Despite predictions from CWB single desk supporters that supply management marketing monopolies will be the next Conservative target, a prominent Quebec agricultural economist sees little prospect that will happen.
However, Bruno Larue, Canada research chair in international agri-food trade at Quebec City’s Laval University, told an April 5 food policy conference in Ottawa that supply management should not be complacent.
Changes should be made, including a lowering of protective tariffs and taking steps to lower Canadian production costs by increasing farm size, particularly in dairy.
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“The political equilibrium is solid,” he said.
“Still, I think it is time to change the way supply management operates.”
Larue said much of the political equilibrium comes from the fact that the system of production controls, administered prices and import controls benefits too many players to be dismantled, including producers, processors and financial lenders.
As well, any dismantling of the system would force governments to consider a costly buyout to compensate for quota value loss.
“There is a case to be made for compensation,” Larue said. “With the constraints on the budget now, I don’t see it coming.”
Besides, those who lose because of the system, including consumers and the poor, have little organization or policy voice.
“Supply management has not lasted as long as it has without significant support,” Larue told the conference, organized by the University of Guelph.
Trade negotiations will continue to put pressure on the protectionist policy, “but I think supply management is safe for awhile.”He made contentious proposals for reform.
Larue said Canadian dairy production costs are higher in Canada than in many other countries and a major reason is that the system encourages and protects smaller operations that have higher costs.
“We need economies of scale to get costs down.”
However, high over-quota import tariffs protect Canadian producers against much challenge from lower-cost competitors, and efforts to limit quota values mean less quota is going to market, which stifles farmers’ ability to buy quota to expand their farm base.
He said significant cost of production reductions come after the milking herd grows beyond 1,000 head. The average Quebec dairy herd is 60 head, he added.
Larue proposed that guaranteed import access granted through tariff rate quotas be ended and that TRQs be replaced by tariffs that would then be lowered.
Supply management defenders insist lower tariff protection would lead to more imports and erosion of predictability of supply that the system needs to administer quota and pricing rules.
Larue disagreed.
He argued that increased competition would force the industry to restructure to lower production costs, which in turn would make the industry more cost-competitive and better able to defend its market share against potential imports.
