Canada
September 7, 2018

NAFTA 2.0: Will Canada Give Up Supply Management?

 |  By: Anna-Lisa Laca

All eyes have been on Washington this week as trade negotiators from the U.S. and Canada work to come to a final agreement on the renegotiated North American Free Trade Agreement (NAFTA). 

What’s holding up NAFTA 2.0? Dairy policy.

“I think NAFTA is down to really one to two issues: One issue for the U.S. and one issue for Canada,” Jim Wiesemeyer told AgriTalk host Chip Flory adding that Robert Lighthizer, the U.S. Trade Representative promised a handful of lawmakers that they would get Canada to make a significant give. “I think that's the only way you can pass this in Congress.”

The snag is milk, said Larry Kudlow, the National Economic Council director, last week. Will Canada be willing to budge on dairy access? Sean Haney of RealAgriculture.com says that depends on what the ask is.

“If Robert Lighthizer is asking for a complete destruction of the supply management system. I would say that that that's a super tough sell, especially with a government here in Canada that is completely under siege,” he said. “If it's about Class 7, I think there is a compromise. I continue to be optimistic about it.”

According to Haney, Canada won’t be willing to compromise on cultural exemptions or the Chapter 19 dispute resolution. 

“I think there's a compromise there,” he said. “I think it makes both sides look completely ridiculous that we would hold up this economic pact over milk. And I realize that it's an important issue on both sides for dairy producers, but this is a complete over promise by the Trump administration. You could open up Canadian dairy market 100% and it's like a little tick. It doesn't really make that big of a difference overall, so I think it's gonna be hard to come through some of these promises the President has made.”

The Trump administration needs movement on the dairy provision to get the trade pact passed in Congress, according to Wiesemeyer.

“Lighthizer is looking at the next step in my judgment, getting through Congress, and the only way you do that is by getting a dairy provision. Then he can get some Democrats like Collin Peterson on board,” he said. “So, I think that's the secret here now, if they get some cover with dairy then this thing can get through the U.S. Congress.”

Haney predicts the U.S will trade Chapter 19 for dairy access. Chapter 19 is another mechanism for Canada to dispute trade issues, Wiesemeyer explained. 

“Like we have now relative to the International Trade Commission and other aspects, the U.S. wants to water that down because they think it gets into sovereignty issues,” Wiesemeyer said. 

According to Haney, Canada wants to ensure they don’t have to settle trade disputes in U.S. courts, particularly because President Trump doesn’t follow trade rules. 

“I think what we're going to see is: Canada gets to keep Chapter 19 for giving up some dairy market access,” Haney said. “That is the most likely outcome here.” 

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