The United States, frustrated over the lack of progress with Canada over new rules for agriculture trade, is weighing "contingencies" that could include completing a Pacific Rim trade pact that excludes Canada, according to two sources familiar with the issue.
One official familiar with the 12-nation Trans-Pacific Partnership trade negotiation said Canada is not coming forward with plans to lower its barriers to agricultural trade.
Meanwhile, several U.S. senators who met with U.S. Trade Representative Michael Froman on Thursday urged him to "move forward on TPP without Canada unless a serious offer on dairy, poultry, and agriculture market access" was made, a U.S. Senate aide said.
According to the aide, Froman responded that he preferred to move forward with Canada, but added that the United States is "preparing for all contingencies."
Max Moncaster, a spokesman for Canadian Trade Minister Ed Fast, told Reuters: "We continue to work with all TPP partners to conclude an ambitious agreement that will create jobs and prosperity for Canadians."
But Moncaster added that Ottawa will "continue to promote and defend Canadian trade interests across all sectors of our economy, including supply management."
The United States is set to host a meeting of TPP trade ministers in Hawaii July 28-31.
The Obama administration is hoping to wrap up in coming weeks the negotiations that would establish a massive trade pact encompassing 40 percent of the world's economy, ranging from Japan to Chile.
The negotiations got a boost last month when the U.S. Congress approved "fast-track" authority for President Barack Obama, which allows him to negotiate trade pacts knowing that Congress can approve or reject such deals, but not amend them.
Japan and other leading countries in the 12-nation negotiation said they were awaiting action by Congress before moving toward the final stage of the talks.
Now, Canada's agriculture industry is the focus of negotiators' attention, in addition to many other details that still have to be settled.
Canada's dairy and poultry industries are worth tens of billions of dollars.
Canadian farmers are afraid that TPP would endanger the supply management system, which keeps dairy and poultry prices artificially high by restricting supply. Cheaper supply could come from the United States but also potentially from New Zealand and other countries.
(Additional reporting by Randall Palmer in Ottawa; Editing by Lisa Shumaker and Christian Plumb)