Supply management is bad public policy but won’t end until Canadian consumers demand it, says Michael Hart, professor of trade policy at Carleton University.
“It seems to be one of the few areas where the consumer seems to be prepared to accept the status quo,” Hart said at the recent Fields on Wheels conference.
The trade expert, one of the architects of the Canada-U.S. free trade deal, predicted supply management will endure “until the minister of agriculture starts getting letters from consumers saying, ‘What the hell are you doing with a 238 per cent tariff (on imported French cheese) in a global economy?’”
But with global demand for protein growing, Canada is missing out on a golden opportunity, said Hart, citing the example of New Zealand and Australia, which abandoned supply management about 20 years ago and now are large dairy exporters to India and China.
Defenders of the system say matching Canadian dairy and poultry production to demand provides consumers with reasonably priced, safe food while ensuring farmers make a decent living. Officially, the federal government supports that view, but it really doesn’t, said Hart.
“I’ve talked to a lot of cabinet ministers and if I get them one on one they agree it’s a real dumb idea,” he said. “But if they smell press around them, (then) it’s wonderful. Well, that’s because they’ve not heard from you (the public).”
The sensible option would be to phase out supply management, Hart argued, saying that’s becoming easier each year because of the declining number of dairy farmers. There are around 12,500 now compared to 50,000 in 1977 when supply management was implemented, said Hart, who predicted that number will eventually fall by a further 50 per cent.
“But by the time we get to that we will no longer have the mom-and-pop kind of farms that are in the advertising campaigns,” Hart said.
“They’ll all be large, corporate farms and the large, corporate farms will need more outlets than the local dairy and they too will say, ‘This is dumb.’ So over the next 10 to 15 years we should see a transition out of this awful, awful policy decision made in the ’70s to a more open system.”
But killing supply management won’t mean lower prices, said a spokeswoman for the Dairy Farmers of Canada.
“We saw that with BSE in Canada,” said Therese Beaulieu. “Beef prices dipped a bit at retail and then went back up (even though farm gate cattle prices plunged.) That’s what happened in the U.K. when its dairy sector deregulated its supply management system.”
She also challenged Hart’s critique of how the system works, saying, for example, that the 238 per cent tariff on imported French cheese doesn’t apply until thousands of pounds enter the country under a one per cent tariff.
Many countries use tariff rate quotas to regulate dairy and other imports, said Beaulieu, adding Canada has one on beef. According to the Dairy Farmers’ website, Canada imports six per cent of its dairy products while the U.S. only imports 2.75 per cent. The website also says the ultimate price for milk isn’t much different between the two countries because the U.S. government provides an additional 31 cents a litre in subsidies.
The U.S. dairy industry also has a long history of boom and bust, and many large American dairy farms are going out of business right now because of high grain prices caused by this year’s drought, Beaulieu said.
“It’s not unlike what’s happening with the pork sector here,” she said.