There is a reason to be excited about the TPP

There is a reason to be excited about the TPP

There is a reason to be excited about the TPP While voters tossed out Stephen Harper and the Conservative government last week, it doesn’t mean that the Trans Pacific Partnership (TPP) deal should be the baby that is thrown out with the bathwater.

“I think it is an incremental positive. It is the first major trade deal in 20 years,” says Stephen Lingard, senior vice president and portfolio manager with Franklin Templeton Solutions. “The headline is positive – particularly when you’ve had global trade that has struggled so mightily.”
It was outgoing Prime Minister Stephen Harper who made it public only a few weeks before the October 19 election that Canada was poised to sign off on the TPP – a partnership that could potential include 18 or more members.

So far, Prime Minister-elect Justin Trudeau has only confirmed that while he is “pro-trade” he is also “pro-Parliament,” and that he would not allow a free vote in the Commons on the deal.

Lingard told WP that the TPP can serve as a model for broader treaties, as it will represent about 40% of the world’s GDP.

“That is a meaningful amount of trade that is going to be subject to much freer flow of goods,” he says. “Obviously there can be some pitfalls, such as being derailed by the member governments, but I think it will get passed. The only question is: how quickly will it get passed?”

Lingard expects the new Trudeau Liberal government will sign off on the TPP, with the Americans following suit next fall once the presidential elections have wrapped up.

And it is a trade treaty that is long, long overdue.

“Since China’s entry into the WTO, NAFTA (North American Free Trade Agreement) was one of the more meaningful regional trade agreements over the last 20 years,” says Lingard. “We’ve been kind of stuck in the mud in terms of getting a new global trade deal.”

With China making headlines back in August fuelling the volatility in the stock market, the TPP presents what Lingard calls “a template” for that country to adjust how it conducts world trade – opening a door for it to become a full trading partner within the TPP.

“China will want to be a part of that global trade, so you are in a sense dictating the terms,” he says. “There are lots of protections in there that China will frankly struggle with, and will have to make some hard decisions if they want to live up to the high quality requirements of the TPP.”

And with global trade numbers falling, despite numerous stimulus efforts to prop up the collective economy, the TPP represents a real positive for the global economy, says Lingard.

“This is the most significant global block trade deal that should kick start the discussion on a wider participation,” he says.