By Lawrence Herman
Once the genie is out, it’s nigh impossible to get it back into the trade negotiations bottle.
That’s what happened in the Trans-Pacific Partnership (TPP) trade talks in Hawaii last week when Canada finally offered concessions regarding its protectionist supply management system. Unfortunately, trade ministers from the 12 negotiating countries couldn’t cement a final deal in Hawaii. They got pretty close, but some tricky issues remain unresolved beyond the dairy sector – patent rights, automotive issues, investment disputes, among others.
Australia and New Zealand are pushing for greater access to the U.S. market in the TPP talks and the U.S., in turn, is demanding concessions from Canada. Trade ministers will meet again to try to break the logjam on all remaining points, probably in Kuala Lumpur, around the time of the Asia-Pacific Economic Cooperation meeting near the end of this month. The United States requires a deal to be done by September-October to allow President Barack Obama to present it to Congress (90 days advance notice is needed) before the U.S. election period starts in earnest in January.
In Hawaii, Canada came under repeated fire from the United States, Australia and New Zealand because of the government’s refusal to make offers to reduce its 250-per-cent dairy tariffs. For 30 years, Canada has prevented all but a small amount of milk, cheese, butter and yogurt imports. The big foreign dairy exporting countries want access to Canada’s market.
At the 11th hour in Maui, Trade Minister Ed Fast, made a significant move: To keep Canada in the game, he tabled an offer to reduce Canada’s exorbitant tariffs and open up quotas for imports (called tariff-rate quotas or TRQs). This would apply to fluid milk and fluid milk equivalents with a phase-in period so that allowable duty-free dairy imports would expand over time.
The offer was made, of course, as part of the process of horse-trading, the expectation being that Canada would make major gains in other areas, for example in financial services, construction engineering, transportation, government procurement, as well as beef, pork and other agri-foods.
Canada also needs to be in the TPP to avoid being cut out of preferential access to the U.S. market and losing our North American free-trade agreement gains.
The United States, Australia and New Zealand didn’t think Canada went far enough with its offer. But, interestingly, they didn’t reject it either. Negotiations will be continuing between now and the next TPP ministerial meeting and Canada will be pressured to do better.
Leaving aside the details – which are still confidential – once an offer like this is made by a senior cabinet minister responsible for trade, the principle is established, the genie is out of the bottle, and there’s no turning back.
Having finally put dairy import quotas out there for bargaining, the precedent has been set. We’re now talking about numbers, not concepts. Canada will be negotiating dairy import volumes, tariff levels and timing.
This is a major step in the right direction for Canada, re-entering the TPP foray with an offer that appears to be reasonable, albeit one that Canada will be leaned on to improve.
During the ill-fated World Trade Organization Doha Round negotiations, all three political parties supported an ill-conceived parliamentary resolution requiring Canadian trade negotiators to keep supply management off the table.
The result was to remove an important playing card from Canada’s game and, to a degree not appreciated, seriously weakened Canada’s influence in the WTO negotiations. That weakness spilled over into the TPP talks after the Doha Round collapsed, putting Canada on the defensive.
The sacrosanctity of supply management is now gone. Not only in TPP but in future trade negotiations as well. Maybe now Canada will regain some of that lost leverage.
Critical questions loom, however. What happens if the government of Stephen Harper is defeated or comes back in a minority position after Oct. 19? Can Canada’s offer on dairy imports be withdrawn? And if it is, what will remain of Canada’s credibility in future international trade negotiations, whether in TPP or elsewhere?
Getting the genie back in the bottle will be a problem for Canada.
Lawrence Herman practices international trade law and is a senior fellow of the C.D. Howe Institute.
Published in The Globe and Mail on August 4, 2015
