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Congress hands Harper a political hornets’ nest with TPP

Former Trudeau-era agriculture minister Eugene Whelan discovered what happens when Ottawa messes with Canada’s dairy farmers.

iPolitics | 28 Jun 2015

Congress hands Harper a political hornets’ nest with TPP

By L. Ian MacDonald

Just when the Conservatives thought they might get through the Canadian election campaign without talking about Canada’s supply management system, along came the U.S. Congress to give President Barack Obama trade promotion authority (TPA) to proceed with the 12-nation Trans-Pacific Partnership free trade agreement.

TPA, also known as “fast track”, compels both the U.S. House and Senate to vote any trade deal yea or nay, without amendments. This avoids petty domestic politics and the last-second additions of political pork being added to trade agreements. TPA means it’s back to full steam ahead for TPP negotiations, talks that put Canadian supply management on the table. The dairy and poultry farm lobbies are fast mobilizing to oppose the deal (or at least extract vast amounts of compensation) and it has all the hallmarks of becoming a major election issue in rural Quebec and Ontario ridings.

For Canada and the other 10 countries at the table with the Americans, the absence of President Obama having fast track was, effectively, a deal breaker. Avoiding a legislative pile-on in the U.S. Congress is considered so crucial to trade agreements that TPA is much more than a procedural hurdle. There would have been no Canada-U.S. Free Trade Agreement in 1987 had Ronald Reagan not secured TPA (the deal was reached on the night his fast track authority expired). Had the first George Bush not had fast track, there would have been no North American Free Trade Agreement with Canada and Mexico in 1992. That was just with one, and then two, countries at the table with the U.S. You can imagine how complicated the talks are with 12 countries in the TPP negotiations.

Fast track looked to be a dead letter only two weeks ago, when Democratic representatives attached an adjustment bill for dislocated workers to it in hope of killing fast track in the Senate. But with the support of the White House, the Senate Republican leadership severed the two bills and passed them both. The House Democrats, who couldn’t be seen opposing adjustment aid for workers losing their jobs because of free trade, promptly fell into line.

Obama’s trade representative now has a mandate from Congress to negotiate a deal. The White House and the Republicans are in a hurry. Both want a deal over the summer so it can be ratified by year’s end, avoiding it becoming an issue in the 2016 presidential primary season. But for Stephen Harper, their timing is very inconvenient, heading into his election writ around Labour Day.

Trade is one of two major second-term international legacy pieces for Obama, the other being climate change. Obama is on a roll. The day after fast track passed the Senate, the U.S. Supreme Court upheld Obamacare, the signature legislation of his first term in office, then on Friday, the court made same-sex marriage legal in all 50 states — another major victory for the administration. Still in the works are agreements with Iran on its nuclear program and Cuba on restoring diplomatic relations.

He also claimed the high ground of moral leadership on the racial shootings in South Carolina. His eulogy for the Rev. Clementa C. Pinkney and other victims Friday was the most powerful and impassioned speech of his presidency. His themes were both pastoral and presidential, concluding with him singing the opening refrain of “Amazing Grace”. As rhetoric, it was soaring and eloquent.

As a leadership moment, it was perfect. Suddenly Obama is looking a lot less like a lame duck and a lot more like Reagan in his last two years in office, when he did big things like the FTA and the arms reductions talks that led to the end of the Cold War.

On TPP, the Americans have already made it clear that they want Canada to put supply management in dairy and poultry on the table. They are not alone. They’re joined by the Australians and New Zealanders, who have themselves transitioned out of protectionist supply management regimes and become major exporters of dairy products. New Zealand Trade Minister Tim Groser said in Washington a couple of months ago that Canada has a protected dairy industry “which looks like it belongs in the former Soviet Union.” He’s not wrong about that.

There are only 12,000 dairy farmers in Canada, and their milk and cheese quotas are worth considerably more than their actual farms — land, buildings, machinery and cows combined. Quotas in Quebec and Ontario, where most of the dairy industry is located, are about $25,000 per cow. Translation: a herd of 100 cows is worth about $2.5 million before they even produce a litre of milk.

The Canadian dairy market is protected by tariffs of up to 300 per cent on imports. But the closed home market has the effect of limiting exports of milk and cheese because the World Trade Organization ruled Canada’s fixed milk prices are, in effect, a subsidy, which they are.

Quebec politics dictate that every Canadian political leader ends up giving in to the pressures of supply management. Unanimous motions to that effect have routinely passed the House of Commons. Half the country’s dairy farms are in Quebec, most of them in ridings held by the NDP, which is very much on side with dairy farmers.

But dairy farmers could pose a huge problem for the Conservatives in their rural Ontario strongholds, particularly eastern Ontario. There may be only a few thousand of them, but dairy farmers are political activists with the potential to disrupt a campaign. In Ottawa, the Dairy Farmers of Canada are an entrenched and powerful lobby. Harper and Trade Minister Ed Fast are both old enough to remember the indelible image of protesting dairy farmers dousing then agriculture minister Eugene Whelan with milk on Parliament Hill in 1976.

This is why Harper got in front of a potential dairy revolt in Quebec City last Thursday when he said that while the TPP was important to Canada’s economic future, “we are working to protect our system of supply management and our farmers in other sectors.”

Fast issued a statement pointing out that “the government’s commitment to our supply managed sector has not prevented us from concluding ambitious free trade agreements such as the Canada-European Union agreement and the Canada-South Korea free trade agreement.”

That’s true. In the Canada-EU agreement, the Europeans won an increase in cheese exports to Canada from 13,000 to 30,000 metric tons, in return for concessions on Canadian beef and pork exports to Europe.

Agriculture is by no means the biggest part of the TPP puzzle, but it’s probably the most difficult to negotiate. Fortunately, Canada is not alone in protecting this sector. We could talk to the Americans about sugar, which has been protected by Congress since 1789. Or we could talk to the Japanese about rice.

But it’s also important to keep an eye on the big picture. The countries at the TPP table represent 40 per cent of the world’s economy. Canada, as a trading nation and a Pacific country, needs to be there. Intellectual property, automobiles, agriculture, labour standards and the environment are just some of the big items on the table.

“These negotiations are going to establish what will become the basis of the international trading network in the Asia-Pacific,” Harper said in Quebec. “It is essential, in my view, that Canada be a part of that, that the Canadian economy be part of that.”

But he also needs to keep them happy down on the farm. To do that, he could be looking at cash for cows, which is an expensive way to start an election.

L. Ian MacDonald is editor of Policy, the bi-monthly magazine of Canadian politics and public policy. He is the author of five books. He served as chief speechwriter to Prime Minister Brian Mulroney from 1985-88, and later as head of the public affairs division of the Canadian Embassy in Washington from 1992-94.

 source: iPolitics