Southeast Asia is a critical region for Canada, and its recently launched Indo-Pacific Strategy places a strong emphasis on strengthening the relationship with this dynamic area. An impressive financing of 2.3 billion Canadian dollars has been devoted to this strategy for the next five years, with more than 10 percent allocated specifically for the Association of Southeast Asian Nations (ASEAN). One of the main objectives is to strengthen the commercial relationship with this strategic Indo-Pacific region.
In November 2021, exactly one year before the strategy announcement, ASEAN and Canada began negotiations for the ASEAN-Canada Free Trade Agreement (FTA). This remarkable development in the ASEAN-Canada partnership signifies Ottawa’s unwavering commitment to promoting trade and economic engagement in the region, an essential strategy for diversifying Canada’s trade and investment, which has traditionally focused on the United States. United and China.
The 2018 joint feasibility study by ASEAN and Canada for the ASEAN-Canada FTA highlighted the potential to implement an agreement that encompasses the liberalization of goods, the reduction of non-tariff measures and improvements in trade facilitation. The study revealed that such an agreement would yield substantial economic benefits, including a notable increase of USD 39.4 billion (1.6%) for ASEAN’s GDP and USD 5.1 billion (0.3%) for ASEAN’s GDP. Canada. In addition, the agreement would boost ASEAN exports to Canada by a staggering US$3.36 billion (18.7 percent) and Canadian exports to ASEAN by an impressive US$3.18 billion (26.5 percent).
In addition to economic gains, the ASEAN-Canada FTA would grant Canada market access to ASEAN countries that are not part of the Comprehensive and Progressive Partnership for Trans-Pacific Partnership (CPTPP): Cambodia, Indonesia, Laos, Myanmar, the Philippines and Thailand. . This presents a wealth of opportunities for Canada in various export-oriented industries such as oil and gas, mining, advanced technology, telecommunications, agri-food, financial services, aviation, and consumer goods. Each of these nations offers significant prospects for Canadian businesses to prosper and expand their reach.
In addition, the implementation of the ASEAN-Canada FTA would level Canada’s competitive landscape in the region, particularly in comparison with Australia and New Zealand. These two countries, already beneficiaries of a regional FTA, currently enjoy preferential entry for their exporters in ASEAN member countries. By joining them through its own FTA with ASEAN, Canada would ensure fair competition and create a level playing field, allowing Canadian exporters to tap into the immense potential of the Southeast Asian market for crucial agricultural and natural resource commodities. .
However, negotiating a free trade agreement with ASEAN is an arduous task, fraught with challenges at all levels. The complexities of thethree level game” complicate the process as ASEAN becomes involved in negotiations with countries like Canada.
At the national level, each ASEAN member state steers the negotiating ship according to its national interests. Various agendas and priorities compete to influence the national government, making consensus building a formidable task.
Moving to the regional level, ASEAN must strive for unity among its member states. But achieving consensus within this diverse bloc is no walk in the park. It’s a long drawn-out battle that requires diplomatic finesse and countless rounds of arguments.
Now comes the international level, where Canada enters the scene. As the negotiations between ASEAN and Canada progress, they navigate through a maze of complexities. It’s a high-stakes game, where both sides must find common ground amidst their divergent interests.
However, the challenges do not end there. Within ASEAN itself, a “Two levelsThe dynamics add another layer of complexity. The advanced economies of ASEAN-6 (Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand) contrast sharply with the emerging economies of Cambodia, Laos, Myanmar, and Vietnam (CLMV). Income disparities, different levels of human resources, institutional capacity, infrastructure development, and overall competitiveness create a gap that must be bridged for a successful FTA.
Canada, anxious to secure favorable treatment, is pressing for the inclusion of six critical areas in negotiation discussions. These areas cover labor, environment, gender, monopolies and state-owned companies, public procurement and transparency, and anti-corruption. But given the different levels of development within ASEAN, finding common ground on these issues is an uphill battle.
In the search for a mutually beneficial FTA, ASEAN and Canada face the challenging task of finding common ground. However, a phased approach may be the key to quickly concluding the FTA negotiations. By focusing on important areas such as trade in goods, trade in services, investment, e-commerce, intellectual property, competition policy, and dispute settlement mechanisms, both parties could finalize initial agreements. This approach allows for a gradual inclusion of more advanced areas in the agreement, as both sides agree to negotiate the enhancement of the ASEAN-Canada FTA in the future.
Drawing inspiration from successful models, such as the ASEAN-Australia-New Zealand FTA, which was recently updated to cover new chapters and provisions, ASEAN and Canada may follow a similar path. This approach allows for flexibility and adaptation over time. Canada has also shown openness to improving FTAs, as evidenced by the Canada-Chile FTA, which was enhanced in 2019 to include a chapter on trade and gender. Therefore, a phased approach is feasible and potentially acceptable to both ASEAN and Canada.
Addressing the development gap within ASEAN is another crucial aspect that requires attention. Closing this gap is essential to ensure that ASEAN member states are ready to include more advanced areas in the FTA. To achieve this, Canada should consider supporting capacity building initiatives for its ASEAN partners, particularly in the six areas it advocates: labor, environment, gender, monopolies and state-owned enterprises, public procurement and transparency, and anti-corruption.
By finding a middle ground approach and prioritizing key areas of agreement, ASEAN and Canada can pave the way for a successful FTA that brings mutual benefits and strengthens economic ties. The willingness of both parties to adapt and update the agreement over time demonstrates their commitment to fostering a strong and inclusive business relationship. As negotiations continue, addressing the development gap and supporting capacity building efforts will be crucial to achieving a comprehensive and balanced ASEAN-Canada FTA.