Canada battles to maintain special access to U.S. market in TPP talks

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Canada is fighting at Pacific Rim-area trade talks to maintain its privileged commercial relationship with the United States at the same time as it girds itself for a new agreement that would grant 10 other countries even better access to U.S. markets than the North American free-trade agreement.

This emerged from a long-awaited meeting at Trans-Pacific Partnership talks in Hawaii between Canadian International Trade Minister Ed Fast and his U.S. counterpart, Michael Froman, the U.S. Trade Representative.

The Canadian government is using every opportunity to signal to the United States how badly it wants to preserve a special trading arrangement that has reaped big dividends for businesses and workers over the decades as the two countries build everything from autos to airplanes together.

It underlines the pressure on Canada during this final stretch of negotiations taking place on the island of Maui's resort-heavy west coast. Ottawa is bargaining to open up new markets for products from beef to grain but is also trying to hold onto, and even intensify, the trade advantages it holds with the United States under NAFTA.

Following the meeting, Mr. Fast's office described the 30-minute bilateral discussion as an opportunity to address the "future prosperity of North America" and spoke of how Ottawa is hoping that, as the trading environment shifts with the transpacific deal, the United States and Canada can nevertheless solidify the "North American production platform" to "create jobs for businesses, workers and their families."

It's a theme Mr. Fast has been increasingly hammering away at during the talks.

The White House is trying to steer the 12-country transpacific talks to reach a deal by Friday or Saturday – one that would eclipse NAFTA in importance – and hundreds of negotiators have taken over luxury hotels near Lahaina, Hawaii, to try to finalize a deal.

Wednesday was the first time Mr. Fast and Mr. Froman met since May and comes after weeks of public wrangling between Washington and Ottawa over opening up Canada's protected dairy sector. The bickering reached a peak when the U.S. envoy in Ottawa pointedly said if Mr. Fast doesn't want the United States negotiating through the media then he should start bargaining at the negotiating table.

It's likely a Trans-Pacific Partnership deal would include measures that allow member countries to use parts or ingredients from other TPP signatories without triggering major tariffs or running up against domestic-content rules. It's far from certain a final agreement would create a tariff-free manufacturing zone, but it's likely whatever results will make Asian parts more attractive to U.S. manufacturers – a shift that could come at the expense of Canadian companies.

One in seven Canadian jobs depends on trade with the United States, Ottawa says. According to the U.S. Census Bureau, Canada is the currently the most important trading partner for 35 U.S. states.

The erosion of manufacturing-sector jobs and the Conservative government's record in spurring new employment will be major points of debate in the coming federal election campaign.

Prime Minister Stephen Harper needs to be able to defend his performance as a steward of the economy in the face of accusations from NDP Leader Tom Mulcair and Liberal Leader Justin Trudeau that the Tories have failed to protect Canadian prosperity.

The cost of entry to a transpacific deal will include opening up Canada's heavily sheltered dairy and poultry sectors to greater foreign competition, however, and the political damage arising from these concessions will dog the Conservatives on the campaign trail.

Alan Wolff, who served as U.S. deputy special representative for trade negotiations during the Jimmy Carter administration, said Canada is a "linchpin" in the transpacific talks because the United States needs to demonstrate to its own dairy producers that there will be new markets for them if other dairy exporters gain improved access to U.S. consumers under an accord. "If Canada doesn't show up, this thing might not come together," said Mr. Wolff, who serves on the U.S. National Foreign Trade Council.

Canadian dairy farmers are stepping up their fight against a flood of new foreign imports, warning the Tories could face punishment at the ballot box for trade concessions in Maui.

The Dairy Farmers of Canada said, by their calculations, there are 44 federal ridings in Ontario and Quebec alone where their industry has a significant footprint. They said each of these seats has at least 45 dairy farmers, employs at least 200 people and makes an economic contribution in excess of $35-million a year.

"As we head toward an Oct. 19 federal election, all of the latest polls point to an extremely tight race between the NDP and the Conservatives, with the NDP holding onto a slight lead for the past several weeks, and the Liberals in third place," said the dairy lobby, which represents more than 12,000 farmers. "In a race as close as this, anything can happen, every single vote counts – and no party can afford to be complacent, in any riding."