Supply management faces fresh criticism
Economists say current system stifles competition, raising prices
There aren’t many issues that garner support across party lines in Ottawa these days.
But when it comes to the supply management system for egg, poultry and dairy products — the mechanism that sets prices for producers — all of Canada’s federal parties seem to see eye-to-eye.
Political support for the controversial agricultural framework has endured, despite the country’s ongoing affordability crisis and critics who persistently warn it’s Canadian consumers who pay the price.
As a result, Ryan Cardwell, an agricultural economics professor at the University of Manitoba, doesn’t put much stock in what elected officials have to say on the subject.
“On one hand, they talk about food affordability, and (on) the other hand, they have a governmentsanctioned cartel in staple foods,” Cardwell said. “So, it’s talk. I don’t give it much credence.”
Canada’s supply management system sets prices for products and puts controls on production and imports to protect domestic farmers from foreign competition, guard against price volatility for their products and stabilize production levels.
First introduced in the dairy industry in the 1960s before expanding into eggs and poultry, the system exists in lieu of subsidies.
Proponents argue the system is a win-win for producers and consumers alike: it offers stability and predictability in prices and production. But economists are often critical of the system because they say it stifles competition. Economic theory suggests more competition generally leads to lower prices.
The sharp rise in food prices post-pandemic has led to more scrutiny of grocery giants and raised concerns about a lack of competition in the industry. All parties have had more to say on competition since inflation took off in 2022.
Conservatives and New Democrats, for example, both opposed a proposed banking merger between Royal Bank and HSBC, arguing it would reduce competition and lead to higher mortgage rates. But when it comes to sectors covered by supply management, concerns about weak competition in the Canadian economy don’t seem to exist.
Former competition commissioner Melanie Aitken is a forceful critic of supply management, which she described as a “sacred cow” in Ottawa. “If you want to take advantage of the opportunities of trading with your global partners … you need to recognize that you can’t have these incredibly stultifying protectionist policies denying access to our markets,” she said.
From an affordability standpoint, Aitken said regulating prices hurts lower-income earners the most.
Bruce Muirhead, a history professor at the University of Waterloo, is a strong advocate for supply management who holds a research position funded by a lobby group for egg farmers. “There’s just this sort of implicit assumption, if it’s regulated … then it just can’t be competitive. But that is absolutely not the case,” Muirhead said.
He argues the agricultural industry deserves to be approached differently by government because it is responsible for producing essential goods: food.