Ed Fast on Canada’s shift toward Asia, FTAs and exports of expertise

The minister of international trade talks with Luiza Ch. Savage

Photography by Blair Gable

Ed Fast, the minister for international trade, is overseeing the Conservative government’s aggressive trade agenda that is opening new markets to Canadian exporters, and raising questions about everything from drug patents to environmental regulations. As Canada and the U.S. mark the 25th anniversary of the bilateral Free Trade Agreement, Ottawa’s strategic focus is shifting to the high-growth countries of Asia and Latin America, and to a new generation of trade agreements that cover services as well as goods.

Q: When I came into the room, I didn’t realize that it was you playing the grand piano. Do you play often?

A: I don’t play as much as I used to because of my schedule. Music has been a part of my life since I was a toddler. There were eight kids in my family and my mother made sure we each played at least two instruments. I play piano, violin and guitar, but piano is the instrument I love. I learned to play it from age 6, and when I became a teenager I learned to improvise. It’s something that’s really freeing. It’s a great stress reliever.

Q: This week marks the 25th anniversary of free trade with the U.S., but you’ve been travelling everywhere from Brazil to Burma. Are our trade patterns shifting? What does the future look like 10 years from now?

A: The U.S. is still far and away our largest trading partner and always will be. But we have also recognized that it is in Canada’s interest to expand and diversify our markets, especially taking advantage of the highest growth markets—many of which are in Southeast Asia, China, Korea, Japan. Canada is a leader on trade liberalization—we have unilaterally eliminated over 1,800 tariffs, we have eliminated the monopoly of the Canadian Wheat Board, and have opened up opportunities in the telecommunications sector. Trade, we believe, is the new stimulus.

Q: Is there a goal or a prediction for how much of our trade will go to Asia?

A: You are looking at a more balanced mix of trade relationships. I want to emphasize that we are in no way abandoning our most important trade relationship. But if you look at what our exports to China have done, just in 2011 alone, they went up 27 per cent. Imports from China went up eight per cent. And that is playing itself out throughout the Asia Pacific region.

Q: You talk about using the Trans-Pacific Partnership to “connect the North American manufacturing base to the Asia supply chain.” What exactly does that mean?

A: In today’s economy, supply chains wrap themselves around the globe. Companies that want to remain competitive have to have access to, and take advantage of, the highest quality and best-priced manufacturing inputs they possibly can find. By the way, it’s not restricted to goods. More and more services—for example, the design of the products—are playing a much larger role in the value [of products] driving trade around the world. And it happens that some of these critical supply chains are located in the Asia Pacific region. And for us, and our partners, the U.S. and Mexico, it’s critical we forge deeper integration with those Asia Pacific supply chains.

Q: So it’s this notion that John Manley talks about, the “made on Planet Earth” idea?

A: Absolutely. We can no longer assume that we can remain competitive simply by accessing supply chains only in Canada and North America.

Q: So is NAFTA now totally outdated?

A: The Trans-Pacific Partnership provides the 21st-century opportunity to pursue Canadian interests in areas such as services, investment, intellectual property, government procurement and the temporary entry of workers—in other words, labour mobility. These are all areas that were not typically covered under first-generation trade agreements [such as NAFTA]—which were primarily goods-only agreements. The TPP is expected to be a very ambitious and very comprehensive agreement involving some of our key trading partners within the Asia Pacific region.

Q: So what does the TPP mean for NAFTA?

A: We expect it will take us beyond NAFTA and it’s going to increase the number of partners covered by a comprehensive trade agreement.

Q: But once the TPP is negotiated, is there anything special left between Canada and the U.S.? Will Canada become the same as any other country trading with the U.S.?

A: It’s difficult to say. We are not at the negotiating table yet, though we hope and expect to be at the table in the next round of negotiations. To suggest it would supplant NAFTA would be a mistake, certainly at this time. Only time will tell what form it will take.

Q: What was the genesis of Canada’s aggressive trade strategy? Was there a view coming out of the financial crisis that the U.S. is not growing, let’s look elsewhere?

A: The global commerce strategy predates the global economic crisis, but I can tell you that the global economic crisis certainly lent additional urgency to the imperative that Canada take very seriously the trade opportunities that are available in areas of the world we are not significantly engaged in.

Q: What is the implication for Canada-U.S. trade relations?

A: Our most important trading partner will remain the U.S. Where our real opportunities lie are in eliminating non-tariff barriers. There was a study by the Fraser Institute that estimated non-tariff barriers cost us $19 billion a year. Imagine if we liberated just a fraction of that.

Q: The government has recently tabled a Canada-China investment agreement. [A foreign investment promotion and protection agreement, or FIPA.] Critics say the text of the deal looks like a series of concessions. For example, it prevents discrimination against companies already established in China, but omits protections for companies seeking to establish businesses there.

A: For businesses looking to set up in China, “most-favoured nation” status will apply. In other words, China cannot treat us less favorably than they would any other outside companies looking to set up in China. It is true that national treatment does not apply to pre-establishment phase; but it certainly does apply post-establishment. The same thing is true for Chinese companies wanting to establish in Canada. The FIPA we have signed and are looking to ratify measurably improves the protection that Canadians have when they invest in China.

Q: Critics are concerned Chinese companies will be able to challenge Canadian regulations at closed-door international tribunals, rather than in Canadian courts, which are more transparent. Are they right?

A: Nothing could be further from the truth. It has been Canada’s long-standing policy to permit public access to investor-state dispute settlement proceedings and that will continue. Documents submitted to a tribunal will be made available to the public. We are not giving up transparency. Those who are suggesting otherwise are anti-investment and anti-trade. We have gone through this agreement with a fine-toothed comb to ensure it promotes Canadian interests.

Q: Why is the investment agreement with China not being put to vote in Parliament?

A: It’s our government that put into place a formal process for tabling foreign investment promotion and protection agreements. The opposition parties have Opposition days to debate any subject they see fit. What’s interesting is that even though they have been making noises about wanting to debate it, this week they had two opportunities to debate it on their days and they have chosen not to, which tells you how seriously they take trade and investment.

Q: Canada is also negotiating a free trade deal with the EU. The Europeans want to give more protection to brand-name drugs and increase the length of patents—which could make drugs more expensive for those who save money by using generics. Do our negotiators have a specific mandate on this?

A: What I can do is tell you exactly what our goal is: to achieve a balanced outcome to these negotiations. We want to ensure that our Canadian innovators are protected while at the same time ensuring that Canadians themselves continue to have affordable drugs available to them going forward. We are confident that at the end of the day we will be able to arrive at a balance.

Q: You recently spoke in Washington in support of an international services agreement. You said that Canada is the fourth-largest exporter of engineering services in the world.

A: We wouldn’t be as successful in promoting oil and gas and resources development without the highest capacity when it comes to engineering and geology. This is an area of competitive advantage. But in many parts of the world, there are non-tariff barriers that prevent the export of services. So the international services agreement would be a huge step forward simply because 71 per cent of our GDP is driven by the service sector. It’s a jaw-dropping number. We are trying to open up markets around the world to export those services.

Q: So you’re saying we have to stop thinking of ourselves as exporters of trees and oil—and start thinking of ourselves as exporters of expertise?

A: You’re spot on.