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Canada Should Sign a Free Trade Deal with Japan Too

11/14/2013 05:39 EST | Updated 01/23/2014 06:58 EST

The Canadian government seems to be on a roll lately having concluded a trade agreement in principle with the European Union and signing a new deal with Honduras. But Canada's trade initiative to diversify beyond the NAFTA has only just begun. Missing in particular is a trade agreement in Asia-Pacific where Canada has a few irons in the fire including the bilateral Economic Partnership Agreement (EPA) with Japan and the Trans Pacific Partnership or TPP.

While the TPP is the most prominent, the EPA with Japan offers the best opportunity to conclude and implement a comprehensive trade agreement given majority governments in both countries - an important step in generating more jobs and increasing prosperity for Canadians.

This week, the fourth round of Canada-Japan EPA talks will be held in Ottawa. While the EPA negotiations began last November, there's an opportunity to pick up the pace. Now that the CETA is entering an estimated two year ratification process among the 28 countries of the EU, Canada and Japan should elevate and accelerate their negotiations.

When concluded, the Canada-Japan EPA would create a year-on-year multi-billion-dollar gain for the Canadian economy. A joint study by Canada and Japan has estimated the annual boost to Canada's gross domestic product from an EPA would be between $3.9 billion and $9.3 billion, while the gains for Japan's economy are estimated to be between $4.5 billion and $5.1 billion.

Such impressive economic growth is exactly what Canada needs as it continues to recover from the effects of the global economic challenges of the past few years. That's why Canada must make it a top priority to complete the Canada-Japan EPA in 2014.

Given the size of the Canada-Japan bilateral trade relationship -- Japan was Canada's fourth-largest trading partner in 2012, with bilateral merchandise trade of over $21 billion -- there's a clear vision towards a deeper and expanded relationship across a broad spectrum of sectors. If Canadian negotiators could reach an agreement in principal with the European Union on a much larger and more complicated Canada-EU free trade deal, there's no reason they can't do the same with Japan, particularly given the largely complementary and harmonious economic relationship between the two countries.

As the association representing Japanese automakers in Canada, we know what free trade deals can do to enhance trade and investment. Among other things, previous trade agreements have made the North American auto sector highly integrated. Several Japanese automakers have established assembly plants in Canada since the mid-1980's and for the past 20 years have exported more vehicles from Canada than have been imported from Japan, the U.S. and Mexico combined.

Eliminating import tariffs is a key part of any free trade deal. Currently, Canada imposes a 6.1 per cent tariff on all imported vehicles from Japan. That not only makes some Japanese vehicles more expensive than they should be, but also limits the potential for importing price-sensitive fuel-efficient entry-level vehicles or low-volume, high-tech vehicles Canadians want to buy. This issue will intensify as automakers in EU countries start to benefit from the elimination of tariffs under the Canada-EU agreement - unless Canada and Japan reach a similar agreement to level the playing field for Japanese automakers who have collectively invested more than $9 billion in Canada, employ directly and indirectly tens of thousands of Canadians in high-paid, high-skill jobs and who, since 1993, have been net exporters of nearly three million vehicles.

As a comprehensive free trade negotiation, however, a Canada-Japan EPA would go far beyond just tariffs and address non-tariff trade barriers, technical standards, intellectual property rights and other issues, as well as encourage cross-border investment that helps create even more jobs and business opportunities for Canadians.

Now is the time to make the final push to complete the negotiations so Canadians across the country can begin enjoying the many benefits such a deal will bring.

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