Where is dairy headed in Canada?

Dairy cows at the Central Experimental Farm (photo by Lucy Martin)

Back in March, John Ibbitson wrote an interesting analysis piece predicting Canada’s ruling Conservative government was preparing to take a new look at the dairy industry in Canada – specifically the governing supply mangement system. For dairy this is also sometimes called “milk quota“.

To generalize, Canada’s federal government utilizes tariffs and provincially-administered price supports – with limits on production – to smooth market fluctuations in specific farm sectors. Canadian consumers pay more – considerably more – for dairy products. By some estimates the system adds $2.4 billion to the consumer side of the ledger each year.

Dairy farmers in Canada enjoy relative stability, compared to many other countries. But that safety net does not exist across all sectors of agriculture – a sore point for the vast majority of Canadian farmers who lack that greater guarantee of security.

The article postulated that conservatives with a free-trade preference are willing (eager?) to consider changes because there wouldn’t be any over-riding political cost.

Oh, there would most certainly be a furor! But the once-strong Liberal Party is in serious (some say fatal) disarray and the NDP is (by and large) devoted to serving urban and unionized voters. Consumers would most likely welcome lower prices. It seems “do-able”.

Here’s Ibbitson’s calculus:

If it comes down to joining what could be the world’s most important new trade bloc, or protecting butter and eggs, don’t bet on Mr. Harper to side with butter and eggs.

After all, although the dairy lobby is among the most powerful in the country, its members are largely centred in Quebec ridings where the Conservatives have been shut out and in Eastern Ontario, where support for the Tories is so deep that the party might even hold some of the ridings in the next election despite the outrage of farmers.

The political costs, in short, are containable, while the economic benefits of opening Canada to trade in the Pacific are potentially enormous.

The subject sort of fell off the general news radar screen. Looks like it’s coming back, though, as with this June 20 article in the Globe and Mail about current trade talks:

The United States, Australia and New Zealand are demanding unfettered access to Canada’s highly protected dairy and poultry markets a day after inviting Ottawa to join them in the Trans-Pacific Partnership free trade talks.

Their demands to tear down agricultural trade barriers mean Canada’s supply management system will be in the cross hairs in the TPP talks

The article goes on to discuss the nuances of trying to negotiate change without seeming to give way too much, too soon, or make too many enemies. Read the tea leaves as you will, but something could be brewing in those back rooms.

It’s a balancing act. Speaking personally, I live in rural Ottawa surrounded by numerous family dairy farms that seem pretty stable and happy with the quota system. (Making my pretty slice of bucolic bliss a government subsidy?)

I also buy groceries. No doubt about it, cheese, butter and milk cost much more here than 30 minutes south, in neighboring Ogdensburg, NY. Anything over $20 of dairy products bought there is subject to a 200% tariff at the Canadian border.

As this editorial in the Montréal Gazzette suggests, and the  aforementioned June 20 Globe and Mail article illustrates, there is support to reduce trade barriers:

“It’s time to be a little braver,” said Mr. Hart, a professor at Carleton University’s Norman Patterson School of International Affairs. “Mr. Harper wants Canada to be a trading nation. Okay, Mr. Harper: just do it.”

Re-vamping Canada’s decades-old use of supply management quotas would be a huge shift that bears watching.

This is not an area where I can feign any expertise, but I know many In Box readers understand dairy issues inside and out.

What’s your take on the status quo, on possible changes and the best way(s) to proceed?

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3 Comments on “Where is dairy headed in Canada?”

  1. tootightmike says:

    Let me simplify…Revamping and re-arranging the present system will create another underpaid and oppressed minority in Canada…the dairy farmers. The system in the US is so poor. Why would Canada want to follow into such a failure?

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  2. Lucy Martin says:

    Well, general consumers pay a lot more for butter, eggs, milk in Canada than they would without this system. Counting those votes alone, the consumer side would easily overwhelm the dairy lobby.

    Is this the expansion of what some call a race to the bottom? Or something that’s long overdue? Opinions will vary.

    Here’s an article by Andre Coyne calling the current management supply system a sacred cow that really should be slaughtered.

    Quoting from that article:

    “Yet virtually every economist or policy analyst of note agrees that supply management is a disgrace. The primary effect of the quotas – the intended effect – is to drive up the price of these foods, staples of most Canadians’ diets, to two and three times the market price. The burden of these extraordinary price differentials, of course, falls most heavily on the poor, a fact that ought to trouble self-styled ‘progressives’ but evidently doesn’t.”

    Talking a different view, here’s a column in which U of Ottawa professor Michael Geist wonders why Canada chose to pursue the Trans-Pacific Partnership free trade (TPP) talks as a weaker/junior negotiating partner in the first place? (Geist is a prominent Canadian expert on Internet and E-commerce Law.)

    In this case, Geist theorizes the TPP’s most essential element for this government might be providing political cover (as in ‘they made us do it’) for something that will raise hackles.

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  3. Michael Greer says:

    People (consumers) always want a lower price. Just because there are a lot of them doesn’t mean that we should only shop from child laborers, slaves, or sweat shops. It also doesn’t mean that it’s OK to shop at Wal Mart, where the child laborers are carefully hidden.
    Were talking about food here, and the truth is we want good food …don’t we?

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