Supply management means trade-offs: prof

Elimination of supply management would also come with benefits

Economist Danny LeRoy concedes that eliminating supply management would result in severe losses to producers, but there would also be benefits.  |  File photo

A University of Lethbridge economist says low-income Canadians are adversely affected, but so are other groups

The 13,500 Canadian farmers who operate with the supply management system have a combined quota value of more than $35 billion. It’s no wonder that those farmers want to retain the system, says University of Lethbridge economist Danny LeRoy.

However, both retention and loss of supply management involve trade-offs to the economy and individuals, he told those at a May 10 meeting of the Southern Alberta Council on Public Affairs.

“There is a lot at stake here, much more for some individuals than others and it is much more than just money. It’s family business, friendships, security, property, freedom and things so personal and so deeply subjective that they defy words. It is imperative to remember the people involved.”

Supply management controls the supply of specific goods and the price Canadians pay for them, LeRoy said. That means low-income Canadians are adversely affected but the system affects others, too.

“It’s people who produce these goods. It’s people who would like to import goods produced by individuals in other geopolitical jurisdictions. It’s individuals who would like to start a business or individuals who would like to produce something that’s innovative that isn’t currently in the marketplace in Canada,” LeRoy said in an interview.

“It’s a hindrance to all these different types of Canadians who bear the consequences of the supply management system.”

Producers in supply managed sectors do not require government support, LeRoy said, but other citizens pay a price.

“It is true today that the prices they receive, there’s no taxpayer support for that, but the prices that they do receive are a consequence of shorting the market through production quotas and limiting imports. So, it’s the consumer who is paying for it.”

If supply management was eliminated, producers involved would suffer large losses, as would their lenders. Because of the high value put on quota, there would be tremendous pressure for a bailout to affected producers, he said.

On the flip side, he said elimination of supply management would also come with benefits.

“There will be small gains across many groups. For example, one would expect the prices for dairy products would be lower. There would be a greater supply of them.”

LeRoy noted the current system gives rise to smuggling of supply-managed products. He cited a Niagara police officer who was jailed in 2015 for smuggling thousands of dollars worth of cheese and chicken wings into Canada, and a 2013 case of a Burnaby, B.C., importer who hid contraband cheese in cross-border shipments of grape juice.

Supply management functions in part by imposing tariffs on imports of certain goods. LeRoy said those tariffs are 168 percent for eggs, up to 285 percent for chicken, 246 percent for cheese and 298 percent for butter.

“The possibility of these import taxes being reduced, and greater access provided to potential foreign suppliers from international trade agreements like NAFTA (North American Free Trade Agreement), is a big concern to producers of supply managed commodities and their marketing boards,” he said.

“It reduces the scope of the privileged market into which producers of supply-managed commodities in Canada sell. It also reduces the perceived value among producers of … quota.”

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