Obama urged to boot Canada from trade talks or gain concessions

OTTAWA — The Globe and Mail

A group of Congress members are putting pressure on Ottawa to open the dairy and poultry markets under threat of being dropped from Trans-Pacific Partnership talks. (JOHN LEHMANN/JOHN LEHMANN/THE GLOBE AND MAIL)

A powerful group of U.S. members of Congress says the White House should cut Canada out of a major global trade deal unless it opens up its protected dairy and poultry markets.

Without more significant concessions on agriculture, Canada should be booted out of the 12-country Trans-Pacific Partnership talks, 140 Democratic and Republican members of Congress argued in a letter sent to President Barack Obama.

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“We are … troubled by Canada’s lack of ambition, which is threatening a robust outcome for U.S. farmers,” according to the letter, which also singled out Japan for harsh criticism.

The signatories include the leaders of the trade subcommittee of the powerful House Ways and Means Committee – California Republican Devin Nunes and Democrat Charles Rangel – along with dozens of normally staunch free-trade supporters.

“We urge you to pursue the TPP negotiations without any country, including Japan, Canada or others, that proves unwilling to open its market,” said the letter, sent July 31.

The warning comes as Mr. Obama faces trouble on the home front garnering support for his trade agenda, including the TPP.

The U.S. President is facing difficulty securing so-called trade promotion authority, which would give him the crucial power to negotiate trade deals without later needing to return to Congress for approval.

The congressional demands echo frustrations expressed publicly in recent months by top Obama administration officials over Canada’s refusal to put the supply management system on the table in the TPP talks. The system, which shields domestic dairy, poultry and egg producers from most foreign competition, is becoming a more frequent target of other agricultural exporting powers, including the U.S., Europe, Australia and New Zealand.

Canadian officials would not respond directly to the letter. But Rudy Husny, an aide to Trade Minister Ed Fast, said Canada is committed to playing a “constructive role” in the TPP talks and, like everyone else, wants a high-standard agreement.

Trade experts warned that Ottawa’s unwavering defence of a blatantly protectionist policy risks undermining its negotiating position and weakening its international credibility.

“Canada is continually being targeted on supply management and it might weaken our position in other areas unless we’re willing to put it on the table,” Toronto trade lawyer Lawrence Herman explained.

“It’s quite clear that Canada is going to have to give something on supply management in order to be part of the TPP negotiations.”

In March, U.S. Trade Representative Michael Froman – Mr. Obama’s top trade official – first lumped Japan and Canada into the same protectionist camp among TPP countries. “We’re going to be working very hard to open Canada’s market, and we’ve got to make progress on that front before we can bring home a deal,” he said.

It was considered a slap at Canada. Japan notoriously and vigorously protects key sectors of its economy, including rice and beef.

Meanwhile, Canada and Japan are continuing to negotiate a bilateral free-trade agreement, completing a sixth round of talks in Ottawa last week, dealing with issues that included services, intellectual property and investment.

Japan has insisted that the TPP is its top priority over other trade deals. But some business groups are suggesting that Canada could gain a trade edge over the U.S. and others by quickly wrapping up a bilateral deal with Japan – particularly if the TPP becomes bogged down in Congressional politics.

“There is an opportunity if things are slowing down on the TPP,” pointed out David Worts, executive director of the Japan Automobile Manufacturers Association, which speaks for Toyota and Honda – both of which have auto assembly plants in Canada. “Canada and Japan should consider forging ahead.”

Japanese auto makers are worried they could be penalized as their European and South Korean rivals take advantage of a phase-out of Canadian tariffs on imported cars as a result of the Canada-EU and Canada-Korea free-trade agreements.

The bilateral negotiations are important and will continue “in parallel” with the TPP talks, said Mr. Husny, Mr. Fast’s communications director.

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