The Trans-Pacific Partnership The Canadian Perspective Trevor Tombe Assistant Professor, Department of Economics Research Fellow, School of Public Policy
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The Trans-Pacific Partnership
The Canadian Perspective
Trevor TombeAssistant Professor, Department of EconomicsResearch Fellow, School of Public Policy
TPP: The Canadian Perspective
Canada’s trade challenge: Diversification
Tariff reductions are important, but TPP goes far (far) beyond classic trade liberalization
International investment posed to grow
Large gains from multinational production – the case of Canada’s auto sector
The view from Canada’s PNWER regions
Our Eggs are in 2.5 Baskets
0
0.1
0.2
0.3
0.4
0.5
0.6
Herf
inda
hl In
dex
of E
xpor
ts
Measure of Export Market ConcentrationA Herfindahl Index Across Export Destinations
Canada
Tariffs on Canadian Imports
$1B
$800M
$450M
$2.3B
$150M
$270M
Tariffs Paid by Canadians, by Exporter (2015)UN-TRAINS data from WITS
EU TPP TPP + China India Rest of World
Import Tariffs, by Country
0% 5% 10% 15% 20% 25% 30% 35% 40%
Singapore
Brunei
New Zealand
Canada
Australia
Japan
Peru
United States
Malaysia
Chile
Mexico
Vietnam
Simple Avg MFN
Import Tariffs, by Country
0% 5% 10% 15% 20% 25% 30% 35% 40%
Singapore
Brunei
New Zealand
Canada
Australia
Japan
Peru
United States
Malaysia
Chile
Mexico
Vietnam
Simple Avg Bound Simple Avg MFN
Import Tariffs, by Country
0% 1% 2% 3% 4% 5% 6% 7% 8%
Singapore
United States
Mexico
New Zealand
Japan
Peru
Brunei
Australia
Malaysia
Chile
Vietnam
Average Tariffs Applied to Canadian Exports (2014)
The U.S. average tariff against Canada in 1987
Import Tariffs, by Country
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
AustraliaChile
New ZealandSingapore
BruneiCanada
United StatesPeru
JapanMalaysia
MexicoVietnam
Fraction of Tariff Lines Above 10% (2014)
Sometimes Complex
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Years Since TPP in Force
Japan's Beef Tariff Liberalization Schedule Under TPPThe Default Tariff Schedule With "Safeguard" ProvisionsWith Annual Renew of Safeguards
Trade is More Than Trade
Within-Firm Trade
0%
10%
20%
30%
40%
50%
60%
2002 2004 2006 2008 2010 2012 2014
Shar
e of
"Re
late
d Pa
rty
Trad
e"
"Related Party Trade" as a % of Canada's Exports to the USUS Census Bureau Related Party Trade Data: http://sasweb.ssd.census.gov/relatedparty/
Global Supply Chains
0%
10%
20%
30%
40%
50%
60%
70%
80%
1995 2011
Intermediate Inputs as a Share of Canada's TradeImports Exports
Investment Poised to Expand
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Mill
ions
of D
olla
rs
Investment Flows Between Canada and TPP CountriesCANSIM 376-0051
Mexico and U.S. TPP Countries, non-NAFTA
Investment Poised to Expand
0%
10%
20%
30%
40%
50%
60%
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Shar
e of
GDP
Investment Flows Between Canada and TPP CountriesCANSIM 376-0051
Mexico and U.S. TPP Countries, non-NAFTA
Quantifying the Gains from Economic Integration
Sales
AssemblyHeadquarters
Classic Trade
Frictions
Quantifying the Gains from Economic Integration
Sales
AssemblyHeadquarters
Classic Trade
FrictionsNEEDED: A model of trade, multinational
production, and regulatory
harmonization
Head and Mayer (2015)“Brands in Motion”
Sales
AssemblyHeadquarters
Classic Trade
Frictions
MultinationalProduction
Frictions
MultinationalSales
Frictions
Head and Mayer (2015)“Brands in Motion”
Sales
AssemblyHeadquarters
Classic Trade
Frictions
MultinationalProduction
Frictions
MultinationalSales
Frictions
Trade Costs in Autos (OECD)
22%
28%
8%
TPP and the Auto Sector
-15%
-10%
-5%
0%
5%
10%
15%
JPN CAN USA MEX DEU KOR
Estimated Change in Car Production from TPPSource: Head and Mayer (2015)
Lower Trade Frictions
TPP and the Auto Sector
-15%
-10%
-5%
0%
5%
10%
15%
JPN CAN USA MEX DEU KOR
Estimated Change in Car Production from TPPSource: Head and Mayer (2015)
Lower Trade Frictions Lower Trade and MP Frictions
Canada’s auto sector stands to gain from TPP
TPP and the Auto Sector
-15%
-10%
-5%
0%
5%
10%
15%
JPN CAN USA MEX DEU KOR
Estimated Change in Car Production from TPPSource: Head and Mayer (2015)
Lower Trade Frictions Lower Trade and MP FrictionsLower Trade, MP, and MS Frictions
The View from the CanadianPNWER Regions
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
BC AB SK YK NWT
Shar
e of
GDP
Trade with non-NAFTA TPP Countries (2015)Trade Data Online
Exports to TPP, non-NAFTA Imports from TPP, non-NAFTA
Top Product Exports
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
NaturalResources
Agriculture /Food
Chemicals /Plastics
Machinery /Vehicles
Clothing Other
Thou
sand
s of D
olla
rs
Exports to non-NAFTA TPP, Top Products (2015)Trade Data Online
British Columbia Alberta Saskatchewan
Top Product Imports
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
Machinery /Vehicles
Agriculture /Food
NaturalResources
Clothing Chemicals /Plastics
Other
Thou
sand
s of D
olla
rs
Imports from non-NAFTA TPP, Top Products (2015)Trade Data Online
British Columbia Alberta Saskatchewan
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