BUILDING CANADA’S COMMERCIAL POTENTIAL WITH SOUTHEAST ASIA:

ALIGNING DFATD’S ASEAN AGENDA WITH CANADA’S NEXT GENERATION PRIORITY MARKETS

 

INTRODUCTION

This research proposal is situated within the political science literature’s growing focus on Asia Pacific multilateralism. Fuelled by a generation of rapid industrialization and economic integration, the region’s growing economic strength raises many questions about its implications on trading partners, the regional community, and even the future of global political-economic alignments. In response, several of Canada’s peer economies, including the United States, Australia and Great Britain, have accordingly identified and included many emerging economies from this region on their priority list of markets ‘to watch’ and engage with. While the literature has examined high potential economies in the context of economic liberalization and financial globalization, it overlooks the necessary policy considerations for strategizing an effective commercial potential agenda with a candidate next-generation country.

 

My research attempts to address this gap in the literature by focusing on Canada’s commercial relations with select emerging economies within Southeast Asia, evaluating it on the basis of policy compatibility while taking into account industrial structure, political risks, and policy dimensions. This research assesses three necessary aspects of DFATD’s agenda for building commercial potential with ASEAN: country-specific regional-political factors; aligning Canada’s recent prioritizations and reinventing Canada’s future relevance in the region. My project will be a relevant contribution to the policy literature on Canada’s commercial relationship with ASEAN because it focuses on the policy accessibility of individual countries and the extent to which the Canadian government can have a meaningful impact on shaping another country’s policy affecting Canadian businesses.

BACKGROUND

In a preliminary analysis report on Canada’s “Next Gen” priority market report (2012), the Conference Board of Canada highlighted the need to identify a fresh list of countries with the greatest potential for Canadian companies, especially for the medium to long term. The report emphasized the importance of realizing opportunities beyond Canada’s traditional commercial relationship with the United States and other developed economies, in addition to the obvious large, developing economies of Brazil, China, and India. The analysis narrowed down several “sweet spot” nations on a matrix that proxy for both Canadian business potential (two-way trade and two-way investment) and country growth potential. Within the quadrants of countries identified as worthwhile considering based on its high growth potential and unexplored Canadian business potential, several of them are situated within Southeast Asia and comprise a part of the ASEAN regional trading bloc: Indonesia, Thailand, Malaysia, Philippines, and Vietnam.

 

Realizing the centrality of ASEAN in Asia’s Regional Trade Architecture, DFATD has recently taken steps to re-energize its engagement with the organization. In 2009, Canada appointed its first Ambassador to ASEAN, and, in 2010, Canada acceded to ASEAN’s peace treaty, the Treaty of Amity and Cooperation (TAC). Canada and ASEAN have since adopted the Joint Declaration on ASEAN-Canada Enhanced Partnership, currently implemented through the ASEAN-Canada Plan of Action (2010-2015). Additionally, Canada is in the process of negotiating Foreign Investment Promotion and Protection (FIPAs) with Indonesia and Vietnam. Most recently, Canada concluded a tour by ASEAN Economic Ministers in which Dr Lim, Deputy Secretary-General of ASEAN, reaffirms, “Canada is a big potential market for ASEAN given its natural resources and [it] also serves as a gateway into North American market. Canadian businesses should also seize the opportunities availed under the ASEAN Economic Community” (ASEAN, 2014).

 

The rhetoric of urging Canada to seize its window of opportunity to foster trade relations with the Southeast Asian region echoes the broader concern that Canada is not doing enough to build on its mutually beneficial economic interest with Asia towards a more Asia-Competent Canada. The implications of Canada’s thin diplomatic presence with ASEAN, especially in comparison with its Asia Pacific cohorts, including Australia, United States, and New Zealand, becomes particularly significant when understood in the context of a geopolitical power shift from the West to Asia.

 

Della-Giacoma (2014) observes that Canada is lagging behind its peers in terms of diplomatic strategy and practice with ASEAN and that its absence is being noted. Likewise, Hugh Stephens (2013) warns that Canada cannot afford to ignore the association given the role ASEAN plays with trade and economic issues that are of direct interest to Canada, notably the Regional Cooperative Economic Partnership. Despite DFATD’s recent prioritization with ASEAN, Canada’s trailing political and diplomatic engagement with the association continue to underlie lingering doubts about the coherence and staying power of Ottawa’s plan for the region. This raises questions about the efficacy of DFATD’s agenda for the association becomes singularly poignant. Will DFATD’s agenda be effective at building Canada’s commercial potential with Southeast Asia? And to this end, what are some of the specific regional-political factors that need to be considered, do recent prioritizations align with those criteria, and, perhaps most importantly, given that “next-gen” markets necessitate long term calculations, how should Canada prepare itself for the long run in order to reinvent its relevance in the region. 

 

RESEARCH DESIGN

 

This proposed research serves to examine the relationship between DFATD’s recent prioritization with ASEAN and Canada’s commercial potential with next-generation priority markets in Southeast Asia. By 2012, Canada-ASEAN relations have seen significant advancement on several critical statistical measures over a five-year period. As a group, ASEAN represents Canada’s 7th largest trading partner with bilateral trade increasing more than 19% over the last five years (2012 figures) and stock of known ASEAN foreign direct investment in Canada grew over two-fold in the five year period ending in 2012 (DFATD, 2014). The region is also the source of over 14% of Canada’s permanent residents in 2012, which is an increase of 35% from five years before (DFATD, 2014). That such developments coincided with Canada’s recent prioritization with ASEAN might serve as an indication of the region’s status as an important commercial ally and a priority market for Canada. To examine the factors that have led to this correlation, my proposed research will be broadly divided into three sections examining: the criteria for building commercial potential, the alignment of DFATD’s ASEAN agenda, and Canada’s future prospects and regional approaches in the region.

 

The first section stems from a regional perspective of ASEAN and considers the criteria for building commercial potential with select emerging economies in Southeast Asia. It attempts to build upon the preliminary report by the Conference Board of Canada insofar as it is solely focused on Southeast Asian member states from their list of identified high growth potential candidate economies. Currently, only Indonesia has been recognized as a “sweet spot” next-generation priority market within Southeast Asia (Conference Board of Canada, 2012). However, since the purpose of this research is focused on building Canada’s commercial potential, we will expand the “sweet spot” criteria to include countries that not only have high growth potential but, more significantly, represents unexplored Canadian business potential or ‘weak Canadian linkages’. This becomes an important criterion when planning for the medium to longer-term that is inherent for any ‘next-gen’ analysis. This inclusion expands our matrix of countries to form a “second sweet spot”, comprising of Thailand, Malaysia, Philippines and Vietnam. Correspondingly, this segment also pays particular attention to the contributing factors behind a candidate’s low score on the Canadian business potential index. We conclude this segment with a consideration of the policy measures within each of this specific country, such as the ease of doing business, most favoured nation status, and foreign investment promotion and protection agreements.

 

The second segment of this research focuses on Canada’s relationship with the region and how its agenda aligns with the criteria explored in the first section. This portion evaluates the current status of several bilateral and regional trade agreements, both existing and those currently under negotiations, in the context of a larger strategy by Ottawa to court longer-term gains. These include Canada’s Global Commerce Strategy (2007), Joint Declaration on Trade and Investment with ASEAN (2009), and the ASEAN Commercial Network (2009). We will assess how these work plans cater to “sweet spot markets” considerations and, in turn, address the issue of unexplored Canadian business potential.

 

The final section of this research takes into account both ASEAN’s and Canada’s interest and considers existing gaps in the DFATD’s policy framework for building commercial potential with next-generation Southeast Asian economies. Crucial to this segment’s analysis will be a discussion on the feasibility of Canada taking a regional approach via the ASEAN trading bloc. By extension, this necessitates an exploration into Canada’s future prospect for navigating the overlapping “noodle bowl” of FTA and economic forums in the region. These include: the ASEAN led ASEAN+3 (APT), ASEAN Economic Community (AEC), and Regional Comprehensive Economic Partnership (RCEP); the U.S. oriented Transpacific Partnership (TPP), and the APEC initiative on Free Trade Area of the Asia Pacific (FTAAP).

 

This research project seeks to explore the effectiveness of DFATD’s ASEAN agenda at building Canada’s commercial potential with next-generation priority markets in Southeast Asia. This proposed research provides a perspective on an area that has been overlooked by the literature – Canada’s policy compatibility with emerging economies that currently constitute unexplored business potential. Nevertheless, the extent to which the Canadian government can have a meaningful impact on shaping another country’s policy affecting Canadian businesses continues to be the subject of interest for foreign policymakers. It is a discussion that entails Canada to consider how it should prepare itself for the future in order to reinvent its relevance with ASEAN.

 

 

REFERENCES

 

ASEAN. 2014. “ASEAN Economic Ministers Conclude Roadshow in Canada.” ASEAN Secretariat News, posted June 10.

http://www.asean.org/news/asean-secretariat-news/item/asean-economic-ministers-conclude-roadshow-in-canada

 

Calder, Kent E., and Francis Fukuyama. 2008. East Asian Multilateralism: Prospects for Regional Stability. Baltimore: John Hopkins University Press.

 

Della-Giacoma, Jim. 2014. “Engaging ASEAN: What Next for Canada?” The Asia Pacific Foundation of Canada, published March 19.

http://www.asiapacific.ca/canada-asia-agenda/engaging-asean-what-next-canada

 

Department of Foreign Affairs, Trade and Development Canada. 2014. “Canada-ASEAN Relations.” March 7.

http://www.international.gc.ca/asean/index2.aspx?lang=eng

 

Kahler, Miles. “Multilateralism with Small and Large Numbers.” International Organization, 46, 3 (Summer 1992), 681.

 

Potter, Evan. 2004. “Branding Canada: The Renaissance of Canada’s Commercial Diplomacy” International Studies Perspective (February): 5-1, pp 55-60.

 

Stephens, Hugh. 2013. “Canada Can’t Afford to Ignore ASEAN” The Asia Pacific Foundation of Canada, published March 18.

http://www.asiapacific.ca/editorials/canada-asia-viewpoints/editorials/canada-cant-afford-ignore-asean

 

Woo, Yuen Pau. 2007. “Canada-ASEAN Economic Relations: Prognosis and Prospects” The Asia Pacific Foundation of Canada, posted February 22.

http://www.asiapacific.ca/sites/default/files/archived_pdf/speeches/Yuen_Pau_WOO_22feb07.pdf

 

Wu, Daniel and Marc Mealy. 2012. “Asia’s Competing Visions” The Diplomat, posted June 12.

http://thediplomat.com/2012/06/asias-competing-visions/

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Daniel W. Lin