U.S. demands end to supply management in Canada

ARLINGTON, VA. The United States has lit the fuse on one of Canada’s most politically explosive trade issues, asking in NAFTA talks for an end to the supply management system for dairy, chicken, eggs and turkey within the next decade.

With that demand, the U.S. has now adopted a highly aggressive posture on virtually all the key issues expected to arise in the current NAFTA talks: It has asked to erect trade barriers in its own politically sensitive sectors, while eliminating them north of the border.

The latest demands come near the end of a weeklong round where American negotiators dropped bombshell demands, leading the other nations to question whether the U.S. goal is to actually reach a deal or to blow up NAFTA.

Two sources say the request came on Sunday evening, catching some on the Canadian side off-guard, since they hadn’t expected the highly contentious issue to arise during the current round.

One source says the supplymanagement request came with an initial phase-in period of five per cent more market access per year, leading to total duty-free, quota-free trade in protected supply-managed areas within 10 years.

That adds dairy, poultry, and eggs to a list of irritants that includes auto parts, textiles, trade-enforcement panels, Buy American rules for public works and a proposed five-year termination clause embedded in the agreement.

The Canadian government says the idea is a non-starter. Canada’s system of protections arose from a 1960s bid to stabilize dairy prices by limiting imports and setting fixed prices.

The system’s critics say the tightly controlled program stifles innovation, bars Canadian firms from selling onto international markets, limits choice at the grocery store and saddles consumers with higher prices.

The U.S. move was praised by the Montreal Economic Institute, a free-market think tank in Montreal, which urged Canadian policy-makers to seize the opportunity to dismantle a system that it says costs Canadian families an extra $339 a year in grocery bills.

“You can’t on the one hand defend tariffs that sometimes reach 300 per cent for supplymanaged products, then accuse the American government of being protectionist,” said Alexandre Moreau, a policy analyst with the institute.