Negotiations on a landmark free-trade pact among 12 Pacific nations stumbled as pressure mounted on Canada to soften its stance on dairy imports after Prime Minister Stephen Harper pledged to reach a deal.
After months of demands from countries including the U.S., Australia and New Zealand to open its dairy markets as part of the Trans-Pacific Partnership, Canada outlined a proposal during talks in Hawaii that other nations rejected as inadequate, according to two people briefed on the negotiations.
Frustration over the Canadian position has darkened negotiators’ mood on the sun-drenched island of Maui, where talks are scheduled to run through Friday. U.S. Trade Representative Michael Froman, the host of the meeting, has called on nations to tackle the “tough political issues” standing in the way of an agreement.
“The good thing is that Canada is talking now,” Mike Petersen, New Zealand’s special trade envoy for agriculture, said in an interview. “But we haven’t seen enough, and this is not something we can sell at home.”
Optimism had been high going into the talks after six years of negotiations on a pact that would stretch beyond a normal trade deal to take in such issues as intellectual property and state-owned enterprises. An agreement would clear barriers to commerce among nations that produce 40 percent of global economic output and is a centerpiece of the U.S. administration’s strategic refocus on Asia.
Harper signaled from Ottawa that his negotiators, led by trade minister Ed Fast, have the flexibility to reach a deal.
“Given that we are a trading nation, and given the global economy is the way of the future, we cannot be left out of this kind of trade arrangement,” Harper said in an interview on Wednesday. “The government is at the table making sure it protects the interest, as best we can, of every Canadian industry.”
Still, Canada’s offer on Maui fell short of what its trade partners expected, according to the people briefed on the talks. The absence of extensive staff-level work with Canada before the Hawaii meeting kicked off also handicapped the talks, the people said, asking not to be named given the sensitivity of the negotiations.
Trevor Kincaid, a spokesman for Froman, declined to comment. Max Moncaster, a spokesman for Fast, said “negotiations are ongoing across a range of issues, including market access.” Canada still wants an “ambitious agreement,” he said.
A better Canadian offer could resolve the interlocking disagreements common to the end phase of trade talks, Petersen said. Without that, the U.S. won’t give New Zealand better access to its market, and in turn wouldn’t have the credibility to demand Japan allow more dairy imports.
“If Canada doesn’t open to the U.S., none of those dominoes will fall,” Petersen said.
The issue looms particularly large for New Zealand, which sells over 90 percent of its dairy production abroad, accounting for 27 percent of its total exports, Petersen said.
Wally Smith, president of Dairy Farmers of Canada, said he had “no reason to believe” his country couldn’t reach an agreement in Hawaii.
The Canadian system limits imports and domestic production to raise prices its dairy farmers receive. Smith suggested Canada has flexibility to increase imports as long as the change can be forecast.
“Predictable imports will allow us to manage the system on behalf of all Canadians,” he said in an interview.
Canada has previously concluded trade pacts with other nations that affected its supply management system. In a deal with the European Union in 2013, Canadian negotiators held back concessions until the last few days of talks, then cushioned the blow with promises to compensate farmers.