Expanding free trade in Southeast Asia

  • March 26, 2021

Canada is and always has been a trading nation. According to Global Affairs Canada in 2018 we had “14 free trade agreements in force with 51 countries, totalling a combined gross domestic product of US$52 trillion.”

Canada is contemplating a comprehensive economic partnership agreement with Indonesia. In their submission to Global Affairs Canada, the Canadian Bar Association’s International Law Section, Competition Law and Foreign Investment Review Section and Canadian Corporate Counsel Association (the Sections) say the “shifting grounds” of the international trade and investment landscape have a serious impact on our country. That’s why our approach to an agreement with Indonesia “should consider how it can advantage Canadians and Canadian business” when viewed against our existing agreements with other countries, particularly those in Southeast Asia.

In general terms, the Sections support negotiating a bilateral trade agreement with Indonesia to “strengthen its trade and investment ties to align with an export diversification strategy.” We have enjoyed long-standing diplomatic relations with Indonesia and have collaborated in many areas over the years including human rights and anti-terrorism capacity building. And, another important reason, Indonesia is located in an economically dynamic part of the world.

“Canada’s trade and investment in Southeast Asia is expanding quickly,” the Sections note, “not only in volume, but across many sectors, including oil and gas, mining, high tech, telecommunications, agri-food, financial services, aviation and consumer goods. Yet, Canada has few comprehensive economic agreements in Southeast Asia (the CPTPP and the Canada–South Korea Free Trade Agreement are notable exceptions),” the submission reads.

Indonesia is not only the second-largest destination for Canadian direct investment in Southeast Asia, but it also boasts the region’s largest economy. Among the G20 countries it stands out for its growth potential.

The Sections believe Canada should use the opportunity of trade negotiations with Indonesia to review its model Free Trade Agreement. “Investment provisions and dispute settlement mechanisms – namely modifications to the International Centre for Settlement of Investment Disputes mechanism – merit careful attention,” they add.

Other elements that could benefit from a review include excessive luxury or import taxes on alcohol and household goods, import restrictions on certain products, bureaucratic requirements that prevent foreign participation in the oil and gas and electricity projects, as well as ongoing concerns related to transparency and corruption. The CBA also recommends adopting a series of measures aimed at promoting fair competition and consumer protection, administered “with detailed commitments to adhere to the principles of procedural fairness, non-discrimination and transparency.”

In addition, since foreign companies benefit from the Canadian environment of good governance and the rule of law, it’s important to ensure “Canadian companies are afforded similar protections when doing business abroad,” the Sections write.

More than just trade

Trade agreements facilitate the flow of goods and people, of course, but they can also be used to share best practices and encourage positive change for the populations of every country involved. This is no exception.

The Sections are of the view that Canada should encourage cooperation between Canadian and Indonesian corporate social responsibility experts and share information and best practices to support green growth, employee development and sustainable communities. “Any agreement should reflect the parties’ commitment to sustainable economic development,” they write.

Vigilant and constant attention will also be required to ensure a trade agreement between Canada and Indonesia results in an equitable and fair distribution of economic prosperity, the harmonization of local laws with international human rights, better protection for workers including the elimination of child labour, pay equity, proportional gender representation across professions, protecting the rights of LGBTQIA2S+ people and ensuring cultural differences do not become a casualty of aggressive trade and business practices.

The CBA encourages Canada’s negotiation team to consult again where necessary. “We believe an opportunity to give further and more targeted expert input would strengthen Canada’s positions.”