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THE TRANS-PACIFIC
PARTNERSHIPS AND
THE PACIFIC ALLIANCE:
COMPLEMENTARY AGREEMENTS
TOWARD HIGHER REGIONAL
ECONOMIC INTEGRATION IN
THE ASIA PACIFIC REGION
BY JUAN NAVARRO
Document: REIWG 36-061A
Draft: FIRST
Date: 13 November 2016
Source: ABAC Canada
Meeting: Lima, Peru
ABOUT ABAC
ABAC was set up to provide a link between
APEC and the business community. Drawn from
the private sector, ABAC members collectively
prepare an annual report with recommenda-
tions on how to improve the business and
investment environment within the Asia-Pacific
region. ABAC members are appointed by their
respective Leaders, and represent a range of
business sectors, including small and medium
enterprises. The ABAC International Secretariat
based in Manila. For more information, visit
www.abaconline.org
ABOUT THE ASIA PACIFIC
FOUNDATION OF CANADA
Established by an act of Parliament in 1984,
the Asia Pacific Foundation of Canada (APF
Canada) is a not-for-profit organization focused
on Canada’s relations with Asia. Our mission
is to be Canada’s catalyst for engagement with
Asia and Asia’s bridge to Canada. APF Canada
supports the building of Asia-competency and
promotes knowledge and understanding of
developments in Asia. Its research and policy
work focuses on trade, investment, innovation,
energy, and the environment.
A leader in research and analysis on Canada-Asia
relations for over 30 years, APF Canada partners
with government, business leaders, academics,
and opinion makers in Canada and across the
Asia Pacific region to offer clear, specific, and
actionable policy advice.
ABOUT THE AUTHOR: JUAN
SALVADOR NAVARRO
Mr. Navarro has vast experience conducting
economic analysis, studies and research as an
economist for 10 years at the Mexican Central
Bank, as well as a university professor at pres-
tigious universities. During the past year, Mr.
Navarro has focused his research on themes
related to international trade and FTAs. In
addition, Mr. Navarro is a successful Canadian
business entrepreneur, member and leader in
different business and global organizations such
as the Canadian International Council.
Submitted to Policy Research Grants Asia Pacific
Foundation of Canada. This report was presented at
the ABAC IV 2016 meeting in Lima, Peru.
The views expressed here are those of the author’s,
and do not necessarily represent the views of the
Asia Pacific Foundation of Canada.
3	 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA
TPP & PA : REGIONAL ECONOMIC INTEGRATION
The last report of the Organisation for Economic
Co-operation and Development (OECD) pointed
out that recovery in the global economy after
the crisis remains modest due to a combination
of economic factors, citing weak global trade as
one of the causes. A report by the World Bank
highlighted that global trade growth decreased
from an approximate average of 7 percent during
the period from 1990 to 2007 to about 4 percent
annually after the crisis. The World Bank also
listed the slowing momentum in the liberaliza-
tion of commerce, the maturing global supply
chains, and the weakness in global investments
as some other reasons behind this slowdown
in international trade. Despite the lacklustre
economic environment, there were 277 regional
trade agreements (RTAs) registered at the World
Trade Organization, as of December 2015. Still,
these RTAs have not been enough to reactivate
the global economy because many of these agree-
ments have faced new realities and issues of
international trade.
Thus, global economy slowdown requires countries
to make sound decisions and actions to reacti-
vate global trade as an important component to
boost economic growth to benefit all nations.
RTAs such as the Trans-Pacific Partnership (TPP)
and the Pacific Alliance (PA) come up at a crucial
moment because they represent real engines for
an improved global economy. The TPP and PA are
innovative, proposing new solutions and overcom-
ing challenges as no trade pact has done before,
breaking new ground in a number of areas that
go beyond traditional RTAs, and supporting a
multilateral trading system to recover the route.
Based on their frameworks, these two free trade
agreements (FTAs) might be complementary agree-
ments that contribute to the integration of the
dynamic Asia-Pacific region through the creation
of the Free Trade Area of the Asia-Pacific (FTAAP).
Both trade pacts are aligned with the goals of the
Asia-Pacific Economic Cooperation (APEC) forum
that aims to open investment and trade within the
region and has been a key supporter of the FTAAP.
THE TRANS-PACIFIC PARTNERSHIPS
AND THE PACIFIC ALLIANCE:
COMPLEMENTARY AGREEMENTS TOWARD
HIGHER REGIONAL ECONOMIC INTEGRATION
IN THE ASIA PACIFIC REGION
BY JUAN NAVARRO
4	 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA
TPP & PA : REGIONAL ECONOMIC INTEGRATION
Canada, as a member of the TPP, an observer
of the PA, and a member of APEC, has a unique
opportunity as a leader in bridging Latin America
and the Asia-Pacific region. Taking this role will
send a clear message of Canada’s genuine interest
to contribute to and strengthen its relationships
with the nations of the Asia-Pacific region. The
participation of Canada needs to come from
leaders, policy makers, government, business
people, and Canadian society. Canadians need
to understand that the TPP and PA are excel-
lent allies to boosting their country’s economy,
expanding and opening new markets, and inte-
grating its business and economic trade sectors to
global supply chains. Reports indicate that only
3.6 percent of Canadian businesses are exporting,
showing the potential to keep encouraging entre-
preneurs to think and trade globally.
The TPP and PA represent two excellent pathways
toward higher regional economic integration in the
Asia-Pacific region, giving Canada an opportunity
for a leadership role and to act as a bridge between
Asia and Latin America. Studies show that compa-
nies that export tend to be more competitive and
productive, and that they achieve higher profits
than those companies that don’t export. The
benefits of FTAs to Canadian businesses include
opening up opportunities to global supply chains
from traditional to advanced manufacturing,
creative industries, professional and financial ser-
vices, tourism, education, and business.
THE TPP AND THE PA
On February 4, 2016, the TPP was signed by 12
nations: Australia, Brunei, Canada, Chile, Japan,
Malaysia, Mexico, New Zealand, Peru, Singapore,
the United States, and Vietnam. The TPP is a
comprehensive and state-of-the-art free trade
agreement that put together new solutions to
many issues that have plagued global trade for
the last several years. At this stage of the TPP,
each nation is following the domestic procedures
for ratification, so the FTA has been signed, but
is not in force yet. In comparison, on May 1, 2016,
the PA, composed of Colombia, Chile, Peru and
Mexico, (the latter three being TPP members),
entered in force. This alliance opened a new
chapter in the history of the Latin American
region and its trade relationship with the world,
in particular the Asia-Pacific region.
The goals of both regional FTAs have many
concurrences, but there are also some differences
in their approach and how the agreements are
implemented. The TPP aims to remove barriers
to investment, to liberalize trade, to eliminate or
reduce tariffs and non-tariff barriers, and to go
further in the establishment of trade rules and
disciplines on a range of issues affecting global
trade. The PA aims to become a platform for trade
and economic integration with a clear interest
to promote business in the Asia-Pacific region.
The PA has introduced standards that go further
than the free movement of people across borders,
including elimination of visas, a decision that is
already having a positive impact on tourism and
overall business.
COMPARATIVE ANALYSIS
The TPP includes the United States and Japan,
two of the top three world economies, but also
includes dynamic nations with high potential to
grow economically and with industries well con-
nected to global supply chains. For the last few
years, Vietnam has had a 6.4 percent growth in
their GDP per capita, one the fastest worldwide.
Of the PA members, four nations have economies
with an expertise in international trade, and all
have FTAs with the United States, the European
Union (EU), and Canada. Additionally, according
to Doing Business 2016, the PA nations earned
5	 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA
TPP & PA : REGIONAL ECONOMIC INTEGRATION
the top four places in the ranking of ease of doing
business in the Latin American and Caribbean
region: Mexico (1), Chile (2), Peru (3), and
Colombia (4), a clear indication of the potential
for international business opportunities. The TPP
represents about 40 percent of the global GDP
and 28 percent of world goods exports. Globally,
TPP nations represent more than one-third of
exports of heavy and light cars, one-quarter of
chemical exports, one-fifth of aerospace exports,
and more than half of mining exports. It is esti-
mated that the TPP will eliminate about 18,000
tariffs. In parallel to this, PA nations, as part of
the Latin American and Caribbean (LAC) region,
represent 52 percent of the total trade, 39 percent
of the GDP, and 45 percent of the foreign direct
investment (FDI). The PA eliminated 92 percent
of tariffs on products among PA nations.
The TPP and PA have integrated provisions that
exceed international standards, and they have
offered solutions to several issues that com-
panies of all sizes and industries were facing,
exporting and importing goods and services and
doing international business overall. Solutions
included improvements or new standards related
to market access, rules of origin, trade facilita-
tion, customs co-operation, public procurement,
cross-border services, financial services, trans-
parency, digital commerce, public procurement,
investments, and investor-state dispute settle-
ment (ISDS). TPP members have also added
new standards related to intellectual property
rights (IPRs) and state-owned enterprises (SOEs)
that they included in separate chapters. In the
PA, there is a higher interest in promoting free
movement of people and tourism, encouraging
academic and cultural exchanges, and integrating
stock markets. While these two FTAs represent
rather comprehensive documents, a further look
at three important themes, investments, IPRs,
and SOEs, will be undertaken for the purposes of
this paper.
INVESTMENTS
The PA and TPP have followed similar pathways
to include investment articles in their agree-
ments. They have designed individual chapters
that set the basis of a good business environ-
ment in their regions. Both agreements included
provisions that offer more certainty to foreign
investors, such as setting clear definitions of
what constitutes an “investment” and an “inves-
tor”, incorporating National Treatment (NT)
and Most Favoured Nation (MFN) provisions in
pre- and post-establishment stages. These two
concepts, NT and MFN, are key provisions that
help investors feel more confident investing in a
foreign country, as one, NT, prohibits the dis-
crimination of a foreign investment as compared
to a local investment and the other, MFN, guar-
antees that a member country must be accorded
the same advantages as any other “most-favored”
member by the granting country. It is worth
noting that the TPP includes special chapters
for important themes that will also inevitably
impact investments, such as labour, competitive-
ness, business facilitation, regulatory coherence,
technical co-operation, and capacity building. For
investors who have determined that a violation
to their rights has occurred, the ISDS provi-
sions provide for a fairer and transparent process
than originally seen in other investment or trade
agreements. For instance, both agreements allow
for public access to hearings and allow for the
potential discussion of an appellate mechanism.
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TPP & PA : REGIONAL ECONOMIC INTEGRATION
The following table is a side-by-side comparison
of the investment chapters of both agreements.
PROVISIONS ABOUT INVESTMENTS
TRANS-PACIFIC
PARTNERSHIP
PACIFIC ALLIANCE
Chapter Number Nine Ten
Definition of investment Yes / Art. 9.1 Yes / Art. 10.1
Lists required characteristics of
investment
Yes Yes
Definition of investor
Yes / Definition of Party
and non-Party investor
Yes / Definition of Party
and non-Party investor
Includes requirement of substantial
business activity
No No
Type of National Treatment (NT) clause
Article 9.4 Pre- and
post-establishment
Article 10.4 Pre- and
post-establishment
Reference to “like circumstances” Yes Yes
Type of Most Favoured Nation
(MFN) clause
Article 9.5 Pre- and
post-establishment
Article 10.5 Pre- and
post-establishment
Includes Denial of Benefits clause Yes / Art. 9.15 Yes / Art. 10.13
Discretionary (“Party may deny”) or
mandatory (“benefits shall be denied”)
Unilaterally discretionary Unilaterally discretionary
Investments covered
Applies to post-BIT
investments only
Applies to post-BIT
investments only
Procedural issues (ISDS) Yes Yes
Fair and equitable treatment (any
mentioning in the text, except preamble)
Yes Yes
Includes Expropriation and
Compensation clause
Yes / Art. 9.8 Yes / Art. 10.12
Includes treatment in Case of Armed
Conflict or Civil Strife
Yes / Art. 9.7 Yes / Art. 10.7
Includes transfer of funds clause Yes / Art. 9.9 Yes / Art. 10.11
Includes prohibition of performance
requirements
Yes / Art. 9.10 Yes / Art. 10.8
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TPP & PA : REGIONAL ECONOMIC INTEGRATION
Requires senior management nationality No / Article 9.11 No / Art. 10.9
Health and environment (any mentioning
in the text, except preamble)
Yes / Art. 9.16 Yes / Art. 10.31
Labour standards (any mentioning in
the text, except preamble)
Yes, TPP has a special
chapter for Labour
(chapter 19)
Yes
Corporate social responsibility (any
mentioning in the text, except preamble)
Yes / Art. 9.17 Yes / Art. 10.30
Corruption (any mentioning in the text,
except preamble)
TPP has one chapter
about it: Chapter 26
“Transparency and
Anti-Corruption”
Yes / Art. 10.30
Subrogation clause Yes / Art. 9.13 No
Reference to investment promotion in
text of agreement (not preamble)
TPP has one chapter
about this and other
related themes: Chapter
22 “Competitiveness and
Business Facilitation”
Yes / Art. 10.29
Dispute Settlement included
Yes. In addition, TPP
has Chapter 28 “Dispute
Settlement” setting rules
about this important
theme
Yes. In addition, PA has
Chapter 17 “Dispute
Settlement” setting rules
about this important
theme
Frivolous claims
Inclusion of a process for
addressing claims that are
“manifestly without legal
merit” as a preliminary
objection
frivolity is an element
considered when
awarding costs to a
respondent who has
successfully objected the
validity of a claim
Technical co-operation/capacity building
TPP has one chapter
setting rules about
this theme: Chapter
21 “Cooperation and
Capacity Building”
Yes / Art. 10.33
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TPP & PA : REGIONAL ECONOMIC INTEGRATION
INTELLECTUAL PROPERTY RIGHTS
(IPRS)
According to the World Intellectual Property
Organization (WIPO), the reasons why nations
should consider promoting IPRs in their econo-
mies are to encourage innovation, boosting
their economic growth, and to give legal rights
to innovators regarding their inventions and
overall work, balancing these with the interest
of society to have access to these innovations.
In terms of IPRs, the TPP and PA have made
improvements to the IPR system, but have taken
different routes. On the one hand, TPP members
invested a lot of time in this topic and discussed
at length on how to create a better framework
that balanced the interests of all stakehold-
ers. The final document showed standards that
no previous FTA had covered and went beyond
current provisions of Trade-Related Aspects of
the Intellectual Property Rights Agreement. The
new standards defined in the TPP improved the
provisions related to trademarks, copyrights, and
patents, including criminal penalties for trade
secret theft, clarifications regarding IPR enforce-
ment including infringement in the digital space,
and a proviso that TPP members cannot exclude
SOEs from IP compliance rules. In addition, TPP
negotiators agreed to include provisions about
traditional and biologic medicines.
On the other hand, even though the PA docu-
ment includes some articles referring to
intellectual property, it does not have a specific
chapter addressing IPRs separately. Instead, PA
nations established a work group with the goal of
bringing together the four intellectual property
offices of member nations to plan and execute
a strategy with joint and specific co-operation
activities that strengthen IPR protection. This
group has been working in three specific areas:
intellectual property, copyrights, and transver-
sal issues. In October of last year, the PA issued
a joint declaration stating that they would be
working on specific activities to increase intel-
lectual property protection and to ensure access
to services related to intellectual property. The
Patent Prosecution Highway, one of the planned
activities, consists of sharing information
among the four intellectual property offices of
PA nations and makes the registration processes
simpler and faster for the final user. The second
activity was the study of possible measures for
harmonization, and the simplification of proce-
dures in the field of trademark registration. The
PA takes a pragmatic approach, swiftly moving
forward from purposes to concrete actions in
benefit of their individual economies.
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STATE-OWNED ENTERPRISES
The ratio of state-owned enterprises among the
Fortune Global 500 grew from 9 percent in 2005
to 23 percent in 2014, and SOEs from China
strongly influenced this number. Likewise, the
OECD pointed out the importance of implement-
ing an effective legal and regulatory framework
that guarantees a fair competition between SOEs
in Asia and other companies. For this reason, this
international organization created the forum
“OECD-Asia Network on Corporate Governance
of State-Owned Enterprises” with the goal of
creating a space to share best practices related
to SOEs and, in this way, boost competitiveness
and economic growth in Asian economies. Many
times, SOEs fulfil a social purpose and their pres-
ence adds value to society. However, when SOEs
offer commercial services or products, regulation
should be put in place to avoid any preferential
support by governments or regulations, allowing
all companies to compete on an even playing field.
Since many TPP nations have active and power-
ful SOEs in their economies, such as Vietnam
and Malaysia, and considering the potential-
ity of China joining the TPP, the United States
promoted and achieved consensus to include a
separate chapter about SOEs in this agreement.
Some of the provisions in this chapter included
requiring a list of SOEs to share with the other
TPP Parties, providing reporting requirements
to guarantee SOEs make purchases and sales in
a commercial base, and ensuring SOEs do not
discriminate against the enterprises of other
TPP nations. In comparison to this, the PA did
not include a chapter about SOEs in its agree-
ment. Still, in the event that member nations
ever deemed this to be an important subject to
address, there is a flexibility in their functioning
which can allow for the creation of a work group
that could regulate the space and create special
activities, just as they did for IPRs. Furthermore,
the agreement allows them to make amendments
and a new chapter could be agreed upon by the
four nations, as they did on July 3, 2015, when
they added a new chapter on regulatory improve-
ment. The TPP chapter on SOEs could serve as a
good reference to this end.
THE TPP AND THE PA IN THE
BROADER CONTEXT OF APEC
The international trade system is at a very criti-
cal moment in which positions and definitions
are crucial to support the recovery of the global
economy and to boost business in local communi-
ties. It seems that two main options exist about
how nations might position themselves on FTAs.
One option is to withdraw from them, keeping
distance or stepping back from any membership
in FTAs, the decision of the U.K. to leave the
European Union being a recent example of this
position. The other option is that nations keep
moving forward toward more integration with
current partner nations and new ones, trying to
be part of larger FTAs which allow integration
of their industries to global supply chains. It is
important to clarify that every nation has the
right to decide how they will participate in these
processes of trade and regional economic inte-
gration, analyzing their industries, identifying
strengths and weakness, setting objectives, and
preparing to compete and to reap the benefits
of their efforts. In this regard, the TPP and PA
are two excellent examples of nations trying to
move forward in their goals of greater trade and
economic integration with countries of the Asia-
Pacific region.
Analyzing the TPP and PA in the broader context
of APEC suggests that both FTAs share the
values of APEC related to deeper integration and
collaboration in the Asia-Pacific region to achieve
sustainable economic growth. In the coming
days, a study to create a roadmap, step-by-step,
10	 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA
TPP & PA : REGIONAL ECONOMIC INTEGRATION
for the Free Trade Area of the Asia-Pacific will be
released. Endorsed by APEC nations in 2014, it
has generated great expectation and will arrive at
a very important moment considering the need
to accelerate international trade. According to the
Peterson Institute for International Economics,
there are two feasible roads for reaching the
FTAAP’s vision. One option is the expan-
sion of the TPP. The second option is through
a new agreement that brings together different
FTAs of the region, including the TPP and the
Regional Comprehensive Economic Partnership
(RCEP). RCEP is a potential RTA between the
Association of Southeast Asian Nations (ASEAN)
and six states with which ASEAN has existing
FTAs, including China. While the two scenarios
presented by the Peterson Institute are feasible,
considering the PA and TPP as two complemen-
tary agreements in the context of APEC that can
support each other would be economically and
socially useful. The TPP and PA working together
under their respective frameworks could con-
tribute to the integration and prosperity of the
Asia-Pacific region and beyond.
The TPP and PA require commitments and more
economic and trade integration efforts from their
members and, most importantly, both FTAs
share common values about global trade. Over
the past few years, some analysts have suggested
that the TPP and RCEP might be the two FTAs
that could match the composition of the FTAAP.
However, other critics worry that RCEP would
not be a good match with the TPP because it
would set provisions below TPP standards, which
would make integration with the FTAAP more
difficult. For that reason, the PA gets a gold star
rating based on all that has been achieved since
it was signed. For instance, the PA, consistent
with its practical approach since they signed the
agreement in 2011, has been in a constant invest-
ment promotion campaign, visiting more than
22 nations to invite them to invest in the PA
region, organizing business summits, and con-
tacting directly more than 5,000 business people
to become a real platform for trade and economic
integration. In addition, PA members have
opened consulates and embassies together to
provide information and promote their nations’
businesses in countries of interest. Last, but not
least, they have achieved a milestone success with
the integration of their four stock markets into
the integrated Latin American market, known as
MILA by its acronym in Spanish. MILA offers
investment opportunities in equities on over 700
companies from the four PA nations. The frame-
work created by the PA has lead to substantial
benefits and could serve as an example for RCEP
negotiations and a vital piece, along with the
TPP, of the FTAAP puzzle.
CANADA’S ROLE AS A BRIDGE
BETWEEN LATIN AMERICA AND
ASIA
Canada’s role in helping bridge Latin America
with Asia is a unique opportunity to demonstrate
Canada’s genuine interest to collaborate in initia-
tives between both regions. Moreover, this role
would allow Canada to be present and involved
in the different trade initiatives occurring in
these areas and to promote its own companies in
growing markets. To succeed in this role, it could
make use of its expertise in these regions and
make effective use of its seats as special observer
in the PA, as a signatory nation of the TPP, and
as a member of APEC. Canada’s participation in
these three spaces could positively influence the
course of co-operation and integration for both
regions. There is a wealth of Canadian expertise
from its long history negotiating FTAs with all
of the PA members, FTAs with Costa Rica and
Panama, as well as nine foreign investment pro-
motion and protection agreements with countries
of the region. In addition, its experience through
11	 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA
TPP & PA : REGIONAL ECONOMIC INTEGRATION
the Canadian Trade Commissioner Service, with
offices in 23 nations of the Asia Pacific region
and 20 in Latin America countries, makes
Canada a the perfect position to assume this
role. According to Global Affairs Canada, since
the Americas “were made a foreign policy prior-
ity in 2007, two-way trade between Canada and
the Americas has increased over 40 percent and
two-way investment has more than doubled.”
Marc Lortie, a former Canadian diplomat with
extensive experience representing Canada abroad
as Canadian Ambassador to Chile, Spain, and
France, as well as sherpa for the third Summit
of the Americas, pointed out in this report that
Canada’s role as a trade bridge linking Latin
America with Asia is a real possibility and an
opportunity it should take. He added that even
though there are Asian countries doing direct
business in Latin America, Canada has in its
favour a vast knowledge of the region. He men-
tioned that during the last 20 years, Canada has
truly developed a meaningful relationship with
Latin America, and, for that reason, Canada is
very well-positioned there through several FTAs
and investments. Mr. Lortie further noted that
Canada counts on huge relationships with Asia
and, along with Port Vancouver, one of the most
important ports in the Pacific. These are unde-
niably great assets to put in play when looking
to bridge both sides. He advised that if Canada
wants to succeed in this role, it needs to find
creative and pragmatic solutions that link these
regions effectively. About Canada’s participation
as observer in the PA, Mr. Lortie affirmed that
being an observer gives Canada the opportunity
to better understand the issues being discussed,
and gives the country an opportunity to col-
laborate on the possible solutions. Mr. Lortie
concluded his contribution to this report by
saying that Canada remains an open trading
partner and that is good, because prosperity is in
open markets and dynamic trade. “Canada has
to be extremely attentive and vigilant because
the forces of protectionism are on the rise”, said
Mr. Lortie, “and it is not a good signal at all for
Canada and the overall economy.”
Canada has been an active observer of the PA
ever since it became the first non-Latin American
observer to this trade pact in 2012. In 2015,
Canada hosted a PA delegation on a study tour of
the extractive sector and in June 2016, Canada
and the PA signed a joint declaration on part-
nership, in which they identified six areas for
increased co-operation: education and training;
technology and innovation; responsible natural
resource development; science; small- and
medium-sized enterprises; and trade facilitation
and promotion. Canada should seize the current
opportunities and take the next step to bridging
and supporting PA nations, observers of the PA,
and Asian economies. To this end, Canada has to
apply its leadership and influence in several orga-
nizations of the Asia-Pacific region, particularly
the APEC forum.
12	 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA
TPP & PA : REGIONAL ECONOMIC INTEGRATION
CONCLUSION
Global trade is a key element to boost the global
economy and recover the dynamism present
before the crisis. The TPP and PA are two inno-
vative trade agreements that share common
values that have taken two somewhat different
approached to achieve similar outcomes. These
FTAs can and should serve as building blocks
towards the FTAAP. In this regard, the possibil-
ity for Canada to assume an active role as a trade
bridge to between Latin America and Asia is a
unique opportunity that should not be looked
over. Likewise, Canadian businesses should strive
to better understand the benefits of FTAs such as
the TPP and PA, and prepare themselves to partic-
ipate in global opportunities, as they are endless.
13	 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA
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World Bank. 2016. Global Economic Prospects.
Retrieved from: https://www.worldbank.org/
content/dam/Worldbank/GEP/GEP2016a/
Global-Economic-Prospects-January-2016-
Implications-Trans-Pacific-Partnership-
Agreement.pdf
Deloitte. 2014. The future of productivity: Smart
exporting for Canadian companies. Retrieved
from: http://www2.deloitte.com/content/dam/
Deloitte/ca/Documents/insights-and-issues/ca-
en-insights-issues-future-of-productivity-2014.
pdf
PWC. 2015. State-owned enterprises: catalysts
for public value creation? Retrieved from: https://
www.pwc.com/gx/en/psrc/publications/assets/
pwc-state-owned-enterprise-psrc.pdf
Jeffrey J. Schott, Cathleen Cimino-Isaacs, and
Euijin Jung. July 2016. Implications of the Trans-
Pacific Partnership for the World Trading System.
Peterson Institute For International Economics.
Retrieved from: https://piie.com/publications/
policy-briefs/implications-trans-pacific-partner-
ship-world-trading-system
Lortie, Marc. Interview by author. British
Columbia, November 4, 2016.
Asia Pacific Foundation of Canada
Fondation Asie Pacifique du Canada
900–675 W Hastings St
Vancouver, BC V6B 1N2
Tel.— 604 684 5986 
Fax.— 640 681 1370
www.asiapacific.ca

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TPP and PA: Complementary agreements toward higher regional economic integration

  • 1. THE TRANS-PACIFIC PARTNERSHIPS AND THE PACIFIC ALLIANCE: COMPLEMENTARY AGREEMENTS TOWARD HIGHER REGIONAL ECONOMIC INTEGRATION IN THE ASIA PACIFIC REGION BY JUAN NAVARRO Document: REIWG 36-061A Draft: FIRST Date: 13 November 2016 Source: ABAC Canada Meeting: Lima, Peru
  • 2. ABOUT ABAC ABAC was set up to provide a link between APEC and the business community. Drawn from the private sector, ABAC members collectively prepare an annual report with recommenda- tions on how to improve the business and investment environment within the Asia-Pacific region. ABAC members are appointed by their respective Leaders, and represent a range of business sectors, including small and medium enterprises. The ABAC International Secretariat based in Manila. For more information, visit www.abaconline.org ABOUT THE ASIA PACIFIC FOUNDATION OF CANADA Established by an act of Parliament in 1984, the Asia Pacific Foundation of Canada (APF Canada) is a not-for-profit organization focused on Canada’s relations with Asia. Our mission is to be Canada’s catalyst for engagement with Asia and Asia’s bridge to Canada. APF Canada supports the building of Asia-competency and promotes knowledge and understanding of developments in Asia. Its research and policy work focuses on trade, investment, innovation, energy, and the environment. A leader in research and analysis on Canada-Asia relations for over 30 years, APF Canada partners with government, business leaders, academics, and opinion makers in Canada and across the Asia Pacific region to offer clear, specific, and actionable policy advice. ABOUT THE AUTHOR: JUAN SALVADOR NAVARRO Mr. Navarro has vast experience conducting economic analysis, studies and research as an economist for 10 years at the Mexican Central Bank, as well as a university professor at pres- tigious universities. During the past year, Mr. Navarro has focused his research on themes related to international trade and FTAs. In addition, Mr. Navarro is a successful Canadian business entrepreneur, member and leader in different business and global organizations such as the Canadian International Council. Submitted to Policy Research Grants Asia Pacific Foundation of Canada. This report was presented at the ABAC IV 2016 meeting in Lima, Peru. The views expressed here are those of the author’s, and do not necessarily represent the views of the Asia Pacific Foundation of Canada.
  • 3. 3 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION The last report of the Organisation for Economic Co-operation and Development (OECD) pointed out that recovery in the global economy after the crisis remains modest due to a combination of economic factors, citing weak global trade as one of the causes. A report by the World Bank highlighted that global trade growth decreased from an approximate average of 7 percent during the period from 1990 to 2007 to about 4 percent annually after the crisis. The World Bank also listed the slowing momentum in the liberaliza- tion of commerce, the maturing global supply chains, and the weakness in global investments as some other reasons behind this slowdown in international trade. Despite the lacklustre economic environment, there were 277 regional trade agreements (RTAs) registered at the World Trade Organization, as of December 2015. Still, these RTAs have not been enough to reactivate the global economy because many of these agree- ments have faced new realities and issues of international trade. Thus, global economy slowdown requires countries to make sound decisions and actions to reacti- vate global trade as an important component to boost economic growth to benefit all nations. RTAs such as the Trans-Pacific Partnership (TPP) and the Pacific Alliance (PA) come up at a crucial moment because they represent real engines for an improved global economy. The TPP and PA are innovative, proposing new solutions and overcom- ing challenges as no trade pact has done before, breaking new ground in a number of areas that go beyond traditional RTAs, and supporting a multilateral trading system to recover the route. Based on their frameworks, these two free trade agreements (FTAs) might be complementary agree- ments that contribute to the integration of the dynamic Asia-Pacific region through the creation of the Free Trade Area of the Asia-Pacific (FTAAP). Both trade pacts are aligned with the goals of the Asia-Pacific Economic Cooperation (APEC) forum that aims to open investment and trade within the region and has been a key supporter of the FTAAP. THE TRANS-PACIFIC PARTNERSHIPS AND THE PACIFIC ALLIANCE: COMPLEMENTARY AGREEMENTS TOWARD HIGHER REGIONAL ECONOMIC INTEGRATION IN THE ASIA PACIFIC REGION BY JUAN NAVARRO
  • 4. 4 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION Canada, as a member of the TPP, an observer of the PA, and a member of APEC, has a unique opportunity as a leader in bridging Latin America and the Asia-Pacific region. Taking this role will send a clear message of Canada’s genuine interest to contribute to and strengthen its relationships with the nations of the Asia-Pacific region. The participation of Canada needs to come from leaders, policy makers, government, business people, and Canadian society. Canadians need to understand that the TPP and PA are excel- lent allies to boosting their country’s economy, expanding and opening new markets, and inte- grating its business and economic trade sectors to global supply chains. Reports indicate that only 3.6 percent of Canadian businesses are exporting, showing the potential to keep encouraging entre- preneurs to think and trade globally. The TPP and PA represent two excellent pathways toward higher regional economic integration in the Asia-Pacific region, giving Canada an opportunity for a leadership role and to act as a bridge between Asia and Latin America. Studies show that compa- nies that export tend to be more competitive and productive, and that they achieve higher profits than those companies that don’t export. The benefits of FTAs to Canadian businesses include opening up opportunities to global supply chains from traditional to advanced manufacturing, creative industries, professional and financial ser- vices, tourism, education, and business. THE TPP AND THE PA On February 4, 2016, the TPP was signed by 12 nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The TPP is a comprehensive and state-of-the-art free trade agreement that put together new solutions to many issues that have plagued global trade for the last several years. At this stage of the TPP, each nation is following the domestic procedures for ratification, so the FTA has been signed, but is not in force yet. In comparison, on May 1, 2016, the PA, composed of Colombia, Chile, Peru and Mexico, (the latter three being TPP members), entered in force. This alliance opened a new chapter in the history of the Latin American region and its trade relationship with the world, in particular the Asia-Pacific region. The goals of both regional FTAs have many concurrences, but there are also some differences in their approach and how the agreements are implemented. The TPP aims to remove barriers to investment, to liberalize trade, to eliminate or reduce tariffs and non-tariff barriers, and to go further in the establishment of trade rules and disciplines on a range of issues affecting global trade. The PA aims to become a platform for trade and economic integration with a clear interest to promote business in the Asia-Pacific region. The PA has introduced standards that go further than the free movement of people across borders, including elimination of visas, a decision that is already having a positive impact on tourism and overall business. COMPARATIVE ANALYSIS The TPP includes the United States and Japan, two of the top three world economies, but also includes dynamic nations with high potential to grow economically and with industries well con- nected to global supply chains. For the last few years, Vietnam has had a 6.4 percent growth in their GDP per capita, one the fastest worldwide. Of the PA members, four nations have economies with an expertise in international trade, and all have FTAs with the United States, the European Union (EU), and Canada. Additionally, according to Doing Business 2016, the PA nations earned
  • 5. 5 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION the top four places in the ranking of ease of doing business in the Latin American and Caribbean region: Mexico (1), Chile (2), Peru (3), and Colombia (4), a clear indication of the potential for international business opportunities. The TPP represents about 40 percent of the global GDP and 28 percent of world goods exports. Globally, TPP nations represent more than one-third of exports of heavy and light cars, one-quarter of chemical exports, one-fifth of aerospace exports, and more than half of mining exports. It is esti- mated that the TPP will eliminate about 18,000 tariffs. In parallel to this, PA nations, as part of the Latin American and Caribbean (LAC) region, represent 52 percent of the total trade, 39 percent of the GDP, and 45 percent of the foreign direct investment (FDI). The PA eliminated 92 percent of tariffs on products among PA nations. The TPP and PA have integrated provisions that exceed international standards, and they have offered solutions to several issues that com- panies of all sizes and industries were facing, exporting and importing goods and services and doing international business overall. Solutions included improvements or new standards related to market access, rules of origin, trade facilita- tion, customs co-operation, public procurement, cross-border services, financial services, trans- parency, digital commerce, public procurement, investments, and investor-state dispute settle- ment (ISDS). TPP members have also added new standards related to intellectual property rights (IPRs) and state-owned enterprises (SOEs) that they included in separate chapters. In the PA, there is a higher interest in promoting free movement of people and tourism, encouraging academic and cultural exchanges, and integrating stock markets. While these two FTAs represent rather comprehensive documents, a further look at three important themes, investments, IPRs, and SOEs, will be undertaken for the purposes of this paper. INVESTMENTS The PA and TPP have followed similar pathways to include investment articles in their agree- ments. They have designed individual chapters that set the basis of a good business environ- ment in their regions. Both agreements included provisions that offer more certainty to foreign investors, such as setting clear definitions of what constitutes an “investment” and an “inves- tor”, incorporating National Treatment (NT) and Most Favoured Nation (MFN) provisions in pre- and post-establishment stages. These two concepts, NT and MFN, are key provisions that help investors feel more confident investing in a foreign country, as one, NT, prohibits the dis- crimination of a foreign investment as compared to a local investment and the other, MFN, guar- antees that a member country must be accorded the same advantages as any other “most-favored” member by the granting country. It is worth noting that the TPP includes special chapters for important themes that will also inevitably impact investments, such as labour, competitive- ness, business facilitation, regulatory coherence, technical co-operation, and capacity building. For investors who have determined that a violation to their rights has occurred, the ISDS provi- sions provide for a fairer and transparent process than originally seen in other investment or trade agreements. For instance, both agreements allow for public access to hearings and allow for the potential discussion of an appellate mechanism.
  • 6. 6 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION The following table is a side-by-side comparison of the investment chapters of both agreements. PROVISIONS ABOUT INVESTMENTS TRANS-PACIFIC PARTNERSHIP PACIFIC ALLIANCE Chapter Number Nine Ten Definition of investment Yes / Art. 9.1 Yes / Art. 10.1 Lists required characteristics of investment Yes Yes Definition of investor Yes / Definition of Party and non-Party investor Yes / Definition of Party and non-Party investor Includes requirement of substantial business activity No No Type of National Treatment (NT) clause Article 9.4 Pre- and post-establishment Article 10.4 Pre- and post-establishment Reference to “like circumstances” Yes Yes Type of Most Favoured Nation (MFN) clause Article 9.5 Pre- and post-establishment Article 10.5 Pre- and post-establishment Includes Denial of Benefits clause Yes / Art. 9.15 Yes / Art. 10.13 Discretionary (“Party may deny”) or mandatory (“benefits shall be denied”) Unilaterally discretionary Unilaterally discretionary Investments covered Applies to post-BIT investments only Applies to post-BIT investments only Procedural issues (ISDS) Yes Yes Fair and equitable treatment (any mentioning in the text, except preamble) Yes Yes Includes Expropriation and Compensation clause Yes / Art. 9.8 Yes / Art. 10.12 Includes treatment in Case of Armed Conflict or Civil Strife Yes / Art. 9.7 Yes / Art. 10.7 Includes transfer of funds clause Yes / Art. 9.9 Yes / Art. 10.11 Includes prohibition of performance requirements Yes / Art. 9.10 Yes / Art. 10.8
  • 7. 7 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION Requires senior management nationality No / Article 9.11 No / Art. 10.9 Health and environment (any mentioning in the text, except preamble) Yes / Art. 9.16 Yes / Art. 10.31 Labour standards (any mentioning in the text, except preamble) Yes, TPP has a special chapter for Labour (chapter 19) Yes Corporate social responsibility (any mentioning in the text, except preamble) Yes / Art. 9.17 Yes / Art. 10.30 Corruption (any mentioning in the text, except preamble) TPP has one chapter about it: Chapter 26 “Transparency and Anti-Corruption” Yes / Art. 10.30 Subrogation clause Yes / Art. 9.13 No Reference to investment promotion in text of agreement (not preamble) TPP has one chapter about this and other related themes: Chapter 22 “Competitiveness and Business Facilitation” Yes / Art. 10.29 Dispute Settlement included Yes. In addition, TPP has Chapter 28 “Dispute Settlement” setting rules about this important theme Yes. In addition, PA has Chapter 17 “Dispute Settlement” setting rules about this important theme Frivolous claims Inclusion of a process for addressing claims that are “manifestly without legal merit” as a preliminary objection frivolity is an element considered when awarding costs to a respondent who has successfully objected the validity of a claim Technical co-operation/capacity building TPP has one chapter setting rules about this theme: Chapter 21 “Cooperation and Capacity Building” Yes / Art. 10.33
  • 8. 8 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION INTELLECTUAL PROPERTY RIGHTS (IPRS) According to the World Intellectual Property Organization (WIPO), the reasons why nations should consider promoting IPRs in their econo- mies are to encourage innovation, boosting their economic growth, and to give legal rights to innovators regarding their inventions and overall work, balancing these with the interest of society to have access to these innovations. In terms of IPRs, the TPP and PA have made improvements to the IPR system, but have taken different routes. On the one hand, TPP members invested a lot of time in this topic and discussed at length on how to create a better framework that balanced the interests of all stakehold- ers. The final document showed standards that no previous FTA had covered and went beyond current provisions of Trade-Related Aspects of the Intellectual Property Rights Agreement. The new standards defined in the TPP improved the provisions related to trademarks, copyrights, and patents, including criminal penalties for trade secret theft, clarifications regarding IPR enforce- ment including infringement in the digital space, and a proviso that TPP members cannot exclude SOEs from IP compliance rules. In addition, TPP negotiators agreed to include provisions about traditional and biologic medicines. On the other hand, even though the PA docu- ment includes some articles referring to intellectual property, it does not have a specific chapter addressing IPRs separately. Instead, PA nations established a work group with the goal of bringing together the four intellectual property offices of member nations to plan and execute a strategy with joint and specific co-operation activities that strengthen IPR protection. This group has been working in three specific areas: intellectual property, copyrights, and transver- sal issues. In October of last year, the PA issued a joint declaration stating that they would be working on specific activities to increase intel- lectual property protection and to ensure access to services related to intellectual property. The Patent Prosecution Highway, one of the planned activities, consists of sharing information among the four intellectual property offices of PA nations and makes the registration processes simpler and faster for the final user. The second activity was the study of possible measures for harmonization, and the simplification of proce- dures in the field of trademark registration. The PA takes a pragmatic approach, swiftly moving forward from purposes to concrete actions in benefit of their individual economies.
  • 9. 9 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION STATE-OWNED ENTERPRISES The ratio of state-owned enterprises among the Fortune Global 500 grew from 9 percent in 2005 to 23 percent in 2014, and SOEs from China strongly influenced this number. Likewise, the OECD pointed out the importance of implement- ing an effective legal and regulatory framework that guarantees a fair competition between SOEs in Asia and other companies. For this reason, this international organization created the forum “OECD-Asia Network on Corporate Governance of State-Owned Enterprises” with the goal of creating a space to share best practices related to SOEs and, in this way, boost competitiveness and economic growth in Asian economies. Many times, SOEs fulfil a social purpose and their pres- ence adds value to society. However, when SOEs offer commercial services or products, regulation should be put in place to avoid any preferential support by governments or regulations, allowing all companies to compete on an even playing field. Since many TPP nations have active and power- ful SOEs in their economies, such as Vietnam and Malaysia, and considering the potential- ity of China joining the TPP, the United States promoted and achieved consensus to include a separate chapter about SOEs in this agreement. Some of the provisions in this chapter included requiring a list of SOEs to share with the other TPP Parties, providing reporting requirements to guarantee SOEs make purchases and sales in a commercial base, and ensuring SOEs do not discriminate against the enterprises of other TPP nations. In comparison to this, the PA did not include a chapter about SOEs in its agree- ment. Still, in the event that member nations ever deemed this to be an important subject to address, there is a flexibility in their functioning which can allow for the creation of a work group that could regulate the space and create special activities, just as they did for IPRs. Furthermore, the agreement allows them to make amendments and a new chapter could be agreed upon by the four nations, as they did on July 3, 2015, when they added a new chapter on regulatory improve- ment. The TPP chapter on SOEs could serve as a good reference to this end. THE TPP AND THE PA IN THE BROADER CONTEXT OF APEC The international trade system is at a very criti- cal moment in which positions and definitions are crucial to support the recovery of the global economy and to boost business in local communi- ties. It seems that two main options exist about how nations might position themselves on FTAs. One option is to withdraw from them, keeping distance or stepping back from any membership in FTAs, the decision of the U.K. to leave the European Union being a recent example of this position. The other option is that nations keep moving forward toward more integration with current partner nations and new ones, trying to be part of larger FTAs which allow integration of their industries to global supply chains. It is important to clarify that every nation has the right to decide how they will participate in these processes of trade and regional economic inte- gration, analyzing their industries, identifying strengths and weakness, setting objectives, and preparing to compete and to reap the benefits of their efforts. In this regard, the TPP and PA are two excellent examples of nations trying to move forward in their goals of greater trade and economic integration with countries of the Asia- Pacific region. Analyzing the TPP and PA in the broader context of APEC suggests that both FTAs share the values of APEC related to deeper integration and collaboration in the Asia-Pacific region to achieve sustainable economic growth. In the coming days, a study to create a roadmap, step-by-step,
  • 10. 10 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION for the Free Trade Area of the Asia-Pacific will be released. Endorsed by APEC nations in 2014, it has generated great expectation and will arrive at a very important moment considering the need to accelerate international trade. According to the Peterson Institute for International Economics, there are two feasible roads for reaching the FTAAP’s vision. One option is the expan- sion of the TPP. The second option is through a new agreement that brings together different FTAs of the region, including the TPP and the Regional Comprehensive Economic Partnership (RCEP). RCEP is a potential RTA between the Association of Southeast Asian Nations (ASEAN) and six states with which ASEAN has existing FTAs, including China. While the two scenarios presented by the Peterson Institute are feasible, considering the PA and TPP as two complemen- tary agreements in the context of APEC that can support each other would be economically and socially useful. The TPP and PA working together under their respective frameworks could con- tribute to the integration and prosperity of the Asia-Pacific region and beyond. The TPP and PA require commitments and more economic and trade integration efforts from their members and, most importantly, both FTAs share common values about global trade. Over the past few years, some analysts have suggested that the TPP and RCEP might be the two FTAs that could match the composition of the FTAAP. However, other critics worry that RCEP would not be a good match with the TPP because it would set provisions below TPP standards, which would make integration with the FTAAP more difficult. For that reason, the PA gets a gold star rating based on all that has been achieved since it was signed. For instance, the PA, consistent with its practical approach since they signed the agreement in 2011, has been in a constant invest- ment promotion campaign, visiting more than 22 nations to invite them to invest in the PA region, organizing business summits, and con- tacting directly more than 5,000 business people to become a real platform for trade and economic integration. In addition, PA members have opened consulates and embassies together to provide information and promote their nations’ businesses in countries of interest. Last, but not least, they have achieved a milestone success with the integration of their four stock markets into the integrated Latin American market, known as MILA by its acronym in Spanish. MILA offers investment opportunities in equities on over 700 companies from the four PA nations. The frame- work created by the PA has lead to substantial benefits and could serve as an example for RCEP negotiations and a vital piece, along with the TPP, of the FTAAP puzzle. CANADA’S ROLE AS A BRIDGE BETWEEN LATIN AMERICA AND ASIA Canada’s role in helping bridge Latin America with Asia is a unique opportunity to demonstrate Canada’s genuine interest to collaborate in initia- tives between both regions. Moreover, this role would allow Canada to be present and involved in the different trade initiatives occurring in these areas and to promote its own companies in growing markets. To succeed in this role, it could make use of its expertise in these regions and make effective use of its seats as special observer in the PA, as a signatory nation of the TPP, and as a member of APEC. Canada’s participation in these three spaces could positively influence the course of co-operation and integration for both regions. There is a wealth of Canadian expertise from its long history negotiating FTAs with all of the PA members, FTAs with Costa Rica and Panama, as well as nine foreign investment pro- motion and protection agreements with countries of the region. In addition, its experience through
  • 11. 11 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION the Canadian Trade Commissioner Service, with offices in 23 nations of the Asia Pacific region and 20 in Latin America countries, makes Canada a the perfect position to assume this role. According to Global Affairs Canada, since the Americas “were made a foreign policy prior- ity in 2007, two-way trade between Canada and the Americas has increased over 40 percent and two-way investment has more than doubled.” Marc Lortie, a former Canadian diplomat with extensive experience representing Canada abroad as Canadian Ambassador to Chile, Spain, and France, as well as sherpa for the third Summit of the Americas, pointed out in this report that Canada’s role as a trade bridge linking Latin America with Asia is a real possibility and an opportunity it should take. He added that even though there are Asian countries doing direct business in Latin America, Canada has in its favour a vast knowledge of the region. He men- tioned that during the last 20 years, Canada has truly developed a meaningful relationship with Latin America, and, for that reason, Canada is very well-positioned there through several FTAs and investments. Mr. Lortie further noted that Canada counts on huge relationships with Asia and, along with Port Vancouver, one of the most important ports in the Pacific. These are unde- niably great assets to put in play when looking to bridge both sides. He advised that if Canada wants to succeed in this role, it needs to find creative and pragmatic solutions that link these regions effectively. About Canada’s participation as observer in the PA, Mr. Lortie affirmed that being an observer gives Canada the opportunity to better understand the issues being discussed, and gives the country an opportunity to col- laborate on the possible solutions. Mr. Lortie concluded his contribution to this report by saying that Canada remains an open trading partner and that is good, because prosperity is in open markets and dynamic trade. “Canada has to be extremely attentive and vigilant because the forces of protectionism are on the rise”, said Mr. Lortie, “and it is not a good signal at all for Canada and the overall economy.” Canada has been an active observer of the PA ever since it became the first non-Latin American observer to this trade pact in 2012. In 2015, Canada hosted a PA delegation on a study tour of the extractive sector and in June 2016, Canada and the PA signed a joint declaration on part- nership, in which they identified six areas for increased co-operation: education and training; technology and innovation; responsible natural resource development; science; small- and medium-sized enterprises; and trade facilitation and promotion. Canada should seize the current opportunities and take the next step to bridging and supporting PA nations, observers of the PA, and Asian economies. To this end, Canada has to apply its leadership and influence in several orga- nizations of the Asia-Pacific region, particularly the APEC forum.
  • 12. 12 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION CONCLUSION Global trade is a key element to boost the global economy and recover the dynamism present before the crisis. The TPP and PA are two inno- vative trade agreements that share common values that have taken two somewhat different approached to achieve similar outcomes. These FTAs can and should serve as building blocks towards the FTAAP. In this regard, the possibil- ity for Canada to assume an active role as a trade bridge to between Latin America and Asia is a unique opportunity that should not be looked over. Likewise, Canadian businesses should strive to better understand the benefits of FTAs such as the TPP and PA, and prepare themselves to partic- ipate in global opportunities, as they are endless.
  • 13. 13 ASIA PACIFIC FOUNDATION OF CANADA - FONDATION ASIE PACIFIQUE DU CANADA TPP & PA : REGIONAL ECONOMIC INTEGRATION SOURCES: World Bank. 2016. Global Economic Prospects. Retrieved from: https://www.worldbank.org/ content/dam/Worldbank/GEP/GEP2016a/ Global-Economic-Prospects-January-2016- Implications-Trans-Pacific-Partnership- Agreement.pdf Deloitte. 2014. The future of productivity: Smart exporting for Canadian companies. Retrieved from: http://www2.deloitte.com/content/dam/ Deloitte/ca/Documents/insights-and-issues/ca- en-insights-issues-future-of-productivity-2014. pdf PWC. 2015. State-owned enterprises: catalysts for public value creation? Retrieved from: https:// www.pwc.com/gx/en/psrc/publications/assets/ pwc-state-owned-enterprise-psrc.pdf Jeffrey J. Schott, Cathleen Cimino-Isaacs, and Euijin Jung. July 2016. Implications of the Trans- Pacific Partnership for the World Trading System. Peterson Institute For International Economics. Retrieved from: https://piie.com/publications/ policy-briefs/implications-trans-pacific-partner- ship-world-trading-system Lortie, Marc. Interview by author. British Columbia, November 4, 2016.
  • 14. Asia Pacific Foundation of Canada Fondation Asie Pacifique du Canada 900–675 W Hastings St Vancouver, BC V6B 1N2 Tel.— 604 684 5986  Fax.— 640 681 1370 www.asiapacific.ca