Charest optimistic Canada will reach renewed trade deal with US and Mexico

The U.S. and Mexico have reached a draft, bilateral trade agreement and now they want Canada to sign on. But Quebec dairy producers fear new dairy concessions will further weaken supply management.

Quebec dairy producers fear new dairy concessions will further weaken supply management

Former Quebec premier Jean Charest advised Canada's trade negotiators to 'stay cool and stick to the plan.' (Graham Hughes/CANADIAN PRESS)

Former Quebec premier Jean Charest said he believes Canada will be able to sign on to the newly reached U.S.-Mexico trade agreement before a looming Friday deadline.

Charest quoted the assessment of David MacNaughton, Canada's ambassador to Washington, who said that reaching a new NAFTA agreement requires a solution where American President Donald Trump can said, "I won," — and Canada can walk away saying, "We have not lost."

Canada's negotiating team should "stay cool and stick to the plan," said Charest.

The former premier was a leading advocate of the Comprehensive Economic and Trade Agreement between Canada and the European Union, which was reached after changes in supply management.

Supply management is the key 

Charest said NAFTA renewal will also require changes in Canada's supply management regime for dairy products.

Supply management is a system that allows specific commodity sectors — dairy, poultry and eggs — to limit the supply of their products to what Canadians are expected to consume in order to ensure predictable, stable prices.

​While in the business community, supply management may be viewed as an irritant, Charest said it's a lifeline for rural communities.

He said it took a compromise by Canada on supply management — allowing more imports of European cheese — to reach the trade deal with the EU.

"In my opinion, that is where [NAFTA renegotiations are] going to go," Charest said.

It would cost the federal government $20 to $30 billion to buy back dairy production quotas from Canadian dairy farmers, Charest said, and that would only be thinkable if the U.S. side agreed to do the same.

Tinkering with the present regime is more likely, Charest said.

Quebec dairy farmers remember that it took concessions from Canada to get both the EU trade deal, and a final Trans-Pacific Partnership agreement.

"We are hoping this isn't the third time," said Yann Rioux, a dairy farmer in Tingwick, about 170 kilometres northeast of Montreal.

"We're already letting in 10 per cent of our production, totally tariff free," said Peter Strebel, regional president for dairy farmers in Quebec's western Montérégie region.

Strebel, who has a dairy farm in Saint-Blaise-sur-Richelieu, 50 kilometres southeast of Montreal, said concessions to the EU and under the TPP will expand tariff-free, dairy imports to 15 per cent.

"That's the most open border of any dairy producing country," he said.

U.S. also protects its dairy farmers

Strebel said the U.S. limits dairy imports to three per cent of its market.

"They already have a five-to-one advantage in the dairy sector with Canada."

When he announced the draft, bilateral agreement with Mexico this week, Donald Trump referred to Canada's dairy tariffs and repeated his threat to impose 25 per cent tariffs on cars imported from Canada.

"Mr. Trump is always pointing to the dairy industry in Canada as being the one single point that is going to make or break the deal," Strebel said.

"Trying to link dairy and automobiles, it just doesn't fit."

​While in the business community, supply management may be viewed as an irritant, Charest said it's a lifeline for rural communities. (Twitter/@PureHolsteins)

Strebel said dairy is a sensitive product that Canadian lawmakers have chosen to protect, but about 39 per cent of the 2.1 million U.S. farms receive some form of a subsidy.

Washington spends more than $20 billion a year on subsidies for farm businesses, with most of those subsidies going to producers of corn, soybeans, wheat, cotton and rice.

Strebel said he is encouraged by assurances from Foreign Affairs Minister Chrystia Freeland that there won't be concessions this time, but he said he remains wary of dairy farmers losing ground.

"We're always afraid that we are going to pay again," he said.

'We have to be optimistic'

In an interview with Radio-Canada today, Charest said most of the tenets of the trade agreement that relate to Canada have already been resolved, though there are a "lot of grey zones" in the U.S.-Mexico portion of the agreement.

"We have to be optimistic," Charest said.

He said Canada wanted to maintain NAFTA's current dispute settlement arrangement, and is opposed to a sunset clause.

The proposed deal includes a 16-year expiry date. That's not what Canada had wanted, Charest said, but it's better than Trump's initial proposal of a five-year sunset clause on any new arrangement.

U.S. President Donald Trump announced a draft, bilateral trade agreement with Mexico to replace NAFTA at the White House on Aug. 27. (Kevin Lamarque/Reuters)

A five-year term would have discouraged investment in Canada by companies seeking access to the NAFTA free-trade zone.

Charest said the fact that Mexico and the U.S. have reached a bilateral agreement puts pressure on Canada.

"It's deliberate," the former premier said, calling it Trump's "divide to dominate" rule.

Trump "decides where and when and what music we will dance to," Charest said.

With files from CBC's Jaela Bernstien and Radio-Canada

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