Canada Pledges Support for ‘Powerhouse’ Pacific Trade Pact

The Canadian government is reiterating its support for the Trans-Pacific Partnership deal, with Finance Minister Joe Oliver saying increased trade and investment will benefit the economy.

His comments come as TPP talks heat up amid questions over what changes the Canadian government -- with an election three months away -- is willing to make to its protected poultry and dairy sectors to secure its place in any agreement.

Canada has “come a long way from the free trade bogeyman” era of the 1980s, in the lead-up to the North American Free Trade Agreement, Oliver said according to a speech Tuesday in Vancouver.

The TPP deal involves countries representing 800 million consumers, $27 trillion in GDP and “will unlock the Pacific powerhouse” and create jobs in Canada, he said.

Canada is under pressure to open up its dairy and poultry sectors, where production is controlled through quotas and imports are restricted with high tariffs. Dismantling that system, known as supply management, may become an issue in rural districts as the governing Conservatives gear up for a closely fought fall election.

“Free trade is at the heart of the Canadian advantage,” Oliver said. “It is the heart of Canada’s future. So Canada must build on the free trade empire we have forged.”

Supply Management

Canada’s dairy, egg, chicken and turkey sectors are all regulated by supply management. Agricultural lobby groups have supported the government’s approach to talks but defended the supply management system.

If a TPP deal were to reduce or eliminate tariffs on imports that exceed current quotas, producers warn they’d be hurt or even put out of business.

“The worst case scenario is if our over-quota tariff is reduced to a point where it’s not prohibitive,” said Mike Dungate, executive director of the Chicken Farmers of Canada. The country already provides “significant access” to imported chicken, he said.

The chicken sector in the U.S. is much bigger than Canada’s and could flood the Canadian market, he said. “They could take a loss leader for a month or two and put people out of business, then reap the benefits,” he said.

Political Will

Prime Minister Stephen Harper said in June that it’s “essential” for Canada to be a part of TPP talks and would take steps to “protect our system of supply management and our farmers in other sectors.”

A spokesman for International Trade Minister Ed Fast said the government is committed to concluding a TPP agreement and that supply management has not blocked other pacts, including with the European Union.

Canada is “constructive partner at the negotiating table” and will work hard “to conclude an ambitious agreement that will create jobs and prosperity,” Rick Roth said in an e-mail. “Our government will continue to promote Canadian trade interests across all sectors of our economy, including those subject to supply management.”

The U.S. Congress last month passed enhanced trade negotiating powers -- known as fast track -- for President Barack Obama. The approval created the conditions for what the 12 countries hope will be the final negotiating session, now planned for the end of this month in Hawaii.

Obama’s new powers “unlocked the momentum” on talks, said Adam Taylor, a former adviser to Canada’s trade minister who now works as a consultant at Ensight Canada.

“In trade negotiations, you do the easy stuff first and you do that hard stuff last,” Taylor said. “The hard stuff for Canada is to decide whether the price of admission is ultimately worth it.”

Dairy Fears

Between 6 percent and 8 percent of Canada’s dairy consumption is supplied by imports coming in tariff-free, which is more generous than the U.S. and the European Union, the Dairy Farmers of Canada said in a May 2013 report to government. Essentially 100 percent of dairy sales take place on the Canadian market and export opportunities are virtually nil, according to the report.

“Any market opening therefore, even if it were reciprocal, would come at the expense of Canadian dairy farmers,” the industry group said.

More than 80 percent of Canada’s dairy farms are in Ontario and Quebec. The country is not a large dairy exporter and production is primarily to meet domestic requirements, according to the Canadian Dairy Information Centre.

Canada imported C$900 million ($707.4 million) worth of dairy products in 2014, up 20 percent from a year earlier, government data shows. And farmers exported C$281 million worth of dairy products, up from C$262 million in 2013.

Next Steps

If Canada backed away from the TPP agreement it would have “a devastating impact on agriculture and agri-food exports,” Brian Innes, president of the Ottawa-based Canadian Agri-Food Trade Alliance, said in a June 11 letter to Harper.

Loss of market access would put as much as 2 million tonnes of premium wheat exports and nearly 40 percent of pork exports to Japan at risk, he said in the letter. “It is imperative that Canada is at the table when the agreement is finalized,” Innes said.

No changes to Canadian trade policy would happen without agreement on the full TPP -- and with 12 nations participating, the potential for other issues to upend the Hawaii meeting is great.

The U.S. is still pressing Japan for greater access to its long-protected market for rice, while the U.S. is under pressure to drop tariffs on cars and light trucks. The fate of a controversial process in which corporations can sue governments for violations of the TPP also remains uncertain.

Other countries are also resisting U.S. pressure to enhance patent protection for pharmaceuticals, with Vietnam in particular wanting to avoid U.S.-proposed rules on labor rights.

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