Supply management defended | Milk prices in New Zealand are almost double Canadian prices and productivity is lower, says an opponent to deregulation
In the international campaign against Canada’s supply managed dairy system, no voice is more critical than New Zealand’s, a global dairy powerhouse that deregulated its industry 25 years ago.
In the domestic campaign against supply management, New Zealand is often held out as proof that the end of protectionism and regulation would invigorate Canada’s dairy industry, making it more productive while producing lower-priced products for consumers.
New Zealand is a leading supply management critic in World Trade Organization talks and the Cairns group of exporting nations. It also opposes Canada joining the Trans-Pacific Partnership group unless it is prepared to negotiate away supply management tariff protections.
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At the Dairy Farmers of Canada annual policy conference Feb. 2 in Ottawa, academics from Canada and New Zealand who have studied the competing dairy industry models as part of a Norwegian-sponsored agriculture project suggested the comparisons are not so stark.
Bruce Muirhead, history professor and associate dean of arts at the University of Waterloo, is an unabashed defender of the benefits of supply management, arguing that its critics are driven by a free market ideology that does not take account of the facts.
“The critics are wedded to an ideological approach that flies in the face of good management, sanity and good governance,” he told delighted DFC delegates, who have seen their system face a barrage of criticism during the past six months.
Among the realities Muirhead says they are missing are:
- despite the lack of cost-of-production price setting in New Zealand, milk prices are almost double Canadian prices and a government inquiry has been called to investigate high prices
- despite allegations that Canada’s dairy prices are responsible for declining consumer demand, per capita dairy consumption has fallen much faster in New Zealand, Australia and the United States than in Canada
- despite complaints that supply management stifles productivity, the average New Zealand grass-fed dairy cow produces just a fraction of the milk produced by a Canadian dairy cow enhanced by genetics and feed rations
- Canada’s smaller average dairy herds (72 milking cows in Ontario compared to 300 in New Zealand) are more environmentally sustainable
“Perhaps in 20 years it will be Canadian negotiators at climate change talks who will be lecturing (New Zealand) on the desirability of adopting a more enlightened and resilient approach to dairying,” Muirhead wrote in the book Rethinking Agricultural Policy Regimes, to be published next month as a result of the Norwegian project.
He says Canada’s smaller scale and more farmer-friendly policy “has a certain amount of social, economic and environmental resilience built into it.”
Muirhead’s research collaborator, Hugh Campbell from New Zealand’s University of Otago, told the DFC conference that despite deregulation, the two systems have more in common than might be expected.
The Fonterra dairy co-operative, which became a farmer-owned dairy exporter, is a near-monopoly buyer of New Zealand milk and the world’s largest dairy export company with 32 percent of the world’s market.
Despite policy liberalization, Fonterra effectively sets prices and buys more than four billion litres of milk abroad each year to meet export obligations.
Campbell said farmers worked collectively to maintain some control through Fonterra when deregulation occurred in the dairy sector. The 12,000 farmer-owners are doing well.
In other industries, including the once dominant sheep and wool sector where the ideology is more individualistic, deregulation has left the sector in a deep slump.
“Pastoral farmers have been big losers.”
Campbell said the deregulation model that New Zealand is trying to export is not an answer for all.
“Deregulation does not offer a one-size-fits-all solution,” he said.
