The conflicting arguments surrounding Canada’s supply management system are bewildering. It’s either the model for a properly managed food system that is the envy of farmers in other countries or a ruthless Soviet-styled anachronism that is gouging consumers.
Canada’s supply management system has its warts, but an analysis of the arguments, including the Western Producer’s own foray into the United States-Canada dispute in the last two editions, shows there is reason to tweak supply management, not to scrap it, as U.S. President Donald Trump would have us do.
The system covers dairy, poultry and eggs. Since it’s dairy that’s under scrutiny during the NAFTA talks, we will focus on that sector.
The main argument from opponents of supply management, including The Canada West Foundation’s Martha Hall Findlay, is that it results in inflated prices that cost consumers an extra $600 per year, throwing thousands of people into poverty. Among other issues, opponents argue, it causes problems negotiating trade deals.
Defenders, most notably the Dairy Farmers of Canada, say Canada’s milk is priced about in the middle of world markets.
Supply management defenders say systems that have deregulated, such as Australia and New Zealand, have not seen substantially lower prices and have resulted in government bailouts.
As well, defenders note that Canada has trade agreements with 53 countries, so supply management isn’t getting in the way of international deals.
Deregulating supply management would result in a massive disruption of the system — and it would likely cost upwards of $30 billion to buy out quotas.
Evidence in the U.S., which is facing a significant oversupply of milk, also suggests doing away with supply management in Canada would cause a trend away from smaller dairies to large regional centres. If supply management were abolished in Canada’s dairy sector, that could see some of these large dairies located in the U.S. enter the Canadian marketplace, since 90 percent of Canada’s population lives within 160 kilometres of the border.
Why would that be a good thing? It might result in more “efficiencies,” such as reduced labour costs and increased automation, but rural dairy farms in Canada, which hire local people as farm workers, would likely disappear.
There is also the issue of subsidies. The U.S. is said to provide market price supports for dairy at US$5.3 billion to $6.6 billion annually), while Canada’s supply-managed sector gets no such subsidy.
What’s causing the current ruckus is Class 7 milk. U.S producers made powdered milk as an ingredient that can be used in other products, such as cheese and butter. American farmers sold Class 7 milk into Canada until last year when Canada closed what some call a “loophole” in the system (meaning it wasn’t invented when NAFTA negotiated), and levelled tariffs on it.
This added, albeit in a very small way, to an oversupply of milk, causing Trump to take up the bullhorn.
Canada sells Class 7 milk on world markets. That seems to violate the spirit of supply management, if not the fine print. It has been reported that Canada has already given on this point in NAFTA negotiations. It would seem like a fair saw-off.
As well, dairy producers in Canada won’t like it, but providing access to Canada’s dairy market akin to the CETA and CPTPP deals (about 3.25 percent) would seem to be another reasonable saw-off.
Other than that, Canada’s negotiators must stand firm against U.S. attempts to dismantle supply management.
Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.