Supply management on table in EU talks, negotiator says

Canada is willing to talk about its protected farm industries in free trade negotiations with the European Union, but its goal is to keep its protectionist mechanism, supply management, in place, the country’s chief agriculture negotiator said Wednesday.

The Conservative government, sensitive to sentiment in vote-rich Eastern Canada, has long said it will maintain supply-management measures for dairy, poultry and egg farmers. These measures largely entail matching production to domestic demand and levying high tariffs to discourage imports.

But Prime Minister Stephen Harper drew criticism after saying on Nov. 13 that all issues are up for negotiation as Canada joins talks to forge a free trade area in the Asia-Pacific region, even though he affirmed that Ottawa intends to protect its supply-management system.

The government is taking the same approach in negotiating free trade with the European Union, said top farm negotiator Gilles Gauthier.

"All trading goods for us are subject to negotiation," Gauthier told Reuters on the sidelines of the Canada Grains Council conference in Ottawa. "But our position on supply management is what it is, and it has always been like this."

Asked if Canada might seek to keep supply management but ease tariffs, Gauthier said it may come down to politics.

"If there are political decisions later, that’s up to our political masters."

The Dairy Farmers of Canada said earlier this month that it believes the government sees value in supply management.

"Most difficult part"

EU countries, such as the Netherlands and France, would benefit from shipping more cheese to Canada, while Canada is eager to move more beef, pork and grain into Europe, the world’s biggest agricultural importer.

Canada has more to gain from free trade on farm products than the more heavily protected European market, Gauthier said, so it may have to make concessions in nonagricultural areas to win greater farm product access.

Four-fifths of Canada’s 13,200 dairy farmers live in Ontario and Quebec, populous provinces that are generally critical to election success.

Even as the Conservative government says it will defend supply management, it is moving rapidly to create an open market for grains in Western Canada, where the Conservatives  have strong support.

Canada hopes to become the first major agricultural exporting country to establish free-trade access to the European Union, which would give it a massive advantage if competitors such as the United States continue to face high tariffs.

Canada is the world’s No. 3 or 4 wheat shipper, depending on yearly production, and the No. 3 exporter of beef and pork.

The EU and Canada have completed nine negotiating rounds and are moving toward a free-trade deal in the first half of 2012.

"Things are moving in the right direction," Gauthier said in a presentation at the grain conference. "The most difficult part is always the last part, but there is a good prospect for an agreement."

Free trade talks with the EU are also focusing on intellectual property, procurement and investment protection.

For Canada, the pact would be the biggest since it signed the landmark North American Free Trade Agreement with the United States and Mexico in 1994. Canada-EU bilateral trade in goods totaled $77 billion last year, far shy of the Canada-U.S. trade total of $556 billion.

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