A prominent Canadian free trade economist says it is time for the Canadian government to start down the path to abolish supply management, with a buy-out component included.
Supply management is a trap that should be escaped, said Michael Hart in a C.D. Howe Institute report.
This round of World Trade Organization negotiations offers an opportunity, said Hart, a former federal trade official and now a professor of trade policy at Carleton University. Canada’s trade competitors, Canadian exporters, consumers and food processors all would cheer the demise of the regulated system.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
“All would support a phased elimination of supply management, particularly if it was made part of a Doha Round package that included significant reforms and improvements in market access for the full range of farm products, as well as a sensible adjustment program funded by the federal and provincial governments,” he wrote in the analysis published by the conservative business think-tank.
In an interview from Washington, D.C., where he is finishing a year as a Fullbright scholar at American University, Hart said he could not speculate on how much a quota buyout would cost.
He dismissed as ridiculous speculation that put it at more than $10 billion, but said the final figure would depend as much on political considerations as on the paper value of the quotas when the buyout is announced.
Hart said many would question why there should be a buyout at all since the quotas were originally given to farmers for free, but they have developed value and now farmers pay millions of dollars for quota. Since governments created the quotas and allowed the value to become entrenched in the system, farmers have a case that they should receive some compensation for their investment.
Hart used familiar arguments against supply management, alleging it inflates food costs, takes investment money for quota that could be invested elsewhere, rewards farmers too handsomely and represents protectionism at a time when the world and Canada are trying to move to trade liberalization.
He said the basis of the supply management debate in Canada has been self-deception because consumers are told to believe it is a good deal to have reliable supply, politicians are told to believe the price of reform would be too high and farmers “are eager to deceive themselves that stable prices and assured returns are better than the vagaries of competition.”
He said sectors can move beyond protectionism and thrive, citing the Canadian wine industry and the Australian dairy industry.
The supply managed sectors rejected Hart’s analysis as free market theory that ignores the fact supply managed sectors are among the few economic bright spots in Canada’s struggling farm economy.
In Parliament, both Liberal and Conservative parties recently embraced supply management and vowed to protect it from its detractors at WTO negotiations.
