OTTAWA – As Canada’s dairy, poultry and egg industries nervously await this summer’s trade panel ruling on supply management tariffs, some federal officials are quietly suggesting the result may not be the clear-cut legal victory Canada has predicted.
Officially, the government still insists it expects to win a decisive victory vindicating Canada’s tariffs.
But industry, provincial and political sources say word is being spread privately that the North American Free Trade Agreement panel may not make a simple legal ruling on whether Canada’s protective import tariffs are trade legal.
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Instead, there is talk of a third option, a ruling which says that technically Canada’s decision to convert quantity restrictions on imports of poultry, dairy and egg products to high tariffs is legal, but not in the spirit of the free trade deal.
This could lead to a panel suggestion that the two countries resolve it politically by sitting down to negotiate freer access to both their protected markets – dairy, poultry and eggs in Canada and peanuts and sugar in the United States.
Under world trade rules, the U.S. last year imposed the same type of border tariffs to protect sugar and peanut industries that it is challenging in Canada.
Sources say the prospect of a “third option” judgment was raised last week when senior foreign affairs trade officials met provincial officials to discuss various trade files.
They said Canada could get its first look at a confidential preliminary report from the NAFTA trade panel by July 15, although it is not expected to be made public before August.
The prospect of a mixed judgment has outraged Canadian supply management officials and their political supporters.
Farmers disconcerted
“We have been told consistently we have a strong case and we will win,” Mike Dungate, head of trade policy for the Canadian Chicken Marketing Agency, said June 14. “This is supposed to be a challenge on strict legal grounds. It’s disconcerting to hear that it could lead to a proposal for negotiations.”
Liberal MP Murray Calder, a chicken producer, said he heard the same suggestion “reading between the lines” during a recent visit of Canadian MPs to Washington.
“My position is that the panel should issue a legal judgment and not a political suggestion,” he said last week. “We should do no negotiating. If we are within the law, that’s it. As soon as you sit at the table with the Americans, you have to start giving things away.”
Jack Wilkinson, president of the Canadian Federation of Agriculture, said he has heard the same third option idea from government trade officials.
“I absolutely reject it,” he said. “We were told with NAFTA we would be governed by the rule of law. We have a good case. There is no way we should agree to go back to the table to give the Americans more access. If we win the case on the letter of the law, it is case closed.”
A trade panel ruling which suggested the issue be thrown back into the political arena would undermine one of the main NAFTA attractions for Canadian farmers – that trade disputes would be settled according to the letter of the law rather than according to the political power of the Americans.
“It was raised in terms of options when we were in Washington,” Liberal MP and dairy farmer Wayne Easter said last week. “If that happens, our government will have to stand tough.
“We cannot get into negotiations with the Americans. Farmers gave up enough to get this deal.”
