Governments pursue misguided and often harmful policy when they give food companies millions of dollars and call it an investment in jobs and competitiveness, says a food industry analyst.George Morris Centre analyst Kevin Grier argues in a recent paper that grant or loan recipients are chosen arbitrarily, often to the detriment of their unsubsidized competitors and often are ineffective in accomplishing the announced goal.Grier looked at food industry grants and loans offered by the federal, Alberta and Ontario governments.He argued they are often misplaced.“The competitiveness angle is particularly ironic given that the government is often a key culprit in why the Canadian food industry, and in particular the meat industry, is struggling competitively,” he wrote. “This is an industry that is saddled with higher taxes, regulations and inspection fees compared to the United States.”Grier said grants to expand meat packing capacity are particularly perverse, especially in regions where there is under-capacity.“While livestock producers typically like to have plenty of extra slaughter capacity, the fact is that the last thing this industry needs is added capacity,” he wrote.Grier said money spent to improve the structure and performance of the Canadian Food Inspection Agency would be a better investment for the industry.“Reform and reallocation of resources at the CFIA is an area that the meat industry strongly needs from the federal agriculture ministry,” he said. “Again, it is noted that there are millions committed to these incentive initiatives such as SIP (Slaughter Improvement Program) but not to the improvement of the CFIA.”Grier highlighted a grant that the Alberta government made to American-owned industry giant Cargill through its Alberta Livestock and Meat Agency.“ALMA is providing Cargill $237,666 for the operation of a case-ready processing plant in Alberta,” he wrote.“ALMA’s website says that ‘service will initially be to Loblaw’s banners and then expand service to other retail chains in Western Canada.’ No doubt the $238,000 was appreciated, but Cargill recently reported net earnings of $898 million US for its fiscal 2010 third quarter ended Feb. 28 versus $326 million a year earlier.”Grier said the government largesse is inherently unfair because it involves bureaucrats deciding the winners and can lead to unfair competition with unsubsidized plants and inappropriate influence on where investments are made.“These programs do influence/distort decisions on timing, scale, location,” he wrote. “If not, then why would such initiatives be undertaken?”Grier said he recognized that more fundamental reform of regulations and the performance of government agencies is more difficult and less appealing for politicians.“The areas where government really needs to act often require difficult choices or upsetting the status quo,” he wrote.“These real actions that can actually improve competitiveness are not as enjoyable as having a minister hand out a cheque or cut a ribbon.”
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