April 3, 2024 – As 2024 Chair of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Commission, Canada has the unique opportunity to help repair the fragmentation of today’s global trading system by promoting global institution building, according to a new C.D. Howe Institute Verbatim.
Based on a recent presentation to the C.D. Howe Institute’s International Economic Policy Council, Paul Jenkins and Mark Kruger explain in “Furthering the Benefits of Global Economic Integration through Institution Building: Canada as 2024 Chair of CPTPP” that an important factor behind the fragmentation of the global economy has been the inability of institutions that provide the governance framework for international trade and finance to adapt to changing realities.
To recover the benefits of economic integration, Jenkins and Kruger write that the international community should re-commit to a set of common rules with the renewal of existing institutions in line with current economic realities as well as the nurturing of new institutions that reflect the realities of today’s global economy. One of these is the CPTPP – a free trade agreement between Canada and 10 other countries in the Indo-Pacific (Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam).
Jenkins and Kruger say that, as Chair of the CPTPP Commission, our country can help move the global economy back along a path towards a more open, rules-based trading system. The role of the Commission includes considering proposed modifications to the agreement and applications to join it.
“While efforts to renew existing global institutions to better reflect current economic realities are important, we see promoting broad accession to the CPTPP as the best means to turn today’s global economic fragmentation around,” the Verbatim’s authors explain.
As such, they say that an important goal for Canada’s chairmanship should be to clarify the rules of accession, which would be a big step forward in sustaining the CPTPP’s expansion.
“Broad based accession to the CPTPP represents a unique opportunity to strengthen global governance overall, and to address common challenges in ways that benefit both countries as well as the global economy,” says the authors.
Notably, a half dozen countries have applied to join the CPTPP, including China, whose entry would boost global GDP by $600 billion annually. However, Jenkins and Kruger explain that the challenge for Canada and subsequent chairs is to ensure that China’s entry maintains the high standards members have met so far.
They say that the key for China is to demonstrate that a socialist market economy can be consistent with fair trade. They also note the applications of both China and Taiwan represent a particularly challenging area to navigate. If the US were to join the CPTPP also, it would gain from preferential access to growing Pacific Rim markets, in particular that of China’s services sector, but that it “would need to step well back from its current mercantilist mind set, which risks worsening.” Therefore, the authors say that both joining is best viewed as a long-term goal.
Nevertheless, as Chair, Canada should champion discussion and understanding of why building towards the long-run goal of broad accession to CPTPP as open and inclusive institutions are at the core of ensuring each economy can benefit from global economic integration.
For more information contact: Paul Jenkins, Senior Fellow, C.D. Howe Institute; Mark Kruger, Senior Fellow, Yicai Research Institute; and Lauren Malyk, Senior Communications Officer, C.D. Howe Institute, 416-865-1904 Ext. 0247, lmalyk@cdhowe.org