Trans pacific partnership (tpp) and canada

Trans Pacific Partnership (TPP)

- CanadaBy: Paul Young, CPA, CGA

Why are Trade Deals important?

• Trade agreements are treaties signed by two or more nations to encourage the free flow of goods and services between the members. These agreements, which can be bilateral or multilateral, reduce or eliminate trade barriers such as tariffs and quotas. As such, they lead to the creation of new markets for businesses, facilitate the production of high-quality goods and enhance economic growth.

Wages / Trade• As the United States and Mexico share expanded trade across their border, both countries have also experienced a

waning connection between trends in economic productivity and wages. Productivity has gone up as trade has expanded, but wages have stagnated or even declined.

• By 2011, productivity in the United States had risen to about 170% of what it was when the North American Free Trade Agreement was instituted. But the average U.S. worker has not reaped much benefit from this improvement in the productivity of the economy. Real hourly compensation for American workers rose by only about 16% in the same period.

• In Mexico, the relationship has been even more disappointing. By the time the North American trade agreement was implemented in 1994, Mexican manufacturing wages had been declining for more than a decade — they were 30% below what they had been in 1980. To counter domestic opposition to the agreement, Mexican politicians relied heavily on claims that more trade with the United States would reverse the prior wage deterioration.

• We now know that, like President Clinton’s promises about job creation, the arguments from Mexican trade supporters were based on the false assumption that trade expansion would automatically lead to rising wages. Expanded trade certainly helped stimulate new investment, and the adoption of more advanced manufacturing technologies in Mexico helped, in turn, to generate increases in productivity. Labor productivity in Mexican manufacturing rose by 76% between 1994 and 2011. However, when adjusted for inflation, typical hourly compensation for Mexican manufacturing workers did not improve. As a matter of fact, in 2011 wage compensation was 20% below what it was at the start of the North American Free Trade Agreement — not at all what had been projected by boosters of the pact

Wages / Impact• Public Sector vs Private Sector compensation

• Pension Funding• Benefits• Salaries• Other perks

• Skills• Skill level• Education level

• Government Policies• Payroll Taxation• Healthcare tax• Workers’ Compensation• Income Taxation

• Market Price • What will the market pay for work of equal value

Exports / Canada

• Exports are $525B• Each $1B exports generates 5,500 jobs• Export jobs pay on average $1,200/week• Exports drive taxation like personal and corporate taxation• Exports drive FDI• Exports can reduce both the balance of payments and/or create

trade surpluses

Countries involved in TPP

Issues with Trade

• Many countries put controls into how much capital can leave the country, i.e. profits. China wants the hard currency, why? China wants to control the flow of money such can influence the supply of money which then impacts currency rates.

• Many Countries put heavy tariffs on goods as way to protect industries that may not be cost competitive in their country. Trade deals remove tariffs which should in theory reduce the price of goods for the consumer

• We have growing economies in the world that will exceed 6%+ as such Canadian companies need to expand to those markets as way to diversify beyond the USA. $1B in exports creates 5,500 jobs. Export jobs pay in general $1,200/week.

• We need fair deals when it comes to trade. • Canada needs to get its house in order in terms of development of the resources. We need to

reduce the environmental assessment and move forward with projects that will expand export capacity

• Comments on TPP: • Elimination or reduction of tariffs on a broad series of products including pork, fruits, wines and

spirits, canola, barley, machinery, minerals and forestry products. As one example, the beef industry expects to see exports triple to Japan, with a multi-year phase-out in tariffs there from 39 per cent to nine per cent.

• More foreign car parts likely entering Canada, likely benefiting producers and consumers but hurting some auto workers. Cars will be allowed without tariffs as long as they have 45-per-cent content from the TPP region. That's significantly down from the 62.5 per cent regional-content provision under NAFTA, which mostly kept out pieces from places like China and Thailand. But the formula is more complex than that: the government says it will "encourage" producers to use Canadian ingredients, parts and materials when making goods exported to other TPP countries.

• Canada's protected dairy sector remains mostly intact. Currently, 10 per cent is set aside for foreign products. Now another 3.25 per cent share of imports would be allowed. An even smaller rate of imports will be allowed for supply-managed sectors including eggs, chicken and turkey.

• Farmers will be compensated for losses under the TPP and the recent Canada-EU deal, through a multibillion-dollar series of programs. The most important will see farmers paid up-front annually over 10 years to maintain 100 per cent income protection, and the program would taper off the five following years. The program is worth $2.4 billion. Smaller programs apply to quota-protection, modernizing equipment, and marketing assistance.

• Buy American provisions won't disappear. The deal does not eliminate buy-local provisions for state- and municipal-level infrastructure projects. But it does simplify bidding for contracts with six regional U.S. power authorities, and also addresses sub-national procurement with some smaller countries.

• Better labor mobility for some high-skilled and business workers.• Next-generation pharmaceuticals, including cell-based biologics, will have patent-style protections for eight years. That's in line

with Canadian policy, but will disappoint some countries who declared anything beyond five years would be unacceptably expensive for patients and taxpayers.

• Rules protecting the digital economy, and practices likes cloud computing. It would prevent national governments from cutting off data flows, by limiting laws that require local storage of data.State-owned enterprises will face more regulation. Companies backed by governments will have new transparency requirements and rules when competing with private companies. The government says cultural exemptions would protect the CBC and Telefilm Canada.

• New workers' rights, including rules on child labor, forced labor and discriminate

Who supports the deal

• CME - https://www.youtube.com/embed/nWmCM2Oelt0 • Chamber of Commerce -

http://globalnews.ca/video/2258873/tpp-is-leveling-the-playing-field-canadian-chamber-of-commerce