Canada has become a founding member of the Trans-Pacific Partnership, a 12-country trading block that will enjoy a significant drop in tariffs nearly across the board while fundamentally changing the nature of the North American auto industry and nudging Canada's supply-managed agricultural sectors towards greater international trade.
Canadian officials briefing media and industry stakeholders in Ottawa early Monday morning outlined a wide range of new export opportunities for Canadian industries.
For example, Canadian beef exports to Japan — the world's third largest economy — currently subject to tariffs of over 38 per cent, will be lowered to 9 per cent over the next 15 years.
Other tariffs on a large range of commodities like canola, fish and seafood, forestry products and industrial goods will be eliminated or lowered across the TPP region, either immediately or over a phase-in period ranging from five to 15 years.
Canada will also have new access to government procurement projects abroad, including opportunities to bid on projects for six regional power authorities in the U.S.
But the compromise required to reach the deal means that aspects of the North American Free Trade Agreement pertaining to the auto sector will change. That deal required roughly 60 per cent of parts and vehicles sold tariff-free to be manufactured in North America.
In order to qualify as a tariff-free vehicle under the TPP, 45 per cent of the net cost of the vehicle will need to originate in TPP countries — not just North America. For auto parts, 45 per cent of core parts and priority parts identified by the Canadian industry, and 40 per cent of the net cost of other parts, will need to originate in TPP countries.
Canada has also granted new access for TPP member countries to its supply-managed agricultural sector. Imports representing roughly 3.25 per cent of Canada's current annual dairy production will be allowed, as well as 2.3 per cent for eggs, 2.1 per cent for chicken, 2 per cent for turkey and 1.5 per cent for hatching eggs.
Offsetting this is a phased-in tariff reduction for artisanal cheese producers who wish to export to the United States.
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Fluid milk will be included in the dairy allotment, but 85 per cent of the milk will be directed to Canadian processors. All TPP countries will have equal access to the new dairy allotment, although exporters like New Zealand and Australia are more likely to ship butter or cheese across the longer distances than fluid milk.
All dairy imports will be subject to Canadian regulations, including physo-sanitary rules like permissible livestock drugs.
Prior to the TPP, Canada's supply managed agricultural sectors did not receive taxpayer-funded income support programs from the federal government.
With the implementation of TPP, a $4.3 billion suite of income guarantees and quota value guarantees becomes available to Canadian farmers over the next 15 years, as well as a $450 million program to support improvements to Canadian dairy, poultry and egg processing facilities.
Cabinet has also approved a $15 million market development fund to help the supply-managed agriculture sector promote Canadian products.
Unlike the compensation program offered for the Canada-European Union trade agreement, these programs will not be contingent on proven losses in the sector.
The 12 countries in the TPP are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam.
A "comprehensive" text of the agreement in principle will be released "in the coming days," officials said Monday. Each country will need to ratify the final text of the deal before it takes effect. In Canada, that will take the form of a vote in Parliament, following the Oct. 19 federal election.
Source: AlbertaPork