The Conference Board of Canada has issued a report titled Reforming Dairy Supply Management: The Case for Growth, which pretty much condemns Canada’s system of supply management of dairy products. Authors, Michael Grant, Richard Barichello, Mark Liew, and Vijay Gill, say their report “makes the case for growth and suggests an equitable way to wind down supply management of dairy products.”
Unfortunately, even this latest learned challenge to our antiquated system governing the dairy segment of our agricultural economy is likely to fall on deaf government ears—wilfully deaf ears, I might add.
Back in 2011, I quoted from the Conservative government’s throne speech, as follows:
In all international forums and bilateral negotiations, our Government will continue to stand up for Canadian farmers and industries by defending supply management.” [Emphasis mine]
Since that time, the prime minister has given no indication of having changed his mind. To the contrary, indications from Ottawa are that Canadians will be expected to continue financing our wrong-headed model of agricultural quotas and tariffs, which was implemented in Canada in the early 1970s and that continue to cost average and low-income Canadian consumers so dearly.
According to the Conference Board:
“The OECD [The Organization for Economic Cooperation and Development] calculates that ‘market price supports’ cost Canadian dairy consumers [families] an average of $2.6-billion per year in the decade to 2011: roughly $200,000 per dairy farm per annum and around $276 per family every year.
Furthermore, as I said in a Feb. 2013 essay, the 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 … [are] equal to more than 60% of the value of total dairy production that year .”
Because Canadians must pay more for dairy products than they would on the open market, they are being “taxed” and the low-tax Conservative government seems to believe that’s OK.
Moreover, it seems to be OK that Canadian families with average household net worth (in 2011) of $363,202 are subsidizing dairy farmers with a net worth of more than $2 million on average.
So why don’t we reform our market‑distorting system, don’t we Conservatives still pride ourselves on supporting free markets? Well, I don’t know for sure, but I have a theory.
It goes like this: Canada is expanding its trade and economic presence in Asia—the rapidly-growing Asia-Pacific market is seen as critical to Canada’s growth and economic prosperity. For example, Canada is reportedly about to sign a free trade deal with South Korea.
To that end, Canada is involved with a sweeping free trade agreement with a dozen Pacific Rim countries—Trans-Pacific Partnership (TPP), covering about 40 per cent of global economic output and about one-third of world trade.
A TPP entry price is, apparently, Canada’s supply management regime. Member states like Australia and New Zealand—our long-time allies—absolutely insist on it, even moving to exclude Canada from the agreement.
As Ian Lee, professor, Sprott School of Management at Carleton University put it in a Toronto Star article in 2012:
Supply management benefits fewer than 14,000 Canadian farmers, mostly in rural Ontario and Quebec, and is preventing Canada’s 34 million citizens from participating in the most important trading agreement in modern history with the most dynamic and populated part of the globe—Asia-Pacific.”
Isn’t supply management a dandy bargaining chip to hold back, while all the time planning to give it up “reluctantly” in exchange for something of significant value, whatever that may be.
Give it up prematurely and we’ll get nothing in return—timing is everything. Maybe Stephen Harper is the smartest politician in Canada.