John Morriss is associate publisher and editorial director of Farm Business Communications.
Drop supply management, buy out dairy farmers for the value of their quota and throw open the border to imports. The result will be cheaper milk for Canadian households and dairy processors will prosper from selling to a booming international market.
Or so you might think from recent commentary on the Canadian supply management system, which would also have you think that the only barrier to Canada joining the Trans-Pacific Partnership is our willingness to open our border to American milk. Given that this deal has been called "NAFTA on steroids," it might be that there are one or two other issues at play.
This alleged sticking point is blamed on what is often called "the powerful dairy lobby." With just 12,000 dairy farms spread across dozens of constituencies across Canada, it's questionable whether the lobby is strong enough to make any political difference. The real political issue goes beyond the interests of the dairy farmers themselves – it's whether we want Canadian milk on Canadian tables.
All agricultural policy is complicated, but dairy policy is particularly so, partly because milk is perishable. Grain can be stored for years, but milk goes off within days. That makes it nonsense to talk of the Canadian milk price being higher than the "international" one. Yes, you can produce milk more cheaply in New Zealand or Ireland, where cows can graze outside on pasture 365 days a year. But you can't buy fresh milk from New Zealand or Ireland in Canada – it has to come from local cows, which means all the additional costs of housing them in barns and hauling the feed to them during the months when they can't graze outside.
The problem for Canada is that the "local" cows are also just across the U.S. border, where dairy farmers receive government-subsidized insurance against a drop in their profit margins. And if you think Canadian supply management is bureaucratic, don't bother even trying to get your head around the U.S. system of "milk marketing orders," in which the government tells buyers what to pay for milk depending on different end uses. Then there are the subsidies on the demand side, such as food stamps and school lunch programs.
If supply management was dropped and the border was opened, much of Canada's milk demand would be within a few trucking hours of subsidized U.S. producers, who would need to increase production by just 10 per cent to supply our entire market. The Canadian government, which now pays no subsidies to dairy farmers, would either be forced to match the U.S. support level or allow most of the milk in Canadian cereal bowls to come from cartons reading "Product of the USA."
As for the TPP, would it prevent signatories from introducing subsidy programs that weren't in place before, as past trade agreements have? In other words, would Canadians be stuck with no import controls and no subsidies?
Assuming that Canadians could compete with or without subsidies, they would be pressured to match U.S.-style mega-dairies with thousands of animals managed with questionable labour- and animal-welfare practices.
As for the notion that dropping supply management would allow Canada to export more, that is doubtful at best. There has indeed been a sharp increase in demand for dairy products in China and other Asian countries, most of which is for skim milk powder and infant formula. However, there is currently a glut of those products on the market, and New Zealand's dairy quasi-cartel has been cutting payments to producers. The glut isn't likely to end any time soon – the European Union eliminated quotas on April 1 and Irish producers plan for a sharp increase in production and processing. Again, Canadians can hardly compete with these countries, which have year-round pasture.
If you're looking for a home for the term "powerful dairy lobby," look no further than the National Milk Producers Federation in the United States, where there are, no doubt, broad smiles every time their clipping service produces another mean-spirited Canadian commentary portraying Canadian dairy farmers as rich fat cats depriving children of low-cost nourishment. They have made no bones about wanting a big piece of our market.
It's reasonable to take a position that supply management would be a worthwhile tradeoff for the overall benefits of the TPP. It's not reasonable to ask Canadian producers to compete against U.S. milk without U.S.-level subsidies. Supply management may have problems, but this issue demands more analysis than "throw open the border and let farmers compete."