So you have to negotiate a Free Trade Agreement!
With the agreement between Canada and the Association of Southeast Asia Nations (ASEAN) to begin negotiations towards a Free Trade Agreement (FTA), it is important that companies and individuals understand the negotiating process how they might be able to provide input and feedback to the negotiating team.
The purpose of any free trade agreement is to liberalise trade between partners and the benefits of such an agreement are maximised through the greatest possible cover of goods and services.
For Canada, its trade agreements initially focused on the removal of tariff barriers and import restrictions. Trade agreements then shifted towards a focus on services, intellectual property, investment, and non-tariff barriers. The current Canadian government pursues a Progressive Trade agenda that looks to include provision on issues such as greater transparency, trade and gender, workers’ rights, the environment and small- and medium-sized enterprises in free trade agreements.
ASEAN countries have signed free trade agreements on a bilateral, regional and a global level, but these agreements focus on economic-based issues instead of the more progressive issues found in recent Canada trade agreements.
How are Free Trade Agreements negotiated?
The process for negotiating a free trade agreement is a long and technical one that includes multiple rounds of discussion and engagement with various stakeholders. To get a better understanding of the process, let’s look at the entire process from the Canadian point of view.
The negotiating process starts with Canada identifying its interests for the free trade agreement and the development of the specific objectives that negotiators should achieve to meet those overarching interests. These objectives can be broken down on a sector-by-sector basis or by subject area. It is these objectives that will form the basis of Canada's negotiating mandate which must be approved by the Federal Cabinet.
Next the Government of Canada will table in the House of Commons a Notice of Intent of entering free trade negotiations. This notice must be tabled at least ninety calendar days prior to the commencement of such negotiations. For the Canada-ASEAN Free Trade Agreement, Mary Ng, Minister of International Trade tabled the Notice of Intent on November 24, 2021. This means that the earliest date formal negotiations can begin is February 22, 2022.
In addition, the objectives for the free trade negotiations must also be tabled at least thirty calendar days prior to the commencement of such negotiations. At this time, these objectives have not yet been submitted to Parliament.
During this time, the Government of Canada will appoint a chief negotiator for the free trade agreement. This individual is usually a member of Global Affairs Canada (which is the lead federal department on international treaty negotiations) and a professional diplomat. Canada has a strong bench of experienced trade negotiators due to its history of trade negotiations.
For the formal negotiations themselves, working groups are established for each of the issue areas of the negotiation. In the case of the Canada’s negotiation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), there were 21+ separate working groups which gives you an idea of the complexity and scope of that a multilateral negotiation can entail.
The actual negotiations are conducted in rounds with each round hosted by each party on an alternating basis. Each negotiating team lasts between three to five days. At the end of each round, a consolidated text is produced to confirm what has been agreed and to function as a record of the round.
At the conclusion of negotiations, the draft text is typically endorsed by each side's chief negotiators and the text of the agreement is sent for a legal review or “legal scrubbing” and translations. This is done to make sure that the text the negotiators have agreed on meets each side's existing international obligations and to confirm that the language of the agreement meets the intention of the negotiators.
Once a free trade agreement is finalized and translated, the Cabinet will approve the document and the Minister of Global Affairs or their designate can sign the agreement. The agreement is then tabled in the House of Commons for 21 days of debate and consideration.
In addition, legislation required to implement the agreement is often required and must be passed by Parliament and receive royal assent. At the time that the implementing legislation is introduced into Parliament, the Government will also table an economic impact assessment of the agreement as required by law.
Only after all the regulatory changes and legislative requirements are met, will the free trade agreement come into force.
The good news is that Canada is open on the process and progress of its trade negotiations and makes information available. However, this openness does require consent from a negotiating partner so the amount of information regarding each trade negotiation can vary.
So how long will this all take?
To answer this question, we need to look at other free trade agreements that Canada has negotiated.
Canada has signed four other multilateral free trade agreements that can be comparable to a Canada-ASEAN Free Trade Agreement. The four agreements are Canada–European Free Trade Association Free Trade Agreement (CEFTA), Comprehensive Economic and Trade Agreement (CETA), Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the Canada–United States–Mexico Agreement (CUSMA).
Of the four, CUSMA was negotiated the fastest at just three years but it was more of an updating of the previous North American Free Trade Agreement than a new trade agreement so it may not be as applicable for answering the question.
For the remaining three trade agreements, on average, it took Canada and its negotiating partners thirteen rounds of negotiations to arrive at an agreed upon text and 9.6 years from the start of negotiations to the agreement entering into force.
When examining ASEAN trade negotiation history, there are six FTAs that are similar in nature to the proposed Canada-ASEAN FTA. The average negotiating time for these agreements is a little over 4 years. While there is little information available on the number of rounds of negotiations required for each agreement, ASEAN has a history of requiring numerous meetings to make decisions. The recently concluded RCEP agreement for example required thirty-one rounds and 11 Ministerial level meetings over 10 years.
The difference in negotiating timelines between ASEAN and Canada may be due the fact that as noted Canada FTAs tend to be broader in scope while ASEAN FTAs are more focused on pure trade related issues.
The information above suggests that we are looking at a range of between 4 to 9 years from the start of the negotiations to an agreement coming into force. If we split the difference between the two that would suggest a timeline of 6.5 years. If negotiations start early in 2022, this means that we could be looking at a finalized treaty by the end of 2028 or the start of 2029.
A part of the negotiating process for the Canadian government is engaging with a wide range of stakeholders who want to ensure that their views are heard, and concerns being acted upon. This engagement takes place not only at the start of the free trade agreement process when the priorities and objectives are being set but on an ongoing basis as the negotiations unfold.
The list of potential stakeholders for a free trade agreement can include:
The Canadian Public,
Provincial, Territorial, Municipal government, and other levels of government,
Industry and Unions,
Universities, Colleges and Think Tanks,
Non-governmental organizations and
Public interest groups
Another important group of stakeholders that the Government will consult is parliamentarians who will raise their constituents' issues, conduct public consultations, and make sure that the agreement reflects all Canadian’s interests. Parliamentarians also will review and approve any free trade agreement at parliamentary committees during the legislative process.
Interested stakeholders need to understand the negotiating process so that they know when and how to make their views known.
What are the major challenges to the negotiations?
While there are different challenges to negotiating a Canada- ASEAN Free Trade Agreement, from a process point of view, I would highlight four issues.
1. Difference in types of agreements - Canada and ASEAN are both highly active in negotiating and using free trade agreements but the type of agreements that they have signed are different. Chapters on issues such as labour, environment, transparency are found in all the FTAs that Canada has signed since 1999. These issues are not found in any ASEAN free trade agreements nor are more modern issues such as gender, environment, or rules regarding state-owned enterprises. It is unclear if ASEAN is willing to incorporate any of these issues into a free trade agreement nor is it likely that Canada will sign a trade agreement that is significantly narrower in scope than its more recent trade agreements.
2. Timelines - The sheer length of the negotiating process is a challenge to coming to a successful agreement. A quick look at trade negotiations that either Canada or ASEAN have started but have never finished the list is larger than one would hope. This is going to be a long multiyear process. If you were hoping for a quick agreement, well then, I am sorry to rain on your parade. Issues such as a lack of a champion, lack of bandwidth, changes in governments and other issues (both local and global) are magnified the longer it takes to negotiate this agreement.
3. Changes in Government - With 11 different countries trying to negotiate an agreement that could take more than half a decade, it is almost certain that there will be a change in government by one of the signing parties. While this can be expected in multilateral trade negotiations, it does raise the risk that a new government could be fundamentally opposed to a Canada-ASEAN FTA thus halting negotiations or scrapping them entirely.
4. Lack of Bandwidth - Negotiating a free trade agreement is a significant undertaking for any government and for its negotiators. This undertaking can be even more difficult if a country is negotiating multiple free trade agreements at the same time. There are only so many experienced negotiators or subject matter experts in a country while elected officials and Ministers only have so much time that they must prioritise. If the Canada-ASEAN Free Trade Agreement is not viewed as a priority, then personnel, resources and time can be shifted to other agreements that are seen as more important to a country’s strategic goals.
So, what does all this mean?
That the start of the negotiations is just that the start and that this is going to be a long multiyear process. The negotiations themselves will be very process oriented and include stakeholders and other participants.
For those individuals, groups and companies that are supportive of the free trade agreement between Canada and ASEAN, it is important that you remain engaged in the process and make sure your voice is heard.