Canada has set an ambitious trade agenda that includes separate proposed deals with the EU, Japan and South Korea, along with entry into the Trans-Pacific Partnership negotiations. The issues on the table differ from negotiation to negotiation: Japan and South Korea want Canada to reduce or eliminate a 6.1 per cent tariff on imported automobiles and parts; The EU and United States are requesting a change in Canadian intellectual property laws.
One issue, however, is common to all negotiations: Our trading partners want to see an end to supply management of our dairy and poultry industries.
The tariffs that buttress the system range between 200 and 300 per cent on imported dairy products, with milk facing a 241 per cent tax and butter one of 298.5 per cent. These tariffs make foreign products prohibitively expensive and keep domestic prices among the highest in the world.
Despite the insistence of all of our trading partners that supply management come to an end, the Prime Minister continues to insist that Canada “stands by its strong commitment to defending the dairy sector in trade talks.” This is truly baffling, given that supply management does more harm than good to Canadians.
Supply management keeps prices high for consumers, lowering consumption of dairy products. This higher price is essentially a regressive tax, as lower income households spend a larger percentage of their income on supply managed goods than other households. Supply management prevents new farmers from entering the market, keeping the industry inefficient and old. There are ways of removing supply management that do not unduly harm the dairy industry or dairy farmers, as shown by the experience in Australia when their supply management system was ended.
It is often argued that supply management is necessary to support farmers, but the vast majority of agricultural commodities in Canada are not supply managed. There are more than 200 000 farms in Canada, of which less than 13,000 are dairy farms and another 5,000 are poultry and egg producers. Pork producers, in particular, would be delighted to see an end to supply management if it meant increased free trade.
Even if Canada were not seeking to sign new free trade deals, supply management should come to an end. The policy does nothing but enrich a handful of dairy and poultry farmers at the expense of Canadians, while limiting consumer choice. The fact that we can use this harmful policy as a chip to be negotiated away in a trade deal should provide even further encouragement to get these deals completed.
Mike Moffatt is an Assistant Professor in the Business, Economics and Public Policy (BEPP) group at the Richard Ivey School of Business – Western University