‘Very serious trading bloc’ achieved with TPP deal: trade lawyer

The details have yet to emerge, but Canada has scored a significant deal in reaching an agreement on the Trans-Pacific Partnership, says an international trade lawyer.

“Prime Minister [Stephen] Harper was absolutely right in taking this to the end,” says Milos Barutciski, co-head of international trade at Bennett Jones LLP.

He admits he had been a skeptic of the likelihood of a deal until recently due to the political challenges to the deal in the United States.

Today, Canada announced that members of the Trans-Pacific Partnership had concluded a free-trade agreement covering a $28.5-trillion market. Besides Canada, the 12 countries in the trading block are Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.

The deal provides for lower tariffs and covers a range of areas. They include: textiles and apparel; financial services; telecommunications; government procurement; labour; and competition policy.

While the government has released a summary of the deal that, for example, refers to an investor-state dispute settlement mechanism and provides for protection from expropriation without adequate compensation, Barutciski says the fine details have yet to emerge.

“Trade agreements historically follow a boilerplate,” he says.

For Canada, of course, supply management in the dairy sector was a key sticking point in the negotiations, especially given the political sensitivities around agriculture. The federal government has maintained it has protected supply management, and Barutciski, who notes he’s not a fan of the system, says that likely means it will continue as is but with a higher quota for imports.

“We’ll still have supply management, but imports will play a bigger role,” he says, suggesting the change would largely benefit the United States, New Zealand, and Australia.

The government did, in fact, release some details on the plans for the agricultural sector today. Under the agreement, Canada will open up access to imports through quotas phased in over five years: 3.25 per cent of Canada’s milk production for 2016; 2.3 per cent for eggs; 2.1 per cent for chicken; two per cent for turkey; and 1.5 per cent for broiler hatching eggs.

In return, the government will provide the supply-managed sector with $4.3 billion in support, including an income guarantee program to “keep producers whole” with 100-per-cent income protection to producers for 10 years from the day the trade deal comes into force. The funding will continue on a “tapered basis” for a further five years, the government announced today.

Graham Lloyd, general counsel with the Dairy Farmers of Ontario, emphasizes his organization is pleased with the agreement "in the circumstances" given reports that those lobbying on the supply-management issue in the United States had been seeking access to 15 per cent of the market.

"You can't ever say when you're losing market share that you're happy," he says. "But in the circumstances of what was at risk, we are relieved that it wasn't as serious as it could have been."

Lloyd also notes the organization is happy with a plan to cancel a duty-deferral program that allowed imports to Canada for processing with a window of up to four years to re-export the product. "That program was not well audited," he says.

"We know that as much as one per cent of our market was being taken," he adds.

In addition, Lloyd gave kudos for new funding for development and innovation in the sector.

"We are in need of investment for new plants . . . and this will go a long way towards that," he says, noting he's not yet ready to pronounce on the government's broader compensation program for the sector given the need to assess the impact of the quota changes.

"I'll say at this point, it's difficult to assess," he says.

Trade deals are, of course, always controversial, and the Conservative government has faced some criticism for moving on the issue during an election campaign with the NDP in particular expressing cynicism about the deal.

Barutciski, however, says the negotiations couldn’t stop for a Canadian election, particularly given U.S. President Barack Obama’s drive to complete a deal as one of his last major achievements in office. And he suggests the deal will open up significant opportunities for Canadian companies to join “broader Pacific supply chains.”

But the biggest imperative for Canada, he says, was avoiding a repeat of the situation with South Korea where the United States got ahead of Canada when negotiations with this country stalled over the auto sector.

“We were pretty much wiped out when we stalled over the auto issue,” says Barutciski.

He notes Canada’s beef and pork industries suffered significantly despite reaching a subsequent free-trade deal with South Korea.

“American beef and pork suppliers basically took over our market,” he adds, suggesting Canada faced a similar loss of market access if it stayed out of the Trans-Pacific Partnership.

While politicians such as Harper are touting the economic benefits of the deal, Barutciski says the partnership was in many ways about the U.S. “geopolitical objective” of countering China’s growing influence in the region. The deal took years to conclude, something he attributes to the complications of bringing in additional countries such as Canada late in the game.

“That made the negotiations more complicated,” says Barutciski, who nevertheless suggests that having countries such as Canada, Japan, and Mexico involved “makes this a very serious trading bloc.”

Update 4:25 pm: Quotes added from Graham Lloyd.

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