Progressive Trade

A buzzword worth understanding and undertaking in Canada’s international economic policy

by | Mar 23, 2018

Prime Minister Trudeau during his February 8, 2018 trip to Silicon Valley to promote investment in Canada. Flickr/Office of the Prime Minister of Canada

Recent developments in Canada’s international trade agenda have proven to be diverse and dizzying. Within the first month of 2018, a Reuters report detailing that officials were convinced of a U.S. pull-out from NAFTA caused the Canadian financial markets, including the CAD dollar and bond yields, to tumble; the Minister of International Trade announced the creation of the Canadian Ombudsperson for Responsible Enterprise to ensure ethical conduct of Canadian companies abroad; the sixth round of NAFTA negotiations began in Montreal, and Prime Minister Trudeau announced the successful conclusion of discussions for the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) at  the World Economic Forum in Davos.

While headlines have swung between grim predictions of the NAFTA re-negotiations and statistics showing Canada’s relatively strong economic performance, a key matter has been steady: the Government’s reference to its “progressive trade agenda”. Often tagged with other catchy words, such as “sustainable” and “inclusive”, Canada’s commitment to its progressive trade agenda has become its trademark in a global climate characterized by protectionism and isolationism. The buzzwords suggest liberal policies, but as of yet the Trudeau Government has offered somewhat evasive signals as to what their progressive trade policy looks like in practice.

In its 2017-18 departmental priorities, Global Affairs Canada (GAC) pledged to promote economic growth through international trade and foreign direct investment by “developing and leading a progressive trade agenda that will consider issues such as labour, the environment, gender equality, transparency and inclusive economic growth”. In this manner, progressive trade policy is holistic and wide-ranging by covering many different facets of economic and social policy. Rather than solely targeting economic growth and financial opportunity, progressive trade simultaneously addresses, among others, environmental and social considerations, governance standards, and inequality.

In fact, Foreign Affairs Minister Chrystia Freeland alluded to this holistic approach to international trade in her address to the House of Commons regarding the modernization of NAFTA.  Her outline of Canada’s trade objectives touched on matters from across the board, including technological innovation, red-tape reduction, and the inclusion of environmental provisions. The progressive trade policy laid out by Freeland is far-reaching and comprehensive.

The Canadian government’s progressive trade agenda has also made reference to promoting the participation of all citizens. In the 2017 Canada’s State of Trade: Trade and Investment Update, progressive trade was defined as “doing everything possible to ensure that all segments of society … can take advantage of the economic opportunities owing from trade and investment”. In particular, the Government has targeted the inclusion of women, youth, Indigenous communities, and small-and-medium sized enterprises (SMEs). In addition to promoting economic growth and business development in Canada, the focus on inclusivity in international trade has reinforced Prime Minister Trudeau’s self-branding as a feminist while also promoting the country’s values of equity and multiculturalism.

Still, comprehensiveness and inclusiveness provide very few indications of how the Canadian government intends to execute these values and objectives in an increasingly challenging global context. In addition to these two components of the trade agenda, International Trade Centre Executive Director Arancha González noted that progressive trade in Canada should stimulate “more and better” domestic and international trade. Despite its ambiguous definition and implementation, Canada’s progressive trade agenda is a worthwhile policy framework to understand and undertake as it offers opportunities to improve both the quantity and quality of trade.

Despite the promising prospects of progressive trade, the Canadian government’s relentless pursuance of this agenda has been perceived as a deterrence by current and potential trading partners. For example, recent exploratory trade talks with China were reportedly cut short due to Canada’s insistence on labour and gender rights. In another instance, former Foreign Affairs Minister John Baird suggested that the Trudeau government “put away some of the politically correct, progressive trade agenda” in the NAFTA renegotiations and focus on its key arguments in the discussions with the U.S. and Mexico. Despite these criticisms, the government’s desire for progressivity in international trade is not a disadvantage to its economic interests. Rather, the push for a progressive trade agenda is an opportunity to emphasize the country’s competitiveness, strong financial system, and business opportunities, while highlighting Canada’s distinct economic environment and labour force amongst the G7. Canada’s competitive advantage lays in its global brand – that is, its identity as a stable political and financial system that values diversity, tolerance, and democracy. These labels can help promote investment and trade with Canada against a backdrop of political volatility and risk-averse partners. In this same manner, Canada can highlight its strong business environment as it ranks third amongst the G7 countries on the World Bank’s “Ease of Doing Business Index”. Hence, Canada can capitalize on its reputation of sound and stable institutions to push forward its progressive trade agenda.

In addition to pushing its global brand, Canada stands to gain from diversifying its progressive trade pursuits by engaging with other political allies and “underdog” countries. The threat of “America First” trade policies from the Trump Administration and the unwillingness of particular trade actors to respect social justice and environmental provisions is a significant concern for Canada’s economic prosperity. Currently ranked as 24th out of 136 countries on the World Economic Forum’s Enabling Trade Index, Canada has room for improvement in its trade facilitation. The Forum’s report details that compliance costs and tariffs on Canadian exports hinder the country’s trade openness and efficiency. In this manner, Canada stands to gain from further trade facilitation including greater economic growth and a status in the international community as the leader for progressive trade policies.

In February, during his visit California to promote the Canada-U.S. trade and investment ties, Prime Minister Trudeau highlighted the “Canadian advantage”, that is, Canada’s attractive economic environment due to its interconnectedness with global markets, free trade outlook, and its advanced human capital levels. Trudeau made a compelling case for foreign investors and companies to engage economically with Canada by signalling its healthy business climate, but still managed to showcase Canada’s uniqueness by referring to its “diverse workforce”. Hence, as Canada continues to seek international trade agreements, a negotiating strategy that both underscores the country’s strong economy and financial stability, while staying true to its progressive culture and global brand, will be advantageous and truly holistic and comprehensive. And, is that not what progressive trade is all about anyway?

Authors

Carmen Avila-Yiptong
Carmen Avila-Yiptong graduated from the University of Ottawa where she received an Honours Bachelor of Social Sciences in economics and international development. With extensive volunteer experience with student and charitable organizations in Ottawa and Ghana, Carmen is interested in the nexus between economic policy-making, international trade and finance, and social well-being. She was an intern within the Trade and Economic Policy Division at the Embassy of Canada in Washington, DC during the 2016 Presidential Elections where she was responsible for reporting on Congressional hearings and policy developments pertaining to taxation and Dodd-Frank legislation, agricultural trade policy, and international development funding. She is currently a Research Assistant at the Bank of Canada in the Funds Management and Banking Department.