Canada claims to be a Pacific Ocean country. We have a front seat on the Pacific Rim. The Harper government trumpets its Pacific Gateway initiative. We say we’re a natural partner for Asian countries and take transpacific trade seriously. Yet, Canada is sitting out one of the biggest games in town, the Trans-Pacific Partnership trade talks.
Some heavy hitters are in these negotiations, starting with the United States but also Australia, Chile, New Zealand, Singapore, Indonesia, Vietnam and Peru. Malaysia is now seeking to join. While China and Japan are not participating, this is still a pretty impressive club.
Yet, so far, Canada has sat on the sidelines. That’s because the price of admission to the talks is to put agriculture on the table – and that’s a card Canada doesn’t want to play.
A number of participants, notably Australia and New Zealand, are cool to letting Canada join unless we agree to negotiate foreign access to our dairy and poultry sectors. Both Australia and New Zealand opened up their own dairy and poultry markets years ago. But Canada still maintains a closed system called supply management that prohibits all but an insignificant volume of foreign dairy, egg and poultry imports.
If this were based on sound trade policy or economic thinking, it might be defensible. But it’s really based on pure domestic politics and fear of the electoral price that would be exacted by doing anything lowering the protectionist wall around the dairy, egg and poultry industries that – as circumstances have it – are largely concentrated in rural Ontario and Quebec.
Canada maintains this supply management regime – sanctioned in the last set of trade negotiations that created the World Trade Organization – by prohibitively high duties, some approaching 300 per cent. By shielding the market from foreign competition, marketing boards control domestic supply and keep the farm-gate prices for these products high.
So politically sacred is this system that a unanimous House of Commons resolution in 2005 instructed our negotiators at the WTO Doha round trade talks to refuse any outcome that made the slightest change to these high tariff walls.
This all-party resolution means that, rather than influencing the course of the Doha round talks on agriculture, Canadian representatives are stuck with a non-negotiable defensive position, fighting off every attempt to whittle away Canada’s agricultural tariff walls. Unfortunately, this has tended to isolate Canada – virtually the last holdout for maintaining supply management – and to weaken our influence in the other areas in the WTO negotiations.
Meantime, well-respected opinion says supply management is a costly and outmoded protectionist system that should have been consigned to the trade dustbin years ago. Among those highly critical of Canadian policy are the Conference Board of Canada, the C.D. Howe Institute and the Montreal Economic Institute. Even agriculture groups such as the Canadian Agri-Food Trade Alliance, made up of both domestic producers and exporters, have criticized Ottawa for its unbending support of supply management and for sacrificing Canada’s agri-food export interests in the bargain.
Matched against reasoned opinion are the powerful dairy, poultry and egg producer lobby groups, whose valuable quotas would be affected if lower priced imports were allowed in the door. So well-organized are they that Canadian contingents at Doha round ministerial meetings are dominated by these farmer representatives who make sure nothing agreed to by Canada in any way limits the extraordinary tariff protection they enjoy.
One must wonder about the wisdom of so narrow a trade policy paradigm. It’s not unique, of course, to the supply managed sector. Canada pursues other policies that appear equally limited and often quixotic – such as defending our asbestos exports and our annual seal hunt – where arguably the damage done to Canada’s international reputation far outweighs the economic interests at stake.
This isn’t a crusade against all aspects of supply managed industries or the need to limit the exigencies of price volatility in these sectors. Nor is this an attack on the virtues of the family farm. Rather, it’s an argument for Canada’s negotiating position at the WTO and in a range of other international forums, including Canadian entry to the Trans-Pacific Partnership, to not be held hostage to narrow self-interests and internal lobbying pressures.
To play a leading role on the international stage, at the WTO and in Asia-Pacific trade, Canada’s position can’t be hamstrung by retrograde policies that are out of step with the rest of the world and inconsistent with Canada’s broader national interests.
Lawrence Herman, a former Canadian diplomat, practises international trade law at Cassels Brock & Blackwell LLP in Toronto.
