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Thursday, June 9, 2011

Supply management must go!

Free trade stands near the top of the Conservative government’s economic agenda for Canada, or so we were told in the recent Speech from the Throne.  But, as we know only too well, “free” is a relative term. Just as “free speech” in Canada doesn’t mean we can say as we wish without penalty, so too “free trade” doesn’t mean we’ll be able to import goods from our trading partners without paying tariffs. Read the following paragraph from the throne speech:

“Our [Stephen Harper Conservative] Government will aim to complete negotiations on a free trade agreement with the European Union by 2012. It will also seek to complete negotiations on a free trade agreement with India in 2013. In all international forums and bilateral negotiations, our Government will continue to stand up for Canadian farmers and industries by defending supply management.”

So, at the same time we’re promised freer trade with the EU and later with India, Prime Minister Stephen Harper tells us that in these negotiations his Government “will continue to stand up for Canadian farmers and industries by defending supply management,” and ordinary Canadians can go suck eggs—very expensive ones at that.

Canada has already been condemned by the WTO for price-fixing practices in the dairy sector.

In other words, Canadians will be expected to continue financing our so-called “supply management” model of agricultural quotas and tariffs that cost Canadian consumers so dearly. We conservatives pride ourselves as being free-traders and the World Trade Organization (WTO) wants us to dismantle the system as part of our participation in the Doha round at the WTO. So why not do it?

Because our politicians of all political stripes cringe at the very thought of the sort of bitter reaction there’d be from the farm lobby, especially the Quebec dairy industry.

Our supply management system is much the same as us creating a government-mandated cartel for the marketing of poultry, egg and dairy products. Through import tariffs, producer pricing and quotas, it seeks to protect producers to the financial detriment of ordinary Canadian consumers.

The Organization for Economic Cooperation and Development (OECD) found that Canadian milk prices have been two to three times higher than world prices  since 1986.

And the OECD estimates support to Canadian dairy producers at $2.7 billion in 2003, equal to more than 60% of the value of total dairy production that year.

It is time for Canada to scrap supply management systems and allow farmers to run their businesses on the same basis as most Canadians must, producing their products on an open, competitive basis and allowing consumers to have a choice among competing products, including those imported from trading partners.

It is time to end the insane practices that see customs tariffs reach exorbitant levels, ranging from 200 to nearly 300 per cent—specifically, about 245 per cent for cheeses and nearly 300 per cent for butter. Outrageous!

Obviously, this is too costly a burden to place on Canadian consumers, especially those who are seniors on fixed incomes and parents who struggle to make ends meet. Other countries with similar social and economic structures have deregulated agricultural markets.

In 1984, the New Zealand government eliminated most agricultural
subsidies, some of which were as high as 40 per cent of farmers’ incomes. This was followed by deregulation of its domestic market. In 2000, Australia overhauled its supply management system and compensated farmers for losses due to the elimination of quotas and lower prices by installing a “deregulation adjustment package” financed in part by a temporary tax on Australian milk consumption—their resulting fresh milk tax of 11 cents a litre was lifted February 23, 2009.

By 2003, New Zealand and Australia were among the OECD countries with the lowest agricultural supports. New Zealand’s agriculture sector adapted quickly, resulting in a significant return to organic farming and to a more diversified product range, with stronger export capability at world prices. Agriculture’s share of New Zealand’s GDP rose from 14.2 per cent in 1986-87 to 16.6 per cent in 1999-2000—a period during which agriculture experienced the greatest productivity gains of any of New Zealand’s economic sectors.

This future awaits Canadian consumers and farmers alike. Supply management should be a thing of the past, if only there was the courage and political will to make it happen.

 

© Russell G. Campbell, 2011.
All rights reserved.
 
The views I express on this blog are my own and do not necessarily represent the views or positions of political parties, institutions or organizations with which I am associated.

6 comments — This is a moderated blog and comments will appear when approved. Please don’t resubmit if your comment doesn’t appear immediately, and please do not post material that is obscene, harassing, defamatory, or otherwise objectionable.

  1. The issue is not supply management; it is security of supply. New Zealand and Australia are bad examples. Look at a globe. They are both a long way from any potential large supplier / competitor. Now look at where Canada is situate. There are megaproducers in the US who can, without any strain at all, provide all the cheap dairy, chicken and eggs Canada can use and in the process wipe out every dairy, chicken and egg farmer in Canada. If you get your wish and this happens, enjoy your cheap milk from California, your cheap chicken from Arkansas and your cheap eggs from Mississippi but consider, when E Coli, Mad Cow or Bird Flu or some other disease closes the border, as surely will happens, or, given the wrong set of circumstances the US restricts exports of food (as Russia threatened to do with wheat in 2010) where is your cheap breakfast coming from then?

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  2. Anon 2:46 pm,

    Your line of reasoning just doesn't hold up. Canada holds no special place as a producer of safe dairy. As to "mad cow," we sent it to the USA, not the other way around. Do you have one shred of evidence that the US has more cases of bird flu, adjusted for population size, than we do?

    How come the US hasn't wiped out our apples, peaches, grapes, wheat, soy, barley, corn, beef, pork and lamb? What about produce? We import lots of that.

    The issue IS supply management. It breeds inefficiencies like the $20,000+ per cow a Canadian farmer must pay before he's allowed to produce a single pint of milk. I'm for open markets, and "cheap breakfasts" if I can get them.

    If your argument had validity, we'd have had to slap duties on everything strategic--food and otherwise--and subsidized all those producers. That's the mess we've been trying to work ourselves out of for the past several decades.

    Viva free trade!

    ReplyDelete
  3. 1. It is not that Canada is particularly safe; it is that we don't have "all our eggs in one basket"

    2. Free trade is wiping out fruit growers. Take a drive through the Niagara region or the Okanagan. Canadian beef producers only survived mad cow because of subsidies.

    3. We import a lot of produce out of season because transportion is relatively cheap. That will change with increasing oil prices.

    I would rather pay a premium for food from a diverse group for local, small and to be sure, inefficient, farmers than to dependent on a long fragile supply chain from foreign megaproducers. Food is a security issue and should be regard as such.

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  4. Anon,

    The reason we treat dairy the way we do has nothing to do with security and everything to do with a powerful special interest group profiting at the expense of ordinary Canadians.

    Supply management is not causing a reasonable premium on those select products affected, it's forcing us to pay 200% to 300% of average world prices.

    And that's shameful.

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  5. This is not the same anonymous as before. Supply management really sucks for other farmers who are not part of that group. Being a farmer myself we struggle on a daily basis as we are not protected by supply management. These so called small local dairies or poultry producers are not so small. How many dairies are there consisting of a 300 or more cows. These farmers are making a killing at $.80 a liter with a cow producing 25 or more liters a day. it only costs approx. $.25 a liter to produce. They drive up land prices cause any financial institution will lend them money as their market is secured. This makes it almost impossible for other farmers to even compete for land. Financial institutions are not interested in loaning money to anyone without quota. How can we ever expand our farming operations, so we can compete better in the market if only a small portion of agriculture is protected? We approached our bank to get increase in our loan to improve temporary cashflow issues. Although we had enough equity our market is "not secure enough", so we were turned down. They recommended a proposal for bankruptcy and maybe selling off some land to come up with cash.. Hello..isn't decreasing our income further if I can't realize the higher corn prices and increase my profits. As far as subsidies go... There were subsidies for beef and pork producers in 2003, only to be paid back in 2004, because they made some stupid adjustments in the calculations. How come all the big supply managed farms are the only ones getting all the environmental subsidies, while all us smaller have to conform to all the same rules. They don't need the freaking money. us smaller farmers depend on it,but always get shafted as we don't have as big an impact on the environment. Supply management should be diluted to make it a fair market for everyone in agriculture. Either that or protect us all.
    The government is leaving all other agriculture sectors to fend for themselves, why are they protecting the supply management sector. What is in it for them? Why are they willing to sacrifice billions in export and economic growth potential to save 1 small sector.

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  6. Supply management is a good system, but some of them are making too much money,and behave a little bit arrogant, and laugh at the beef and hog farmers. The efficient farms are simply overpaid because the cost of production is based on for example somebody with 30 cows and on people with 300 cows or more,and they blow up the system and pay too much for quota and land. In the stores a part of the consumers can't afford to pay these high prices,which i think is a bad thing, the rich people richer and the poor people even more poor. So I am not sure if the free market is a good idea, but this system is blowing itself up, now they are getting another increase in the milk price, because of more expensive feed and fuel! Unbelievable!

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