LOS CABOS, Mexico (Reuters) - Canada will join 10 other nations in talks aimed at creating an Asia Pacific free trade agreement, Prime Minister Stephen Harper announced on Tuesday, part of a bid to reduce reliance on the U.S. market in favor of fast-growing emerging economies.
The Trans-Pacific Partnership (TPP) talks are aimed at creating a free-trade zone with a combined population of 658 million people and a gross domestic product of more than C$20 trillion ($19.65 trillion).
“This is a further example of our determination to diversify our exports and to create jobs, growth and long-term prosperity for Canadian families,” Harper told reporters in the Mexican beach resort of Los Cabos on the sidelines of a G20 summit.
Harper and U.S. President Barack Obama said in a joint statement that the two countries shared the goal of “expeditiously” reaching a “high standard agreement that will build on the commitments of NAFTA (the North American Free Trade Agreement),” which went into force in 1994 and phased out most trade barriers between the United States, Canada and Mexico.
The deal will likely increase pressure on Canada to scrap a farm support program that other countries see as protectionist. Canada limits domestic production of dairy, poultry and eggs to match demand, and high tariffs are imposed on imports to protect farmers, a scheme considered unfair by competitors but one that has been politically sacrosanct.
Many of Canada’s farmers consider supply management essential to their survival since it allows them to compete against much larger U.S. competitors. Defending supply management has always been Canadian government policy.
Keen to avoid losing votes in the province of Quebec, home to a big dairy industry, the Conservatives have promised to keep the program intact and exempt it from any eventual TPP negotiations.
U.S. business groups welcomed Canada’s entry to the talks, which came fast on the heels of Monday’s announcement that G20 host Mexico would also join the negotiations.
“Companies and workers in our three countries literally make things together, with supply chains that cross our borders and make North America more competitive on the global stage. As a result, negotiating the TPP together is an excellent strategic decision for North America,” said Thomas Donohue, president of the U.S. Chamber of Commerce.
U.S. Trade Representative Ron Kirk said the White House would soon formally notify Congress of its intentions to enter trade talks with Canada, beginning a 90-day consultation period on U.S. negotiating objectives.
“Given the close integration between our economies, Canada’s inclusion in TPP is the right decision and should be mutually beneficial. It will also give us the opportunity to correct the mistakes of NAFTA, especially on labor and the environmental standards,” said Representative Sander Levin, the top Democrat on the House of Representatives Ways and Means Committee.
Harper said there were no conditions attached to Canada’s entry to the TPP talks when asked if he would put supply management on the negotiating table.
“Canada has not agreed to any specific measures in terms of an eventual Trans-Pacific Partnership Agreement,” he said.
“Canada aims, whenever it gets into a trade negotiations, to promote and to protect all of its interests across all the range of industries ... and Canada’s record in terms of dealing with those particular issues in trade negotiations under our government has been very strong and that will continue to be our position,” he said.
He said Canada would not seek to undo any progress already made by existing TPP partners and that the negotiations were in very preliminary stages. “As in any negotiations, nothing is agreed to until everything is agreed to by all parties.”
Canada’s accession to the TPP will take a period of time, he said, without giving details.
Therese Beaulieu, spokeswoman for the Dairy Farmers of Canada, a national lobby and promotional group for Canada’s 12,965 dairy farms, said the group expected Harper to defend supply management. “Canada has been able to conclude a number of trade agreements before, and we’ve kept supply management. We have confidence that they can do it again.”
Canada’s opposition political parties oppose elimination of supply management but political analysts have said that even with opposition in farming areas, there is the potential for a political upside from urban voters if prices of milk and chicken fall.
Gerald Ked, parliamentary secretary to the minister of international trade, reaffirmed on Tuesday that Canada did not give anything away to be part of the talks.
On Monday, Mexico also joined the TPP talks, while doubts remained over Japan’s seven-month-old bid to join the negotiations. The other countries negotiating the trade pact are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam.
Each member country must separately approve Canada’s bid to join the talks. The government expects to have observer status at the next round of talks planned for July, but an agreement among the nine countries currently in the group is not expected for at least another year.
“Negotiations will likely extend well into 2013 before a deal is struck. It may even drift longer than that. But it is certainly do-able in the second half of 2013,” said Jeffrey Schott, a trade scholar at the Peterson Institute for International Economics.
The Washington-based think tank on Tuesday released a study estimating the potential global income gains of a TPP pact at $295 billion, including $78 billion for the United States.
Schott said he expected Japan to come into the negotiations sometime next year, and also expected South Korea to join before an initial deal is struck.
Japan’s GDP is about $5.9 trillion and South Korea’s is $1.1 trillion.
(This version of the story has been corrected in the final line of story to show Japan and South Korea GDP in the trillions of dollars rather than billions.)
$1=$1.02 Canadian Additional reporting by Scott Haggett, Douglas Palmer and Randall Palmer; Editing by Padraic Cassidy, Peter Galloway and Dan Grebler