There is something about Canada’s supply management system that drives otherwise-passive economists bonkers.
How else to explain the fact that so many economists spend so much time obsessing about a minuscule part of the Canadian economy?
Supply management accounts for approximately 20 percent of Canadian farmgate receipts and a fraction of a percentage point in the greater Canadian economy.
Yet a community of academic economists has been griping about the system for years.
Late last year, the respected Conference Board of Canada weighed in, insisting that all producers, including dairy farmers, should give up their protections and price-fixing ways to join the income roller coaster that the vast majority of producers “enjoy” in the volatile market.
Read Also
Agriculture needs to prepare for government spending cuts
As government makes necessary cuts to spending, what can be reduced or restructured in the budgets for agriculture?
The Conference Board argued that supply management may have had a purpose when it started but now it simply protects a small elite and gives them market power no farmer should have.
“Farmers have moved from a situation in the 1960s in which processors held power when it came to pricing to one today in which producers clearly hold the balance of power,” wrote the report author, apparently seeing that as a bad thing.
Now comes the equally respected business think-tank C.D. Howe Institute weighing in on the same issue with the same conclusion.
Supply management, with its production controls, import controls and set prices, is a free market affront, a cartel whose time has passed, wrote C.D. Howe president William Robson and policy analyst Colin Busby.
“While this government-mandated cartel allows producers to sell their goods for higher-than-free-market prices, this comes at the expense of domestic consumers, new entrants and robust competition,” they wrote.
That would be like the “robust competition” waged on a day-to-day basis by the handful of corporations that control the upstream and downstream side of the food business.
It is well known that fertilizer companies produce as much as they can and then discount prices to try to win farmer business.
To their credit, Robson and the C.D. Howe Institute didn’t just criticize. If supply management must end, they proposed a 20-year path to that goal, flooding the market with new quota to erode and end more than $28 billion worth of quota that now exists.
It would at least offer producers a transition period to uncertainty and lower incomes.
And they make the points that high quota values are an impediment to new entrants while defence of high quotas undermines Canadian efforts to sell itself abroad as a free trader.
But still, it is difficult to understand why this relatively small sector – the only farm sector that derives the vast majority of income from the farm rather than off-farm income or subsidy – rates so much attention.
It must be ideological, a mote in the eye of a Canadian economy they see as “free market” despite all the evidence.
The supply management sector should be flattered at the attention, if only the constant attacks did not feel like the ominous drumbeat of the inevitable end.
