Afew years back, while working as a writer for our sister publication Country Guide, I spoke at some length with Saskatchewan-based agriculture economist Murray Fulton, about how farm policy is typically set in Canada.
He told me that what tends to happen is something he called “punctuated equilibrium” — which is to say that Canadian agriculture policy tends to reach a state of consensus on a topic, then remain there for quite some time.
Over time, new issues appear, and pressure begins to slowly build under the surface. Eventually it begins to bubble up, reach a boiling point, then boiling over in a flash of action — like the death of the Crow Rate or the move to an open market for western wheat and barley.
He also told me, in his opinion, we were probably at the start of the process where the pressure would begin to build on supply management. With the benefit of hindsight, he’s beginning to appear downright prescient.
There’s little doubt pressure is rising. Various trade agreements threaten to both undermine it and cap future growth. Columns in both the farm press and mainstream media increasingly take issue with it. Recently Maxime Bernier, a Conservative MP from Quebec and candidate for the party’s leadership, broke ranks and said it is time to reform the system. A pair of University of Manitoba researchers recently received a national economics award for a policy paper examining the outsize impact supply management has on poor households.
In a nutshell their case states that supply management is a regressive tax that rich and poor alike pay at the same rate, and the higher prices of basic grocery staples is driving poor households to less healthy and wholesome options.
Drip by drip, the dam is breached, and change now appears inevitable — the question is no longer if, but when, how and by whose design, in my opinion.
So far, supply-managed commodity groups have taken a fighting stance, battling every perceived threat. It’s certainly understandable, after all the current system appears to have functioned well for them for decades now. But in a strategic sense, I believe this is an error. After a while policy-makers will just conclude the farmers in question are resistant to change and they’ll impose a solution, like it or not.
When the punctuation is reached, governments tend to act the same no matter the party in power, or the issue at play. It can be summed up pretty simply: distract them, rip the bandage off and run like hell. It would be nice to think a new generation of leaders might actually display leadership, but don’t count on it.
If they won’t, industry will need to, or risk being saddled with a deal they’ve had little input on.
I’m not suggesting giving away the farm, of course, and I don’t think even the most ardent free market proponents are either. The truth is a lot of commodities are subsidized in a lot of different ways in a lot of different places. But what makes supply management unique is that it’s been singled out as a trade-distorting policy and essentially shuts Canada out of export markets for commodities, in particular dairy, while spinning off unintended consequences at home.
Agricultural economists Al Mussell, Doug Hedley and Kamal Karunagoda examined this in a widely discussed policy paper, Canadian Dairy Exports: The Knowns, Unknowns, and Uncertainties. In it they noted many other countries provide both direct and indirect subsidies, but don’t suffer the same sort of trade backlash, because of the different way those subsidies are viewed.
In fact, the milk sector looks, to the casual observer, like the supply-managed commodity that’s currently under the most duress. There’s a well-documented mismatch between production and consumer demand that’s resulted in ever-rising butterfat imports. There’s a thriving grey market in U.S. milk solids that are crossing the border by exploiting a poorly understood loophole. Our exports are unwelcome because of supply management, while at the same time our domestic market is opening to dairy imports, suggesting Canadian producers are likely to lose out market share with no chance of a replacement.
Left unaddressed it will be death by a thousand cuts. Rather than sticking their collective heads in the sand and hoping for the best, I strongly believe supply-managed producers would be best served by having a painful conversation amongst themselves. They should be taking a long and hard look at what criticisms of the current system might be most valid, and attempting to address them.
There’s still plenty of time to take a more proactive approach to this situation, and nobody appears to be making a case for leaving farmers high and dry, holding the high-priced bag of quota they just bought.