NAFTA rene­go­ti­a­tions threaten Canada's sup­ply man­age­ment sys­tem

The Victoria Standard - - Commentary - JAN SLOMP

With Pres­i­dent Trump’s “Amer­ica First” rhetoric it looked like NAFTA rene­go­ti­a­tions would end in a stale­mate, but Cana­dian give-aways to ap­pease Trump are keep­ing NAFTA alive. Farm­ers and con­sumers must not be com­pla­cent re­gard­ing the fed­eral gov­ern­ment's po­lit­i­cal com­mit­ments to de­fend sup­ply man­age­ment against Trump's de­mands.

Sup­ply Man­age­ment, a Cana­dian in­no­va­tion cre­ated in the 1960s, reg­u­lates the sup­ply of dairy prod­ucts, chick­ens, eggs and tur­keys. Com­mit­ted farm­ers in ev­ery re­gion pro­duce the re­quired quan­ti­ties in ex­change for a farm-gate price that re­flects the cost of pro­duc­tion. Sup­ply Man­age­ment cre­ates sta­bil­ity in the farm­ing com­mu­nity, elim­i­nates the need for gov­ern­ment farm bailouts, al­lows pro­ces­sors to max­i­mize plant ca­pac­ity uti­liza­tion, re­duces food miles and pre­vents waste. Con­sumers are of­fered a wide range of high qual­ity prod­ucts for prices that are on par with coun­tries with­out sup­ply man­age­ment.

The in­dus­trial man­u­fac­turer re­duces vari­able costs by lay­ing off work­ers, idling or re­duc­ing pro­duc­tion and stor­ing in­ven­tory un­til the mar­ket im­proves. In con­trast, a farmer de­pends on pre­dom­i­nantly fam­ily labour, ab­sorbs labour costs and tries to pay the other bills with in­creased pro­duc­tion, de­spite the smaller mar­gins. Farm­ers work­ing with an­i­mals, soils and plants, gen­er­ally in an­nual cy­cles, have a very lim­ited abil­ity to stop or re­duce pro­duc­tion. While it can make sense for in­di­vid­u­als to in­crease pro­duc­tion to main­tain house­hold in­come, when ev­ery­one does, the mar­ket is glut­ted and prices drop. A vi­cious cir­cle of over-pro­duc­tion and de­clin­ing prices quickly be­comes a cri­sis.

At a re­cent dairy con­fer­ence in New Zealand, Lino Sa­puto, CEO of Mon­treal-based in­ter­na­tional dairy gi­ant Sa­puto, urged the world to reign in milk pro­duc­tion to stamp out price volatil­ity. In dairy ex­port­ing coun­tries with­out Sup­ply Man­age­ment, mas­sive per­ma­nent gov­ern­ment bailouts are paid out to pre­vent dis­as­ter.

Canada's sup­ply man­age­ment sys­tem is a bea­con of suc­cess, in­creas­ingly rec­og­nized and en­vied around the world as an el­e­gant so­lu­tion to over­pro­duc­tion, price volatil­ity, and ru­ral eco­nomic vi­tal­ity. The Euro­pean Par­lia­ment is presently deal­ing with a res­o­lu­tion to rein­tro­duce sup­ply man­age­ment af­ter aban­don­ing it in 2012, as mem­ber states in­creas­ingly see no other so­lu­tion. Yet our po­lit­i­cal lead­er­ship has a his­tory of trad­ing it away in bits and pieces.

When the World Trade Or­ga­ni­za­tion (WTO) was founded in the 1990s, Canada was forced to re­place 5% of our do­mes­tic mar­ket with im­ports. Since then, the Amer­i­can pro­ces­sors have used tar­iff loop­holes to ex­port du­bi­ous new prod­ucts into Canada -- but­ter oil blends for ice cream, ca­sein con­coc­tions as pizza in­gre­di­ents and di­afil­tered milk to re­place Cana­dian milk in cheese pro­duc­tion. Canada did not en­force bor­der con­trol mea­sures and sat idly by while these im­ports caused havoc. Farm­ers were forced to man­age the sit­u­a­tion by ab­sorb­ing quota cuts and pro­vid­ing dis­counts to Cana­dian pro­ces­sors. Con­se­quently, the farm gate price is now well be­low the cost of pro­duc­tion formula Canada com­mit­ted to when to the sys­tem was es­tab­lished.

Upon sign­ing CETA, the Com­pre­hen­sive Eco­nomic Trade Agree­ment with Europe, Canada agreed to im­port 17,000 ad­di­tional tonnes of Euro­pean cheese, tak­ing the pro­duc­tion of 400 Cana­dian farms out of our econ­omy. Al­though sig­nif­i­cant here, it will do noth­ing to help Euro­pean dairy farm­ers swamped by over-pro­duc­tion.

With the Trans Pa­cific Part­ner­ship, the Cana­dian gov­ern­ment agreed to grad­u­ally in­crease im­ports for all sup­ply man­aged prod­ucts and im­me­di­ately elim­i­nate tar­iffs for milk pro­tein im­ports dis­plac­ing even more Cana­dian poul­try, eggs and dairy – an­other ma­jor blow to Cana­dian farm­ers.

The Cana­dian gov­ern­ment's ea­ger­ness to pro­mote glob­al­iza­tion by giv­ing away crit­i­cal pieces of our econ­omy is surely ap­par­ent to Amer­i­can NAFTA ne­go­tia­tors.

Cana­dian milk is pro­duced with­out ge­net­i­cally mod­i­fied hor­mones and to higher qual­ity stan­dards than US milk. Amer­i­can ex­cess pro­duc­tion would fill the Cana­dian mar­ket overnight, while our re­tail­ers could con­tinue charg­ing cur­rent prices. Farm­ers, ru­ral economies and the Cana­dian pub­lic have a lot to lose if our dairy sec­tor is sac­ri­ficed to ap­pease Trump.

Canada should proudly and defini­tively up­hold our sup­ply man­age­ment sys­tem for the great pol­icy in­no­va­tion it is. We must not al­low NAFTA ne­go­tia­tors to give away our dairy, poul­try and egg farms with a wink and a nudge by chip­ping away at Sup­ply Man­age­ment's foun­da­tions to the point that it can no longer stand.

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