A Spoilt Deal: How a Dispute Over Dairy Helped Sidetrack the Trans-Pacific Partnership

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The Trans-Pacific Partnership (TPP) has been on many people’s minds lately, especially Canadian voters who are preparing to go to the polls on Oct. 19. The massive trade pact includes 12 countries at different stages of economic development, covering some 40% of the world’s economy. It is being negotiated in secret, without consultation from lawmakers in the nations signing on, let alone the citizens of those nations.

Stephen Harper’s Conservatives were hoping to push the deal through before the October election, but they now know this won’t happen. As reported by multiple sources, the last round of talks in Hawaii ended in failure over what many commentators called “minor issues.” The setback was good news for global opponents of the trade pact, who know that upcoming elections – not only in Canada but also in Japan and especially in the United States – could derail the TPP, perhaps permanently, depending who gets elected in each of these countries.

As Reuters reported in the aftermath of the Hawaii talks, key points holding up the negotiations included a dispute between the U.S. and Japan over auto parts production, and the fact that negotiators couldn’t reach agreement about the length of new drug patents. The deal-breaker, however, seems to have been dairy products: specifically, a fight between two countries with relatively small populations, Canada and New Zealand.

The Supply Management Setback

The dispute between Canada and New Zealand hinges mainly on Canada’s supply management system. This system features high tariffs on imports and no subsidies for farmers, unlike in the U.S., where government subsidies keep the price of milk products artificially low. Instead, the supply management system does almost the opposite, by keeping prices higher.

More concretely, the system puts quotas on how much milk – as well as cheese, poultry and eggs – can be produced and sold by farmers. This means consumers pay a higher purchase price to help ensure the domestic industry remains viable for producers.

Whether one agrees with its supply management system or not, Canada’s lack of subsidies for dairy producers would suddenly become very problematic once the TPP goes into effect, according to John Morriss, associate publisher and editorial director of Farm Business Communications. In an op-ed in The Globe and Mail, Morriss makes the valid point that New Zealand, which has been the most vocal country pushing to open up foreign markets to dairy producers, can graze cows year round while Canadian dairy farmers, due to the long northern winter, enjoy much less productivity.

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