TPP ministers back at table as Canada preps final offer on dairy, autos
12 Pacific Rim countries set to reach agreement in principle in Atlanta by end of week
How badly do Stephen Harper's Conservatives want Canada to be part of this week's anticipated Trans-Pacific Partnership trade deal? We're about to find out, less than three weeks before the election.
Ministers from the 12 Pacific Rim countries today begin what's expected to be their final talks in Atlanta. Hopes are high for an agreement in principle by week's end.
But this is a complex, multi-directional trade pact, not a charity: no one gets in free.
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That's the catch for Canada, even as multiple federal government departments — Agriculture, Natural Resources, Fisheries and Oceans — already circulate statements about what Canada gains in new export markets.
The cost of TPP admission will be controversial, in particular for the final two sectors in play: the recently troubled automotive manufacturing industry and the supply-managed dairy business.
"If Canada is not prepared to move on either one of those, personally I think an agreement can be done without Canada fairly easily. And I don't think [U.S. President Barack] Obama would lose any sleep over that … or anybody else," said trade lawyer Mark Warner.
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As Canada joined the talks three years ago, critics warned TPP was a back door to reopening the North American Free Trade Agreement (NAFTA.)
Then, July's ministerial talks in Maui went sideways shy of the finish line, as Mexico and Canada nixed a bargain between the U.S. and Japan to change regional content rules for automotive manufacturing.
To stay tariff free under NAFTA, auto parts needed 60 per cent North American content, and an assembled vehicle had to contain 62.5 per cent North American content. The U.S. and Japan now suggest 30 per cent for parts and 45 per cent for vehicles.
Senior negotiators scrambled toward a compromise between the two, perhaps closer to what Japan wants. But there could be exemptions for particular parts or technologies.
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Harper previewed the concession during the Calgary leaders' debate, saying the industry won't like everything.
Last Saturday, International Trade Minister Ed Fast's office started suggesting media contact two major Canadian auto-parts employers supportive of the deal: Rob Wildeboer from Martinrea and Linda Hasenfratz from Linamar Corp.
"If a company like Linamar stands up around London, Ont., and says we're OK with this, there will be some weight to it," Warner said. "It seems to me that [Harper] probably has enough cover to make the concessions that he needs to make."
As well, the 60 per cent rule is "silly to defend," he said. "It was linked to a footprint for the automotive industry in southwestern Ontario that no longer exists … our industry has been cut in half."
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NAFTA didn't stop recent declines, and auto companies can't be strong-armed into doing business in Canada, he said.
"Are you really going to spend a lot of political capital … to defend something that's obviously not working?" Warner said.
Cows come home
When Canada joined the talks, debate began over whether the price of admission was a dairy concession.
Other countries sure hoped so. Now the answer appears to be yes. But on what, or perhaps whose, terms?
Harper needs to position Canada's final offer inside, not offside with his pledge to defend supply management or risk backlash, particularly in Quebec and parts of rural Ontario.
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The impetus for change must be his own, not something forced by Americans or anyone else.
"Decisions to be made on whether we have such a system or not are decisions that we want Canadians to take, not foreigners to take," Harper told reporters on the campaign trail Wednesday.
Warner sees an implied linkage between the auto concession and the final offer on dairy — not a straight tit-for-tat, but a measure of commitment.
"If Canada were to make some concessions on the rules of origins for autos, then the demands coming back from the United States on dairy would be softened. I don't think they would be eliminated, but I do think it would be enough to get to some kind of agreement," Warner said.
Fast's strong denials last weekend that Canada would offer the market access the U.S. asked for — 10 per cent of Canada's consumption — suggests Canada won't go too far with its offer, Warner said.
This week's talks may not finish sorting out what countries get exactly what dairy imports. Import penetration is already at 6.3 per cent for cheese (more if the Canada-Europe trade deal is ratified), 10 per cent for butter and 10 per cent for milk powder.
"Our trading partners would just like to see us move. I don't think we have to go the full distance," Warner said, adding that some would be happy enough to see a shift in Canada's "architecture."
That "architecture" shift shakes the so-called pillars of the supply management system: production control, price-setting and import control. But planning is underway for a multibillion-dollar transition program to help that happen gradually.
The corporate dairy industry is preparing more than their rhetoric might imply, Warner said.
Sales job or sell-out?
Harper wants to fuel the home stretch of his election campaign leading up to the Oct. 19 vote with a success story on trade.
While neither Liberal Leader Justin Trudeau nor NDP Leader Tom Mulcair has put down markers for the kind of TPP deal an alternative government could accept, a perceived lack of transparency during the negotiations offered ammunition for critics.
A handful of ridings could swing into the loss column for the Conservatives, particularly in Ontario, over both these concessions. But other voters the Tories target may embrace the deal.
Lower consumer prices are coming, Conservatives will say.
But for dairy, Canada's lower retail competitiveness, higher labour costs and the relatively smaller economies of scale on farms and at processing facilities matter as much as the price farmers receive.
There are "one thousand different interests" to be balanced, Harper said. Including some political ones.