TPP – Will It Strengthen Canada’s Economy?

From Global Credit Risk Management

In 2015, the government of Canada announced the signing of the Trans-Pacific Partnership (TPP). This is a free trade agreement among the economies of 11 of Canada’s trading partners accounting for over 800 million people.

In North America, TPP will replace the North American Free Trade Agreement (NAFTA). Many regard TPP as an excellent deal for Canada, as it will solidify Canada’s relationship with key trading partners around the globe. Economists suggest the agreement will benefit industries like agriculture, forestry, the beef and pork industry, engineering services and aerospace. It is unclear at this point if the biggest loser may be the automotive industry as the % of Canadian content established under NAFTA may be reduced.

Canada is expected to benefit from reduced duties and tariffs to enter the Japanese market, which is the world’s third largest economy.   It is likely Canadians will be consuming more foreign dairy products, but the dairy farmer’s supply side management system will be maintained. Once the agreement is ratified, it is important that Canadian business take advantage of the opportunity. In order to do so, Canadian companies will require supply chain financing, programs to support SME expansion into foreign markets (like accounts receivable insurance), support in dealing with different business culture in TPP markets, education on currency hedging and debt collection support in export markets. This agreement will take two years to ratify, so the impact will not be felt until 2018. Also, the recent change by the Trump administration and the United States’ subsequent withdrawal from the TPP will cast significant doubt as to the future of the agreement.

The bottom line is Canada is an exporting nation and we need to open our doors to the rest of the world and take advantage of opportunities in foreign markets.