The National Farmers Union (NFU) predicts the Trans-Pacific Partnership deal is the beginning of the end for supply management while claiming prospects for export agriculture are “illusory.”
But Ryan Cardwell, a University of Manitoba agricultural economist, says the deal announced earlier this month doesn’t go far enough to end higher costs for dairy, eggs, chicken and poultry that Canadians pay.
After years of negotiations, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam agreed on a trade deal Oct. 5, however, ratification could take two years.
Prime Minister Stephen Harper says the TPP will open markets in Asia for Canadian grains, oilseeds, pulses, canola oil, pork and beef. Supply management farmers, currently protected from imports by high tariffs, will give up some of their market. In return the government promises up to $4.3 billion in compensation.
Canadian dairy farmers will lose 3.25 per cent of their market (plus another one per cent through the Comprehensive and Economic Trade Agreement (CETA) with the European Union, which still must be ratified.
Egg, chicken, turkey and broiler hatching egg producers will lose 2.3, 2.1, two and 1.5 per cent, respectively.
Compensation is as follows:
- $2.4 billion to make up for lower income.
- $1.5 billion to support quota value.
- $450 million to help processors be more competitive.
Plus, $15 million has been budgeted to help develop exports.
“The federal government’s promise of a $1.5-billion compensation package for loss of quota value over 10 years and $2.4 billion for loss of income over 15 years seems unnecessarily high if we are only talking about a 3.25 per cent dairy quota cut,” NFU president Jan Slomp said in a news release. “This large dollar amount suggests that the intent is to completely dismantle dairy supply management over the next 10 years.”
Others suspect the same thing, including Sylvain Charlebois, associate professor of marketing and consumer studies at the University of Guelph.
“Maybe there will be more announcements ahead,” he said in an interview.
“The $4.3 billion could actually be based on the fact we’re really talking about more than 3.25 per cent.”
However, one dairy industry official noted the $4.3 billion is for all supply management, not just dairy and it includes money for processors and market development.
New Zealand officials have hinted this is just the start of breaking down access to Canada’s dairy market.
Bertrand Montel, an independent agriculture consultant in Montreal, told the Globe and Mail the TPP will see milk prices fall, forcing inefficient farmers out.
“I can’t help but think it’s a transition fund in disguise to phase out supply management in 10 or 15 years,” Montel said.
Harper told reporters the compensation is not a buyout.
“The government missed an opportunity to do something here (to end supply management),” Cardwell said in an interview. “When we see these trade agreements come there’s hope we can reform it and it was missed again this time.
Supply management marketing boards say Canadian consumers get an assured supply of high-quality Canadian product at a reasonable price and in return farmers get good, stable returns through market protection.
Slomp said open dairy markets in New Zealand, Australia and the U.S. are failing farmers and consumers. “Sacrificing our farmers and destroying a system that works for Canadian farmers, consumers, processors and taxpayers will not solve New Zealand’s problems.”
While Canadian supply management farmers are not competitive now, they could be, Charlebois said. Canadian wine producers feared free trade with the United States would destroy their business, but it’s better than ever.
The American government subsidizes its dairy farmers at levels so high the Canadian government couldn’t afford to match then, Charlebois said.
“We can’t compete against the U.S. Farm Bill,” he said. “There’s no way. It’s a trillion-dollar bill (for all agriculture not just dairy).”
Cardwell said Canadians would be better off importing cheaper dairy, eggs and poultry from the U.S.
“The reality is we have 11 million households buying dairy and poultry products, paying a very, very high price,” he said.
“We estimate in our paper as a result of supply management if you’re making $15,000 to $20,000 a year and you have kids you’re paying an implicit tax of $460 a year.
“You have to look at the big picture. Is it more important to recognize the interests of 11 million households that spend billions of dollars a year or a very small concentrated group of a few thousand producers who benefit from these protectionist policies?”
Even with the limited imports under TPP, Canadians will save almost $250 million or $6 billion over 15 years, Cardwell said, which means the government can spend $4.3 billion in subsidies and the country would still be ahead.
Until now supply management could boast it wasn’t directly subsidized. How can Ottawa now justify import protection and subsidies?
“We don’t view this as a subsidy, we view this as an investment in the strength of the system and what it brings to rural Canada,” said a senior government official. “Some 300,000 people are involved in the sector, tens of billions of dollars returned from that sector. So these are investments to make sure they can continue to deliver for the economy as it has been doing.”