The financial services sector would benefit from the trade deal known as the Trans-Pacific Partnership (TPP), and stands to suffer if the deal is not ratified, according to a report from the C.D. Howe Institute published on Thursday.
The TPP would likely have “a modest impact on Canada” overall, the Toronto-based think tank says in an announcement accompanying the report’s release, with some sectors benefitting from the deal, while others will see negative effects. Moreover, Canada would likely incur modest losses from not ratifying the deal.
While much of the deal focuses on goods sectors, on the services side, “the interesting sectors for Canada are financial services and business services, which make fairly significant gains in cross-border exports,” the report says. However, “the major expansion in services is in the non-traded sectors through indirect income effects,” the report adds.
Overall, the report projects that, if the deal is ratified, it would boost Canadian household income by $485 million in 2018 (measured in 2016 dollars), rising to about $3 billion by 2035, “when the full impacts of the TPP have been realized.” This represents a 0.02% increase in real GDP in 2018, rising to about 0.08% in 2035
The primary winners, the report says, would be major gains in trade for agricultural produce, whereas trade sensitive sectors, such as the dairy and automotive sectors, would see a decline in shipments under the deal.
“Canada, along with Malaysia and New Zealand, make tangible gains in terms of exports resulting from the TPP,” the report says. “However, as a trade deal, the TPP mainly benefits the United States, Vietnam, and Japan.”
Conversely, if Canada does not ratify the agreement, the cost to Canada would be minor in the short term, $290 million, rising to about $1.7 billion by 2035, the report finds. The main sectors that would lose in this scenario would be financial services and business services, along with agricultural products.
Sectors that are expected to see losses under the TPP, such as the auto sector, cannot avoid declines by Canada staying out of the deal, the report says.
“What our analysis suggests is that even ambitious, so-called deep and comprehensive agreements like the TPP have limited traction in what is an already highly open global economy, which features many parallel processes chipping away at irritants to trade and investment,” the report concludes.