Event Summary:
Trade Policy in Difficult Times with Assistant Deputy Minister, Trade Policy and Negotiations, Don Stephenson
5 March, 2009
In partnership with McMillan
Summary by Tatiana Kanberg
Student at the Munk Centre, University of Toronto
In his talk, entitled “Trade Policy in Difficult Times”, Don Stephenson, the Assistant Deputy Minister of Trade and Policy Negotiations, a key member of the Canadian international trade team, briefed the audience on the most prominent issues of the current trade agenda. The title of this event is telling of the many challenges Canada is facing in the light of the present global financial crisis, particularly due to the air of uncertainty surrounding state policy responses to this crisis. Mr. Stephenson explained that it was a very busy time for Canadian trade officials, as they are consumed by pressing issues, including a recent loss in the softwood lumber arbitration with the United States, developing a new and enhanced trading relationship between Canada and the European Union and the worrying “buy America” signals emanating from south of our border. The main question to be addressed in this discussion was: Should Canada’s Trade Policy strategy be different in difficult times?
Mr. Stephenson addressed the question in relation to three important determinants of the current global environment: economic downturn, the uncertainty about American policy, and the rising tide of protectionism. The overall economic situation in the world is worrying, especially when it comes to trade, as a snapshot of figures from the last quarter of 2008 indicates: Canada saw its first trade deficit in 32 years with a large decline in exports combined with falling commodity prices; world GDP contracted by 6 percent; imports in China and Japan dropped by 40 and 30 percent, respectively; the U.S. GDP fell by 6.2 percent. On the financial side, the implications are rather severe as well, since nearly 90 percent of world trade involves some form of financial instruments. As Mr. Stephenson pointed out, this is keeping the Bretton Woods institutions busy talking about how to respond to trade finance problem.
When it comes to the global trade policy environment in general and the U.S. in particular, the prospects were said to be not any more encouraging. Our largest trading partner is not sending reassuring signals about its future policy, and, as they continue to play an import direction-setting role in the world trade arena, this also sends a negative signal to the world at large. The G20 and the WTO are all awaiting in suspense for the new U.S. policy to be delivered by its new president, Barrack Obama and his administration. Mr. Stephenson expects the first important signs of it to become visible at the upcoming G20 Summit this April. However, what can be read so far from the 2009 President’s Report on Trade is already disheartening in its prospects for the multilateral trade agenda, as it seeks to “rebalance the world trade agenda”. This was also indicated in the American statement at the recent Trade Ministers’ Meeting in Davos about the need to review their policy, which generated retaliatory sentiments around the table. Thus, the biggest problem in the global environment right now is its overall uncertainty. Contrary to the G20 instruction for a 12 months suspension of protectionism, many countries are using a variety of trade distorting mechanisms in their policies, including the U.S. with the expansion of ‘buy America’ in its new stimulus package, and several other countries.
‘Buy America’ provisions are particularly worrisome to Canada. Mr. Stephenson noted that the present ‘buy America’ policy is not as significant in hard dollar terms, but more so in terms of a worrying direction it is setting for our most important market. Canada continues to uphold its firm belief that the best way to avoid protectionism is to continue to move forward in trade liberalization, and by doing so, we hope to show leadership to the Americans. The bi-lateral Canada-U.S. trade relationship cannot be understated, as it continues to account for 80 percent of our export market. Mr. Stephenson reminded the audience that geography matters in trade, and we have to attend to the biggest and closest market first, hence the U.S. remains Canada’s trade priority. It is extremely important for us that this border remains open. Canada is putting a lot of hope into the WTO to help manage our bi-lateral relationship with the Americans through a well developed multilateral framework. The government is also resolute to continue to guard our benefits from NAFTA, although there has been talk of “renegotiating”, “tweaking” and “upgrading,” as well as adding labour and environment provisions to the document.
On the side of the immediate practical challenges in our trade relationship with the U.S. two were listed: the U.S. Country of Origin Labeling (COOL) Program, which may bare negative effects on our meat exports, and softwood lumber. The latter is particularly problematic, since Canada had just lost a round of arbitration resulting in an increase in the American tariff on our lumber exports to 15 percent. This is a harsh blow to the struggling industry where the current reference price of wood is equal to half of what it was when the original agreement was signed. Nevertheless, Mr. Stephenson says, there is hope for an improvement, since Ron Kirk, U.S. Trade Representative nominee, awaiting Senate confirmation, said that his job would be to explain benefits of trade to the Americans.
The importance of the WTO to Canada was another point Mr. Stephenson stressed. Its strong dispute management system is helpful in managing Canada’s trade relationship with the U.S. and the world at large. This is the only arena which can be effectively used to promote agricultural trade policy reform and provide negotiation leverage for the developing countries through multilateralism. Development was affirmed as an important objective for Canada at the WTO, with specific instructions from the Cabinet to our trade team to “ensure movement on the development agenda.” Canadian commitment to development is evident in its aid efforts in Africa and such programs as “Aid-for-Trade,” and we are determined to move further. Mr. Stephenson relayed three messages to the audience regarding last July’s WTO round of negotiations and their status. The first was that Canada tried hard to promote the NAMA (Non-agricultural market access) provisions, but hit a brick wall of resistance from certain other members whose politics brought the talks to a halt, most likely due to lack of consensus on the appropriate level of tariffs. The second message was that “it’s doable,” because we got very close to consensus, and final concessions on most issues are being made by everyone. The third message was that “it’s worth doing”! Tariff reductions are beneficial to the global economy as a whole, especially on agriculture, and special differential treatment for developing countries remains on the table. Hence, there is hope that the development round negotiations are coming close to a positive conclusion.
The third important priority of the Canadian trade policy is its bi-lateral trade agenda, which needs to progress while the Doha round is at a standstill. Mr. Stephenson said that our focus lies primarily on the emerging markets at this time. Particularly, India and the European Union (EU) are on the top of our bi-lateral agenda, as negotiations with these two important players are in progress. Pre-negotiations of a free trade agreement with the EU have just been successfully completed; however, their further success continues to rest on the European confidence in Canada’s resolve, level of ambition and the commitment from our provinces to move forward. As the FTA document stands right now, everything is on the table and will be subject to further negotiations. Mr. Stephenson reassured that Canadian values will be upheld at all times during these negotiations, and although cultural sensitivities remain, there is strong hope for progress. In addition to these major priorities, Mr. Stephenson listed several other parallel processes that are taking place on the bi-lateral front, which included: negotiations with South Korea and Singapore, several Latin American states, Jordan, as well as the non-EU members European countries.
Overall, Canada maintains a confident position in our trade politics. As Mr. Stephenson made it evident by describing our policy direction, Canada has a busy and ambitious negotiations agenda ahead. We are ready to move forward, not back, as it was clearly demonstrated in the last budget, which cut tariffs embracing and reaffirming trade liberalization. Finally, Mr. Stephenson concluded with some future prospects and policy directions, whereby the most prominent emerging issue is that of the environment and climate change. This will determine the new policy rules across most global issue areas, and it will certainly be key in trade. In the WTO, Canada is determined to get past the development round and move on to the next, likely the non-tariff barriers round, as Mr. Stephenson predicts.
View the event flyer: Flyer.
|
|
|
|
