Eventually, dairy market compromise in NAFTA inevitable

Common wisdom has it that if Canada hopes to get a deal on NAFTA, it will need to make significant concessions. What might those look like?

First, let’s consider the state of negotiations. The Trump administration has set an artificial deadline of Friday, but no one, least of all Canadian negotiators, is overly concerned by that. The deadline, and the pressure being exerted on Canada, are widely and rightly seen to be political theatre.

This is how Donald Trump works. He went after Mexico first, because it was in the most vulnerable position. Canada has stood up to his bullying, so it was cut out until the last minute and given the high-pressure threatening treatment.

So be it. A deal will be done when it’s done. It took Mexico and the U.S. five weeks of negotiations. To demand Canada do the same amount of work in five days is ludicrous, as many American legislators have pointed out. They also note that the U.S. president had approval to negotiate a revised and modernized threeparty agreement, not a bilateral one.

So let’s assume Foreign Affairs Minister Chrystia Freeland and her team do their jobs. What might they have to compromise on?

Canada is not happy with the renegotiated dispute resolution chapter of the agreement worked out by the U.S. and Mexico. But whatever exists in the preliminary deal is an improvement over what the U.S. wanted in the first place, which is elimination of that chapter entirely.

Similarly, there is language on intellectual property rights that Canada isn’t crazy about. The same issue was contentious during talks for the European trade agreement, but eventually a compromise was achieved and can be here as well. This should not be a deal-breaker.

Originally the U.S. wanted a five-year sunset clause, which was ruled out by Prime Minister Justin Trudeau for good reason. A trade agreement that only provides investor stability in five-year increments is not a good deal. But in the U.S.-Mexico pact, a review would come every six years, with the overall agreement in place for 16 years.

So what will Canada have to give up? Some predict the supply-management system in the dairy sector, but that seems extreme. Some measures giving U.S. producers more access to the Canadian market seem more likely. That, in itself, will lead to rocky times in the sector and political turbulence for the government — and also for the Conservatives, who also support supply management.

The fact is, nearly all other countries have given up on dairy sector supply management. Canada already gave more access to European producers as part of the Comprehensive Economic and Trade Agreement (CETA). We may need to do the same thing to secure a renewed NAFTA.

It’s not a perfect outcome, but there are upsides, the primary one being that more competition will lead to lower prices for consumers.

Canada needs to retain a strong trade relationship with the U.S. And part of that is partnering on key trade agreements, this one being the most significant. Compromises are rarely appealing to those who must sacrifice, but this one appears necessary in the overall national interest.

It took Mexico and the U.S. five weeks of negotiations. To demand Canada do the same amount of work in five days is ludicrous, as many American legislators have pointed out.