Business groups urge Harper to take lead on Trans-Pacific Partnership

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A coalition of major business groups is urging Stephen Harper to take a "leadership role" in completing the Trans-Pacific Partnership amid fears Canada may walk away from the talks to save its protected dairy and poultry sectors.

In a letter sent to the Prime Minister Wednesday, the heads of the Canadian Council of Chief Executives, the Canadian Chamber of Commerce and the Canadian Manufacturers & Exporters urged Mr. Harper not to give up on a "historic opportunity" to expand trade.

"We just don't think supply management in agriculture – a very narrow sector of the Canadian economy – should trump the interests of all other sectors," John Manley, president of the CEO council, said in an interview.

Mr. Manley said the letter was prompted by Mr. Harper's recent suggestion that Canada might abandon the TPP negotiations, which include Canada, the United States, Japan and eight other countries.

"There are 11 other parties around the table. They could decide they've reached an agreement whether we have or not," Mr. Harper acknowledged March 12 at an event in Saskatchewan. "And so, we have difficult choices in this one, we have some areas where obviously we see great advantages for Canada, but others where there will be challenges. But we as Canadians cannot, alone, stop a deal from happening if we don't like it."

Canada is caught in a squeeze between the U.S. and other countries pressuring it to dismantle the system that tightly controls imports and production of dairy, chickens and eggs, and on the other side, farmers who want supply management kept off the table.

"We just want the government to know that we are not content with an outcome that leaves us out," Mr. Manley said.

He pointed out that the TPP, which also includes Mexico, is seen as a way to modernize the North American free-trade agreement.

"It seems disadvantageous to be outside that process," Mr. Manley added. "We can't just stand aside."

The letter, obtained by The Globe and Mail and due to be made public Thursday, is also signed by Jayson Myers of the Canadian Manufacturers & Exporters and Perrin Beatty of the Canadian Chamber of Commerce.

"The TPP is the biggest game on the planet in terms of trade negotiations," the letter said. "New international business opportunities are at stake for Canadian exporters, as is the integrity of the North American supply chains upon which much of our economy is based."

Canadian farm groups are already bracing for major concessions if Canada signs the TPP, expected to be concluded in the next few months.

"It is extremely unlikely, no matter how hard producers lobby, that the federal government will back away from the TPP," according to an internal report prepared by the Dairy Farmers of Ontario.

The report said the supply management system in dairy must change to survive.

Dairy farmers said their salvation lies in creating a new "world-price ingredient class" of milk – milk priced at the lower world price, rather than the inflated Canadian price. This would give Canadian dairy processors access to lower-cost domestic milk and create an incentive for them to invest and export high-margin dairy products.

"The industry is approaching a crossroads beyond which the existing policy framework is no longer sustainable," the report concluded. "A policy environment, which levers export potential within existing trade agreements and enables the marketing system to be operated with more milk and larger growth allowance, is essential."