The reluctance of Canada to open its regulated dairy market to foreign products, and the insistence of New Zealand that it had to be able to export its dairy products freely was always going to be a sticking point in the negotiations.
But this is bigger, much bigger.
US negotiators had quietly cut a side deal with Japan on auto parts manufacturing, and contemptuously sprang the news on its major North American trading partners, Canada and Mexico, expecting them to simply accept it as a fait accompli:
Canada and Mexico only learned when they arrived at the Hawaii round of Trans-Pacific talks in late July that the United States and Japan had brokered a deal on vehicle imports that could hit the NAFTA partners’ auto sectors hard. And, furthermore, Washington had assured Tokyo that its North American neighbours would accept this side deal.
Ottawa and Mexico City discovered in Hawaii that Japan and the United States had cut a side deal lowering the threshold for how much of an automobile would have to come from Trans-Pacific signatory countries in order for it to avoid hefty tariffs.
The remainder of the auto could come from low-cost suppliers outside Trans-Pacific countries, such as Thailand, and are a major source of parts for Japanese auto makers.
Under North American free-trade rules today, 62.5 per cent of a light-duty vehicle must be made in Canada, Mexico or the United States for it to enter these markets free of tariff.
The deal Japan and the United States cut between themselves lowered this threshold significantly. The side-deal details have not been confirmed, but Japan was reportedly seeking a Trans-Pacific country content threshold of 30 per cent and the Americans started out at 55 per cent but compromised at a much lower rate.
Canada's Conservative Prime Minister, Stephen Harper, must have flipped his awful hairpiece when he learned about it. He'd been preparing to throw the Canadian dairy industry overboard, but the auto manufacturing industry in Ontario, with its large population and hence large number of potential votes, and a federal election coming up in two months, was a bridge too far:
The ensuing disagreement regarding auto imports was a major factor in stalling a deal in Hawaii last week.
There is tremendous anger in Ottawa at how U.S. Trade Representative Michael Froman conducted himself at the Maui talks, particularly since Canada and the United States have been close partners in the auto industry for more than 50 years and both countries joined forces in 2009 to bail out two U.S. auto makers.
The Canadian government won’t speak publicly to this, but a former senior adviser to Canadian Trade Minister Ed Fast gave voice to the frustration at how Washington has handled auto talks at the transpacific negotiations.
“To try and cut this side deal just poisons the well,” said Adam Taylor, now a trade consultant at Ensight.
He described the United States as having a “tin ear” for the fact “there are other sovereign countries at the table” and the “North American production platform” that has existed for decades....
Canadian auto-parts makers say they are worried about the prospect of Japan winning the right to sell cars duty-free inside a future Trans-Pacific Partnership trade zone when a majority of the vehicle content comes from low-cost countries that are not signatories to the commercial accord.
This would not just hurt the North American auto industry but also steel and plastics makers. It could also reduce the rationale for assembling cars within NAFTA countries.
So just keep it up, US trade representatives. You and your contempt for your trading partners is the best defense citizens of the TPP countries have to protect themselves from this terrible deal with its rapacious corporate usurpation of national sovereignty over environmental protections, labor protections, national healthcare, food standards and labeling, and so many other social goods.