The Globe and Mail - 21.10.2019

B4| REPORTONBUSINESS OTHEGLOBEANDMAIL | MONDAY,OCTOBER21,2019

OPINION&ANALYSIS

DILBERT

C

anada just received more
bad news on the trade
front.
Japan and the United States
signed a partial trade agreement
this month that should come in-
to effect on Jan. 1.
The agreement, which for the
Japanese market covers only
agriculture and digital services,
essentially gives the U.S. back ev-
erything it lost, and a lot of what
Canada gained, when U.S. Presi-
dent Donald Trump walked
away from the original Trans-Pa-
cific Partnership agreement, now
renamed the Comprehensive
and Progressive Agreement for
Trans-Pacific Partnership
(CPTPP).
While this is not good news
for Canada, neither is it disas-
trous.
If Canadian business can
move quickly to refocus efforts
on advantages it still has over
the U.S. in Japan, it can still do
well. Getting this response right
in Japan will also prepare Cana-
dian business for the return of
U.S. competition in other CPTPP
markets as the U.S. moves to sign
or update bilateral trade deals.
But none of this will happen
by itself. It will take deliberate,
decisive and, most of all, quick
action by Canadian business and
government export-support
agencies.
Canada had done especially
well in Japan in taking agricultu-
ral market share away from the
Americans. Based on Statistics
Canada numbers, the Canada
West Foundation has calculated
that Canadian exports of some
types of beef jumped by 105.9 per
cent in the first year of the agree-
ment and 128 per cent as of Au-
gust, 2019. Similarly, goods such

as barley and pork have in-

creased by 70.4 per cent and 9.6

per cent respectively in the first

year of the CPTPP. This has been

small but welcome relief for Can-

adian agricultural exporters hit

hard by trade difficulties with

China.

Almost all of this is put in

jeopardy by the new Japan-U.S.

agreement which, on Day 1,

hands U.S. agricultural exporters

the same tariff advantages in Ja-

pan that Canadian exporters had

to go through two rounds of tar-

iff cuts to achieve. U.S. agricul-

ture has been hit hard by the

country’s trade wars, and will

move aggressively to take back

market share in Japan. The Unit-

ed States has the trade support

services, money and geopolitical

leverage to do this with devas-

tating effect.

The partial deal also covers

trade in digital services with Ja-

pan – but that is largely it. For

the Japanese market, everything

else that is traded, from manu-

factured goods to services, most

of which is covered by the

CPTPP, is still an area of poten-

tial advantage for Canadian

firms. Canada needs to move ag-

gressively to defend hard-won

agricultural market share in Ja-

pan and to lock down these oth-

er advantages before the U.S.-Ja-

pan agreement is expanded.

First, new modelling by the

Canada West Foundation has un-

covered US$1.9-billion of non-

traditional, non-obvious Cana-

dian export opportunities in Ja-

pan under the CPTPP. These are

goods that are not traded in sig-

nificant amounts, but which can

grow under the trade agreement.

Many other forms of modelling

do not include such specific de-

tail. Businesses and export pro-

motion agencies can use this in-

formation to find new opportu-

nities that match specific firms,

including small exporters that

thought the CPTPP opportunity

in Japan was only barley, beef

and pork. This information

needs to be plugged into Cana-

dian export promotion strategy

and activities.

Second, Japanese companies

can use materials imported from

Canada to make goods and offer

services to any and all members

of the CPTPP under the prefer-

ential terms of the agreement.

Even with their new, bilateral

agreement, this is not something

U.S. firms can offer Japanese cus-

tomers. Canadian firms and ex-

port promotion agencies that

support them need to think cre-

atively about how to exploit

these advantages in the supply

and production chains while

they last.

Finally, any actions taken in

Japan must be replicated in oth-

er CPTPP markets. The Ameri-

cans will eventually forge new or

updated bilateral trade deals to

force their way back into com-

petitiveness in other CPTPP mar-

kets.

Before that happens and the

current window of opportunity

closes, as we are seeing with agri-

culture in Japan, government

and business need to urgently re-

spond. This means using the

new modelling not just for exist-

ing CPTPP members, but also for

countries queued up to join the

agreement. Instead of wasting

time and waiting for countries to

ratify the agreement before act-

ing, this preparatory work needs

to be done in advance, so busi-

ness can hit the ground running

when new markets open.

As the CPTPP expands and as

the Americans force their way

back into the region, Canada

needs to step up its export pro-

motion game, above and beyond

the considerable work currently

being done, if it wants to take the

opportunities on the table to

grow exports into new markets

and out of dependence on the

U.S. and China.

As the U.S.-Japan agreement

reminds us, the clock is ticking.

U.S.-Japantradedealshouldbeawake-upcallforCanada

CattlefeedinMississippiMills,Ont.TheCanadaWestFoundationcalculatedthatCanadianexportsofsometypesofbeefjumpedby105.9percent

inthefirstyearoftheComprehensiveandProgressiveAgreementforTrans-PacificPartnership.SEANKILPATRICK/THECANADIANPRESS

Toremaincompetitive,

Canadianbusinesses

needtorefocusefforts

ontheadvantages

theyhaveovertheir

southernneighbours

CARLODADE
SHARONSUN
DANCIURIAK

OPINION

CarloDadeisthedirectorofthe
Trade&InvestmentCentreatthe
CanadaWestFoundation.

SharonSunistradepolicyeconomist
atCWF.

DanCiuriakispresidentofCiuriak
Consulting,andconductedthetrade
agreementmodellingforCWF.

FortheJapanese

market,everythingelse

thatistraded,from

manufacturedgoodsto

services,mostofwhich

iscoveredbytheCPTPP,

isstillanareaof

potentialadvantagefor

Canadianfirms.

W

hen French bank Crédit
Mutuel Alliance Fédé-
rale embarked on a
North American expansion more
than a decade ago, its executives
selected Canada as its continen-
tal beachhead. At the time,
French entrepreneurs were itch-
ing for financing to pursue busi-
ness opportunities in North
America, but the bank’s private
equity arm, CM-CIC Investisse-
ment, had no operations on this
side of the Atlantic.
Its Canadian subsidiary,
known as CIC Capital, first set up
shop in Montreal and then in To-
ronto, using the latter as a gate-
way to the United States. CIC Cap-
ital has so far invested in 15 com-
panies in Canada and the U.S.,
and has earmarked roughly
$300-million for more invest-
ments.
“We cannot be in Canada with-
out being in Toronto,” said Lu-
dovic André, managing director
of CIC Capital Ventures. “It is
quite obvious that, economically
speaking, you cannot just stay in
Montreal. It doesn’t make sense.”
CIC Capital is among a growing
list of French companies eyeing
new investment opportunities in
Canada. Although Montreal has
traditionally attracted the lion’s
share of French business invest-
ment, entrepreneurs are shifting
their focus to Toronto because it’s
a portal to the U.S. market.
That trend is a gift for Canada’s
next government since this coun-
try has long struggled to attract

foreign direct investment (FDI).

But the issue continues to get

short shrift by federal parties dur-

ing this election campaign, de-

spite the last-minute jostling for

votes. Unless there’s a mind shift

in Ottawa, Canada risks squan-

dering the potential for new FDI

inflows that create jobs, fuel wage

growth and reduce our depend-

ence on the U.S.

“It’s true that the economic re-

lations between France and Can-

ada are strong. But if you put it in

perspective, our trade between

France and Canada represents

only seven days of business be-

tween the U.S. and Canada,” Ka-

reen Rispal, France’s ambassador

to Canada, said at this week’s

France-Canada Innovation Fo-

rum in Toronto. “Obviously, there

is room for improvement. And

honestly, given our history, our

values, we really can do more.”

Canadians, though, have a real

knack for getting in their own

way. Not only do we have a long-

standing aversion to foreign

money, we take a parochial view

of globalization despite being a

Group of Seven country.

For instance, although the

Canada-European Union Com-

prehensive Economic and Trade

Agreement (CETA) went into

force more than two years ago,

Canadian companies have been

slow to take advantage of its ben-

efits, including increased labour

mobility.

A closer look at business ties

between Canada and France, two

CETA signatories, bears out this

point. As of August, there were

roughly 1,130 French companies

with subsidiaries in Canada em-

ploying 105,500 people, but just

250 Canadian companies provid-

ing 25,000 jobs in France.

Moreover, while French invest-

ment in Canada increased by 17

per cent to $13.5-billion in 2018,

Canadian investment in France

grew at a slower pace, 9.5 per

cent, to $7.4-billion.

“I am surprised to see that it is

not that natural for Canadian en-

trepreneurs to consider Europe,”

CIC Capital’s Mr. André said.

“Sometimes when we say, ‘You

know, we can give you a hand in

Europe,’ they’re like, ‘I am not

comfortable. It’s too complicat-

ed.’ ”

Canadians also need to get out

of their comfort zone when at-

tracting more FDI – and not just

from European countries. The

next federal government can

start by urging the provinces to

dismantle internal trade barriers

that prevent the free flow of

goods, services and labour within

Canada.

The Canadian Free Trade

Agreement, which took effect in

July, 2017, has been an abject fail-

ure. Not only does the deal pro-

tect government monopolies, it

excludes key industries including

alcohol. If left unchecked, these

barriers will continue to drive

away foreign investment.

“I think that doing business in

Canada is difficult because each

province has its own rules,” Ms.

Rispal said in an interview. “You

have more and more [French]

companies attracted to Ontario

and other parts of Canada. ... It’s

a major shift.”

Innovation is also key to en-

couraging more FDI. That’s why

Ms. Rispal launched the France-

Canada Innovation Platform this

week. The platform, a corporate

matchmaking service, connects

companies with academics and

R&D experts in France and Cana-

da. It has been endorsed by com-

panies including Power Corp. and

CGI Inc.

The France Canada Chamber

of Commerce (Ontario) is also

working to strengthen business

ties between the two countries.

Brexit, after all, is presenting a

unique opportunity as more

businesses relocate to France.

With London mired in chaos, the

federal, provincial and municipal

governments should organize a

trade mission to Paris.

Bless the French for taking ac-

tion on this issue, and being can-

did about the need for change.

For her part, Ms. Rispal has advice

for Canada’snext government:

“Go outside the U.S. Be interested

by Europe. We have CETA. It’s a

very mutually beneficial agree-

ment, so we have to use it to

make the most of it.”

Wemustdismantleourbarrierstobusinessexpansion–abroadandathome

RITA
TRICHUR

OPINION

It’struethattheeconomic

relationsbetweenFrance

andCanadaarestrong.Butif

youputitinperspective,our

tradebetweenFranceand

Canadarepresentsonly

sevendaysofbusiness

betweentheU.S.and

Canada.

KAREENRISPAL

FRANCE’SAMBASSADORTOCANADA