Canada-U.S. trade negotiations appear to be gaining momentum as officials on both sides turn their attention toward possible concessions and tariff adjustments that could help resolve ongoing disputes.
Canadian industry sources familiar with the negotiations say the tone of discussions has shifted, raising hopes that Ottawa and Washington could begin narrowing their differences. Canadian and U.S. officials are expected to hold another round of talks early next week.
The change comes as both countries increasingly recognize that reaching a broader agreement will require compromises from each side. Rather than focusing on responsibility for the dispute, discussions are reportedly moving toward specific policy changes that could provide a path to an agreement.
One area where a potential compromise could emerge is Canada’s supply management system, which has historically been a source of tension in bilateral trade relations.
According to industry sources, U.S. negotiators are not currently seeking the dismantling of Canada’s supply management framework. Instead, Washington is pushing for changes to how Canada distributes tariff-rate quotas, or TRQs, covering imports of American dairy products.
The narrower focus could provide negotiators with greater flexibility. Altering the allocation of dairy import quotas would be considerably less significant than reopening the entire supply management system, which regulates Canada’s dairy, poultry and egg sectors through production controls, pricing mechanisms and restrictions on imports.
Under the Canada-U.S.-Mexico Agreement (CUSMA), Canada agreed to provide American dairy producers with tariff-free access equivalent to 3.9 per cent of the Canadian dairy market. However, the way that access is allocated has remained a point of disagreement.
The United States has argued that its producers have been unable to fully use the market access provided under the agreement. U.S. data cited in the discussions indicates that an average of only 42 per cent of the 14 dairy TRQs established under CUSMA were being filled, with nine categories operating below 50 per cent.
Some Canadian importers have also criticized the quota system, arguing that significant portions of the available access have traditionally been allocated to large domestic dairy processors rather than importers, retailers and distributors that may have stronger incentives to bring U.S. products into Canada.
Restrictions on American alcohol could provide another possible opening for compromise.
A source familiar with the Quebec government’s position indicated that the province has some flexibility regarding its restrictions on U.S. liquor. However, Quebec would reportedly look to Prime Minister Mark Carney for direction before changing its approach.
Provincial restrictions on American alcohol have been among Canada’s most visible retaliatory measures during the trade dispute, with several provinces using their authority over liquor distribution to remove or limit U.S. products.
A coordinated easing of those restrictions could potentially form part of a wider effort to lower trade tensions if Ottawa and Washington make progress toward an agreement.
The federal government, meanwhile, has declined to publicly discuss details of the negotiations while talks continue.
Gabriel Brunet, a spokesperson for federal Minister Dominic LeBlanc, said the government would not comment on specific elements of the ongoing discussions.
Ottawa says its objective remains securing a comprehensive agreement that addresses sector-specific tariffs while protecting the interests of Canadian workers, farmers and businesses.
