Dairy could struggle under free trade

Dairy farmers might have escaped immediate pain under the Trans-Pacific Partnership, but an assistant economics professor says they need to think about how they operate under new trading rules.

They have reciprocal access but might not be able to take advantage of that, said Trevor Tombe of the University of Calgary.

“Unfortunately for a lot of the supply managed producers in Canada, their costs are extremely high,” he said.

“Our dairy producers are actually extremely inefficient and non-competitive, and their export opportunities are limited not be-cause of trade barriers but because of our low productivity.”

Sylvain Charlebois, a professor at the University of Guelph’s Food Institute, said that is more of a domestic issue, but Canada does need to think hard about how to deal with it going forward.

“Frankly, the whole notion of creating a breach in supply management is something that we need to manage very carefully,” he said.

A lot of fiscal baggage is attached to Canada’s system, he added, and changing the rules means changing quota value, farmland value, the way farmers transfer wealth and the banking system, which uses quota as collateral.

In Europe, where he has been on sabbatical for the past 10 months, it took 13 years to move to dismantle protections, and the dairy system there was much simpler than Canada’s, he said.

“If countries are ill-prepared for the free market, they actually expose their dairy farmers to a tremendous amount of risk,” he said.

The previous Conservative government had pledged a $4.3 billion compensation program for affected producers and processors but the Liberal government isn’t bound by that promise.

It has pledged a thorough, public debate before it decides whether to ratify it.

There are two ways the deal can be enacted:

  • If all 12 countries ratify it, it comes into force in 60 days.
  • If six countries that collectively represent 85 percent of gross domestic product ratify it within two years, then it comes into force within 60 days in those countries.

“It boils down to, I think, Mr. Obama and the Americans,” Charlebois said. “This is really about a deal between Japan and the Americans, and the other 10 countries are just there to follow along.”

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