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Thanks to Canada’s supply managed dairy sector, consumers pay hundreds of dollars more a year than they need to for products like cheese. (Peter Power/The Globe and Mail)
Thanks to Canada’s supply managed dairy sector, consumers pay hundreds of dollars more a year than they need to for products like cheese. (Peter Power/The Globe and Mail)

Martha Hall Findlay

Politicians need courage to dismantle supply management Add to ...

Despite a professed commitment to free trade, Canada has retained a staunchly protectionist supply management regime in several agricultural sectors, notably the dairy industry. It harms our trade options. Domestically, it also costs consumers far too much.

Dairy farms are governed by a byzantine system that prices milk based on intended usage, locks out most foreign products with exorbitantly high tariffs and even determines how much farmers can produce. Everyone suffers. First in the line of people harmed by supply management are consumers – Canadians are forced to pay two to three times as much for whole milk as Americans.

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It is simply untenable that Canadian families pay upwards of $300 more a year than they need to, for milk alone, let alone higher prices for other products like cheese, yogourt and ice cream, to subsidize a tiny number of relatively well-off farmers. Worse, it’s regressive, which means that the ones who suffer most are the low-income families – the very ones who most need affordable access to nutrition. Many others, including processors and restaurants, have been calling to an end to supply management for years.

Canada’s insistence on this protection also makes it difficult for Canada to open up access to international markets. This means that all other Canadian enterprises that rely on trade, all those who would benefit from Canadian participation in trade arrangements such as the Trans-Pacific Partnership, are too often denied lucrative access to some of the world’s largest and rapidly growing markets. This includes, ironically, most of the farmers in the non-supply -managed sectors, such as beef, pork, grains and oil-seeds who make up by far the majority of Canadian farmers.

In contrast to the fewer than 15,000 supply-managed farmers, there more than ten times that many – over 210,000 farmers (92 per cent of the total number of Canadian farmers) – that are directly dependent on export markets; they either export their products or sell them domestically at prices set by international marketplaces. These farmers would benefit from increased access to the world’s rapidly growing emerging economies, particularly those in Asia. Even the dairy farmers themselves are prevented from taking advantage of the opportunities and efficiencies a truly free market affords.

The system needs to go.

This is not new. Most economists, think tanks, commentators, consumer advocates (and trade negotiators) have, for quite some time, recommended the dismantling of Canada’s supply management regime – for both domestic economic reasons and for reasons of international trade. Politicians, however, seem stuck. Frustratingly, many of them agree in private that it no longer makes sense, that it should be dismantled – but they say that “politically, it’s not possible” and “there are too many votes at stake.” But this is, quite simply, no longer true.

Despite every effort on the part of the dairy lobby to promote this fear, these political concerns are no longer valid. Since 1971 (when supply management in dairy started), the number of Canadian dairy farms has dropped by a staggering 91 per cent, from 144,000 to a mere 12,746. Based on electoral analyses of the ridings where these last few are concentrated, even if dismantling supply management angered stakeholders (which would by no means necessarily be the case; see the recommendations below), there are few, if any, ridings where dairy votes could plausibly swing elections – particularly compared to the votes of all those in those same ridings who would benefit from dismantling supply management.

More importantly, however, dismantling supply management is not something that should be feared by the dairy sector. It is possible to dismantle supply management in a way that not only works well for dairy farmers, but that can leave them even stronger. Even better, it can be done without extra cash from the government – financed, ironically, by a temporary levy on milk that would still mean retail prices that are lower than what consumers are paying now, but, for the transition period, a bit more than they will pay under full free markets.

This approach was used successfully by Australia in dismantling their own dairy supply management in 2000, with an eight-year transition period that provided both compensation and transition assistance to its dairy farmers. Not only did consumers benefit, it had a dynamic effect on productivity and re-oriented the Australian dairy industry to a globally competitive, exporting industry.

There is now increased pressure for international trade opportunities such as the TPP, on which Canada’s future prosperity depends. But we must also eliminate the domestic economic distortions that hurt Canadian consumers, particularly the lowest income earners, the most. The time is now for the federal and provincial governments to act.

Martha Hall Findlay, the former Liberal MP for Willowdale, Ont., is an executive fellow at the University of Calgary’s School of Public Policy

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