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James McIlroy, a trade lawyer and former trade official, said Canada will “rag the puck” until TPA is a certainty in Congress and the Americans have concluded their agriculture deal with Japan. But he said for a trading nation such as Canada to get kicked out of TPP is not an option.

“Pulling out of TPP in the middle of an election campaign would be a disaster,” he said.

American officials say Canada has used the TPA issue as a “fig-leaf” to avoid making substantive proposals on how the supply management regime could be liberalized.

“I get that supply management is very sensitive. But it’s time to start having that serious conversation about market access to dairy, poultry and eggs. At this point there is no real engagement from Canada,” said Ms. Vetter.

In its recently signed deal with the European Union, Canada raised the quota of cheese that was allowed into the country tariff free. But the Americans are looking for a much more ambitious deal on dairy, poultry and eggs – something they say was signaled clearly to Canada when it signed up to the TPP negotiations.

The potential upside for Canadian producers, they say, is access to growing Asian markets and to the U.S.

“Our industry sees an opportunity to be integrated across the northern border. Naturally that would mean dairy moving south as well as north,” said the U.S. trade official.

The Canadian dairy industry recently acknowledged, in a confidential briefing paper leaked to The Globe and Mail, that imports of milk protein isolates are creating a glut of milk north of the border. These new milk products can enter Canada from the U.S. duty free and are being used by processing companies at the expense of Canadian milk. The briefing note stated that the highly concentrated milk protein and “waning government support” is creating an environment that “is no longer sustainable”.