DRESDEN, Ont. — There is middle ground in the supply management debate worth exploring, according to an economist from the University of Guelph.
Sylvain Charlebois says it would be a mistake to abolish supply management for Canada’s dairy industry. However, the status quo fails to take advantage of export opportunities.
“Basically, what we need is a new category of quota, whether for the domestic market or, more likely, for trade,” Charlebois said.
“We tried to do that many years ago and failed, but it’s a very different world today.”
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Charlebois, who specializes in marketing and consumer studies at Guelph, grew up on a dairy farm near Farnham, Que. He envisions two parallel quota systems operating at the same time.
One would operate through the provinces and serve the domestic market, while the other would be introduced at the federal level and target export markets and possibly specialty niche markets in Canada.
He said the federal system would likely interest the owners of larger dairy operations because lower farm-gate prices would be involved.
Charlebois also proposes changing the way farmgate prices are set.
Instead of using the average cost of production across all farms, the formula would be based on the top 25 percent. He said this would encourage less efficient operators to make improvements or leave the business and result in a modest increase in Canada’s average herd size.
Charlebois said he would also reduce Canadian tariffs on dairy imports over a lengthy period, perhaps 10 to 15 years. The move would still protect dairy farmers but also make other countries more willing to accept the two-quota system.
“I don’t think it’s a good idea to reduce tariffs to zero, but at the same time we need to demonstrate some commitment to free trade.”
Other economists have made similar proposals for supply management reform in the past, Charlebois said.
He talked about his proposal during a panel discussion at the Canadian Food Summit in Toronto in March. In the audience were several supply management supporters, including two directors with Dairy Farmers of Canada.
David Wiens, who farms in Manitoba, said an earlier attempt to develop an export market for Canadian dairy products failed after New Zealand and the United States successfully challenged it at the World Trade Organization.
He said the WTO ruled that Canada was dumping because the milk for export was offered at a lower price than what was produced for the domestic market.
Added New Brunswick dairy farmer Reint-Jan Dykstra: “I’m happy about your statement not to abolish, but reform we do. We’ve been doing it for 40 years.”
Dykstra and Wiens were far more critical of the Conference Board of Canada’s reform strategy, which calls for abolishing supply management and compensating Canadian farmers for the lost value of their quota.
Charlebois said the conference board plan doesn’t acknowledge the history or economics of Canada’s dairy sector.
“All countries protect their dairy sector to a degree,” he said.
“If supply management were to cease in Canada, we would eventually need some sort of support for our dairy sector.”
