Stephen Harper is bringing Canada into ambitious new Pacific free-trade talks, fulfilling a key pledge to reduce reliance on the United States but increasing pressure on protected industries to accept more foreign competition.
While the Prime Minister insisted nothing has been sacrificed to join the group, it's clear that the controversial issue of supply management – Canada's protection of its dairy, poultry and egg industries from foreign competition – is on the table.
"It's going to be a real test of the appetite of Canada for trade liberalization," said Andrew Cooper of the Centre for International Governance Innovation, who is observing the Los Cabos summit. "Of course, we're going to have the problems of marketing boards and Canadian responses to the pressure that's going to come. If it doesn't come from Australia, it's certainly going to come from New Zealand."
Tuesday's invitation to join the talks known as the Trans-Pacific Partnership came at the conclusion of G20 meetings in Los Cabos, Mexico, in which European leaders announced they are considering a makeover of their banking sector to prevent struggling financial institutions from causing more problems for their debt-burdened governments.
Canada campaigned behind the scenes for months to get an invitation to the trade talks. All nine member countries of the TPP talks must accept Canada's admission, and while most already have, U.S. approval is the key.
All sectors of the Canadian economy will be under scrutiny for signs of protectionism. Canada has also agreed to live by any deals that have already been reached, although Mr. Harper said the talks seem to be at an early stage.
"Canada has not agreed to any specific measures in terms of an eventual Trans-Pacific Partnership agreement," Mr. Harper said. "As in any negotiation, nothing is agreed to until everything is agreed to by all parties. … We're obviously not going to try to undo what's been done, but these negotiations in our judgment are at fairly preliminary phases right now."
When asked about supply management, Mr. Harper said his government has a strong record of defending those sectors in trade talks.
Questions remain about whether Canada will be a full member of the negotiations. Reports from Washington suggested that TPP countries were reluctant to give new members full veto rights over chapters in the agreement, a condition Canada initially rejected.
Mr. Harper has said joining the TPP is a key element of his government's push to expand trade with fast-growing Asia, but has faced difficulty persuading the Americans that Canada is a major defender of digital intellectual property such as movies, TV shows and music.
Mr. Harper met on Tuesday with U.S. President Barrack Obama as the announcement of the invitation emerged. A day earlier, Mexico was invited to join.
The U.S.-led talks appear likely to eclipse the North American free-trade agreement in importance.
The two invitations must have domestic approval from each of the nine current TPP states – the United States, Australia, New Zealand, Singapore, Chile, Peru, Vietnam, Malaysia and Brunei. Canada expects approval in the fall.
The current TPP countries represent 510 million people and a gross domestic product of $17.6-trillion. With the inclusion of Mexico and Canada, the free-trade zone could reach 658 million people and $20.5-trillion in GDP.
The Dairy Farmers of Canada said they expect Canada can have both free trade and supply management.
"The position of the Canadian government is that it will defend supply management, and we expect them to do just that," said Therese Beaulieu, spokeswoman for the Dairy Farmers of Canada, a national lobby and promotional group for Canada's 12,965 dairy farms. "Canada has been able to conclude a number of trade agreements before, and we've kept supply management. We have confidence that they can do it again."
Others aren't so sure.
Thomas Donohue, president and chief executive of the U.S. Chamber of Commerce, noted that Canada moved to "prove its readiness to join the high-standard TPP agreement" by approving new copyright legislation this week. He added, however, that "issues still remain regarding Canadian policies on intellectual property and supply management."