By: Luke Montalbano
Former Canadian Minister of International Trade and current Member of Parliament for Abbotsford Ed Fast is a veteran politician in the Conservative Party. He led negotiations of a number of free trade agreements under Prime Minister Stephen Harper and was the Shadow Minister of Finance until just recently. Photo Credit: The Abbotsford News
A young person like me rarely has the honor to sit at the table with political heavyweights such as Mr. Ed Fast. However, this summer I found myself working alongside him in the hope to elect Premier Jean Charest as the new leader of the Conservative Party. Although the result was not what he hoped for, there is no doubt that the opportunities derived from the campaign were tremendously beneficial. A few days ago, I sat down with former Minister of International Trade Ed Fast to discuss the economy after COVID-19, free trade, and Taiwan.
Readers note: Minister Fast references the USMCA (United States–Mexico–Canada Agreement) a number of times. This is a comprehensive free trade agreement between the three aforementioned countries, which is a renegotiation of the original North American Free Trade Agreement (NAFTA). Minister Fast also references the World Trade Organisation (WTO), a supranational organization that attempts to regulate and facilitate trade between states.
LM:
At the moment, the global inflationary cycle that has forced central banks to hike key interest rates is being driven in large part by supply chain issues, especially in the sector of energy following Russia’s invasion of Ukraine. However, the cost of importing and exporting goods is also greatly increased without comprehensive free trade agreements with our international partners. With this in mind, I asked the following to the Honourable Ed Fast of Abbotsford, B.C.:
Would Canada be best suited renewing the pursuit of free trade agreements? And if so, what sector should be focused on, and what countries should be traded with?
Former Minister Ed Fast:
A part of the challenge with the global community between the years 2000 and 2015 had generally agreed that freer trade could lead to better economic outcomes around the world. The global community in many respects has retreated from that position—it has become more protectionist. If you look at countries like China, Indonesia, India, and Brazil, which are still highly protectionist, because of their economic size they still have a fair bit of weight at the World Trade Organisation. That has resulted in the WTO losing its effectiveness as the arbiter of free trade rules. I am fiercely supportive of establishing a global rules-based order for trade in which there is a set of rules that all nations comply with that would reduce the amount of protectionism that takes place across the globe. You’ll never avoid protectionism completely because each country wants to protect its own areas of special interests.
I hoped during the Harper years that the world would move in a direction where we would have freer trade. Where the WTO would be seen as the preeminent forum where rules-based trade would take place, but that has not happened. In fact, the WTO has been largely ineffective. It has been emasculated by countries like the US, which have suspicions about the WTO and didn’t want to renew its arbitration capacity. So how do you move forward? By negotiating free trade agreements with willing partners. And I can think of no better willing partner than Taiwan. Taiwan is not part of the CPTPP and I think it should be because it is one of the freest trading countries in the world. The only reason it hasn’t joined trading initiatives is because of China’s concern that it would lead to a strong case that Taiwan should be an independent country and be active in global orders.
[Which industries may benefit from freer trade?]
I am pleased that within the new USMCA we now have a chapter on e-commerce, which recognizes the reality of digital trade around the world. For Canada, the US, and Europe, digital trade is ubiquitous. There has been a massive shift to using the digital economy to conduct business. And in order to do that you need trade rules; Mexico, the USA, and Canada have agreed upon that. I believe there is an opportunity to transfer those provisions to other trade agreements that Canada already has or would like to negotiate. Canada is active in trying to negotiate with India, which is difficult to do because it is highly protectionist and defensive of areas in which Canada would have interests. Another area is now trying to negotiate freer trade access with the ASEAN group of nations, such as countries like Indonesia. Indonesia could certainly benefit from free trade that is rules-based. Canada should be shifting its focus from the WTO, which has in many respects lost its effectiveness, and move that focus over to bilateral and multilateral trade partnerships.
LM:
With the rise of populist movements across much of the Western world (Boris Johnson and Brexit; Donald Trump and trade; Pierre Poilievre and the Bank of Canada), protectionist trade policies have become far more popular in recent years. Do you have any indicators as to why protectionism is now becoming more popular than free trade (which was the mainstream trading policy in the latter half of the 20th century)?
Fmr. Minister Fast:
Part of it may be a move around the world to populist governments. You see that in Brazil in Indian with Modie, you see that in the Philippines where populism, or the 21st century brand of populism, is also very nationalistic. It is all about defending your national interest and sovereignty. These pressures are making it very difficult for governments to make those concessions needed to effectively make trade agreements. I don’t think Canada is among those nations that have become captive of these populist movements. Although we see this in our own party: Pierre Poilievre is definitely a populist. We see it in Alberta where Danielle Smith is Premier. Where we see it take route internationally in other governments, I think there is a natural tendency then to also become even more protectionist and defend a country's sovereignty, which leads to an unwillingness to make the concessions necessary to have freer bilateral and multilateral trade.
LM:
You had mentioned the USMCA earlier and how we should apply the E-commerce clauses to other agreements. The USMCA is the renegotiated form of NAFTA. In your analysis, in what ways has the USCMA benefited the economy, and are there clauses in which Canada could have been a bit more firm in negotiating, or is the agreement great as is?
Fmr. Minister Fast:
No, I do not believe that the USMCA is great as is. I believe that Justin Trudeau was taken to the cleaners by the US negotiators. In fact, there was never an imperative for Canada to open up the original NAFTA. It was Donald Trump beating the drum saying that if NAFTA was not renegotiated, he would tear up NAFTA. The problem is that it was all bluster because President Trump never had the power to tear up NAFTA. If 36 of the American states have Canada as their number one trading partner, do you think that their congressmen and congresswomen or their Governors would ever vote in favour of repealing NAFTA? No they wouldn’t. So Donald Trump never really had the capacity to tear up NAFTA, but for some reason Justin Trudeau had welcomed this re-opening of NAFTA and that brought about a less than superior outcome for Canada. The Americans actually crowed about it that they had received additional concessions from Canada and I think the general assessment is that despite Justin Trudeau’s promises to bring back a better deal than before, it seems that the opposite is true. In fact, we made major concessions on dairy access that we didn’t get reciprocal concessions on. We agreed on a cap to exports of milk protein concentrates, which has limited our ability to grow that value added sector in Canada. We ceded our sovereignty on milk pricing changes: we now have to go to the US for permission to make those changes. We also need to go to the US to ask for permission for free trade agreements with other non-market economies. There was no resolution to our “buy American” concerns, so it goes on and on and on. There are many concessions that the US was able to secure that Canada didn’t receive an equivalent concession going the other way. So I feel that this was a lost opportunity to address a host of other issues that could have been addressed but weren’t.
LM:
With the agreement as it stands, is Canada better off without it? Or is some agreement better than no agreement at all?
Fmr. Minister Fast:
I believe that USMCA despite its serious flaws is still better for Canada, the US, and Mexico to have a free trade agreement that secures our North American advantages and our North American supply chains. We have now said that when it comes to the auto sector that cars must have 70% of their parts manufactured in North America, which is up from 62.5%. We have also agreed collectively as three free trade partners to improve labour provisions. That means that the wage gap between the three countries is going to narrow over time, which will give each country an opportunity to do business in a way that benefits workers.
LM:
You had mentioned Taiwan earlier as a country that we should look to for trade. We have seen an increasing amount of hostility in recent years between China and Canada. With this in mind, how should Canada approach trade with the People’s Republic of China? Should we renegotiate how we do business with the country? What is the path forward for Canada-China trade relations?
Fmr. Minister Fast:
Well I think that we have to understand firstly that when China joined the WTO, all the parties agreed that there would be a pathway under which China would open up tis economy and comply with rules based trade under the WTO. Sadly, that has not happened as we have hoped. Regularly, China defies WTO trade rules. It is one of the reasons why Canada and the US have refused to grant China “market economy” status.
We need to approach trade with China with great caution. Under the Harper government, we negotiated an investment protection agreement with China. The huge advantage of that agreement wasn’t that China got protection but that Canadian companies that do business in China and are at a great risk that government authorities there would act in an arbitrary manner now have protection under the Canada-China FIPA (Foreign Investment Promotion and Protection Agreement). That was an agreement that took fourteen years to negotiate until we got an outcome that satisfied Canada’s demands. We [the Harper Government] resisted negotiating a free trade agreement with China and so far Trudeau has as well because we know how belligerent and bellicose China has become in its bilateral relations generally with many Western countries. When you see how it has conducted itself at the WTO, I think that should sow a significant dose of caution into any of our efforts to negotiate greater free trade access. Because free trade is a two-way street, you need two willing dance partners, and I am not sure if China will ever be a willing dance partner, which is why we have to exercise that high degree of caution.
LM:
Trade with China has been a highly contentious issue in Canada for the past decade. With the percent of total Canadian trade that is China ticking upward and the regime’s increasingly antagonistic stance toward Canada, many a reconsidering the way in which we approach trade with the state. In fact, a number of Canadian politicians have promoted the idea that we should instead be warming our relations with the island state of the Republic of China (Taiwan).
With the whole situation in the South China Sea and the Taiwan Strait, most recently with Speaker Pelosi’s visit to Taiwan, should we look to trading to a greater amount with Taiwan because of its large technology sector or should we avoid trade to prevent greater hostility with the People’s Republic of China?
Fmr. Minister Fast:
I believe we have to assert Canadian sovereignty and make decisions that are in our own best interest. Taiwan has proven for many many decades that they share Canada’s values: rule of law, human rights, freedom, democracy. Taiwan has been engaged in the global community to the degree that it has been allowed to engage I think in a very productive way. I think that it needs to be even more engaged. Unfortunately, countries like the People’s Republic of China are standing in the way because they don’t want Taiwan to expand its influence in the world. But I believe that the time has come to include Taiwan in the CPTPP.
Taiwan is the largest manufacturer of microchips. If Taiwan was shut down overnight, the global economy would crater because of the inability we would have to access technology that is critical to operating in the 2st century economy, and that is one of the reasons why I believe that we should be engaging with Taiwan more on trade. I believe that there is an opportunity for what I call an “early harvest”. We would have a trade agreement with Taiwan where we settle on the easiest issues that might be resolved, and then over time we negotiate a comprehensive free trade agreement. If we could do that within the auspices of the CPTPP that would be even better because we could coordinate our efforts with some of our most trusted partners in the Asia Pacific region.
This is Part 1 of a two-part series from an interview with the Former International Trade Minister and current Member of Parliament for Abbotsford Ed Fast. Ed Fast is a member of the Conservative Party of Canada and has been elected and re-elected six times as M.P. for Abbotsford since 2006. Fast has negotiated the Canada-China Promotion and Reciprocal Protection of Investments Agreement, the Comprehensive Economic and Trade Agreement with the European Union, and the Canada-South Korea Free Trade Agreement. Ed Fast was most recently the Shadow Minister of Finance under Conservative Leaders Erin O’Toole and Candice Bergen.
Written by Luke Montalbano
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