Negotiating NAFTA and TPP at the same time is complicated

The 11 remaining countries in the Trans-Pacific Partnership have agreed to move ahead with work on a trade pact minus the United States after a dramatic 24 hours at the recent Asia Pacific Economic Summit in Vietnam.

Getting to this point was dicey.

Canadian Prime Minister Justin Trudeau missed a leaders’ meeting, infuriating several world leaders who accused Canada of sabotaging the deal.

The fact that the TPP has survived another day was welcomed by Canada’s agriculture industry, which sees the deal as a key avenue into the lucrative Japanese market, which the industry has sought after for a very long time.

Still, the agreement in Vietnam means Ottawa’s trade file just got even more complicated.

For one thing, many of the contentious files in the TPP are also sensitive issues in the ongoing North American Free Trade Agreement. Those files include Canada’s supply management system, rule of origin for automobiles and cultural exemptions, to name a few.

The fifth round of NAFTA talks is scheduled for Nov.15-21 in Mexico City. The round was delayed to give negotiators from all three countries a chance to regroup while trying to narrow significant gaps in positions after a tense fourth round.

Whether those gaps can be overcome remains to be seen. U.S. negotiators have tabled several “poison pill” requests, including a five-year sunset clause, which Canadian and Mexican officials have refused outright. An American walk-out remains a real possibility.

Ottawa has said from the beginning of the NAFTA renegotiation that Canada needs to diversify its trade portfolio.

However, doing so while at the same time trying to salvage NAFTA is easier said than done, trade experts say. The TPP and NAFTA may be different deals, but the decisions, concessions and proposals tabled at either table can easily influence the other negotiation.

Consider supply management, for instance.

Canada has said repeatedly it will defend the country’s quota-based production system for eggs, dairy and poultry at the NAFTA table. Negotiators have already rejected an American demand that calls for the elimination of all tariffs on supply managed goods within 10 years and changes to this country’s do-mestic milk classification system.

Supply management was one of the last contentious issues to be addressed during the original TPP negotiations when the United States was still part of the deal. New Zealand and Australia also had Canada’s supply management system in their crosshairs.

Canada has said it wants to take another look at the concessions made in the TPP now that the United States is no longer part of the deal. Push-back from New Zealand and Australia should be expected.

However, any Canadian concessions on the supply management file at the TPP table would go against negotiators’ positions at the NAFTA table. It sets a precedent that Canadian dairy farmers do not want set.

Then there’s the Liberals’ ongoing interest in negotiating a free trade agreement with China.

At least one retired cabinet member, former Industry Minister James Moore, has warned that entering a free trade agreement with China could lead to problems with the U.S., given the President Donald Trump administration’s testy relationship with Beijing.

Global Affairs Canada recently released results of its public consultation with stakeholders and Canadians about a potential China trade deal. More than 600 businesses and stakeholders took part.

The department found that doubts continue around whether a China-Canada free trade agreement would resolve ongoing trade issues. Those challenges include Beijing’s inconsistent rule of law and the nature of China’s state-run economy — concerns in Canadians view “that are more difficult to resolve using a traditional approach to free trade agreements,” the department said.

Sounds complicated.

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