“With Canadian milk in NAFTA crosshairs, Australia is proof consumers and farmers can benefit from phasing out supply management.”
So says the Fraser Institute Canadian consumers and the dairy industry could both benefit by phasing out supply management, says the Fraser Institute, pointing to a study on Australia’s dairy policies.
“With supply management taking centre stage in the NAFTA talks, Australia offers an important lesson for Canada -ending protectionist trade policies can have positive benefits for both consumers and producers,” said Dan LeRoy, Fraser Institute senior fellow and associate professor of agricultural economics at the University of Lethbridge.
The study, “Phasing Out Supply Management: Lessons from Australia’s Dairy Industry,” finds that immediately following deregulation of Australia’s dairy industry in 2000, the price of milk dropped 12 cents per litre.
And since deregulation, dairy farmers in Australia have seen farm gate prices rise 56 per cent.
“With a more open, competitive system, consumers can benefit from lower prices while farmers also benefit from higher revenues. The key is achieving more productive farms,” Mr. LeRoy said.
Australian milk farmers now export about half their product, making dairy the country’s third most important agricultural export after beef and wheat. Annually, Australian milk exports total about AUD$3 billion.
From 2000 to 2008, Australia charged an 11 cent per litre levy on milk to fund programs that helped dairy farmers adjust to deregulation or transition out of dairy farming.
“Australia is proof that, if done correctly, ending supply management can benefit consumers, farmers and the industry as a whole,” said Mr. LeRoy. “Canada’s high milk prices -- the result of supply management -hurt low-income families the most, so even though the NAFTA talks may serve as a catalyst, policymakers should have considered phasing-out this policy a long time ago.”