Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

Stacked cartons of eggs (Jupiterimages/Getty Images)
Stacked cartons of eggs (Jupiterimages/Getty Images)

Sorry, Egg Farmers of Canada, taxing competition out of the market is not the answer Add to ...

Only in Canada could anyone attempt to argue, with a straight face, that a near 300-per-cent tax on foreign dairy products and a 79.9-cent tax on a dozen eggs does not raise prices. Peter Clarke, chairman of the Egg Farmers of Canada, makes this claim and a number of others in a recent editorial. Of all the assertions made, the most outrageous is the suggestion that such punitive tax rates on foreign products are necessary to protect Canadian consumer preferences.

More Related to this Story

Mr. Clarke’s argument is relatively straightforward. He states that a Bank of Montreal report finds that, all else being equal, Canadians prefer to purchase Canadian foods, with some Canadian foods being favoured by nine out of 10 Canadians. Since Canadians prefer Canadian food, it is argued that a system that blocks foreign products must then be in the interest of Canadians.

It is not uncommon for consumers to hold such strong food and beverage preferences. Roughly the same ratio of North Americans prefer brand name sodas over generic ones. Now imagine if the CEO of a large multinational soft-drink company released a press release stating:

“Surveys clearly indicate that nine out of 10 consumers prefer our brand to store-brand generics. In order to provide consumers with the products that they want, we are calling on a 300-per-cent tax on generic brand soft drinks. In this way Canada can ensure that consumers get the products they wish to purchase.”

We would not accept such an argument from a consumer goods company. Why should we accept one from poultry farmers?

If consumers have a preference for Canadian eggs then the solution should be clear country-of-origin labelling on poultry products, not a punitive tax designed to block competition. If Canadians truly prefer Canadian products, they will purchase the ones with a “Made in Canada” logo stamped on them.

We should also consider the one in 10 (or more) Canadians who prefer non-Canadian poultry products. Why should their preferences not matter? The fantastic thing about markets is that they are not one-size-fits-all. I may prefer chocolate ice cream while you prefer strawberry. Since enough consumers want each product, both will be offered for sale and we can each purchase the product that we want. Contrast this to the Egg Farmers of Canada approach, which would be to survey Canadians to find what ice-cream flavour is more popular and then tax all the other flavours out of the market. Sorry, strawberry lovers.

The Egg Farmers are quite right to point out that this phenomenon of high prices and low choice is not unique to supply-managed products. There are other tariffs that make products purchased in Canada more expensive, from a 16-per-cent tariff on orchids to a 8-per-cent tariff on peaches, which rises to 10.5 per cent in times of national emergency. The need to reduce tariffs starts with supply-managed products, but does not end there. Canadian consumers are having their choices reduced and paying more than they should for consumer goods, thanks to an antiquated tax code.

 

Topics:

In the know

Most popular videos »

Highlights

More from The Globe and Mail

Most popular