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

February 10, 2022

As Canada frames its new Indo-Pacific strategy, a Free Trade Agreement (FTA) with the Association of Southeast Asian Nations (ASEAN) should be at its centre, according to a new report from the C.D. Howe Institute.

In “Canada’s Pivot to the Indo-Pacific: The Strategic Importance of Prioritizing a Trade Agreement with ASEAN,” Dan Ciuriak, Lucy Ciuriak, Ali Dadkhah, Yingkang Lyu and Yun Wen outline the benefits of a renewed economic engagement in the region, which could bring significant income gains for Canada and set the stage for broader entry into the region’s markets.

“After securing new or updated trade agreements that cover North America, Europe and many of Canada’s Pacific Rim partners, Ottawa must look to the global South as a key component of our trade strategy moving forward,” notes lead author and C.D. Howe Fellow-in-Residence Dan Ciuriak.

The study details the considerable economic opportunities to be gained by the Canadian economy through a new agreement with ASEAN. While Canada has a history of under-trading in the region, in the scenarios modelled, Canada would reap the benefits and could see potential bilateral trade increases of up to $4.3 billion, real GDP gains of 0.03 percent, income gains of $2.1 billion (the equivalent of up to $200 per year for a family of four), as well as net job creation on the order of 2-3 thousand.

Beyond these immediately quantifiable gains lies an important strategic potential for Canada. “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 deep integration into Asian supply chains,” the study’s authors explain.

The ASEAN political and economic union is the “linchpin of any comprehensive political and economic regional strategy,” say the authors, and a new Canadian FTA would increase the variety of products in our markets and help increase the diversification of Canadian trade.

A new deal and renewed commitment to the area’s vital economic bloc would also open up access to other strategic trade opportunities, including placing Canada in a position to potentially join the Regional Comprehensive Economic Partnership (RCEP), the largest regional trade agreement in the world, whose members include China, and which has an open door for India. Canadian attainment of RCEP membership would generate an estimated increase in bilateral trade with partners of about $30.5 billion.