Canada, European Union trade agreement not so bad for dairy after all

In the simple and complex politics of Canada’s supply management system, the simple truth is that last week the Conservatives broke a promise.

They signed a Canada-European trade deal that will double potential imports of European cheese to 30,000 tonnes. The dairy industry is outraged, arguing it is a deal to allow subsidized European cheese to compete with Canadian product.

Eight years ago when a motion was before the House of Commons instructing the then-minority Liberal government not to budge on supply management protections in trade talks, every single Conservative voted for it.

The vote was unanimous: 288–0.

An election was in the offing, the minority Liberals were vulnerable and the Conservatives needed to convince rural Ontario and Quebec, where the farm vote matters, that this former anti-protectionism party was onside.

Mission accomplished. In 2006, the Conservatives won a minority government with strong rural Ontario and Quebec support.

Fast forward to 2013 and the signing of what the Conservatives say is the most extensive trade deal in Canadian history, opening a European consumer market of 500 million to Canadian products including up to $1.5 million in agricultural sales.

In the complex and simple politics of Canada’s supply management system, the complex truth is that this is a far better deal than the supply managed system could have hoped for as talks progressed.

The industry is protesting, as it must. Privately, it must be relieved.

The government was under pressure to open up the protectionist supply management system. It will be again in Trans-Pacific Partnership trade talks.

Instead, it struck a deal with the EU, the world’s largest trading bloc, to preserve dairy supply management giving the Canadian industry control of 92 percent of the domestic cheese market with that percentage to grow as domestic consumption grows and European imports are capped at 30,000 tonnes in a market of more than 300,000 tonnes.

The deal should be a template for future agreements.

Agriculture minister Gerry Ritz argues that while dairy farmers have a right to be upset and concerned about future erosion in market share, the EU agreement preserves their right to a vast majority of the domestic market.

Besides, the increased access comes through increased tariff rate quotas that define set levels for imports.

At the core of supply management is assurance of supplies in the market that allows production quota setting.

The deal with the EU slightly increases the imports of cheese but in identifiable quantities that preserve the core of supply management.

The fear always has been a trade deal (as New Zealand would like in the TPP) that would reduce tariff levels, making import levels less predictable.

That did not happen with the European deal. In reaction to Dairy Farmers of Canada and Canadian Federation of Agriculture criticism of the concession, Ritz (who voted for the no-concession motion) said give and take in trade negotiations are normal.

“Every one of our pillars in the domestic system of supply management have been preserved and that’s what we said we would do,” he said. “The pillars of supply management have been preserved.”

He’s right. The chance of a small dairy import concession derailing a multi-billion dollar trade deal were nil.

Dairy leaders should be privately celebrating even as they do their public political thing.

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