Canada puts its hand up to join TPP

Ed Fast. Photo / Mark Mitchell

Canadian Trade Minister Ed Fast has been in New Zealand this week pressing Canada's case to join the Trans Pacific Partnership trade negotiations, and the sooner the better.

But while the addition of that G7 economy would undoubtedly add heft to the TPP grouping - as would the other two applicants, Japan and Mexico - Canada's bid faces two obstacles.

One is the United States' preference at this stage to confine the negotiations to the existing nine countries - the US, New Zealand, Australia, Chile, Peru, Singapore, Malaysia, Vietnam and Brunei.

"We will not depart from the US position on this," Trade Minister Tim Groser said.

"The TPP nine have a common position."

He is sympathetic to the desire of both Canada and Mexico, intimately interconnected with their neighbour economically, to join what has become the United States' primary trade initiative.

But the trade-off to the benefits of enlarging the grouping at this stage would be greater complexity to the negotiations and greater difficulty reaching agreement, Groser said.

"I don't believe a full, final, legally scrubbed agreement this year is remotely possible, 'substantial completion' is still the plan," he said.

The other obstacle Canada faces is the conflict between its protectionist defence of its dairy and the TPP goal of eliminating all tariffs.

"That's everything, including the most sensitive products," Groser said.

Fast said Canada would bring a very high level of ambition to the negotiations.

"We share common approaches with New Zealand on key issues such as trade facilitation and state-owned enterprises, on labour and the environment," he said.

"We have made some very clear commitments to Canadian farmers, particularly those who are involved in supply managed sectors [which includes dairy].

"At the same time we have also said to the TPP partners we are prepared to have open and frank discussions about agriculture at the negotiating table."

While in Wellington Fast signed a double tax agreement between the two countries, updating a treaty more than 30 years old.

The withholding rate on dividends will reduce from 15 per cent to a maximum of 5 per cent for an investor holding at least 10 per cent of the shares in the company paying the dividend.

The withholding rate on royalties has been reduced from 15 to 10 per cent generally, with a further reduced rate of 5 per cent for royalties relating to copyright and computer software.

"It modernises our agreement to reflect OECD best practice and by reducing withholding taxes will make it more attractive in Canada's case to invest in New Zealand," Fast said.

The Canadian Government, like New Zealand's, believes it is time to wind back the fiscal stimulus put in place in the wake of the global financial crisis.

"The new stimulus is trade," Fast said. "And we have had a singular focus on expanding trading relationships."

"That is why we are very anxious to join the TPP negotiations because it is an ideal vehicle in which to penetrate the high growth markets of Asia."