Trade Minister Ed Fast will leave the campaign trail to join his counterparts in Atlanta on Wednesday, intent on concluding the Trans-Pacific Partnership trade talks. Chief negotiators from the 12 Pacific Rim member countries meet starting Saturday.
The list of outstanding issues is now very short: rules of origin for the automotive sector, which are also sensitive in Canada, as well as intellectual property protections for pharmaceuticals. The deal is portrayed as “98 per cent done.”
The short strokes on dairy come down to how much of Canada’s domestic market would be opened up to American products to compensate U.S. dairy producers for opening up their market to TPP partners such as New Zealand, an aggressive and competitive dairy exporter.
CBC News has learned Canada is prepared to offer up a significant share of its domestic market (as defined by consumption levels), including not only fluid milk, but also possibly butter, cheese, yogurt or the milk powders and proteins used to make other foods.
The American goal for dairy market access was nine or 10 per cent, a figure that prompts dairy industry folk to use words like “enormous” and “annihilation.” But even if Canadian negotiators successfully push back, an offer of even half that would be huge.
It’s far more than the concession made in the 2013 Canada-Europe Comprehensive Economic Trade Agreement, which was roughly two per cent. That more than doubled the previously tiny amount of European cheese allowed into Canada tariff-free. That deal, however, still protected other Canadian dairy products, including milk. (The EU deal has not yet been ratified by either side.)
For the EU deal, the Harper government offered dairy producers compensation contingent on proven losses — not a foregone conclusion amid rising demand for cheese. Having to prove a loss before getting help was poorly received, with producers uncertain what’s really coming and the government non-committal on precise dollars.
For the bigger concession now in play, the demand for compensation would be greater.
The compensation package this time may have to be massive, and could include a way to help producers out of farming by buying back quota. While it’s unclear how much this would cost the government, at current market values for quota, pulling out 10 per cent of milk production could require $ 2 billion.
This does not dismantle the supply management system, but shrinks it.
Ten per cent less domestic milk would destabilize the supply chain and potentially increase the consumer price of domestically processed dairy, if fixed costs remain the same with lower volumes. Alternatively, local plants may close.
“They don’t want to be a dumping ground,” Leduc says. “Why should we open our markets for dumped products from the U.S., or anywhere else?”
But the U.S. industry is about 10 times the size of Canada’s. A tonne there is less significant to the overall U.S. picture than a tonne in Canada.
“To me, that’s not a level playing field,” Leduc says.
Dairy farmers were hopeful, particularly with comments in the media this week suggesting New Zealand wasn’t going to get the “gold-plated” deal it sought from the U.S., perhaps trying to lower expectations.
Fast’s office won’t confirm or deny anything, saying throughout the talks that Canada’s not “negotiating in the media.”
“Those who know aren’t talking, and those who are talking don’t know,” says Adam Taylor, who worked for Fast during the EU talks but is now a director with lobbying and communications firm Ensight Canada.
“The government won’t try to sell a bad deal or negotiate a bad deal just for the sake of a deal,” Taylor said. “The worst thing they could do is negotiate a bad deal, lose the election, and then have it exposed as a bad deal by their successor … or have to live with it if they win.”
Dairy players also heard nothing in the final run-up to the EU deal.
Other supply-managed commodities, such as chicken, were not part of the Europe deal. This time, they’ve not been told they’re exempt.
But the political impact is not limited to the few seats the Conservatives still hold in that province. The effects could be spread across other rural ridings. Ontario seats like Perth-Wellington, won by a Conservative in 2011 who’s not running for re-election, could swing.
In Thursday’s French-language leaders’ debate, Stephen Harper said he always defends supply management in trade talks.
This deal is expected to conclude less than three weeks before voting day.