Phasing out supply management with a transition plan is fair for producers, helps Canada embrace trade, and lowers prices on essential food items

Last month, something rare happened in the House of Commons. MPs from all parties unanimously agreed on something. Unfortunately for Canadian consumers, what they agreed on was first reading of Bill C-216, a private member’s bill put forward by the Bloc Québécois to protect supply-managed farmers from any concessions in future trade deals.

Supply management is, of course, the system of quotas and tariffs that limits domestic production of dairy products, chicken, turkey and eggs and discourages imports via high tariffs, thus producing less choice and higher prices for consumers. Approval of the bill would mean that any future trade deal — with the United Kingdom post-Brexit, say — would be sidetracked if our counterparts requested concessions in these areas. This is a movie we’ve seen before. Supply management was a huge issue in renegotiating NAFTA, now the USMCA, and delayed our reaching the Canada-Europe agreement (CETA). That MPs would handcuff themselves to protect this system at the expense of future trade deals is mind-boggling.

Why? Because the case for supply management rests on very shaky ground. Supporters argue that Canada’s dairy industry operates without government subsidies, which is why it is appropriate to have massive tariffs on foreign imports. Yes, it is true that U.S. dairy farmers get taxpayer support through the infamous Farm Bill. But supply management itself is tantamount to a subsidy — one that, as the Canada West Foundation points out, is between 3.5 and seven times more valuable than current U.S. dairy subsidies.

Even if we did have to protect our farmers from unfair subsidization by others, that argument wouldn’t apply to dairy imports from New Zealand, which has no farm subsidies at all. For countries that do subsidize their dairy farmers, we could level the playing field by simply having our tariffs offset their subsidy, which in the case of U.S. dairy would mean drastically reducing tariffs from their current levels.

Another common claim is that supply management protects the family farm. Not so. When the system was implemented in the 1970s there were over 100,000 dairy farms in Canada. Today there are fewer than 11,000. That doesn’t prove supply management decimated family farms, but it does clearly show that our supply-managed sector has been just as susceptible to consolidation as the rest of agriculture.

Probably the least credible claim made by supply management’s supporters is that ending it would destroy the Canadian dairy industry, as a flood of cheap imported milk, mainly American, would undercut Canadian producers and put our farmers out of business. Oddly enough, this argument is made by the same people who contend that supply management doesn’t artificially inflate prices. The industry regularly claims that foreign milk is not less expensive than Canadian.

You may recall Schrödinger’s cat from quantum physics, which was both alive and dead at the same time. Here we have “Schrödinger’s dairy cow.” If imports aren’t cheaper than Canadian milk, what threat do they present in terms of undercutting Canadian farmers? Peer-reviewed research shows, on the contrary, that supply management does artificially inflate prices for Canadian consumers, adding upwards of $500 to the average family’s grocery bill each year, which in turn pushes between 133,000 and 189,000 Canadians below the poverty line.

So, would eliminating supply management mean the end of the Canadian industry? Not necessarily, according to research by Colin Carter and Pierre Mérel published in the Canadian Journal of Economics. Doing away with supply management would mean more competition for dairy farmers but it would also mean more export opportunities abroad. With globalization lifting hundreds of millions of people worldwide out of poverty and into the middle class, demand for these products has risen. Consumption of dairychicken and eggs have all increased over the past decade as a result of new demand from the global middle class that is only expected to continue. New trade deals would allow Canadian farmers to sell their products to this new group of consumers — leading these researchers to conclude that “supply management may no longer be beneficial to domestic producers of the supply‐managed commodities.”

Rather than preventing trade deals to preserve supply management, we should be signing trade deals that chip away at it. Our trade relationships would benefit but, more importantly, so would all Canadian consumers. If we have to pay compensation to farmers for quota in the transition, so be it. We’ve transitioned other industries from protection to competition before, like Canadian wine when we first sought a free trade agreement with the United States. In fact, reform-and-compensate is what both the Harper government while negotiating CETA and the Trudeau government while negotiating NAFTA did for dairy farmers, albeit they over-paid on compensation and under-delivered on market access.

Completely phasing out supply management with a modest compensation and transition plan is fair for producers, helps Canada embrace trade, and lowers prices on essential food items.

It’s a good policy. MPs should embrace it, not mindlessly oppose it.

Originally published here.



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