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Who Is Looking Out for the Consumer?

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Canadian consumers are growing increasingly frustrated that we pay more than our American neighbours for the same products even though our dollar is comparable to the US dollar. The problem for the Harper government is how do you contain that frustration and prevent it from turning into anger, anger that down the road can cost you votes?

In the past it was relatively easy, a government could appear sympathetic, stall and wait for the dollar values to change and then the problem would go away. Price differences could once again be explained by the difference in value between our currencies.

That doesn't work anymore. The internet has guaranteed that Canadians can price check 24 hours a day. Consumers are voting with their wallet and ordering online from the United States. With food items, Canadians can drive across the border and pick up items that are more expensive here. With millions of us living within an hour's drive of the border, that is a significant economic loss for Canadian retailers and grocery chains.

While the Senate is presently studying this issue, on the House side the opposition avoids questions on supply management and its impact on dairy, poultry and egg prices and the price spread between American and Canadian prices for these items.

It is worth noting that in the 2011 election the NDP led off their election platform with the following statement:

"For too long Ottawa has focused on the priorities of the well-connected, not the priorities of your family. Together we're going to fix that."

Well, one of the first priorities of any Canadian family is to eat as healthy as possible at an affordable price. If the NDP is willing to fight big banks on high interest rates and high ATM fees and fight the Americans for their $5.50 border surcharge, why won't they fight just as hard to lower domestic food prices?

Domestic poultry, egg and dairy products fall under various marketing boards. The price we pay reflects their control over the market place. This is done through a quota system that limits production and new competition and government agreement to enforce tariffs on foreign products to keep them out of our market place (which could go as high as 245.5 per cent for cheeses and 298.5 per cent for butter)(2).

In reality no political party is willing to take on these marketing boards and their supporters as it impacts on votes, especially in Quebec. These boards and associated lobby groups and supporters are well organized and financed and carry plenty of clout particularly in the province of Quebec.

One can certainly make strong arguments in favour of supply management. It regulates quality, provides an adequate return and wage to local farmers, protects local industries and family farms from outside competition etc. The numbers are not insignificant. In 2003, Quebec milk, dairy and egg production accounted for roughly 9,000 farms and $2.2 billion in revenue and 14,615 farmers. (1)

According to supporters of supply management, Canadian consumers are paying higher prices than our American neighbours in part because:

"Supply management helps preserve the smallest farms: the average dairy farm in Québec has 55 cows, whereas the average dairy farm in the United States has 140 and in California, 660. In the table eggs sector, the average farm in Québec has around 35,000 laying hens, whereas in the United States there are farms with 8 million laying hens." (1)

All very true, but another way to look at this is the consumer is paying to support inefficient farm operations.

The Montreal Economic Institute did a study in 2005 that highlighted that "These prices (milk) are sometimes completely disconnected from world markets. For example, estimates from the Organization for Economic Cooperation and Development (OECD) found that Canadian milk prices have been two to three times higher than world prices since 1986." (2)

In the end the question will boil down to at what cost to the consumer do we continue to support supply management? These consumers are the average Canadians that the NDP claims to be fighting for. Yet by remaining silent on the supple management issue, the NDP is supporting a policy that has low income Canadians and seniors on fixed incomes paying artificially high prices for key food items? Where are the NDP leadership candidates on this issue? Are they in favour of marketing boards or lower costs for consumers? What is the bet, none of them take a public stand on that hot potato?

The same Montreal Economic Institute study concluded the following:

"Artificially high domestic prices correspond in reality to an implicit tax that governments have authorized farmers to impose on consumers. "(2)

That poses an interesting question for our anti-tax Conservative government. If it is not about votes, if they are for free markets, how in tough economic times can they support a system of artificial prices that hurts consumers?

This issue will not go away. In tough economic times, Canadians want choice and fairness. Eventually a compromise will have to be found that is acceptable to all sides, until then Canadians will continue to vote with their wallet.

1. GO5 website

2. Dairy production: The Cost of supply management in Canada. Montreal Economic Institute, February 2005

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