TPP and Canada

Last week, Didier Drogba signed a contract with the Montreal Impact team, and debuted at Saputo Stadium - named after the powerful dairy corporation in Quebec province with revenue of more than 9 billion Canadian dollars last year. TPP negotiations have been 98% completed, but have not yet ended in Hawaii because of some problems such as automobiles, agricultural products, and intellectual property in the pharmaceutical industry. The dairy, chicken and egg industries are Canada's main sticking point with its TPP partners, and could be a prominent issue in the federal election campaign that began this week.

For a long time, Canada has not wanted to open the door to foreign goods into some strictly protected agricultural markets. This is a link in the chain of "mutual satisfaction" concessions between TPP countries. New Zealand, a major exporter of dairy products, demands more concessions from the US, while the US demands that Canada open its dairy market more widely to have room to export products that are knocked out of the US domestic market by imports from New Zealand. If Canada gives in to heavy pressure to allow more dairy and chicken imports, it could have dire consequences for the future of Canadian dairy farmers.

Recently, Canada has often been criticized by the US for not making it clear how far Canada is willing to open up to allow foreign goods to compete with the dairy and chicken industries. With the enthusiastic support of two major agricultural exporters, New Zealand and Australia, the US has offered a "door price" that requires Canada to make concessions on the supply management system since Canada wanted to join the TPP in 2011. Supply management policy is implemented through agricultural marketing councils. Critics see the system as a protectionist wall, a kind of cartel that sets prices, output quotas and high import taxes to discourage foreign goods.

Anyone who has followed Canada's trade negotiations for free trade agreements with the European Union, North America, and the United States has witnessed this struggle before. This time, Canada also hesitated, questioning why the US did not abandon a similar system protecting the sugar industry. The political community in the US would not dare to think of eliminating or reducing the $1,000 billion subsidy that Congress approved for American farmers.

Some US lawmakers wrote an open letter saying that Canada's unwillingness to dissolve marketing councils means Canada is not serious in TPP negotiations. US Trade Representative Michael Froman implicitly threatened to let Canada stay out of the TPP if Canada was too rigid and refused to make further concessions. Japan, a major player in the TPP, also chimed in: Japan's Economy Minister said Canada could be eliminated from this game.

Other Canadian agricultural industries are impatient to see the government focusing too much on dairy and chicken producers, because there are many other related benefits. Agricultural export industries such as beef, pork, wheat and barley have no supply management system, and Canada would lose heavily if it did not join such a large agreement. For example, Japan, the world's third largest economy, is an attractive market in TPP negotiations because Japan has historically had relatively few trade agreements and its domestic market remains relatively untapped by foreign companies. Japan has offered to reduce the 38.5% import tax on foreign beef to 9% in 15 years, and reduce the import tax on foreign pork.

Politics and agricultural products

Brian Innes, president of the Canadian Agricultural Trade Alliance, which advocates for free trade, commented that it is wrong that much of the discussion about TPP in Canada only focuses on the domestic market, forgetting that access to international markets will help economic growth, create jobs and support communities. He said that in the past 10 years in Canada, agriculture and agricultural export turnover has increased by 80%, from 31 billion to more than 56 billion Canadian dollars. In an open letter to Prime Minister Stephen Harper on June 11, the alliance warned of great harm if Canada did not join the TPP, or joined late.

John Manley, former deputy prime minister and current president of the Council of General Managers of Canada, said that by using a supply management system to protect agricultural products, the Canadian Government caused the country to fall behind in international trade negotiations. He calls these industries with state-controlled prices and output the world's last remnants of Soviet-style central planning, and says the TPP is crucial to reviving Canada's collapsing economy.

The ruling Conservative Party hopes to conclude TPP negotiations before starting the election campaign. (On August 2, Prime Minister Harper proposed and received permission from Governor General David Johnston to dissolve the House of Representatives and hold federal elections on October 19). The Conservative Party wants to have TPP in hand to prove its ability to manage the economy, especially when growth data shows that the Canadian economy is in theory officially in recession, the Central Bank has reduced interest rates twice in a row this year, and the Canadian dollar has plummeted, falling to its lowest level compared to the US dollar in the past 11 years.

This unsuccessful round of TPP negotiations puts the Conservative Party government in an awkward position: having to negotiate on controversial issues such as opening agricultural markets while having to fight for every precious vote in the federal election. The Conservative Party holds the majority government at the federal level, but is currently locked in a contest with the New Democratic Party (NDP) nationally, and competing with the Liberal Party in Ontario, Canada's most populous province. The Conservative Party currently needs many parliamentary seats representing Quebec, Canada's second most populous province, partly to offset the risk of losing some seats representing Western Canada in general, and Alberta in particular.

Dairy and poultry farmers can be temporarily happy with the news that the TPP negotiation round has not been able to achieve the desired results, because they can use their votes to protect the rice cooker. The majority of Canadian dairy farms are located in Quebec. However, they no longer have as strong an influence in federal elections as they once did.

In the past, when dissatisfied with the government, farmers would kill cows publicly, partly to shock, partly to prove that cows have no value. These kinds of protests no longer seem to have much effect. The political power of this industry has decreased significantly. Canada currently has about 12,000 dairy farms, down from 145,000 in 1971. And the number is now scattered across the electoral district map, so votes are not concentrated. According to a 2012 report by a Liberal MP, only 13 constituencies have more than 300 dairy farms.

In an interview with Bloomberg on July 29, Prime Minister Harper affirmed that Canada cannot stand outside an agreement of such magnitude, and the government will try its best to protect the interests of all industries in Canada. Many in the dairy industry have a feeling that the federal government may be about to trade away the industry to get a share of the big pie. The evolution of the election campaign in the next few months, especially the support rate of the parties in public opinion polls, will show whether the government is willing to "release the iron hunter to catch the perch".

Source: TBKTSG