Exploring some of the potential risks of the trans-pacific partnership

by | March 29, 2016 11:41 am

by John Melia and Katherine Humphries
Last October, 12 countries—Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam—concluded negotiations with respect to the draft text of the Trans-Pacific Partnership[1] (TPP). In February, each of these countries signed the legally verified text of the agreement. TPP is generally considered to be the most comprehensive regional trade agreement presently in existence. When it is eventually implemented into Canadian law and ratified, it may present significant benefits for Canada’s construction sector. Stakeholders, however, should be cognizant of some potential risks.

Upon coming into force, TPP will affect the conditions of competition for both:

• Canadian exporters of construction goods and services to the relevant foreign markets; and
• importers in Canada of construction goods and services from the relevant foreign markets.

For example, the partnership eliminates almost all existing customs duties on goods imported into Canada from other TPP countries (and vice versa). This ‘tariff elimination’ encompasses customs duties that currently apply to metal-based goods, wood products, and articles of concrete, cement, and aggregate—all materials commonly used in the construction industry. Considering that virtually all these tariffs will be eliminated immediately when TPP comes into force, stakeholders should now begin to carefully consider the potential impacts—including the potential opportunities and risks—that may arise as a result.

For example, how will the manufacturing quality and standards of the construction materials imported into Canada from TPP countries be regulated, both in the exporting countries and here? Construction and design professionals tasked with identifying and sourcing competitive supplies of appropriate building materials for use in construction projects must be aware of the potential risks created by new trade flows from these countries. Care should be taken to ensure goods imported from new, competitive sources of supply in TPP countries for use in the Canadian construction market meet all the applicable Canadian quality standards and requirements. Working with local associations and lobbying to ensure quality standards are enforced will help to address such risks. Developing good relationships with reputable suppliers in TPP countries will also likely provide a greater level of comfort.

Another aspect of TPP that could potentially pose some risk to the Canadian construction industry concerns the lateral movement of foreign-trained workers. The agreement requires the parties to work on implementing ‘mutual recognition agreements,’ which are binding agreements between respective TPP countries that provide for the reciprocal recognition of professional and labour qualifications based on the results of conformity assessments conducted against the appropriate technical regulations or standards in various sectors. This includes the construction sector.

It is anticipated the implementation of mutual recognition agreements will add another layer of regulatory oversight in TPP countries, including Canada, whereby the relevant regulatory bodies will be tasked with implementing measures and procedures for the purpose of formally recognizing professional and labour qualifications through registration and licensing programs.

While the Trans-Pacific Partnership provides some guidance with respect to how the mutual recognition of foreign-trained workers should be regulated, the process to be implemented for the purposes of doing so has been left in the hands of each respective country. Given that professional standards and licensing practices vary between the TPP countries, now is the time for local stakeholders to consult with the relevant associations and regulatory bodies to clarify the regulations and push for streamlined or more stringent standards, as necessary to meet the new market realities. Doing so would not only ensure that those working in Canada are qualified to the appropriate standards, but it would also promote a reputation of high standards for Canadian workers seeking to compete abroad.

Similarly, TPP also outlines Canada’s commitments relating to the temporary entry of business persons from other partner countries. In particular, it confirms Canada shall grant entry (on a temporary basis) and provide a work permit or work authorization for several categories of business persons, including architects and engineers, construction inspectors, supervisors, drafters, surveyors and a host of other construction trades. While entry will generally be permitted without requiring labour certification tests or similar procedures as a condition for temporary entry, it should be noted a grant of entry to a business person does not exempt him or her from meeting any applicable licensing or other requirements, including mandatory codes of conduct.

Although these provisions are meant to be reciprocal—meaning that Canadians will, for the most part, also benefit from temporary entry into other TPP countries on a similar basis—we can anticipate there are likely to be significant implications for the Canadian construction industry and labour market. Opportunities for the larger-scale, international construction companies are more apparent, and the smaller-scale domestic construction companies may have to re-evaluate the best way in which to compete in the new TPP regime. For instance, we may see smaller companies merging in order to remain competitive—that is, through economies of scale. Companies who focus on providing value-added services and who target niche and specialized areas might expect a milder transition, however.

Overall, the Canadian construction sector is well-positioned to compete in the Canadian market and the relevant export markets under the new TPP regime. This is because the potential risks posed by the influx of price-based competition expected to flow from the TPP can be offset by the quality-based competition offered by Canadian companies and professionals who operate to high standards and regulatory requirements. Industry stakeholders should evaluate their position in the new landscape and work with their local associations and regulators to advocate for standards that will promote the Canadian construction industry in the domestic market, as well as in new market opportunities abroad.

John Melia is a partner at the law firm Borden Ladner Gervais LLP (BLG) and is the head of the Construction Group at its Ottawa office. Melia specializes in commercial litigation, including construction-related matters in particular. He can be reached via e-mail at jmelia@blg.com[2].

 

Katherine Humphries is an associate at BLG. She specializes in commercial litigation, with a focus on construction law. Humphries can be reached at khumphries@blg.com[3].

Source URL: https://www.constructioncanada.net/exploring-some-of-the-potential-risks-of-the-trans-pacific-partnership/

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