Canadian Prime Minister Stephen Harper, who has pledged to reach a deal, signaled from Ottawa that the team led by Trade Minister Ed Fast has the flexibility to reach an accord.
"Given that we are a trading nation, and given the global economy is the way of the future, we cannot be left out of this kind of trade arrangement," Harper said in an interview on Wednesday. "The government is at the table making sure it protects the interest, as best we can, of every Canadian industry."
Still, Canada's offer on Maui fell short of what its trade partners expected, according to the people briefed on the talks. The absence of extensive staff-level work with Canada before the Hawaii meeting kicked off also handicapped the talks, the people said, asking not to be named given the sensitivity of the negotiations.
A Canadian government official dismissed the idea that the country is holding up talks or that it dragged its heels, saying Fast and his chief negotiator have spoken regularly with their counterparts in recent months.
"We've been a serious and constructive negotiating partner," Rick Roth, a spokesman for Fast, said in an email. "I view this type of pressure tactic as just more negotiating through the media, and we've been consistent in not engaging in that."
Trevor Kincaid, a spokesman for Froman, declined to comment.
The Hawaii talks come on the eve of an election campaign in Canada, as polls signal Harper's Conservatives are at risk of losing. The Canadian Broadcasting Corp. reported Wednesday that Harper on Aug. 2 or Aug. 3 will call an election campaign. Conservatives regularly tout their record in signing new trade pacts and have said being included in TPP is essential.
Harper will be under pressure to end protection of farmers in order to be included in the TPP, but faces domestic pressure from the dairy industry -- concentrated in Ontario and Quebec, the two most vote-rich provinces -- to preserve the lucrative system of quotas and tariffs and keep Canada's borders at least partially closed to milk, cheese and other protected industries.
A better Canadian offer could resolve the interlocking disagreements common at the end phase of trade talks, Petersen of New Zealand said. Without that, the U.S. won't give New Zealand better access to its market, and in turn wouldn't have the credibility to demand Japan allow more dairy imports.
"If Canada doesn't open to the U.S., none of those dominoes will fall," Petersen said.
The issue looms particularly large for New Zealand, which sells more than 90 percent of its dairy production abroad, accounting for 27 percent of its total exports, Petersen said.
Wally Smith, president of Dairy Farmers of Canada, said he had "no reason to believe" his country couldn't reach an agreement in Hawaii.
The Canadian system limits imports and domestic production to raise prices its dairy farmers receive. Smith suggested Canada has flexibility to increase imports as long as the change can be forecast.
"Predictable imports will allow us to manage the system on behalf of all Canadians," he said in an interview.
Canada has previously concluded trade pacts with other nations that affected its supply management system. In a deal with the European Union in 2013, Canadian negotiators held back concessions until the last few days of talks, then cushioned the blow with promises to compensate farmers.
- Bloomberg
