In a Throne Speech Wednesday that was short on inspiration for tackling many Canada's biggest long-term economic challenges, the one key card the Harper government is playing is on the international trade file. The push to open and expand Canada's trade markets beyond the United States is a critical element to assuring sustainable health and growth in Canada's export-heavy economy, and the government's focus on pursuing trade agreements with the European Union and the Trans-Pacific Partnership is certainly encouraging.
So, too, are the signs that the government is addressing a significant obstacle – that to make meaningful progress on the trade front, it will have to go through its dairy industry. The country's supply-management system protecting its dairy farmers against foreign competition has been an albatross around its neck in trade negotiations for far too long, sheltering one small industry at the expense of the entire trade sector's greater future.
The government indicated it is on the verge of nailing down a trade deal with the EU – which Ottawa claims would bolster the Canadian economy to the tune of $12-billion in GDP and 80,000 jobs. While those numbers are little more than theoretical (Unifor trade-union economist Jim Stanford, for one, argues that the numbers are based on flawed and overly optimistic assumptions), they nevertheless point to an avenue of trade growth that the Canadian economy has been sorely lacking since the Great Recession.
As part of the deal, Canada has agreed to more than double Europe's tariff-free limit on the amount of cheese it exports to Canada. It's a start, but it doesn't even come close to dismantling Canada's system of individual farm production quotas and steep tariffs. Yet immediately, the dairy industry expressed its displeasure, suggesting that the government was throwing Canadian cheese makers under the bus.
Perhaps it is; in trade deals, there is usually a price to be paid. But Canada's dairy farmers have long enjoyed massive trade protections from foreign imports – barriers that run so counter to the principles of open trade that they have done damage to Canada's trade reputation far outweighing the national interests that they protect.
Canada's dairy system has come under fire repeatedly from our trading partners. It has been challenged at the World Trade Organization for running contrary to Canada's commitments under international trade law, and held up as evidence that Canada isn't a serious proponent of free trade. The country's historic refusal to budge on dairy trade barriers has limited its ability to negotiate much broader increased access for its exporters to many foreign markets, particularly in Europe.
And all for what is, let's face it, a tiny sector of the Canadian economy. There are about 46,000 Canadians employed in dairy farming and processing – just 0.2 per cent of Canada's labour force. Dairy farming's contribution to GDP is about the same. Canada's dairy exports totalled $237-million last year, less than 0.1 per cent of the country's total exports.
It's also a sector that is stagnating under the quota system. The number of dairy farms in this country has shrunk by 40 per cent in the past 15 years; the number of dairy cattle has declined by nearly 20 per cent. Exports haven't grown in the past decade. The system might support individual dairy farmers, but it's doing little to promote a dairy industry.
Canada's cheese concessions in the EU trade talks may be a signal that we are ready to start cutting the umbilical cord with the dairy industry, to let it compete in the global market and to remove it as an impediment to trade progress. That would be better for the country, and for the industry.