Stephen Harper has campaigned on free trade, but so far he’s been better at opening big talks than closing big deals. Now crunch time is coming.
In a few weeks, Mr. Harper faces yet another self-imposed deadline to strike a trade deal with the European Union. He’s missed target dates so many times before – all while promising a deal and touting its importance – that he’s painted himself into a corner.
There’s heavy pressure on Canadian negotiators to have a deal to sign when Mr. Harper goes to Europe for the G8 summit in mid-June; the Europeans, too, want to move on to talks with the United States. An EU agreement would be a major trade step for Canada. It would also be revealing for other potential trade-agreement partners: A deal would give them a map of Canada’s sensitive areas on trade. No deal would suggest Mr. Harper can’t commit.
It’s a mistake to believe Mr. Harper’s image as a free-trade zealot making tough domestic political decisions to bring down trade barriers. His record so far suggests he’s not.
He campaigned on deals with the EU and India and entered talks with Japan and the 16-nation Trans-Pacific Partnership. But so far, under Mr. Harper, Canada has entered several bilateral trade deals with relatively small trading partners, and they haven’t required any politically sensitive concessions.
His trip to Cali, Colombia, last week for the Pacific Alliance summit was an example: Mr. Harper’s courting of a new trade bloc ended with cold feet.
The Prime Minister went to Cali because the alliance – Mexico, Colombia, Chile, Peru and soon Costa Rica – is a fast-moving bloc of emerging markets, dropping tariffs, linking stock exchanges, cutting visa requirements and looking to make deals in Asia. He left saying it was “too early” for Canada to join.
Behind the scenes, though, Mr. Harper and his delegation showed a lot of interest, according to sources, making pointed inquiries about what it would take to join.
One problem was that the alliance is getting rid of requirements for visitor visas between members. That’s hard for Canada, which uses visas to screen out people who might apply for refugee status, and the Canadians told alliance-country officials that dropping visa screening might raise U.S. security concerns. The alliance countries said dropping visas was the goal but, according to one source, left a little room that might have allowed a compromise.
But there was no room to save politically sensitive protections like supply management for dairy and poultry. That system, which combines very high tariffs on imports with quotas and fixed prices for domestic producers, keeps Canadian prices for milk and poultry high. It’s also extremely political, because dairy farmers matter to political parties seeking voter support in rural ridings, especially in Quebec and Ontario.
Last Wednesday, Pacific Alliance trade ministers confirmed the bloc would reduce tariffs on merchandise – with no exceptions. Mr. Harper’s aides kept asking if exceptions could be carved out. The answer was no. Mr. Harper, according to a source, told Pacific Alliance leaders that Canada wasn’t ready to drop protections for supply-managed products and change the entire economic structure of the sector.
Of course, the Pacific Alliance didn’t offer Mr. Harper an immediate, clear gain to put against that concession. Canada already has trade agreements with all four current members. The alliance’s emerging-market dynamism may be alluring to free traders looking to the future, but not an instant political prize.
Tactically, refusing to scrap supply management for the Pacific Alliance means dairy can still be a bargaining chip in other talks. The EU is seeking a bigger dairy quota. In the Trans-Pacific Partnership talks, which include the U.S. and countries from Latin America and Asia, Canada is under pressure to scrap supply management, but it can seek its own gains in return.
That is, if those other countries think it’s worthwhile to negotiate a prize from Canada. And that, and Mr. Harper’s political image as free trader, depends on closing a big deal.