While Canada’s supply management system faces serious political challenges at World Trade Organization negotiations and the outcome is uncertain, it is also fending off legal challenges at home.
In Canada’s courts, supply management is winning some battles.
In late April, the Supreme Court of Canada upheld the ability of the Quebec chicken board to effectively put out of business a farmer trying to work outside the quota system to supply product to Ontario.
In Toronto, a long battle by a group of dairy farmers trying to produce milk without quota to sell it into the United States is now before the Superior Court of Justice where a decision may be rendered this spring or summer. Dairy Farmers of Ontario has won most of the legal and political fights so far.
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The Supreme Court judgment on the controlled chicken production and marketing system was decisive.
Between 1998 and 2000, AndrŽ Pelland of Joliette, Que., exceeded his allowed production by more than 4.4 million kilograms. He sold most of it to Ontario buyers.
The Quebec board cracked down, cancelled his quota and levied a fine of $2,433,766.
Pelland went to court, arguing that because he was producing mainly for an interprovincial market, interprovincial trade is a federal constitutional power and the Quebec board could not discipline him.
He lost at lower courts and in April, the Supreme Court drove the final legal stake into the challenge.
It has been constitutionally acceptable since a 1970s challenge to the newly created Canadian Egg Marketing Agency to have provincial control of agricultural production “within the context of a co-operative federal-provincial agreement” such as the supply management agreements, said the court.
The Ontario dairy case is more complicated because it deals with exports.
In December 2002, the WTO ruled that Canadian dairy exports through special classes are illegally subsidized because producers subsidize cheap exports through higher value fixed-price domestic sales.
A group of Ontario producers who had sold their quota said the ruling did not apply to their export sales since they had no connection to the domestic system of quotas and fixed prices and so there was no cross-subsidization.
The provincial dairy board challenged that argument, was supported by the previous Ontario Progressive Conservative government and has been fighting the issue in court since then.
Meanwhile, the producers in the Georgian Bay Milk Co. continue to export, claiming they can make money at cheaper American prices because they do not have the domestic quota cost of close to $30,000 per cow.
The Georgian Bay group challenged in court the right of the province to delegate enforcement powers to “a private producer co-operative” as well as the right of provinces to enforce federal export rules.
The Superior Court of Justice has not indicated when a ruling will be made.
