One of Canada's most protected industries — British Columbia timber — has been targeted by Japan in the massive Trans-Pacific Partnership trade talks, The Canadian Press has learned.
Japan is pushing Canada to eliminate or modify the controls it imposes on B.C. log exports — a practice that is heavily restricted by the federal and provincial governments, and which drives up their cost to foreign buyers.
Details of the forestry impasse with Japan are contained in documents from Canada's Foreign Affairs department that are marked "secret" and that have been obtained by The Canadian Press.
The revelation comes as Canada continues to face pressure from another TPP country — the United States — which has taken aim at the coveted supply management system that protects the country's dairy and poultry farmers.
Prime Minister Stephen Harper has said that Canada would protect its supply management system while pushing ahead with the TPP because he sees that has vital of the country's future economic health.
With the October election looming, the trade impasses have implications for Harper. He has invested much political capital in various free trade talks — none bigger than the TPP — as he positions himself as the most reliable steward of the Canadian economy.
But Canada has another fight on its hands with Japan over B.C. forestry, as it tries to break down trade barriers in that sector in Asia.
"Canada is pursuing full tariff elimination for the forestry sector — as you know, tariffs in Malaysia are as high as 40 per cent, as high as 31 per cent in Vietnam and as high as 10 per cent in Japan," says the April briefing note, prepared for a meeting of senior federal trade officials in Ottawa and their provincial counterparts in B.C.
The memo says talks with Malaysia and Vietnam are progressing well. Not so with Japan, Canada's largest Asian trading partner.
"Discussions with Japan are ongoing but have been difficult. Japan has very clearly linked the elimination of forestry tariffs to B.C. eliminating or significantly modifying log export controls," the memo says.
"Our efforts to delink the two continue but are becoming increasingly difficult."
B.C. exports a small percentage of its logs to foreign markets, including Japan, but must satisfy some strict provincial and federal requirements.
According to one study last year by the Fraser Institute, the result of that protection scheme is that in 2011, logs sold for $74 per cubic metre on the Vancouver Log Market, while the average price for exports hovered around $108.
"Although free trade in logs in not the preferred policy from a B.C. perspective, it certainly is from a global perspective," says the institute's June 2014 report on B.C. log policy.
"Canada is currently in talks to join the Trans-Pacific Partnership, which includes Japan," the report adds.
"It is possible that removing all restrictions on log exports as part of a trade agreement could leverage concessions of a similar size that would benefit British Columbia and Canada."
The report proved prescient, given what is contained in the government's own April memo, which makes clear there's serious negotiating taking place between Japan and Canada on forestry issues.
"There have been some suggestions from your officials that Canada settle for no tariff reductions from Japan on forestry products in order to protect our log export control regime," the memo says.
"This is not an acceptable outcome for Canada; it would put our competitors at a permanent advantage in the Japanese market for one of our primary exports."
A government spokesman declined comment on what has happened at the negotiating table since April.
With the U.S. Congress recently granting President Barack Obama fast-track authority to negotiate the TPP, there is widespread speculation that the deal could be finalized as early as August.
However, the deal will have serious domestic political implications for Harper as he seeks his fourth term as prime minister.
Supply management in sacrosanct in Ontario and Quebec, and so is the forestry sector is in B.C.
The 12 countries in the TPP, including Canada, are Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam, and they represent 792 million people with a combined GDP of $28.1 trillion.