Canada’s Pivot to the Indo-Pacific: The Strategic Importance of Prioritizing a Trade Agreement with ASEAN

25 Pages Posted: 3 Feb 2022 Last revised: 11 Feb 2022

See all articles by Dan Ciuriak

Dan Ciuriak

Ciuriak Consulting Inc.; Centre for International Governance Innovation (CIGI); C.D. Howe Institute; Asia Pacific Foundation of Canada; BKP Development Research & Consulting GmbH

Lucy Ciuriak

Independent

Ali Dadkhah

Ciuriak Consulting Inc.; Infinity Law

Yingkang Lyu

Infinite-Sum Modeling Inc.; China Agricultural University - College of Economics and Management

Yun Wen

Infinite-Sum Modeling Inc.; Simon Fraser University (SFU)

Date Written: February 10, 2022

Abstract

With new or updated trade agreements in place covering trade in North America, with Europe, and with many of its major trading partners in the Pacific Rim, Canada’s trade diversification strategy must increasingly look to the Global South. In the high-growth developing world, ASEAN stands out. Like Canada, ASEAN features a trade-dependent economy with similar interests in maintaining an open, rules-based trading system. An ASEAN-Canada free trade agreement (ACFTA) has been long under consideration and, on 16 November 2021, the parties agreed to pursue negotiations towards one. This study updates the business case for such an agreement. First, it draws on gravity modelling techniques to establish that Canada is under-trading in the ASEAN market. Second, it provides an updated quantitative perspective on the trade and economic implications of an ASEAN-Canada Free Trade Agreement (ACFTA) using a dynamic computable general equilibrium model. The level of ambition is calibrated to be consistent with the RCEP, ASEAN’s most ambitious and most comprehensive trade agreement to date. Third, it considers the advantages of Canada becoming an ASEAN Plus One partner in terms of strategically positioning Canada to join the RCEP, which promises direct gains that are an order of magnitude higher than an ACFTA alone, facilitates full participation in the dynamic production chains that have long characterized Asian regional economy and that will be further advantaged by the accommodating rules of origin in the RCEP, and provides a strategic hedge for preferential access to both the Chinese market and potentially the Indian market.

Keywords: Canada, ASEAN, FTA, CGE, gravity model, RCEP accession

JEL Classification: F13, F15

Suggested Citation

Ciuriak, Dan and Ciuriak, Lucy and Dadkhah, Ali and Lyu, Yingkang and Wen, Yun, Canada’s Pivot to the Indo-Pacific: The Strategic Importance of Prioritizing a Trade Agreement with ASEAN (February 10, 2022). Available at SSRN: https://ssrn.com/abstract=4007464 or http://dx.doi.org/10.2139/ssrn.4007464

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

Asia Pacific Foundation of Canada ( email )

Canada

HOME PAGE: http://ciuriakconsulting.com/

BKP Development Research & Consulting GmbH ( email )

Romanstrasse 74
München, 80639
Germany

Lucy Ciuriak

Independent ( email )

Ali Dadkhah

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

Infinity Law ( email )

200-931 Fort St.
Victoria, V8V 3K3
Canada

Yingkang Lyu

Infinite-Sum Modeling Inc. ( email )

16167 Glenbrooks Place
surrey, BC - British Columbia v4n1t3
Canada

China Agricultural University - College of Economics and Management ( email )

Beijing
China

Yun Wen

Infinite-Sum Modeling Inc. ( email )

#1, 10318 Whalley Blvd
surrey, BC - British Columbia V3T4H4
Canada

Simon Fraser University (SFU) ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

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