Ever since Canada got serious about seeking membership in the TPP, the spectre of eliminating supply-managed dairy has haunted the process.

Domestically, the government has maintained a sharply diffuse position of defending supply management at the same time as it is putting everything on the table for consideration (National Post, 15/11/2011).

Now that it has a seat at the negotiating table, there is little that other parties can do to hold Canada to non-binding promises made on the way in the door. On the other hand, defending a couple of highly protected agricultural sectors weakens Canada’s negotiating strength in seeking market access for agricultural exports where it has a competitive advantage like pulses and beef.

A growing number of Canadian consumer and food service groups are calling for an end to an anachronistic system of protections.  Dawson Strategic argues that, if supply management is done for, it will be domestic, not external, pressures that shut it down.

New Zealand – with its highly efficient dairy export sector – has been the most consistent opponent to supply management.  The U.S. position is changeable and highly dependent on domestic politics. The 2012 Farm Bill, though currently languishing in Congress, offers a set of dairy protections that rival anything we have in Canada.  If the Bill passes, then the U.S. will be disinclined to offer dairy market access in the TPP.

If American dairy protections do not survive Congress, then the U.S. is likely to take a more aggressive stance, eyeing the Canadian market as a way to make up for rising imports and shrinking domestic demand.  The U.S. position was clearly articulated at the December 7th TPP stakeholder sessions by the Teamsters, which represents 20% of U.S. dairy manufacturing workers.

The Teamsters’ preferred position is against granting market access for dairy products, but should this occur, then Canada must open its market as well, the food safety rules of the TPP must have a strong enforcement mechanism, and Fonterra, New Zealand’s largest dairy cooperative, must be subject to strict disciplines to ensure competitive conditions (Inside U.S. Trade, 7/12/2012).