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Jeffrey Simpson

Jeffrey Simpson

JEFFREY SIMPSON

The winds don’t favour supply management Add to ...

There’s more than Keystone XL before the U.S. Congress to give Prime Minister Stephen Harper’s government a headache.

Congressional battle lines are forming around a forthcoming vote on renewing a provision called Trade Promotion Authority.

TPA commits Congress to holding a speedy up-or-down vote on a trade agreement negotiated by the president – in this case, the Trans-Pacific Partnership, involving 12 countries, including Canada. Without TPA, such trade deals would likely founder in the dysfunctional Congress, as U.S. legislators demanded this or that amendment.

President Barack Obama’s administration, having lollygagged on the file for a long time, is now pushing hard for TPA and for a completion of the TPP negotiations early this year. Mr. Obama appealed for congressional approval for TPA in his State of the Union address this week.

With majorities in the House and Senate, the Republicans are largely in favour. They don’t like Mr. Obama, of course, but they are generally far more open to free trade than Democrats. Support would allow Republicans to show the U.S. electorate that they are not relentlessly obstructionist. For Mr. Obama, a TPA deal would form part of his legacy.

If the President can cobble together majorities, largely with Republican support, chances for a successful negotiation and subsequent U.S. ratification will increase. And if the TPP looks like succeeding, Canada will have had to make concessions on the highly protectionist supply-managed systems for dairy, eggs and poultry.

Canada’s supply-management system has emerged as one of the biggest obstacles to a comprehensive deal. Even the Japanese have agreed to concessions on three of five agricultural products they have habitually protected, according to sources familiar with the negotiations. Canada, as usual, has been hanging tough to defend its supply-managed farmers, who operate behind massively high tariff walls and severe restrictions on imports.

It would be difficult for the Harper government to make serious concessions on supply management at any time, so powerful are the supply-management lobbies. It would be harder still in an election year, counting on the support of farmers, who tend to vote Conservative, at least outside Quebec.

No concessions by Canada, or measly ones, might leave the country outside any final deal. The door would be open for Canada to join TPP later, but only if it amended supply management. Sooner or later, something has to give – how much and when are the questions, some of which might be hinted at next week, when TPP negotiators reconvene.

Quebec dairy farmers are the hardest of the hard-liners in the supply-management world, but their Ontario counterparts aren’t far behind. Some know that supply management’s days are numbered, but most have built their careers, retirements and futures around defending the status quo, or limiting changes to it.

They have always feared a liberalizing trade deal and have threatened political havoc on any government that does not vigorously defend their system. Thus far, they have succeeded brilliantly.

In the recent Canada-European Union deal, they pushed the government into largely defending the status quo, except for an increase in cheese quotas from the EU to the Canadian market. Even so, they got the government to promise to compensate cheesemakers for any injury they might suffer.

For the dairy farmers (and others in the supply-management racket), TPP is a threat because the Americans, New Zealanders and Australians would be better able to sell their products here, whereas Canada’s dairy farmers are set up only to serve the domestic markets. Exports have been beyond their mental horizon, and their business models are therefore not organized around sending product elsewhere.

The Harper government has invested politically in securing trade deals, as with the EU, South Korea and some Latin American countries. It has touted the TPP as a job-creator and trendsetter, because the deal extends far beyond merchandise trade. TPP, which includes Japan, Vietnam and Malaysia, is a central part of the government’s trade push toward Asia.

Under these circumstances, staying out of a successful TPP because of supply management would be the height of trade folly, flying in the face of the government’s own trade policy. Whether the government can escape the negotiations with only minor concessions, which it would dearly like, is to some extent up to other TPP players – notably the Americans, who have never liked supply management.

If Congress passes TPA, the American push to complete TPP (which it sees as a geopolitical response in Asia to Chinese power) will intensify. An American push will put the squeeze on Canada’s supply-managed farmers and the government that has defended them.

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