New food policy needed | Conference Board of Canada says changes needed for increased trade
The Conference Board of Canada says “the sky is the limit” for Canada’s food industry because of growing world demand, but only if major policy reforms are made.
Reforms include a move away from government support in the farm and food sectors and toward a more market driven sector, including phasing out supply management.
“There is a potential to move business risk management away from government interventions and toward companies, where it currently resides in the processing and retailing subsectors,” said the business-oriented think-tank’s report on the viability of Canada’s food economy, which was published last week.
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“A new business and innovation model … will be needed to capture additional value and capitalization. Enhanced viability resides in investments.”
The report from the research organization, done under the auspices of its recently created Centre for Food in Canada, joins a growing body of business-oriented arguments that agriculture and food policy is stuck in a past when the role of government was to insulate the sector from market forces and to compensate when market returns fall.
Its external reviewers were from the free enterprise Winnipeg-based Frontier Centre for Public Policy and Guelph’s George Morris Centre.
The report said the new model would include phasing out supply management production control and tariff protection and shifting away from AgriStability farm income support.
A board report on how to move dairy, poultry and egg sectors be-yond supply management will be issued soon, possibly this winter.
“The process of change would likely involve transitional payments and budgetary support to supply-managed farms and away from consumer transfers,” the report said.
“It would likely entail a shift away from Growing Forward’s current (business risk management) support, notably AgriStability, to a new business model.”
The report didn’t analyze the effect of sharp cuts in government contributions to AgriStability and Agri-Invest that federal and provincial ministers agreed to in September and are slated to take effect April 1.
However, it said a credible study on “the economic costs of the termination of supply management” is needed.
It said the agriculture sector should be subjected to the “creative destruction” that faces most business sectors that either adapt to market forces or go out of business.
“The scale of public support programs is such that they have a powerful influence on the organization of agricultural firms,” said report authors Michael Burt, Michael Grant, Jean-Charles Le Vallée and Erin Butler.
“Current state supports are sufficient to make non-viable operators viable. Large parts of the primary sector are, in effect, insured against the vagaries of the creative destruction processes that are very much alive in the processing and retailing sectors of the industry.”
The report included a favourable snapshot of the end of the Crow rate prairie grain transportation subsidy in 1995, which ended more than half a billion dollars in annual transportation help to land-locked wheat farmers.
It argued that the move encouraged diversification of the farm economy at the expense of a decline in wheat.
The report was also scathing in its review of Quebec’s farm income support programs that it says limit diversification, growth and risk-taking.
“A transition period is needed along with financial support so farmers can adapt to changes,” the board said.
“It will be difficult and painful and will require an entrepreneurial attitude (among Quebec farmers).”
The report supported its claim that agriculture is protected by arguing consumers and taxpayers contributed $82 billion to agriculture between 2003 and 2010 through higher prices and government support.
It said these support levels and protections are under threat as Canada increasingly looks for a role in broader free trade agreements.
Domestic policy and subsidy reform is needed if Canada is to succeed in more trade and business-oriented international environments, the report added.
