Returning to the table
Canada’s list of goals for a trade deal with Indonesia sheds light on its efforts to reengage the world, however modestly.
The great age of multilateral trade deals isn’t quite over — but it’s fading. Though countries are still making moves toward trade liberalization, the trend seems to be toward smaller tables, one-on-one deals.
The Doha round, launched in 2001, is still spinning its wheels. Donald Trump’s presidency forced a high-risk renegotiation of NAFTA that ended with modest changes, while his active disdain for the give-and-take of trade talks cast a pall over the WTO and the entire concept of multilateralism.
The pandemic didn’t help, either. Self-sufficiency is now the flavour of the month in many trading capitals — a reaction to the supply chain shortcomings exposed by COVID-19.
“All of which,” says Wendy Wagner, a partner at Gowling WLG, “is driving the thinking in federal circles that if Canada is to support its trading industries, it’s going to have to go it alone.”
Canada is feeling its way toward a possible free trade agreement with the Association of Southeast Asian Nations (ASEAN). In the meantime, it’s also looking at the prospects for a comprehensive economic partnership agreement (CEPA) with Indonesia, a member of ASEAN. Global Affairs Canada issued a call for submissions on a Canada-Indonesia CEPA last year.
The Canadian Bar Association responded with a brief but ambitious list of goals to pursue in trade talks with Jakarta. Many of the proposals are ones you’d expect to see emerge as Canada engages more closely with Southeast Asia’s largest economy.
Indonesia has come a long way since the “command socialism” years of the 1950s and 1960s. But it still has a history of using non-tariff barriers to protect domestic industries. The CBA paper calls for an “industry-focused review of tariff and non-tariff barriers” going into trade talks with Indonesia — import restrictions, luxury taxes, limits on foreign investment.
State-owned enterprises (SOEs) have a particularly large footprint in Indonesia’s economy. The CBA paper recommends Canada include a separate chapter on SOEs in the final deal “to ensure appropriate limitations on the State’s ability to distort trade or hinder investment …”
The CBA also calls for a section on competition law like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) chapter 16 — and recommends that it be excluded from both state-to-state and investor-state dispute settlement mechanisms. It wants the federal government to seek exemptions from local partner percentage rules that restrict foreign investment. It calls for a “negative list” approach to identifying the professional occupations to which global mobility provisions will not apply — with a special emphasis on allowing Canadian companies into Indonesia’s education sector.
All of which is pretty predictable. But the CBA paper pulls some wild cards, too — items that go beyond the bottom line. It calls for adopting the CPTPP’s environment chapter as a template for environmental protection and corporate social responsibility (CSR) in any bilateral deal with Indonesia. It calls for the use of gender-based analysis on any CEPA with Indonesia. It cites the risk of “poor health and safety regulations, low compensation and forced child labour” in Indonesian enterprises and says Canada should ensure that international labour standards “to eliminate child labour are included in any agreement.”
The human rights elements in the CBA’s proposal paper aren’t there entirely for virtue signalling. They’re there for the Canadian companies with global supply chains that now have to be extra careful about where they source supplies and labour — because the consequences of failure can be bad press, divestment campaigns and plummeting share prices.
“This is increasingly an issue for all companies with overseas supply chains — the need to keep those supply chains clean,” says Ke-Jia Chong, general counsel at BroadGrain Commodities. She contributed to the CBA paper.
“Any company with international supply chains has to be very careful about this, about how it deals with the risk of forced labour. It’s a problem in a number of developing regions. FTAs are overarching agreements, but they do set expectations for national legislation.”
Robert Paterson of UBC law is one of the country’s top experts on international trade law. He says he has doubts about Canada’s ability to influence Indonesian policy through a bilateral trading relationship worth just $3.9 billion in 2018.
“I guess I’m a bit jaded,” he says. “Canada’s trade agreements tend to be pretty progressive, but I’ve always been skeptical about what those progressive clauses actually achieve.
“It’s a Muslim majority country. They’re not necessarily going to listen to us when it comes to gay rights, for example. Canada doesn’t really have that much influence in the region. I can’t imagine Jakarta wakes up every day wondering what Ottawa is thinking.”
But bilateral trade deals can sometimes set the terms and tone for larger ones. Wagner said she thinks Indonesia may be talking to Ottawa to pave the way for wider regional engagement
“Canada was able to conclude the CPTPP without the United States,” she says. “Indonesia has expressed interest in being part of that. It’s possible Indonesia sees trade talks with Canada as a stepping-stone to membership in the CPTPP.”
