June 25, 2015 / 4:13 PM / in 2 years

UPDATE 2-Canada must be part of Pacific treaty, will defend farmers -PM

(Adds fresh U.S. pressure on Canada paragraphs 5-6; figures in U.S. dollars)

By David Ljunggren

OTTAWA, June 25 (Reuters) - Canada must join a proposed Pacific trade pact but will strive to protect farmers, Prime Minister Stephen Harper said on Thursday, referring to foreign pressure to scrap tariffs that protect the dairy industry.

Some of the 12 nations taking part in talks on a Trans-Pacific Partnership (TPP) want Canada to start dismantling a system known as supply management, which protects dairy, egg and chicken producers.

That could challenge Harper politically in the run-up to a close-fought Oct. 19 election, especially since his Conservative Party has broad support in rural areas.

The U.S. Senate on Wednesday passed legislation vital to securing the deal, which will in theory allow negotiators to quickly hammer out the details.

Patience with Ottawa is running out. On Thursday, U.S. Trade Representative Michael Froman made clear that Washington wanted to see movement.

“We have work to do ... with Canada on issues like dairy and poultry, where we are certainly waiting for them to come to the table with a meaningful offer,” Froman told a forum organized by Foreign Policy magazine.

Proponents say TPP would cover 40 percent of the world economy and raise annual global economic output by nearly $300 billion.

“It is essential in my view that Canada be part of that ... we are working to open those markets for Canada,” Harper told reporters in Quebec City.

“At the same time we are working to protect our system of supply management and our farmers ... Canada always, in our negotiations, does our best to act in the interests of all of our sectors and will continue to do that right to the end of these negotiations,” he said.

Harper did not give details about how Canada could both join TPP and protect supply management.

Officials played down a report in the Globe and Mail newspaper, which said Harper had decided Canada must sign onto TPP and start dismantling dairy protections despite the potential political cost.

“Negotiations are ongoing. Reports that Canada has made particular concessions are false,” said a spokesman for Trade Minister Ed Fast.

A spokeswoman for the Dairy Farmers of Canada said Ottawa had assured the lobbying group that it still backed supply management.

Harper spoke in Quebec, the province that produces 40 percent of Canada’s dairy products and where the Conservatives aim to win more seats.

Quebec farmers last month took out full-page adverts defending supply management. (Additional reporting by Krista Hughes in Washington; Editing by W Simon and David Gregorio)

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