Good morning.
As you go across the country, you will likely hear from some who worry that the TPP is no more than a contract to prevent governments from interfering with corporations' ability to seek profit and even at times extract economic rents. Under the TPP, the right of the corporation to seek profit is made paramount to a government's obligation to set policy that best serves the public. The justification for this is that to do otherwise would be protectionism. It is an odd argument given that the global economy is already more open than ever.
Canada already has free trade deals with four of the TPP countries: Peru, Chile, U.S., and Mexico, and ironically, we have a $5-billion to $8-billion annual trade deficit with these countries. Furthermore, tariffs on trade with the others are already very low, and the TPP countries with which Canada does not have a free trade agreement make up 3% of total exports and 5% of imports. Insofar as the TPP could grow these percentages, it will only serve to increase the trade deficit we already have with these countries.
Eighty per cent of Canadian exports to these countries are raw or semi-processed goods. Eighty per cent of imports from these countries to Canada are high value-added goods such as autos and machinery. This composition of exports and imports is found in Manitoba as well, where exports are heavily influenced by agriculture. Twenty-one per cent of all exports are from crop production. Of the top 10 international exports by commodity in 2014, seven were raw or semi-processed.
We feel that Manitoba needs to move up the value-added chain. We are not suggesting that we should not have trade that benefits these exports, but there are elements of the TPP that will result in a net loss to Manitoba and Canada.
The strong patent protection in the TPP is an example. U.S. economist Dean Baker notes that:
Patents are a form of protectionism, a government granted monopoly. While economists usually go ballistic over a tariff in the range of 10-20%, patents can raise the price of a drug a hundredfold, as in the case of the Hepatitis C drug Sovaldi.
He concludes that:
This gap between the protected price and the free market price has the same impact as 10,000 percent tariff. In addition to making it difficult for patients to get the drug, this enormous price gap provides incentives for rent-seeking and corruption that impose costs on society and jeopardize people's health. We should be looking to more modern methods of financing drug research, not shoring up a relic from the 15th century.
But it is the investor-state dispute mechanism that presents perhaps the greatest problem for Canada. The ISDS mechanism in the TPP is similar to chapter 11 in NAFTA, but worse.
Canada is already the most sued developed country in the world. For example, a recent Canadian NAFTA ISDS suit ruled in favour of a U.S. firm that had been denied a permit to dig a massive quarry in an ecologically sensitive part of Nova Scotia. The government had to pay $300 million in damages. The dissenting tribunal member called this ruling a remarkable step backwards for environmental protection in Canada.
There may well be ways to better accommodate trade for Canadian producers, but this agreement is not really about trade. It is about harmonizing financial, health, and labour and safety standards, reinforcing intellectual property rights, and opening up new sectors to privatization and foreign investment.
One pro-TPP study estimated that GDP in the U.S. would increase a mere .13% by 2025 if the TPP came into effect, so it's not really about growing the economy.
Many prominent economists, including Paul Krugman, Joseph Stiglitz, and Dani Rodrik feel that the trade impacts of the TPP are far less important than the serious concerns it raises about excessive intellectual property rights, regulatory harmonization, and investor-state dispute settlement.
There are better ways to grow our economy and help producers. Please do not enforce this heavy price on the rest of Canadian society.
Thank you.