Another Conference Board of Canada report claims supply management drives up prices and discourages international trade. I found it interesting to see some trade truths being acknowledged, that one-size does not fit all. Here are some more facts:
Farmers are not against trade. Canadians want Canadian food, and coffee of course!
There is no evidence that deregulating Canada's dairy market would result in lower prices for consumers. In fact, international experience tells us otherwise.
The Australian milk industry deregulated in 2000. The experiment did not work out as people had hoped: Dairy Australia monitored farm price fluctuations increased, hurting farmers, and consumer prices just kept going up at the same pace as before, according to the Australian Bureau of Statistics, resulting in this situation:
Neither consumers nor farmers are benefiting. In the post-deregulated Australian dairy market, price fluctuations faced by farmers are more severe, and consumers are continuing to face rising prices.
It does not seem to work in Columbia either, which I do not find surprising. I've blogged about this before.
Furthermore, supply management has not prevented Canada from negotiating significant international trade agreements. Since 1986, with supply management firmly in place, Canada has completed free trade deals with the U.S. and Mexico (NAFTA), Jordan, Columbia, Peru, Costa Rica, Chile, Israel and EFTA (Switzerland, Norway, Iceland and Liechtenstein).
It must be noted that in these negotiations, Canada was not alone in wanting to "protect" certain sectors. Beef, sugar, dairy and rice are often considered "sensitive" by several countries in trade talks, as are cars, procurement and other services.
Canada is open to dairy imports.
• The Conference board itself acknowledges that cheese is already one of the top 25 foods imported by this country, with a value in 2010 in excess of $221 million.
• Roughly 5 per cent of the dairy products on the Canadian market are imported tariff-free. The European Union, which heavily subsidizes its dairy products, exports to Canada 10 times as much as we ship to them, even though it boasts a market of 500 million consumers.
• Where there are tariffs on imported dairy products, they are minimal. On a kilogram of Parmesan cheese actually imported from Italy, only three cents is paid in tariff!
Reinvest Income Locally
In Canada, supply management works. It allows farm families to make a living similar to average Canadian working families without relying on government subsidies. Because farms are small businesses with high capital costs, farmers reinvest 90 per cent, and sometimes more, of the farm income in the farm's operation. They make purchases for farms locally, re-investing in local economies across Canada.
Retail prices are set by retailers, not by farmers. Over the past 30 years, prices of milk and dairy products in Canada have risen at similar rates to the Consumer Price Index. The average price for milk is similar to the average in other countries.
Put simply, supply management works. It gives stability to dairy farmers, and ensures a viable industry that does not need dollars from government.