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Politics Ottawa says it won’t be 'bullied' by U.S. over TPP dairy negotiations

Holstein cows at Saugeen County Dairy in Grey County, Ont.

Steve Jenkinson/The Globe and Mail

The Canadian government says it will not be bullied as the United States ratchets up pressure on Canada's heavily protected dairy sector ahead of what could be the final round of talks for a Pacific Rim trade deal spanning 12 countries.

More than 20 members of U.S. Congress have written a letter to the Canadian government accusing it of being "unwilling to seriously engage in market access discussions regarding dairy" during Trans-Pacific Partnership negotiations, by which they mean opening up Canada's sheltered milk, cheese and dairy industry to significant new foreign competition.

The challenge expands on recent comments from U.S. Trade Representative Michael Froman, his country's top negotiator, who has repeatedly prodded Ottawa to produce a "meaningful offer" and reveal to the United States what kind of agriculture concessions it will make.

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In their letter, the 21 members of the U.S. House of Representatives, including Paul Ryan, chair of the influential ways and means committee, suggest Canada's protectionist dairy industry is unfinished business from the 1988 Canada-U.S. free-trade agreement and the 1992 North American free-trade deal.

"It is critical that Canada finally commit to finishing the work left undone in our prior agreements and finally commit to significant and commercially meaningful market access for all remaining agricultural products," said the letter, which was delivered last week to Gary Doer, Canada's ambassador to the United States.

A spokesman for Canadian International Trade Minister Ed Fast brushed off the congressional missive.

"We see this as another tactic to negotiate through the media," said Rick Roth, director of communications for Mr. Fast. "We'll negotiate at the negotiating table, and frankly, we won't be bullied into negotiating this through the media."

Next week, trade ministers from 12 countries including Canada, the United States, Japan, Malaysia and Australia gather in Maui, Hawaii, where Washington and Tokyo will push hard to reach a deal in principle. The United States and Japan have been conducting one-on-one talks as part of the transpacific negotiations and are expected to announce they have concluded in the days ahead, although a Canadian government source said Washington and Tokyo must still reach agreement on trade in auto exports and parts.

Chief negotiators for each country, including Canada's Kirsten Hillman, are starting this new round of talks on July 24 in Maui, four days before trade ministers arrive, in hopes of narrowing differences sufficiently that elected officials will be able to reach a deal.

The timing of the talks is bad for the Conservative government, which heads to the polls in October. Tariffs of as much as 300 per cent shield Canadian dairy and poultry farmers from foreign competitors. A rise in imports could mean cheaper chicken, milk and cheese for consumers. It could also destabilize the supply-management system, which tightly regulates the price and production of milk, chicken and eggs, endangering farm incomes.

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The U.S. dairy lobby expects major new access to Canadian markets as part of any TPP deal and it applauded the message from the members of Congress.

"The sentiment is that if Canada cannot come forward with part of a meaningful offer on dairy and poultry, then perhaps Canada is not prepared to be part of TPP," said Jaime Castaneda, senior vice-president of trade policy with the U.S. Dairy Export Council.

Canada has defended itself by saying countries traditionally reveal what concessions they will make in politically sensitive sectors at the 11th hour of talks. Mr. Castaneda said a substantive back-and-forth discussion usually happens beforehand. "You don't wait until the last minute to do an entire negotiation," he said.

He would not divulge precisely what U.S. milk producers want from Canada, but said the market access that Ottawa offered the European Union in a recently concluded trade deal is insufficient. In that 2014 agreement, Ottawa granted the EU the right to import 17,700 additional tonnes of cheese without paying steep tariffs. Mr. Castaneda said that level of access "is not enough."

The Trans-Pacific Partnership talks, which are expected to create a free-trade zone that would eclipse NAFTA in importance, are ambitious. Contentious issues that remain include agriculture, intellectual-property rights and how far states should go in protecting innovations such as medicines as well as the rights and obligations of state-owned enterprises when they operate in other countries.

Mr. Fast appears in no hurry to cut a deal and says he cannot predict whether the Hawaii gathering will produce an agreement. Last week, Japan's Minister of State for Economic and Fiscal Policy Akira Amari raised the possibility of concluding without one or two of the negotiating countries. Mr. Amari would not name the countries, but Japanese-based news services cited sources identifying Canada as one laggard.

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