Trans-Pacific trade deal is close, leaders say

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Stephen Harper, Barack Obama and 10 other leaders of countries bordering the Pacific Ocean used the beginning of a major international summit in Beijing to announce they're nearing a major agreement to liberalize trade between their economies.

Trade watchers warn, however, that there are still significant obstacles to an agreement on what's called the Trans-Pacific Partnership, a deal that would eclipse NAFTA in importance for Canada.

Mr. Harper and the leaders of the 11 other nations involved in the Trans-Pacific Partnership regional trade talks met Monday in Beijing on the sidelines of an Asia Pacific Economic Cooperation summit. It was one of the few sessions Mr. Harper attended at APEC, including the group photo and dinner, before flying back to Canada to commemorate Remembrance Day in Ottawa.

The leaders said in a statement after their meeting that significant progress in recent months "sets the stage to bring these landmark Trans-Pacific Partnership negotiations to conclusion."

The Trans-Pacific talks, they said, have "narrowed the remaining gaps" on the legal text of a trade agreement and are accelerating efforts to clinch a deal.

"With the end coming into focus, we have instructed our ministers and negotiators to make concluding this agreement a top priority."

The Trans-Pacific Partnership is expected to be more comprehensive than the North American free-trade agreement, covering a greater scope of commerce and a market of more than 792 million people. The countries involved are the United States, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Mr. Obama said Monday that a Trans-Pacific deal will set a new bar for breaking down trade barriers. "We're going to keep on working together. We believe this is a model for trade in the 21st century."

A TPP deal could have a dramatic impact on Canada's heavily protected dairy and poultry industries because all negotiating partners are going to be expected to contribute to an ambitious lowering of trade barriers. It is expected Canada will face pressure to greatly reduce tariffs on foreign milk, eggs, cheese and poultry.

The government has been adamant it will stand up for the protectionist dairy and poultry industry. But the tariffs shielding dairy and poultry products from foreign rivals are so high – from 150 per cent to nearly 300 per cent – that Ottawa has considerable room to trim them or to offer limited, duty-free access.

Canada has long had two radically different trade policies for agriculture: It tries to open markets abroad for beef, grains and oilseeds while fending off foreign competition for heavily regulated dairy and poultry producers.

These "supply-managed" industries are largely shielded from foreign rivals while production and prices are set by a command-and-control approach that critics say hikes prices for Canadian consumers.

Trade experts have predicted that U.S. pressure could ultimately spur Canada to make concessions, such as offering some duty-free access or trimming tariffs.

When the 11th hour of talks arrives, they say, it is hard to imagine Washington scaling back American dairy subsidies while allowing Canada a pass.

Trade lawyer Lawrence Herman said two major challenges remain for the TPP talks.

The United States and Japan, both countries with particularly politically sensitive farm subsidies, have to hammer out a deal to liberalize trade that offers sufficient new market opportunities for other negotiating countries. "The U.S. and Japan have to get a deal on agriculture that's saleable to the others," Mr. Herman said.

More importantly, Mr. Obama needs the Republican-dominated Congress to grant him negotiating authority to sign a Trans-Pacific deal. "Without that, TPP is a phantom exercise," Mr. Herman said.

He said it's hard to imagine the Republicans doing anything to help a Democrat President in the years leading up to the 2016 elections.

Mr. Harper is returning to the Asia-Pacific region this week for a visit to New Zealand and then a trip to the Group of 20 summit in Brisbane, Australia.