The Pivotal Role of the Indo-Pacific Region
The Indo-Pacific region will play a critical role in shaping Canada’s future over the next half-century. Encompassing 40 economies, over four billion people and $47.19 trillion in economic activity, it is the world’s fastest growing-region and home to six of Canada’s top 13 trading partners. The Indo-Pacific region represents significant opportunities for growing the economy here at home, as well as opportunities for Canadian workers and businesses for decades to come.
The Indo-Pacific comprises 40 countries and economies, including economic powerhouses like China, India, and Japan. This dynamic region is rapidly becoming the global center of economic and strategic importance. Every issue that matters to Canadians – from national security and economic prosperity to environmental protection and human rights – will be shaped by Canada’s relationships with Indo-Pacific countries.
Canada’s ability to maintain open markets, open societies, and effective climate action will depend on our engagement in this vital region. Today, the Indo-Pacific makes up more than one-third of global economic activity, and by 2040 it will account for over half the world’s GDP. The region’s rapid growth and expanding middle class are driving huge demand across sectors where Canada excels, from education and health services to natural resources and advanced manufacturing.
Simply put, the rise of the Indo-Pacific presents extraordinary opportunities for growing the Canadian economy and creating good jobs for Canadians from coast to coast. But the region also faces profound security challenges, from maritime disputes to nuclear proliferation. As great power competition intensifies, Canada must engage as an active, reliable partner to shape regional peace, stability, and prosperity.
Enhancing Freedom and Prosperity Through Trade
Economists have long recognized the immense benefits of free trade and open markets. By specializing in products where they have a comparative advantage, countries can increase overall production and consumer welfare. Removing trade barriers allows businesses to access larger markets, achieve economies of scale, and become more competitive globally.
The theory of comparative advantage, pioneered by David Ricardo in the 19th century, explains how all countries can gain from trade even if one country is more efficient at producing every good. When countries focus on their relatively cheaper products, overall efficiency and total output rise, enabling higher living standards.
However, modern economic theory has evolved to account for new realities in the global economy. The emergence of global supply chains, in which components and services cross borders multiple times before final assembly, has greatly amplified the gains from trade liberalization. Tariff reductions on intermediate goods now have a far greater impact, as costs cascade through intricate webs of multinational production.
Trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) have been critical in unlocking these supply chain efficiencies. By eliminating tariffs and harmonizing regulations across a wide geographical area, the CPTPP has enabled Canadian firms to better integrate into dynamic Asian markets and strengthen their competitiveness.
The benefits extend beyond just trade in goods. Liberalization of services trade, investments, and intellectual property have also been major achievements of modern trade agreements. Canadian companies can now more easily provide engineering, financial, and other services abroad, while foreign talent and capital flow more freely into Canada. This fosters innovation, technological progress, and a more open, prosperous economy.
Furthermore, trade agreements have enhanced the freedom and choices available to Canadian consumers. Removing trade barriers means Canadians can access a wider variety of higher-quality and lower-cost products from around the world. This increases real purchasing power and living standards.
Strengthening Supply Chain Resilience
The COVID-19 pandemic has underscored the critical importance of supply chain resilience. When borders closed and production was disrupted, many Canadian businesses faced shortages of essential inputs. Trade agreements have been crucial in helping to diversify supply sources and mitigate such vulnerabilities.
Through the CPTPP and other pacts, Canada has secured preferential access to a vast network of trading partners. This allows Canadian firms to source materials, components, and services from multiple reliable suppliers, reducing reliance on any single country. The agreements also include provisions on trade facilitation, customs cooperation, and logistics – all of which help goods flow more smoothly across borders during crises.
Importantly, trade agreements also encourage Canadian businesses to internationalize their operations. By establishing operations or partnerships abroad, firms can build redundancy into their supply chains and better withstand localized shocks. Trade deals unlock these strategic options, enhancing the resiliency of the Canadian economy as a whole.
Promoting Shared Prosperity and Sustainable Development
Beyond the economic gains, trade agreements have enabled Canada to advance important social and environmental priorities on the global stage. Through these pacts, Canada has championed progressive, values-based policies that benefit people and the planet.
For example, the CPTPP’s chapter on trade and the environment promotes cooperation on issues like marine pollution, illegal wildlife trade, and climate change mitigation. It also affirms the right of each country to set its own environmental protection policies. Similarly, the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) contains commitments to uphold labor rights and promote gender equality.
These provisions not only raise standards globally, but also create new commercial opportunities for Canadian businesses in areas like clean technology and sustainable natural resource management. Trade has become a powerful tool for advancing the United Nations Sustainable Development Goals and building a more equitable, climate-resilient world.
At the same time, Canada has used trade agreements to support the economic development of its partners. Through preferential market access, technical assistance, and development cooperation, Canada has helped emerging economies diversify their exports, integrate into global value chains, and improve social outcomes. This mutually beneficial approach fosters stability, reduces poverty, and creates new demand for Canadian goods and services.
Strengthening Canada’s Global Voice and Influence
As an open, trading economy, Canada has a strong interest in preserving and strengthening the rules-based international order. Trade agreements have been a critical avenue for Canada to shape global economic governance, champion its values, and amplify its global voice.
Through its leadership in negotiating high-standard agreements like the CPTPP and CETA, Canada has helped set new benchmarks for disciplines on investment, digital trade, state-owned enterprises, and more. These agreements raise the bar for transparency, good regulatory practices, and fair competition – principles that are vital to Canada’s prosperity.
Canada has also leveraged trade pacts to deepen cooperation with like-minded partners. By aligning policies, regulations, and market access with countries that share Canadian democratic values, the country has built a powerful network of economic and strategic allies. This bolsters Canada’s influence on the world stage and its ability to address global challenges.
Importantly, trade agreements have provided a platform for Canada to defend the interests of its citizens. When trading partners have engaged in unfair or coercive economic practices, Canada has used dispute settlement mechanisms to hold them accountable. This protects Canadian jobs, businesses, and the rules-based order that underpins our economic freedoms.
Conclusion: Trade as a Pathway to a Better Future
Trade agreements have been transformative for Canada, unlocking new opportunities for growth, innovation, and international cooperation. By eliminating barriers, harmonizing regulations, and strengthening supply chain resilience, these pacts have enhanced the freedom and prosperity of all Canadians.
Looking ahead, Canada’s ambitious trade agenda will be crucial in navigating an increasingly complex global landscape. As the world’s center of economic gravity shifts towards the Indo-Pacific, Canada must deepen its engagement and partnerships in this vital region. Trade will be a vital tool for advancing our interests, projecting our values, and building a better future for all.
Through open, rules-based trade, Canada will continue to create good jobs, support sustainable development, and give Canadians more choices and greater purchasing power. Trade agreements empower Canadian businesses to compete globally, while giving consumers access to a wider array of high-quality, affordable products. Most importantly, they strengthen Canada’s position as an influential, principled actor on the world stage – advancing the freedom and prosperity that Canadians cherish.
