Lawrence Herman is principal at Herman and Associates. He practises international trade law and is a senior fellow of the C.D. Howe Institute in Toronto.
The U.S. Congress passed President Barack Obama's long-sought trade negotiating authority this week. It squeaked through – just – with many in the President's own Democratic Party in the Senate and the House of Representatives voting against the legislation.
This "fast-track" Trade Promotion Authority (TPA) is an essential condition for countries negotiating trade deals with the United States. First, because Congress has as much constitutional authority as the executive branch in international trade, the President needs a legislative mandate from that body to conclude trade deals.
Second, under this authority, Congress relinquishes its power to tinker with a concluded agreement in demanding further concessions from other countries as the price of its ratification. Its scope of action is limited to approving the treaty or rejecting it entirely.
There's more to come, however. While this week's fast-track bill gives comfort to the 11 other governments in the Trans-Pacific Partnership (TPP) trade negotiations, it doesn't guarantee free sailing to a finalized agreement.
First, the bill sets out dozens of mandated objectives for Mr. Obama's team, detailed ingredients to be pursued and achieved for a final TPP deal to pass congressional muster. These stated objectives put considerable pressure on the other participants to agree to substantial market-opening concessions.
Second, there are strict conditions for congressional oversight and, in many respects, direct involvement in the talks on a continuous basis. Under the TPA bill, the U.S. team must give Congress continual reports and allow ongoing involvement as the last stages of talks unfold.
This means that, at any point, on any particular item, Senate and House committees, pushed by domestic lobbying, can express disagreement and make it clear that more concessions from other countries, including Canada, are needed to get the final TPP package approved.
The TPA bill places Canada in a very tricky position. Indeed, it's a dual nightmare, one that enmeshes Canada's dairy lobby and the federal Conservative government in the same set of issues. As many have written, Canada has lost significant leverage in the TPP exercise because of the government's unyielding defence of Canada's Soviet-style supply management system, which basically prevents imports and provides protectionist cover for dairy producers, as well as poultry and egg farmers.
No other country maintains this kind of closed system and the pressure on Canada to open those markets under the TPP has been relentless, led by the United States but with strong support from Australia and New Zealand.
So far, Canada has been able to dissemble, using the argument that it won't make any concessionary moves until Mr. Obama has fast-track authority. Now, the spotlight will be turned directly on Canada, and Prime Minister Stephen Harper's government will be pushed to the wall to open up supply management.
The Conservative government's record in promoting open markets has actually been quite positive, beyond the supply managed sectors. But with the TPP talks now moving forward, the government is faced with a set of ostensibly irreconcilable choices.
It can make concessions on supply management, a risky vote-losing move in an election year, certain to provoke dairy farmers in Ontario and Quebec and their well-funded lobby groups.
Or it can refuse to make any offers in this area, and potentially be forced to walk away from a negotiated TPP deal, which would be a clear betrayal of broader Canadian interests.
How can the government navigate its way through these rocky shoals and find safe passage to a policy that responds to international pressures, yet remains a winner at home?
Ironically, the U.S. Congress may have provided Canada with just that opportunity.
Instead of defending its shrinking domestic market and losing out on expanding global opportunities, the supply managed sector needs to accept reality. It should agree to trade concessions in the TPP in return for transitional adjustments from Ottawa and – this is critical – a co-ordinated and aggressive public-private-sector program that promotes Canadian agricultural exports across the globe.
Instead of the regrettable "small Canada" defence of an increasingly indefensible system, supply managed industries should redirect their efforts, with Ottawa's leadership plus some financial incentives, aiming to be global leaders in their industries and embracing the manifold commercial opportunities out there in the real world. But time is short. Thanks to the U.S. Congress, the TPP is moving forward. For Canada, standing pat on decades-old policies is not the answer.