DAIRY BOMBAST NOT A THREAT — IT’S REALLY AN OPPORTUNITY
The time has come for Canada to rethink supply management, as Joe Chidley writes.
Given Donald Trump’s predilection for bombast, it’s hard to know what to make of the tongue-lashing he gave Canadian dairy farmers earlier this week in Wisconsin. In calling the North American Free Trade Agreement “very, very bad” and in need of “very big changes,” he singled out our dairy industry as the source of “some very unfair things” that have happened to U.S. farmers. He vowed to “call Canada” (on the red phone, presumably) “to get the solution and not just the answer, because we know what the solution is.”
Strong (and vague) language. But what does all the bluster mean?
If you’ve a taste for irony, you could note the spectacle of a man criticizing another country’s protectionism at a rally to announce a protectionist “Buy American/ Hire American” initiative. Or if you’re an optimist, you could dismiss it as a play to the regional crowd: Wisconsin dairy farmers are in a dust-up with their Canadian counterparts over allegedly unfair pricing of something called ultra-filtered milk.
Or, if you’re a worrywart about Canada’s sovereignty, you might see it as a shot at our cherished supply management system, which defends Canadian dairy (and chicken and turkey and egg) farmers from the perils of foreign competition, not to mention market forces, and which is every bit as important to the national fabric as hockey, poutine and whining about the weather, judging by how far our politicians, of all parties, go to defend it.
The thing is, if supply management really is what Trump was talking about, then he’s right: It’s long past time Canada put it on the trade block.
Now now, let’s calm down. You defenders of the system, which protects certain farmers through a Byzantine array of quotas, price controls and tariffs, will be quick to point out that U.S. agricultural practices are no less protectionist than Canada’s. You’ll note that the U.S. doles out tens of billions every year on farm subsidies, so its criticism of supply management reeks of hypocrisy, made doubly smelly coming from an economic nationalist like Trump.
All that is true. But so what? It doesn’t turn crappy policy into good policy. And supply management is crappy for many reasons, but here are three: it’s unfair, it’s expensive and it doesn’t work.
Most Canadians don’t get guaranteed prices based on their costs of production; most don’t get a free pass from competition thanks to government-imposed tariffs or quota-based barriers to entry. Neither do other Canadian farmers: Pork, beef, pulse and canola producers, for instance, don’t merit the same protections, even though they outnumber dairy farmers.
Meanwhile, supply management undermines Canada’s credibility in trade negotiations, which hurts those other non-supply managed farm sectors, which are far more export-oriented than the dairy industry. But apparently, Prairie canola farmers are not as important to the political elite as their milk-cow-raising counterparts in Ontario and Quebec, the country’s two largest dairyproducing provinces by far. That’s just plain unfair.
And it’s expensive. Under supply management, our government doesn’t spend billions on farm subsidies the way the U.S. does. It’s the Canadian consumer who ends up paying, at the checkout. A litre of whole milk in a U.S. city costs the equivalent of $1.18; in Canada, the average retail price is $2.47.
No doubt, U.S. retail prices are artificially low thanks to subsidies, but Canada’s are artificially high thanks to supply management. Which would you rather have? Instead of subsidizing farmers with revenue raised through progressive income taxes, all Canadians, of every income level, pay the same for a jug of milk — it’s a regressive, not to mention hidden, tax.
The U.S. approach, as hypocritical as it might be on the stage of trade negotiations, is also more transparent. If senators decide to bail out a farmer, they’re subject to the checks and balances of democracy. Here, the Canadian Dairy Commission, a Crown corporation whose chair, CEO and commissioner are all industry stakeholders, sets support prices, which industry controlled regional marketing boards then use as benchmarks. Consumer interests, or political accountability, hardly figure into the equation.
Maybe you could defend the expense, the unfairness and the inscrutability — maybe — by saying that at least we’re saving the family farm. But we’re not. Since the early 1970s, the number of dairy farms in Canada has declined by more than 90 per cent; between 2006 and 2011, the number of dairy farmers declined by nearly 15 per cent. They’re getting older, too: operators under the age of 45 declined by 30 per cent over the same period.
The sad part is, none of this is new.
The weaknesses and inequities of the supply management system have been apparent for years, and it’s already been under incremental assault. The Harper government opened the first crack with the now-defunct Trans Pacific Partnership, and the more recent Canada-European trade agreement allows more market access to European cheese.
So the time, like a fine Camembert, is ripe. Trump’s testiness over supply management — if that’s what it really was — provides an opportunity for Canada to finish the job, and use the imminent renegotiation of NAFTA to ditch bad policy.
Granted, I don’t expect our politicians will do it. But that doesn’t change the reality that it’s time to put supply management out to pasture.