Canada’s vegetable oil producers appeared before the prestigious Senate banking, trade and commerce committee last week as the classic victims of interprovincial trade barriers.
Sean McPhee, president of the Vegetable Oil Industry of Canada, retold the oft-recounted tale of dairy-protecting rules in Quebec and Ontario that restrict access to vegetable oil products.
He said restrictions in Ontario and Quebec, including Quebec’s rule against butter-coloured margarine, costs the vegetable oil industry at least $120 million annually.
As well, he said both provinces have ignored rulings against them after complaints were filed under the Agreement on Internal Trade meant to ensure Canada is a common market.
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“The two largest provinces in Confederation have let Canadians down in terms of our collective desire to achieve a unified internal economy by making a mockery of the Agreement on Internal Trade,” McPhee said.
He also complained that while Section 121 of Canada’s 1867 constitution insists all produce and manufacture from one province “shall be admitted free into each of the other provinces,” the federal government has refused to intervene to uphold the constitution.
“The federal government has been invisible (on the issue),” he said.
Sitting beside him at the witness table, Canadian Oilseed Processors Association president Bob Broeska told senators the irony is that while the industry has been unsuccessfully fighting to lower internal trade barriers, trade negotiators have been opening markets in the United States, Asia and other regions for Canadian vegetable oil products.
And while not perfect, North American and world trade agreements have dispute resolution processes that can resolve complaints.
Provincial governments routinely ignore results of dispute resolution under the AIT, he said, and there is little recourse.
“The dispute settlement mechanism, in the internal trade agreement, seems to be flawed.”
Senate committee chair Jerry Grafstein wondered why governments favoured the dairy industry when there are so many more oilseeds producers than dairy farmers.
“Our farmers are in western provinces,” McPhee replied.
While both witnesses said they were not trying to undermine the dairy supply management system and were not “dairy bashing,” they insisted that governments overreach the rules of supply management when they protect dairy from domestic dairy substitute products.
Broeska said it hurts the dairy industry as well because it impedes the development of new products that could give dairy producers new market outlets. In the United States, the growth in the consumer market is in dairy-vegetable oil blends while in Canada, dairy is protected and there is little innovation to create new products.
Conservative senator Michael Meighen wanted to know how it can be fixed.
McPhee talked about retaliation: if Quebec will not allow sale of coloured margarine made with prairie canola oil, perhaps Alberta should not allow sale of Quebec-made butter.
Both said the real answer is political will by federal and provincial politicians to make sure the domestic market works as the Fathers of Confederation thought it should and as the AIT tried to ensure.
The Senate committee is in the midst of an extensive study of interprovincial trade barriers and eventually will hold hearings across the country.
