The Canadian government's reluctance to significantly open up its sheltered dairy market to more foreign imports is now at the centre of a logjam in high-stakes talks to strike a Pacific Rim trade pact as the White House ratchets up the pressure to cut a 12-country deal.
Sources familiar with negotiations said as of Thursday afternoon Canada had made no formal offer on dairy at the Trans-Pacific Partnership talks in Hawaii and that what the Canadians had informally offered was insufficient to galvanize negotiations. "As of right now Canada is not in a place that would allow us to close," one official close to the discussions said.
The notion that political concerns over Canadian dairy farmers might hold up the largest free-trade deal in two decades – one that would cover 40 per cent of the global economy – was a popular topic of discussion at the trade talks on Thursday.
Alan Wolff, who served as a senior trade official in the Carter administration and is informally advising the Obama administration on the U.S.-led Trans-Pacific Partnership negotiations in Hawaii, said Canada is a linchpin to reaching an accord and Ottawa's stalling is holding up a chain reaction of concessions from all parties.
A deal will turn on "what is Japan willing to do for the rest of the world, which includes Canada in a very large part, and what is Canada willing to do for the United States so the U.S. can do some things for others, which include Australia on sugar and New Zealand on dairy," Mr. Wolff said of negotiations among 12 countries at a Maui resort.
Canadian dairy farmers, some of whom are on hand in Hawaii to protect their sheltered industry, say the Americans have gone overboard in arm-twisting and manoeuvring to isolate Canada and its supply management system for producing dairy, poultry and eggs.
"This isn't the Trans-Pacific Partnership. This is the United States Trade Pact because of their tactics. They are being too aggressive," said Wally Smith, president of the Canadian Dairy Farmers of Canada, which represents more than 12,000 farms.
International Trade Minister Ed Fast's office declined to comment on the state of negotiations. The Conservative government, expected to trigger an election in the next few days, has made signing free trade deals a central feature of its economic strategy, but faces the prospect of angry farmers on the campaign trail should it give away significant dairy market share to foreigners.
Mr. Smith, however, said the Harper cabinet minister solemnly pledged to dairy farmers in a late-night Wednesday meeting that the Canadian government would preserve their industry from harm. "The minister said, 'We believe in a robust supply-managed system and that's what we plan to achieve at the negotiations,'" the farmer said. "Robust means very much alive. They've made a big commitment."
Mr. Wolff predicted negotiations are now going into overdrive in Maui as the U.S. tries to reach a deal by Friday, as originally planned. "It's not going to be a late night. It's going to be all night."
Trade ministers, led by U.S. Trade Representative Michael Froman, were scheduled to hold a 12-nation negotiating meeting Thursday evening, Hawaii time, at the Maui Westin resort. The United States, which had originally planned to wrap up talks with a Friday afternoon news conference, is using what it calls a "cramming session" to try to dislodge the obstacles to a deal.
Frustration was evident Thursday among other negotiating partners at how Canada had refused to engage before Maui on access to its dairy market, which is sheltered from foreign rivals by tariffs of more than 245 per cent.
"Perhaps if Canada had been willing to start the types of discussions early on a topic so sensitive, we would be a better spot," an official close to the discussions said.
The Harper government rejected the notion that Canada is laggard at the talks because of its negotiating behaviour on dairy-market access. "Our goal is to secure the best deal for Canadians, something which we can sell to the Canadian people," Max Moncaster, press secretary for Mr. Fast, said.
He described the finger pointing at Canada in Maui as a "pressure tactic" and a lie. "To say that one particular issue is a sticking point to a potential deal just isn't based in reality. A number of very serious issues remain for countries to negotiate," Mr. Moncaster said.
Canadian officials said Washington is just redirecting pressure it's feeling from other Trans-Pacific negotiating partners who want the U.S. to offer more market access to American consumers.
As The Globe and Mail reported last month, the Canadian government is preparing a financial compensation package for dairy and poultry farmers as a way to blunt the impact of signing onto a Trans-Pacific deal.
The wide-ranging Trans-Pacific talks are trying to establish a North American-style trading and investment regime for commerce in Asia that becomes the dominant standard and acts as a counterweight to Chinese influence in the region.
A deal would eclipse the North American free-trade agreement in importance and would expand copyright and patent protections for drugs and place constraints on how state-owned companies and sovereign wealth funds conduct themselves and open up traditionally protectionist Japan to more foreign commerce.