Supply management a local hot-button issue with NAFTA

The reopening of the North American Free Trade Agreement – talks got underway this week – is but the latest saga in a long history of Canadian trade and tariff issues.

“Tariffs,” as the historian Robert Bothwell put it in his Penguin History of Canada, “were the great theological question of nineteenth century politics,” and not just a Canadian one. With the great behemoth of the United States to the south, and the imperial mother-country, ever hungry for the spoils of the colonies lying to the east, a surfeit of British outposts and plantations scattered in the Atlantic and across the world, and a rising domestic industry and consumer market, the question of tariffs has wound itself inexorably to the history of Canada.

Apparently, the question has yet to be properly answered.

The NAFTA negotiations that started Wednesday follow the election-trail promises of Donald Trump –  “the worst trade deal in history,” he called it – and will be coloured by the U.S. president’s bellicose words and tweets. Canadians don’t have any idea what to expect at this point.

Not a lot just now, suggests Patricia Goff, associate professor and chair of Wilfrid Laurier University’s department of political science. It could be a while.

“I think it’s way too early to try to read the tea leaves. If you look at the various trade negotiations that have gone on in recent years, they take a long time, they take several years,” said Goff in an interview Tuesday.

“One of the things we’re noticing in the United States, there are a lot of Congress people, business people who are saying ‘do no harm.’ Don’t create problems for us with this, so they will likely reign in the negotiations.”

Cooler heads, in other words, are likely to prevail.

Goff also pointed out that while Trump mans the Twitter account, the actual negotiations themselves would be headed by the U.S. trade representative Robert Lighthizer, the American counterpart in this conflict to Canadian Foreign Affairs Minister Chrystia Freeland.

Trump was elected to office on the back of his hostility towards such things as trade deals and deficits, particularly with the NAFTA’s third member, Mexico, though Canadian industries have not been immune to itchy Twitter-fingers.

Despite his rhetoric, Trump seems unlikely to “rip up” the NAFTA agreement as he had promised, while the looming uncertainty of entering into a trade war with the U.S. is receding.

“I would say the fear of a trade war is considerably less now than it was when Trump took office, and I think there are a couple of reasons for that. One, he has lost a certain amount of his credibility, so that has not helped. He just doesn’t command the sort of fear that he did initially,” said Goff.

Secondly, she pointed out that the president was only an “influencer” in the negotiations and thus far from a deciding factor.

Still, there is plenty on the table, plenty of industries that can be swayed depending on the outcome of the negotiations. The automotive business – a heavily integrated industry with equipment, parts and expertise flowing very liberally across all three borders – has fallen into the crosshairs.

Agriculture, meanwhile, has not been targeted in a broad sense the same way as the automotive sector, but specific subsections, like the B.C. softwood industry and Canadian dairy producers have at various points been suddenly and dramatically brought into dispute.

“I don’t think there’s any question the key issue in the townships is the agricultural portfolio,” said Art Sinclair, vice-president of the Greater Kitchener Waterloo Chamber of Commerce, especially those areas that fall under the Canadian supply management protections: dairy, poultry and eggs.

“Certainly the whole issue with supply management and the continuation of supply management, I think is just going to be the dominant issue for all of Waterloo Region now,” said Sinclair. “Certainly speaking with our membership in the city and the townships, you talk about the NAFTA negotiations and it seems like the first thing that comes up is supply management and agriculture.”

Sinclair says the Chamber of Commerce has reached out to community businesses for their input via a survey available online.

The practice of supply management, which has historically protected certain agricultural industries like dairy, eggs and poultry from the volatility of agriculture markets, has come into contention. The system, which was first adopted by the dairy industry in the 1970s to moderate the wildly fluctuating price of milk in the market, while beneficial to Canadian dairy producers, has been viewed by the U.S. as a discriminatory practice, and a de facto tariff wall unfairly shutting out U.S. dairy products from Canadian markets.

Eliminating these practices in agriculture has been specifically listed by the U.S. as one of their goals in the “Summary of Objectives for the NAFTA Renegotiation,” released July 17:

“Seek to eliminate non-tariff barriers to U.S. agricultural exports including discriminatory barriers, restrictive administration of tariff rate quotas, other unjustified measures that unfairly limit access to markets for U.S. goods, such as cross subsidization, price discrimination, and price undercutting.”

That won’t be an easy goal for the U.S. to achieve, however.

“There’s a lot of support for the system as it exists,” says Sinclair. “And I think if you speak to a lot of dairy producers and chicken producers in the region of Waterloo and across Canada, they’re certainly lobbying heavily for Canada to maintain the current supply management system.”

What that will mean for the years to come is up for speculation. Goff says the negotiations could take years to fruition, pointing out the protracted trade talks that led to the Trans-Pacific Partnership (TPP) and Comprehensive Economic and Trade Agreement (CETA) with the EU.

So what should Canadians be expecting? A long, long talk.

This article was written by Faisal Ali for the Observer. Read the original article here.