The federal government’s decision to join the Trans-Pacific Partnership trade talks has again drawn attention to supply management.
In signing on to these negotiations, prime minister Stephen Harper noted that supply management would be up for discussion, but the government tried to calm the sector’s fears by pledging to defend the system.
Its defense will have to be spirited in the face of strong opposition from free trade stalwarts Australia and New Zealand, which are proud that they gave up most of their agricultural protection policies years ago and are aggressive in pursuing deals that stamp them out elsewhere.
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Supply management, the system that controls production and prices of dairy, eggs and poultry and includes high import tariffs, also has domestic critics.
They have become more vocal in recent months since the federal government began the process to end the Canadian Wheat Board’s monopoly.
Open market purists argue that if the Harper government feels compelled to dismantle the CWB single desk, it should also address the market restrictions associated with supply management.
The benefits the Conservative government says will come from an open wheat market – farmer freedom, increased value-added processing and rural development – will also result if supply management is ended, they argue. And there will be an added benefit to consumers who will enjoy cheaper dairy, poultry and eggs, they say.
On the trade front, critics argue, Canada’s support of supply management in trade negotiations neuters its efforts to promote freer trade in other sectors and relegates our negotiators to the sidelines instead of being leaders.
The arguments have some weight, but it can’t be denied that supply managed sectors are an island of stability in the volatile world of food production.
The marketing system provides Canadians with a reliable supply of high-quality food at stable prices while providing farmers a fair return on their investment, labour and management.
Consumers barely feel the pinch. The cost of the farm products in most meals accounts for only a small portion of the price of the food. Labour, energy, transportation, packaging and promotion as well as processor, wholesaler and retailer profit make up the majority of food costs.
Yet Canadians pay a smaller portion of their income on food than almost everyone else on the planet. Also, per capita consumption of dairy products in Canada is similar to that in the United States.
Because these sectors get returns through the market, they do not need tax-funded support like their counterparts in other countries required in the past year when dairy prices crashed around the world.
The sector’s price-setting powers give producers an adequate return, but not so generous that it prevents a constant need to improve efficiency. Indeed, Canada’s dairy genetics are prized around the world.
By supporting supply management, Canada might relinquish leadership in trade negotiations but it does not stand alone. Most countries have agricultural sectors they want to protect.
Supply management provides Canada many benefits at a modest cost, and it would be a shame to lose those benefits. But that is not to say it is untouchable.
The need for participants to buy expensive quota is a major barrier to new entrants and creates heavy debt loads for current participants.
A planned and staged-in system of renewal that lowers quota costs while respecting the investments that current participants made in good faith would help reinvigorate the sector and make it more resilient if political winds change and the government decides trade is more important than pleasing some farmers.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Joanne Paulson collaborate in the writing of Western Producer editorials.
