CCPA | 15 May 2023

APEP in Canada’s step

by Stuart Trew

From TIRP: A trade and investment bulletin from the Canadian Centre for Policy Alternatives

Between March 25 and May 9, the federal government consulted on Canada’s participation in the U.S.-led hemispheric trade initiative. APEP was launched at the 2022 Summit of the Americas in Los Angeles. Trade officials from the 12 APEP member countries—Barbados, Canada, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico, Panama, Peru, the United States, and Uruguay—held a first ministerial in January and published a joint declaration of priorities. The Biden administration hopes other countries will join but also wants talks wrapped up soon, possibly by the end of this year.

APEP’s geography recalls that other attempt to expand a Washington Consensus on trade and investment into the Caribbean and South America through the failed Free Trade Area of the Americas. But it’s not clear yet what kinds of disciplines or rules APEP will include or if they will be enforceable through state-to-state dispute settlement. Republicans and right-wing APEP member states Ecuador and Costa Rica would prefer a traditional, binding FTA model or even a USMCA plug-in option. Brazil and Argentina, both recipients of large amounts of Chinese development finance, have other plans for Latin American integration and will watch early APEP negotiations from the sidelines. Honduras just launched FTA talks with China following the conclusion, in January, of technical negotiations on a China-Ecuador deal. APEP member Uruguay is also in FTA talks with China, complicating the Mercosur relationship to say the least.

In our submission to the APEP consultation, TIRP researcher Laura Macdonald (Carleton University) and I warned that the federal government needs to be clear-eyed about the geopolitics behind this new U.S. initiative and studious about how Canada should navigate them. APEP is seen by U.S. Democrats and Republicans as a response to the growing influence of China as regional creditor, important investor (through Belt and Road Initiative membership), and trade partner for many Latin American and Caribbean nations. The political parties disagree on how appropriate a response it will be. No matter, it is obvious the U.S. counteroffer to China’s fewer-strings-attached cash—the "friendshoring" premium—will need to be meaningful for APEP members to see the value of a hemisphere-oriented investment and supply chain rejig. Canada should try to focus APEP discussions on items with the most potential to enrich and empower workers in all countries, sustain the rights of Indigenous and Afro-descendant Peoples, and achieve gender equality. The feds should also come ready to write cheques and disappoint influential mining interests.

Importantly, because APEP, in structure, is likely to resemble the U.S.-initiated Indo-Pacific Framework for Prosperity (IPEF), these will be trade negotiations in all but name. The Canadian consultation document envisions chapters on customs and trade facilitation, good regulatory practice, non-tariff barriers, competition, anti-corruption, SMEs, and digital trade, etc. The U.S. is likely to table USMCA text as a starting point at these negotiating tables. Canada must therefore perform a full gender-based analysis (GBA) of the project. Mirroring trade justice campaigns in the U.S., Laura and I also urged the government to use the APEP negotiations to rebalance existing free trade and investment treaties in the region, importantly by neutralizing their investor-state dispute settlement (ISDS) processes and improving on USMCA-like labour protections including the successful rapid-response labour mechanism. There is momentum in the U.S. for a hemispheric investment policy reset, with 33 Democrats last week calling on the Biden administration to "investigate any and all options at your disposal to eliminate ISDS liability from existing trade and investment agreements."

Read our full submission here.

Canadian negotiations

Negotiations with ASEAN countries slouch on, in a piecemeal way, with a fourth all-country trade negotiating committee (TNC) meeting planned for June. According to a recent government briefing on the third TNC meeting on April 18, ASEAN trade ministers discussed next steps on inclusive trade, state-owned enterprises (SOEs), good regulatory practice (Canada tabled an approach but no text), environment and labour. At most negotiating tables it sounds like they’re still exchanging information, though text-based discussions are happening on intellectual property, including with respect to transition periods for least-developed countries. Intergovernmental expert sessions are planned for labour and environment "in the coming months."

According to the briefing, the TNC is hoping subsidiary negotiating bodies can keep pace. The tables for goods, customs facilitation, sanitary and phytosanitary standards (SPS), technical barriers to trade (TBT), services, telecoms, intellectual property, and competition have met only once; eight other tables, including procurement and financial services (where text-based discussions have happened in areas of alignment), have met twice. The temporary entry table has met three times but continues mainly as a Q&A forum on national immigration programs. On procurement, ASEAN countries want the commitments limited to transparency and information sharing (a good move). The SPS table will meet again in mid July, financial services in May, and e-commerce in late June, with texts expected to be shared ahead of time in this last case.

In other trade negotiations news, Ottawa hosts a fifth round of Canada–Indonesia CEPA talks at the end of May. Multiple trips to India are planned, including a Team Canada trade mission in October, as Canadian trade minister Mary Ng (pictured above with Indian trade minister Piyush Goyal) predicts an Early Progress Trade Deal by year’s end. (I commented on the talks in last week’s Hill Times newspaper—see next section.) Canada is still jockeying for a spot at the Indo-Pacific Economic Framework table as another ministerial approaches at the end of May in Detroit. U.S. and Michigan-based trade justice groups have planned a rally and teach-in on the IPEF this coming weekend (May 20).

Canada and the United Kingdom have held five rounds of negotiations on a bilateral FTA since March 2022 and are beginning to close text, according to a recent Canadian government briefing. Round six will be held the week of June 26 in Ottawa and round seven in September. Separately, Canada and other CPTPP parties are in the process of conducting legal reviews of the text of an accession protocol for the U.K., which aspires to become the 12th official member of the trans-pacific pact. CPTPP ministers hope to sign the protocol at a meeting in Auckland, New Zealand in July. Following that step, all member countries must then conduct domestic ratification procedures, which in Canada will include tabling legislation in Parliament. Five other countries—China, Taiwan, Ecuador, Costa Rica, and Uruguay—have officially requested to join the CPTPP and Ukraine is signalling in this direction. Canada, which has not taken a position on any of these country applications, according to the government, will be able to guide CPTPP priorities as it takes takes on the commissioner role in 2024.

And we’ve learned about a host of USMCA-related meetings over the coming months. A third North American Free Trade Commission meeting will be held in Cancun on July 6 and 7. The USMCA competitiveness committee will meet this month and there will be an Indigenous SME event in the next few months. The USMCA labour council will meet in Mexico in June and the environment committee will meet in the U.S. in September, both of which will have a stakeholder component. Mexico is hosting the USMCA SME dialogue in September, another event with a public component.