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Dairy cows are seen at the Bakerview Ecodairy in Abbortsford, B.C. Monday, March 28, 2011 where they use a robotic milking machine. The robotic milker allows cows to be milked whenever they feel that they are full and can access the machine 24 hours a day, giving the animal the "free-run cow" concept. (JONATHAN HAYWARD/THE CANADIAN PRESS)
Dairy cows are seen at the Bakerview Ecodairy in Abbortsford, B.C. Monday, March 28, 2011 where they use a robotic milking machine. The robotic milker allows cows to be milked whenever they feel that they are full and can access the machine 24 hours a day, giving the animal the "free-run cow" concept. (JONATHAN HAYWARD/THE CANADIAN PRESS)

Globe Editorial

We're having a cow over dairy subsidies Add to ...

The Harper government was right to promise to end the Canadian Wheat Board's export monopoly, in the Speech from the Throne, but that sits oddly with the pledge earlier in the speech to “stand up for Canadian farmers and industries by defending supply management.”

The Wheat Board is considerably less anti-competitive than supply management. As Lawrence Herman, a trade lawyer at Cassels Brock, says, it is “a single-desk seller that competes at world market prices. The supply-managed sectors are totally protected from open market competition.”

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The Conservatives – a party not long ago accused of free-market dogmatism – made a similar vow to uphold supply management in the election campaign. It is difficult not to infer motives; their position on the Wheat Board attracts support from many prairie farmers, while their position on supply management is meant to win over the well-organized dairy farmers of Ontario and Quebec.

Thanks to supply management, the prices of dairy products in Canada tend to be two or three times higher than in the rest of the world. This regime is aimed at the domestic market. Consequently, the Canadian Dairy Commission (a Crown corporation intended to co-ordinate a bewildering cluster of federal and provincial policies) assigns much lower prices for dairy-product exports, which is a great help to, for example, Canadian makers of frozen pizza, who have American competitors – while makers of fresh pizza in Canada have to overpay for cheese.

This is a classic case of mercantilism; it favours exporters and hurts domestic, Canadian consumers. As Mr. Herman observes, the improvement of Canadian wine producers has shown the benefits of requiring an industry “to modernize and become internationally competitive.” The Conservatives have got their priorities reversed. They should act to end supply management first. The Canadian Wheat Board's export monopoly should end, but it does less harm than dairy protectionism.

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