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

Abstract

Canadian business and political leaders have long looked to strengthen bilateral economic relations with the ASEAN Economic Community based on its openness to trade, its dynamism and its integration into Asian production chains. Given the shift from an Asia-Pacific to an Indo-Pacific framing for engagement with Asia being made by Canada and by many of its major trading partners, ASEAN’s strategic position at the heart of the Indo-Pacific makes it all the more important in trade policy considerations. Accordingly, it is timely to revisit the merits of a Canada-ASEAN trade agreement both in direct economic terms and as part of Canada’s broader strategy as it seeks to frame its own pivot to the Indo-Pacific.

Canada’s commercial engagement with ASEAN grew substantially over the past two decades as the ASEAN economies sustained strong growth. Canada maintained its overall 0.5 percent share of ASEAN’s imports over this period, which translated into Canada accounting for $6.8 billion of the $1.326 trillion increase in ASEAN’s overall imports between 2001 and 2019.

While Canada appears to have held its own in the growing ASEAN market over the past two decades, there is an open question as to whether Canada’s performance was in line with reasonable expectations concerning its trade with ASEAN. To calibrate expectations, we examine Canada’s exports to ASEAN through a gravity model framework.

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

JEL Classification: F13; F23; F15