Canada and the Trans-Pacific Partnership

CANADA AND THE TRANS-PACIFIC PARTNERSHIP: A TWO-LEVEL GAME

INTRODUCTION

The Trans-Pacific Partnership (TPP), formerly titled the Trans-Pacific Strategic Economic Partnership, is a free trade agreement currently being negotiated that could represent the world’s largest multilateral free trade bloc in terms of gross domestic product (GDP). This agreement, if successfully ratified, would establish stronger economic ties between various Pacific Rim countries. Originally signed by Brunei, Chile, New Zealand, and Singapore in 2005, the list of members participating in the TPP negotiations has since grown in size to include Australia, Peru, the United States, and Vietnam in 2008, Malaysia in 2010, and Canada and Mexico in 2012. From 2010, Canada had been an observer of the negotiations but could not participate as it had been blocked by New Zealand and the United States from joining the talks. This was due to its domestic agricultural policies and intellectual property rights standards. In addition to the current negotiating parties, Japan, the Philippines, Taiwan, and South Korea have also expressed interest in joining the discussions.

Before Canada’s invitation to join TPP negotiations, it found itself in a predicament while weighing the costs and benefits of joining the agreement, which severely delayed its approval by all TPP parties. Like the United States, Canada too wishes to expand its economic foothold in Asia-Pacific markets as the TPP agreement represents 28 percent of world GDP among the first nine members of the agreement (Dawson, 2012) with a potential 40 percent of world GDP when including Canada, Mexico, and Japan (The Economist, 2011), and a greater potential of 60 percent world GDP if it eventually included all Asia-Pacific countries (Fergusson and Vaughn, 2011). This is not to mention the addition of other Pacific states located in North and South America. Even if this agreement were not to reach its full potential and remain as it is with Canada and Mexico included, it would still represent the world’s largest free trade bloc. The current eleven negotiating member countries alone represent 658 million people and a total gross domestic product of $20.5 trillion (Prime Minister of Canada, 2012).

Canada does not currently have any established free trade agreements in the Asia-Pacific region although it does have two bilateral free trade negotiations in progress with Japan and Thailand. An agreement on the TPP is in Canada’s interest as it could act as a foundation for securing future influence over and drawing economic advantages from rapidly growing Asian markets – including those that are not currently observing or negotiating the TPP. At the same time, Canada already has a multilateral free trade agreement with Mexico and the United States under the North American Free Trade Agreement (NAFTA) and bilateral free trade agreements with Chile and Peru. As for the remaining TPP members who have no current trade agreements with Canada, they would represent less than one percent of Canada’s total export market (Doer, 2012). This may seem rather insignificant; however, Japan’s interest in the negotiations is of particular importance to Canada as its membership would represent free trade with one of the world’s largest economies. The ambition to eventually expand the TPP to other Pacific Rim countries, most notably China, would also greatly increase Canada’s access to East Asian markets. Therefore, Canada’s desire to join TPP negotiation talks is to have a significant influence on the details of the agreement, to use the TPP as a step toward tapping into Asian markets, and as a member, ensure that the TPP does not eclipse NAFTA. Otherwise, Mexico and the United States’ membership to the TPP without Canada could render NAFTA less important, potentially damaging the Canadian economy and straining relations between the heavily trade dependent North American countries.

Following Canada’s invitation to join the TPP in June 2012, it was unclear as to what conditions, if any, Canada would be forced to agree to in order to join the negotiations. However, as Canada was previously rejected in 2010 for its protectionist agricultural supply management system and standards for intellectual property rights, these were seen as the likely issues that Canada would need to address to in order to join the talks. Canada’s supply management system protects dairy, poultry and egg farmers with high tariffs. Since Canada’s invitation to join, however, Canadian Prime Minister Stephen Harper has announced that no conditions were in fact necessary to join the TPP negotiations and that the Canadian government would continue to protect the interests of the agricultural industry. This being said, Canada’s supply management system and other issues would be brought to the negotiating table along with issues that it has with other TPP members (Curry, 2012). As will be discussed, the manipulation of both domestic and international elements has been responsible for Canada’s joining of the TPP. At this point, it cannot be known what will become of the supply management system and Canada’s intellectual property rights standards, however, this issue demonstrates how foreign pressures and domestic politics are intertwined in foreign policymaking. Furthermore, this issue demonstrates the theory that state leaders must manage these two domestic and international levels of influence in order to produce a successful outcome.

TWO-LEVEL GAME THEORY

As described by Robert Putnam (1988), two-level game theory explains that domestic politics and international relations are intimately linked with one another. In international negotiations, such as in trade agreement negotiations, all involved states attempt to create a common framework where each party can mutually benefit from the final ratification. Also known as a win-set, each party attempts to obtain the most attractive aspects of an agreement in terms of each of their national interests while avoiding negative impacts that the agreement could have domestically. This is the two-level game, which a state must play in order to amplify benefits while reducing cost. On Level I, or the international level, leaders and decision makers are influenced by outside factors such as international governments and politics, foreign protectionist measures, foreign negotiators, and all other international influences. On Level II, or the domestic level, leaders and decision makers are influenced by intra-national pressures such as labor unions, domestic lobby groups, and local governments to ensure that the welfare and interests of domestic parties are being met.

According to this theory, Level II will often take precedence over Level I as Level II ultimately holds power over the government and also represents the domestic interests of the various interested parties within a state. Level II, therefore, can restrain a government’s ambition to negotiate or ratify an international agreement as leaders aim to either retain or gain domestic political power. In turn, political actors attempt to create coalitions with supporters and bargain with opponents in an attempt to build support for Level I foreign policy ambitions

(Putnum, 1988). Conversely, other states or international organizations push for their interests, which can often be in conflict with a state’s domestic policies or state ambitions. Therefore, the more agreement there is between Level II and Level I on a foreign policy issue, the larger the win-set and so ratification is more likely to occur. It can be argued, however, that a large win-set can also work to a state’s disadvantage as international actors can use a large win-set as a reason to pressure a state into giving greater concessions.

In terms of Canada joining the Trans-Pacific Partnership, both levels have influenced and will continue to shape Canada’s role in the negotiations as well as the eventual final outcome of the agreement. Although it is yet unknown as to what compromises Canada and other members will need to make domestically in order to ratify an agreement, the Canadian government has displayed a strong desire to be a player in the negotiations while other member states, particularly New Zealand and the United States, have shown considerable pushback to Canada’s domestic policies. In turn, this could lead to the complete rejection of a TPP agreement or produce an unfavorable win-set.

[...]