As I've said before supply management is a bit like the designated hitter in baseball. Those that care about it care a lot, but for most Canadians it's just white noise. I'm a big fan of the Montreal Expos, and very few of the people I vote for in elections actually get elected, so I'm used to being on the wrong side of history. My interest and support for supply management (I've written a lot about it in this blog, there's a search box at the bottom of the page) has developed for two reasons. One I was reporting on agriculture issues through the 1970's when supply management was created in response to constant financial crises in the dairy and poultry industries. Eugene Whelan is its god father, and for some reason Pierre Trudeau got behind the issue and told the Liberal cabinet, you may not like it but we're going to do it. More importantly I've watched and endlessly reported on how raw economic power in the food industry has shifted from farmers to increasingly powerful corporate interests in the food processing, wholesale and retail businesses. The fact that the stated goal of Loblaws, Sobeys and Walmart is to give Canadians the cheapest food in the world makes this economic shift look very beneficial to most. The fallout from this: eroding rural communities, and farm families pushing their children into other occupations, is simply a consequence of this power shift. Prices for grain and oilseeds have recently improved, but for the last fifteen years a third of Canadian farmers lost money every year, and debt levels in the Maritimes are staggering in every commodity but those under supply management. The benefits (imo) are that unlike in the U.S. and Europe Canadian consumers pay for milk, poultry and eggs once at the supermarket, and not again through subsidies paid by taxpayers, and secondly the distribution of the consumer dollar is fairly spread between farmers, processors and retailers, everyone gets a reasonable cut. Would food processers and retailers like to get more as they do in other commodities? Of course. And as I wrote yesterday there are environmental and animal welfare issues linked to cheaper dairy and poultry on export markets. Is it a gain to push Canadian farmers to lower the bar in order to compete?
Business/political journalists (a couple of good examples below) have skillfully presented supply management as some kind of dodgy, overly regulated racket that benefits very few. I would argue that there are very few professions (from taxi drivers to lobster fishermen to surgeons) that don't have limited entry (the need for licenses that cost money) and don't have a regulated pricing structure that ensures that people make a profit (not allowed in farming apparently). The business media and politicians can smell blood when it comes to killing off supply management, and unfortunately Martha Hall Findlay will immensely help their cause.
John Ivison: Trans-Pacific Partnership and low political costs mean supply management’s days are numbered
As Martha Hall Findlay reeled off the reasons why Canada’s supply management system should be dismantled, you could almost hear time’s winged chariot changing gears in the background. The former Liberal MP’s research paper, which landed in the week the Harper government joined the Trans-Pacific Partnership talks, has the potential to change everything.
Written for Jack Mintz’s School of Public Policy at the University of Calgary, it is the latest to lay out the irrefutable case for consigning the supply management of dairy, poultry and eggs to history.
Crucially though, it is the first to address the question of political will — or more accurately, political won’t. Her analysis suggests that there are only 13 ridings in Canada with more than 300 dairy farms — eight in Quebec and five in Ontario.
Eight of them are Conservative, most with 10,000 vote pluralities. Her conclusion is that even if Conservatives had made clear their intent to end supply management, and all those seats had been lost in 2011, the Tories would still have won a majority government.
She suggested even that scenario was unlikely, since it discounts the prospect of people actually voting in support of dismantling supply management.
Her analysis of Statistics Canada’s agricultural census division suggests that in every single riding in question, there are far more non-dairy farmers, who would benefit from ending supply management through gains in exports.
There are a mere 12,746 dairy farms in Canada (down from 145,000 in 1970 and 30,000 in 1996). This compares to 210,000 beef, pork and grain farms dependent on international trade.
The reason so many MPs are of the opinion that nothing can be done is that they are constantly bombarded with messages from the vocal dairy lobby, richly funded by the proceeds of the higher milk prices all Canadian consumers pay. No-one wants to be accused of killing the family farm, even though the numbers suggest there has already been a winnowing of small farmers.
Ms. Hall Findlay urged export-oriented farmers to mobilize themselves in support of reform. But the real silent majority is the millions of consumers who pay more than they should for dairy and poultry.
The study suggested a family that buys an average of three bags of milk a week (four litres) is paying up to $300 more than in the United States — and that doesn’t include higher prices for cheese, butter and eggs.
“The worst part is that it’s not just taxpayers, it’s regressive. Lower income families are paying a higher percentage of their income for basic nutrition.
“From a political perspective, that alone should be worth far more than the whole variety of family tax credits that have been offered in recent years to encourage voters,” she said.
The paper did not delve into the ticklish issue of how to compensate dairy farmers for their the loss of value of their production quota — currently, each cow is valued at $28,000. But Ms. Hall Findlay did point to the experience of Australia, which funded transition payments by putting a levy on retail milk sales for eight years. She noted that, while the levy kept dairy prices higher than international free market prices, they were lower than they had been under supply management.
The timing is impeccable. Canada has just been invited into the Trans-Pacific Partnership and top of the list of demands from existing members like the U.S., New Zealand and Australia is the opening of Canada’s supply managed sectors.
The Conservatives hope they can pacify other TPP members by opening up some more tariff free quota, as they are doing with the European Union in their free trade negotiations. But, as the Hall Findlay paper notes, Europe is the only major trading bloc with a higher producer subsidy equivalent than Canada (as a percentage of gross farm receipts, the EU’s PSE is 27%, Canada’s is 18%, the U.S. is 10%, China is 9%, Australia is 6% and NZ is 1%). The quota solution just won’t wash with the TPP members, so the Harper government is going to have go further. Why not make a virtue of a necessity by courting the people who would gain from the introduction of free trade in dairy and poultry?
That is certainly Ms. Hall Findlay’s intention. She lost her Toronto seat at the last election but has expressed an interest in running for the Liberal leadership again (she ran in 2006). She said if she won, she would make the dismantling of supply management Liberal policy.
But that day will be a long time coming, as long as the Liberal Party is dominated by the Wayne Easters of the world. The Liberal trade critic didn’t miss a beat after the TPP announcement landed this week, demanding the government continue to protect dairy and poultry farmers.
Ms. Hall Findlay has made what Yes Minister’s Sir Humphrey Appleby would call a “brave decision” — namely, one that risks losing votes. Regardless, it will raise her candidacy in the estimation of those Liberals looking for some fresh thinking and political integrity.
It’s long been known that supply management is a racket — an indefensible, anti-competitive cartel. Politicians of all parties have known it, condemned it in private and then voted unanimously in support, as they did in November 2005.
But the tide just turned. The combination of entry to the TPP and evidence that change can come at minimal political cost suggests that supply management’s days are numbered.
Mr. Mintz, the renowned tax and fiscal specialist, said he sees the current situation as a “milestone” in Canadian history, similar to the signing of the Canada-U.S. free trade agreement.
“We are at a very important juncture. Do we want to be a major trading country in emerging markets, or, are we like a turtle pulling its head and feet back into its shell?” he asked. This government has already indicated it has ambitions to bolster Canada’s trade in Asia through new alliances.
Supply management is the price of admission.
Political hell hath no fury like dairy farmers arousedIf you think the theatre of 100,000 people in the streets every night in Quebec, coupled with pot-banging and endless (largely sympathetic) media coverage, was over the top, wait until any federal government threatens supply management.
Political hell hath no fury like dairy farmers aroused. They showed it four decades ago when they painted slogans on barn roofs across Quebec, descended on Ottawa, dumped milk over the head of agriculture minister Eugene Whelan and bullied the federal Liberal government into the racket that is supply management.
Dairy and poultry producers are found in many places across Canada, but their heartland is rural Quebec and Ontario. Ever since these farmers got supply management – an attempt to balance domestic supplies and demand, with small quotas for imports and no thought of exports – they have defended it with every available tool.
How vise-like is their grip? A few years ago, the House of Commons unanimously passed a motion instructing Canadian negotiators at international trade talks not to yield an inch of supply management’s protections, including astronomically high tariffs on imports. Imagine, a unanimous motion from a body whose members would have trouble agreeing that today is Friday.
Urban MPs, whose constituents – especially low-income ones – are hosed by supply-management’s high prices, and Western Canadian Conservative MPs, whose farming constituents play on the world stage, are rendered mute by their rural colleagues and by party leaders frightened of the supply-management lobby.
So no chink exists in the political armour defending supply management, either in Ottawa or at the provincial level. In Quebec, especially, the support is ubiquitous, in part because the producers are in a union – l’Union des producteurs agricoles du Québec – that is arguably the most powerful lobby group in Canada, along with the Canadian Association of Petroleum Producers. Any assault on supply management would be seen as an assault on Quebec, and we know what emotional wallop that punch brings.
The only pressure to change supply management has come from outside the country. The system has been regularly pilloried by Canada’s trading partners, who rightly consider it highly protectionist. At various international trade negotiations, Canada has been put under pressure to change the system. All that did was change quotas into sky-high tariffs and open up the protected market a little bit to more imports.
At those meetings, lobbyists for supply management always swarm the Canadian negotiating team. Every meeting is monitored, every statement parsed, every opportunity to presents the farmers’ case exploited. And every government – Liberal or Conservative – has therefore entered negotiations singing the praises of worldwide free trade while singing another hymn to the virtues of protectionism for supply management.
Now, Canada has been allowed – after furious lobbying with the Americans – into the Trans-Pacific Partnership (a move deemed unlikely in this space last week) with the Prime Minister singing the songs of his predecessors. We need more free trade, sang Stephen Harper, and the TPP is one way to get at the burgeoning markets of Asia. But, he sang, we will protect supply management.
There are those who believe Mr. Harper actually wants to use the TPP to destroy supply management or at least to weaken it. As a free trader himself, he must see the absurdity of the protectionist racket that is supply management. But as a prime minister, he must also see the perils of arousing Quebec (and his own political base in rural Ontario).
So, chances are, he will try to use the TPP – and the free-trade deal with Europe – as a way of whittling away at the system.
Our friends in New Zealand and Australia didn’t favour Canada joining the TPP because they knew Canada would obstruct progress on free trade in agriculture. Elements of the U.S. government didn’t favour Canada’s entry either, for reasons of supply management and other protectionist Canadian policies. It took the heaviest of lobbying by Mr. Harper and his staff to get Canada a seat at the table.
Having secured that seat, Canada will find supply management changes demanded by at least some of the other players. As usual, Canada will use every tactic to delay, frustrate and block any changes in order to keep dairy and poultry farmers off the streets of Montreal and Ottawa.