On December 30, 2018 Canada entered into the widely discussed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) along with six other nations within the Asia-Pacific region. The trade agreement, once fully implemented, will bring together approximately 500 million people from across 11 nations including Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, to provide preferential access to markets across four continents.
In both Canada and Australia, there has been extensive discussion among business operators, the media and the general public about the trade agreement and its impact on Canadian and Australian businesses. But what does the trade agreement actually mean for the citizens of these 11 countries? How will it change the way we do business or invest? And, specifically, what does it mean for both Australia and Canada – two countries with uncannily similar histories, growth and cultures despite the oceanic distance?
Tell me simply, what does the agreement do?
In simple terms, through the agreement, trade and investment rules are simplified to ensure trade is fairer, more predictable and helps reduce the number of logistic resources required. The agreement seeks to offer foreign direct investors enhanced protection, predictability and transparency for their investments. The agreement also provides greater access to fast growing markets across the four continents – North America, South America, Asia and Australia.
So, what does the agreement mean for Australia and Canada?
Canada itself has accomplished a significant feat as a result of entering into the CPTPP agreement. Canada is believed to be the only G7 nation with free trade access across the Americas, Europe and the Asia-Pacific region, putting it in a truly unique place on the global stage when it comes to trade and investment.
From a Canadian perspective, the agreement is expected to inject $4.2 billion into Canada’s GDP annually. For Australian exporters, the agreement will eliminate more than 98 percent of tariffs in the free trade area. For both countries, the agreement reinforces presence in each other’s respective region as well as opens commercial opportunities with new FTA partners. In the case of Canada, the agreement opens up commercial opportunities with Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam.
Canada and Australia share a strong and diversified commercial relationship.The relationship is driven by an increase in two-way investment and trade in services. With the introduction of the agreement, nearly all tariffs with Australia have been eliminated, and establishes duty-free access for goods between Canada and Australia for agricultural products, forest products and value-added wood, chemicals and plastics, metals and minerals, among other products.
From an Australian perspective, the agreement provides Australian businesses the opportunity to bid for government procurement services contracts within Canada such as:
- accounting, auditing and taxation services
- architectural engineering and other technical services
- telecommunication and related services
- environmental protection services, and
- education services among others
Australia is Canada’s eighth largest destination for direct investment abroad, and by far the largest destination in Asia-Pacific with an estimated $26.5 billion invested in 2016, so the opportunities for cross-border trade is significant for both countries.
We’ve only scratched the surface of what the CPTPP agreement is and what it means for everyone. As more details regarding the CPTPP agreement emerge, it’s expected that there will be a better understanding of what this means for both Australian and Canadian businesses, allowing companies to invest with greater confidence, greater predictability and transparency.