A Federal Court decision on Greek-style yogurt, made public this week, shows how a supply-management system can tempt firms to try to limit competition, even when the system itself is not in danger.
Fortunately, Madam Justice Sandra Simpson upheld the decision by Ed Fast, the Minister of International Trade, to grant a temporary import permit allowing a U.S. yogurt maker, Chobani Inc., to undertake a test-marketing project in one region of Canada and to then make a transition to manufacturing its yogurt in this country.
One of the key ingredients in Canadian dairy supply management is an overall control of the volume of milk production. For its three-month project (and if the test went well, the 15-month transition) Chobani’s Canadian subsidiary, Agro-Farma Canada Inc., wanted to make its yogurt from American milk – not only because of the deliberately limited supply of Canadian milk, but also because American milk is cheaper. The reason for that is that the United States, being protectionist in a different way from Canada, subsidizes its dairy farmers by direct payments, rather than through supply management.
The Canadian Dairy Commission, a federal Crown corporation that administers the supply-management system, and Dairy Farmers of Ontario, the milk marketing agency in the province concerned, had no problem with the temporary flow of American milk across the border.
After Mr. Fast granted Agro-Farma the import permit, Danone Inc., Ultima Foods Inc. and Agropur coopérative sued to strike it down, unsuccessfully (though an appeal remains possible). As Robert Wolfe of the School of Policy Studies at Queen’s University says, Canadian dairy processors probably do not “care about supply management as such.” But companies, like many institutions, get used to business as usual, ideology or no ideology.
In this instance, the three applicants objected to a prospective foreign competitor’s access to cheaper milk for a limited period. The supply-management system itself – fully intact after the Federal Court’s decision – is a temptation to an inflexible attachment to vested interests.