Liberals’ progressive trade agenda faces uphill battle in Southeast Asian negotiations

Trying to secure ambitious trade pacts with notoriously difficult trading partners as part of its generation shift in Asia, Canada faces a long road ahead to finalize a multilateral deal with Southeast Asian nations and a bilateral agreement with Indonesia. Completing trade deals with Indonesia and the Association of Southeast Asian Nations (ASEAN) are central trade components of Canada’s new Indo-Pacific Strategy, which was launched in November 2022. Slow progress is being made towards an ASEAN deal, according to information from a briefing to Canadian stakeholders obtained by The Hill Times. Canadian chief negotiator Jay Allen told stakeholders earlier this summer that trade talks had slowed due to internal ASEAN mechanisms, as the association operates by consensus. Since coming to power in 2015, the Liberal government has trumpeted a progressive trade agenda, but ASEAN doesn’t yet have a mandate to negotiate labour, environment, and inclusive trade chapters. The Canadian side hopes that will change. Canada and ASEAN have agreed to labour and environment provisions being included in an eventual trade deal, according to information from the briefing obtained by The Hill Times. But the two sides have differences over how they would be included in a final pact, with Canada preferring a dedicated chapter. The Canadian government regards a free trade pact with ASEAN as a building block for greater engagement in the region. The 10-member association is composed of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. Canada has trade coverage with four of the 10 members—Brunei, Malaysia, Singapore, and Vietnam—through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Canada and ASEAN held a fourth round of talks virtually on June 22. Two more rounds are expected to take place by the end of the year, with the next round likely to happen in September or October. At the same time, Canada has completed five rounds of negotiations with Indonesia. Demonstrating the difficulty of completing trade talks with the two partners, the European Union has held 15 rounds of negotiations with Indonesia since starting talks in 2016 without reaching an agreement. Canada is also currently in trade talks with India—another notoriously difficult trade negotiator—a negotiation which was spotlighted in the Indo-Pacific strategy. Some analysts have questioned how many concessions Canada can pry from ASEAN and Indonesia, noting that Canada will benefit far more from a free trade agreement than their Southeast Asian trading partners. “We tend to have a slightly inflated view of Canada that doesn’t jive with the view outside of Canada,” said Canada West Foundation’s Carlo Dade, director of the trade and investment centre. “These countries don’t need Canada.” He added that there is also a question of capacity for ASEAN countries to speedily negotiate a deal as they are in the middle of talks with the EU and dealing with the 15-member Regional Comprehensive Economic Partnership. “The swiftness of the agreements is probably a bit oversold on this,” he said. Dade said the progressive trade agenda is a “non-starter.” “We’ve painted ourselves in the corner on the progressive issues. We’ve said that this will be at the forefront, and that was done for domestic political reasons,” he said, remarking that the substance of the chapters isn’t the problem. Dade said the issue is the framing of such measures being imposed by Canada, remarking that it comes across as “moralistic” and “neocolonial.” Mary Ng, centre, pictured with Prime Minister Justin Trudeau and Governor General Mary Simon, stayed on as Canada's trade minister following last month's cabinet shuffle. The Hill Times photograph by Andrew Meade Stuart Trew, director of the trade and investment research project at the Canadian Centre for Policy Alternatives, said a deal with Indonesia, as well as with ASEAN, shouldn’t be finalized if progressive chapters aren’t included. He said that with limited economic gains for Canada in a trade agreement with Indonesia, there is no reason to wrap up a deal before labour and environment chapters are completed. “We should be pushing the envelope from the protections that were secured under the USMCA. We should be moving further towards thinking about the impact of trade on workers,” he said. Trew said Canada needs to move beyond moralizing and tokenistic rhetoric on trade to working together with trading partners to find out how they can “legitimately work together” to improve wages and working conditions in both countries. He remarked that it will be “tricky” for the Canadian government to reach a finalized agreement with Indonesia. “They’re not interested in the kinds of labour and environmental chapters that Canada puts a lot of stake in, in its trade negotiations,” he said. “I think likely going to have a treaty where the Canadian government takes a step back in those area.” He added that Canada is the one that would be gaining access to the large Indonesia economy, leading to skepticism about Jakarta’s willingness to cave to Canada’s position. “They’re really, in many ways, calling the shots. Everybody is coming knocking. There’s no reason for them to back down on these things,” said Trew. The elephant in the room As part of Canada’s negotiations with ASEAN, Ottawa is in direct talks with Myanmar—a country it is actively sanctioning and that it has accused of committing genocide against the Rohingya. Myanmar has been governed by a military junta since the 2021 coup d'état. Former Canadian diplomat Randolph Mank, who has served as Canada’s envoy to ASEAN nations Indonesia and Malaysia, said Myanmar's place in the talks is a “very real problem.” “That is as much an internal problem for ASEAN to work out as it is for us to have to deal with,” he said, remarking that it is a problem that will have to be dealt with before a final deal is concluded. “They can’t ignore this problem in their negotiations because everyone has to sign on,” he said. “How are we going to impose modern trade rules and disciplines on a country that is not practicing modern governance within its own borders?” Former diplomat Deanna Horton, a past ambassador to Vietnam, said Myanmar is the biggest challenge to ASEAN’s consensus agenda. “Myanmar presents a huge challenge and it could be that this will be a road too far, but even in the darkest corners there can be some ground for collaboration on some issues that can lead into other issues,” she said. As Myanmar poses a challenge for ASEAN as well, Horton said one approach is for Canada to work with ASEAN partners on best ways to engage with the nation. The hope for concluded pacts The Business Council of Canada’s Trevor Kennedy, vice-president of trade and international policy, said completing trade agreements with ASEAN and Indonesia will help as part of an increased Canadian engagement in the Indo-Pacific. “They certainly would be positive contributions,” he said, but noted that the relationships are improving despite the trade pacts not being finalized. While the EU has had difficulties in its trade negotiations, Kennedy said a more optimistic view can be seen with Australia and New Zealand’s free trade area with ASEAN, which was modernized in 2022 after negotiations were launched in 2020. “I would look closer to Australia in what’s doable and what timelines are reasonable,” he said. Kennedy said getting an agreement with ASEAN will require patience, given the association’s internal mechanisms. “But all signs indicate that it would be possible for us to get a deal, and one that’s in the best interest of both parties,” he said. “It’s not something that we need to rush.” Mank said the key to success in Canada’s talks with Indonesia is to have a sense of “enlightened compromise.” Given the “good relationship” Canada has with Indonesia, that can be possible in the trade negotiations, he said. He said talks with Indonesia and ASEAN put in a place another “huge piece of Canada’s trade policy puzzle.” “I think there’s motivation on both sides,” he said. Horton said Southeast Asia is the “linchpin” of any country’s Indo-Pacific strategy. “Southeast Asia has some of the fastest growing economies in the world,” she said, remarking that it is also in the middle of the U.S.-China competition. She said the negotiations with ASEAN and Indonesia are not “going to be easy.” Echoing Kennedy, she said that Canada should look at the Australia and New Zealand example. Horton said there could also be work done towards smaller agreements to negotiate certain issues concurrently. “People tend to think of free trade agreements in an all encompassing lens, whereas I think you can also do smaller agreements,” she said, noting that one path forward is working on issues in stages to build compromises over time and find areas of commonality. nmoss@hilltimes.com The Hill Times

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Liberals’ progressive trade agenda faces uphill battle in Southeast Asian negotiations

Before Canada finalizes a trade pact with ASEAN, Myanmar's place in that deal will have to be confronted, say former diplomats.

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