Let him have it
U.S. President Donald Trump says he wants free trade with no tariffs, duties or subsidies. I think we should give it to him. We could even give up supply management to sweeten the deal.
Trump has constantly berated Canada for our supply management system covering dairy products and has threatened to pull out of NAFTA unless we scrap it under any new deal.
“Free, fair, and reciprocal trade” is his mantra.
Canada has so far continued to insist supply manager has to remain, but perhaps it is time to reconsider this position in exchange for the United States removing all subsidies it offers to its farm industry. Each five years the American government has renewed what it calls a farm bill which provides assistance to various sectors of the agricultural industry to prop up unprofitable areas. These supports include such things as crop insurance, subsidized irrigation, and crop purchases to take excess off the market.
In the last Farm Bill, which was approved in 2015, these measures provided in excess of $20 billion alone in direct and indirect subsidies to the American dairy sector. A comprehensive report completed earlier this year says these subsidies accounted for 73 per cent of returns to dairy farmers. Even with such massive subsidies, American dairy farmers have lost money every year from 2005 to 2016 which is the last year for which data is available.
By contrast, the supply management system in Canada cost about $5.5 billion per year, which amounts to about $450 per year per household. We pay these costs in higher product costs due to the limited supply.
I’m not overly concerned that American dairy producers will overwhelm an open market because I’m not sure how many of them could survive when they can’t even make money with government subsidies covering almost three-quarters of their costs.
Best be careful what you wish for Mr. President.