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TPP: The Promise of Canada-Japan Success

TPP: The Promise of Canada-Japan Success

This is an excerpt of a speech Flavio Volpe, president, APMA gave to a lunch audience of Japanese and Canadian executives at the Japan Society in the offices of McMillan LLP last month in Toronto.

Much has been made of the flawed automotive terms of the TPP, and both the former and current Canadian governments have committed to addressing the results with Domestic Policy and Strategy. In spite of APMA’s strong, public stance during negotiations on automotive-specific terms, we have always held that Canada must be in the TPP if it is to go ahead – we cannot afford to be outside the tent. We influenced the final automotive terms through negotiations, and now we look ahead.

After speaking specifically about the automotive sector in his speech, he turned to global geopolitics, Japan-Canada relations and the opportunities provided by closer links to our new partner.

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“I am an advocate for the automotive industry in Canada, but I am invested citizen of this country and an internationalist at heart. The TPP is much bigger than automotive supply terms, risks and opportunities. This agreement is about 21st-century American geopolitics, the rise of China – based on resource extraction and manufacturing – and the effects of unprecedented demographic shifts in the land of the Rising Sun. With the possible exception of Germany and the outside prospect of India reconstituting itself administratively, China, the United States and Japan will shape the 21st-century through trade in a way that the UK, Germany, Japan and the United States shaped the 20th Century through conflict.

The rise of China has its core has been about the extraction and management of resources – both natural and human – and focusing them on creating economies of scale that have bent every 20th Century model and confounded many 21st-Century economists. China’s great economic growth has been the result of massive mobilizations of manufacturing capital and state-sponsored revolutions in resource extraction. It has channeled successes in these endeavors to finance and grow substantive knowledge-based competencies and capacity. China is threatening in a very real sense to eclipse Japan’s Sun and to establish an economic hegemony in the Pacific Rim that will invariably force great flux in America’s global sphere of influence.

This 21th Century that will be polarized between the two global economic power houses has in my mind only two wildcards of influence: Japan in the primary position because of its influence in the Pacific and Germany because of its increasingly dominant stewardship of Europe. With apologies to the Brits who may continue to play a significant role as a financial clearinghouse, the rest of the global powers will be spectators in this main theater.

The TPP is, in my opinion, Japan’s greatest opportunity to influence the course of the 21st-century and play Kingmaker to the partner of its choosing. Many observers have indicated that they believe Japan was the biggest beneficiary in the negotiations that took place over the last seven years. I believe from a commercial standpoint perhaps they have. But only because they decided that a Japan – USA partnership would be the dominant influence of the global economy. If Japan had turned instead towards China, leaving aside all the head-nodding assumptions we are all contemplating, I believe Japan would have also been declared the winner of a China-Japan centric multi-national agreement. The American political objective was to outmaneuver China by partnering with Japan and its commercial objective was to bolster its stranglehold on international intellectual property protection. It succeeded in both.

Japan is the prize coveted by both spheres of influence as the King-making partner that Germany and the UK play in the diminishing Atlantic sphere. Given our proximity to the US and our deep industrial integration with them, Canada had little choice but to follow the Americans into a large expansive negotiation with the Japanese. History will judge the decision to do so favorably. Not because Canadian consumers will get access to cheaper coveted foreign goods but because a vote for TPP with Japan and the United States is a vote for shared values in intellectual property, and for the continuation of common capitalist consumerism which helps to finance the social structures we hold so dearly.

Japan and Canada share many attributes that make this parallel voyage an important one to do together. Much has been made of the long-term stagflation of the Japanese economy. This is in very large part attributable to negative demographic trends and usually ignores the continued Japanese global leadership in the knowledge, innovation and imagination. Canada’s most lucrative traditional industries like Automotive and Aerospace suffer from similar challenges in demographics. We boast some of the world’s best manufacturers and innovators but our workforce is aging and succession planning is failing. The acute advantages that we enjoy over the rising developed nations will be overrun by our inability to recruit the next generation of Canadians into those high-paying and capital-intensive industries that built the 20th century.

Canada has been searching for a new partner to diversify its dependence on its American sister since our founding fathers created the four-province Dominion of Canada almost 150 years ago. The TPP has potentially provided us this new lineage if we are committed to developing deep and meaningful co-investment and cooperation with Japan. The rise of the new China – the 250+ million people in that country who are becoming accustomed to international trade and western consumer standards – is certainly going to provide an interesting problem for their leadership. A group of people who have grown up in the modern era will continuously demand more freedom to practice the way of life that has characterized Japan and Canada since the end of the Second World War. China will have to contend with the consequences of its own success when it meets with the inevitable declining growth numbers and upside-down demographics of its long-term one-child policy when it transitions to its post-industrialization.

That eventuality will arrive in the coming decades. Until then, post-modern economies like Japan and Canada whose over-65 cohort of citizens already outnumber their under-15 cohort will do well to work together to institutionalize a cultural commitment to continuous improvement, shared success, social and health programming and international stewardship of all things that finance wealth creation. In the 1980’s, Japan represented a model of industrial excellence that shocked and changed the American ethos forever. When that American pendulum finally stopped swinging 20 years later, that slow down turned into the greatest financial crisis since the Great Depression. At the depth of that crisis, it was Canada that represented a model of financial stewardship that signaled the path to stability for that great superpower to our south.

We have accomplished a lot – together and in parallel efforts – without any formal agreement or framework for cooperation. Canada’s automotive sector needs smart domestic policy to smooth out the edges of the TPP that need transitional attention and we will be turning to Ottawa in that regard. Putting that aside, Canadian foreign policy must now turn in an unprecedented proportion to the development of a real partnership with Japan, its industries and most importantly its people as we map out our common future as key partners in the most influential international bloc of the 21st Century.

Thank You.”

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