium sized enterprises. And, of course, it deals with issues like intellectual property in a much more comprehensive way.
J: So when detractors call the TPP “NAFTA, on steroids”, is that necessarily a bad thing?
E: Well, when you look at the total amount of trade that happens amongst the three countries in NAFTA, it has increased quite significantly. For example, since Canada entered into the FTA (Canada-US Free Trade Agreement), our trade with the United States has almost tripled. And of course, investment flows have increased dramatically.
Back when we first signed the FTA (which was superseded by NAFTA), American investment in Canada was probably around a hundred billion dollars. Today it’s closer to four hundred billion. So it’s not just an increase to the amount of trade, but also the amount of investment that Canada attracted as a result of the agreement, because we had strong investment rules, and had investor-state dispute settlement.
J: While we’re on the topic, investor-state dispute settlement is a very controversial topic. There is a general fear that such mechanisms, bundled with agreements like the TPP, can invalidate a nation’s sovereignty and subject it foreign interests. Any comments?
E: That is hogwash. These agreements can be cancelled with 6 months notice. You are not ceding your sovereignty. What you are saying is, we will, during the period of the agreement, agree to specific mechanisms to resolve our disputes. They don not in anyway cede sovereignty. What they do is agree, if there is an independent neutral party that rises above national interests, to resolve issues accordingly, and arrive at outcomes that are deemed fair, independent, and non-arbitrary.
J: I see. Going back to NAFTA, you would say that it has been a generally successful venture for all its members?
E: NAFTA has created significant increases to investment flow— certainly to Canada— and bilateral trade with Mexico has septupled since 1995. The agreement essentially established the North American production platform, which remains the envy of the world. We have these almost-seamless supply chains stretching across our borders, allowing us to do trade in a much more efficient manner than if we were still balkanized and had our tariffs in place. I think the general agreement is that NAFTA has been a benefit to all three parties.
J: Currently, the US government, particularly congress, is still split on whether to ratify the TPP. If the US fails to ratify, other countries may start to back out. What are your thoughts?
E: Now from time to time, the benefits of these trade agreements gets caught up in political ideology. Right now in the US, we have the presidential primaries taking place. And people like Hillary Clinton, who used to be a huge supporter of the TPP, are suddenly not. And it all has to do with internal politics.
But at the end of the day, I am confident that the US will ratify the TPP. Simply because it is in the US’ self-interest to be the one, as part of the TPP, to establish 21st-century trade rules within the Asia-Pacific region. Because if we do not do it as a group, someone else will. And those may be rules we are not happy with.
J: So President Obama has taken a similar stance in an article I read. He warns that if the US does not pass the TPP, countries like China will be set the rules for the Pacific region.
E: I did not mention China … but if there is going to be a set of rules for trade established in the Asia-Pacific region, why not let it be [done by] economies that understand freer and open trade the best? Countries like Canada and the other NAFTA partners, joined by other free markets like Australia, Japan, New Zealand, and Chile, along with markets like Vietnam, which have historically not been open. But even [Vietnam] recognizes that their future prosperity lies within in a larger Asia-Pacific region in which freer and more open trade takes place under 21st-century rules.
J: There are some (including the University of Ottawa’s Michael Geist) who claim that the TPP’s increase to IP protection was made to protect the interests of certain corporations— particularly those belonging to the big pharmaceuticals, consumer technology, and Hollywood. Your thoughts?
E: I am confident that this is not corporate driven. The IP chapter, although it’s not what the US had hoped for, represents a common landing zone where all 12 countries agree to collectively raise the level of protection for IP, understanding that much of our future prosperity will lie with ensuring that the innovators within our economies have their efforts protected in a way that reflects 21st-century standards.
In that sense, this is no different from our negotiations with the European Union. The EU had tougher IP rules than Canada did. When we finalized our negotiations with the EU on our trade agreement with them, we agreed to make some marginal adjustments to raise our IP protection.
The TPP broadly speaking does not significantly change Canada’s existing IP regime… if you compare what our IP protection looks like post-TPP, compared to what it looks like now, there is very little change. The significant part of the change has already happened in our negotiations with the EU.
J: Others, like RIM’s Jim Balsillie, expressed the fear that Canada is compromising itself to the United States with the agreement. After all, the vast majority of IP is produced there, so a stronger system of protection will mean more money in their pockets.
E: There has been a lot said about the US having basically locked in trade advantages by ensuring that there are higher IP protections. In fact, there is very little that changes with respect to Canada. The suggestion that Canada has compromised itself does not hold out when you actually do an analysis on the TPP.
The naysayers are saying that the IP provision of the TPP impairs our ability to catch up to partners like the US or Japan. That is nonsense. But what they really want in Canada is continue to remain in the wild west of IP, where you can still try to gain an advantage by cheating the system. That is not who Canada is. In fact, Canada is one of the most knowledge-oriented economies in the world, and it is to our benefit to product the innovation that comes out of here.
The fact that the US is doing better than better than anyone else in the world is no reason for us to not want protections similar to what is provided in the US. The reason for their success is strong IP protection.
J: Any final remarks on the importance TPP?
E: It is absolutely critical that Canada be a part of the TPP. If we are not a part of TPP, but the US and Mexico are, it represents a huge erosion of Canada’s participation within the North American production platform. Because they that have tariff free access into the Pacific region, and Canada will not. Think about where investments dollars will flow. We have to protect our North American production advantages as a part of the TPP.
Join us next week for part 2 of the interview, in which Ed and I discuss healthcare, digital piracy, and Canada’s role in the TPP negotiations.
John C.H. Wu is an IPilogue editor and a JD/MBA Candidate at Osgoode Hall Law School and the Schulich School of Business.