Wednesday, 20 June 2012

If It Walks Like a Duck....

If the economy is the cornerstone of Stephen Harper's political offerings, then trade is its bedrock.  There are fewer industrialized countries Canada isn't in free trade negotiations with than ones that it is.  This week Canada slipped into what could be the biggest trade deal of all, the Trans Pacific Partnership. Nine countries including Australia, New Zealand, the United States, Brunei, Chile, Malaysia, Peru, Singapore, and Vietnam are  in the partnership. They’ve now been joined by Mexico and Canada, and soon Japan. I say slipped in because Canada is coming late to the party.  It has to accept whatever has already been agreed to before seeing the text, and won't have the veto powers the original partners enjoy.

It's why Canada is late that's both interesting and worrying for the Maritimes. Two of the original partners, the United States and New Zealand, are aggressive dairy trading countries who've been trying for decades to knock down Canada's import controls on dairy, eggs, and poultry. These import controls underpin something we've been hearing a lot about this week, supply management.  Essentially it's a highly regulated marketing system that limits production to Canadian demand, but assures farmers fair prices.  Canada stays out of other countries markets, but protects its own. Business friendly media like the Globe and Mail say giving up supply management to get this trade deal is just too good to pass up:  "However, it is clear that agricultural protectionism is simply no match for the benefits of trade liberalization. Canada’s traditional export markets – the U.S. and Europe – are stagnant, while East Asian and Latin American economies are booming." The unanswered question is, did Canada agree to give up supply management in return for a seat at the table? The government says it's been a long time supporter of supply management. That may be true, but it doesn't offer any assurances that the government didn't  make the same calculations as the Globe and Mail: give up import controls, Canadians get cheaper food, Canada becomes a player in a huge free trade zone. Canada was kept out of the talks because of supply management. Now it's in. If it walks like a duck.....

Here's the rub for this region. Farmers here are generally uncompetitive because of higher transportation costs getting goods to the big consumer markets, and higher input costs. The supply managed industries at least have kept farmers in the game, and its loss would have a relatively bigger impact here, second only to Quebec with its massive dairy sector. (Stephen Harper won an election without Quebec already, and probably feels he can do it again.)

Let's look a little deeper. Canadian consumers might well say they'd welcome cheaper dairy, eggs and poultry.  There's a reason the United States and New Zealand offer cheaper dairy products on export markets. U.S. farmers are allowed to inject their cows with a hormone that forces cows to produce more milk. So far rBGH is banned in Canada. There are questions about its impact on human health, but there is clear evidence that cows don't live as long or as well being pushed beyond their normal lactation levels.  New Zealand also is paying a price for cheap milk. If you google "dirty dairying" you'll fund many references to polluted rivers.  is a story from this past month, and there are many more. So yes there is cheaper milk out there, but at what cost?

There will be even bigger questions in the race for the cheapest milk in the future.  Get ready for UHT milk. It's a process that allows unrefrigerated milk to be sold for up to nine months after processing.  That would allow milk from anywhere in the world to end up on shelves here.

I'm not saying that Canadians should be prepared to pay any price to keep dairy farmers here in business. I am saying that supply management is one of the few marketing systems where the consumers dollar is fairly split between producers, processors and retailers. It allows Maritime farmers to milk 60 to 80 cows, rather than several hundred in the U.S., to get the same income. It allows farmers to plan for the future, protect the environment, and have something of value to pass on to children. 

Canada has protected supply management in earlier trade deals, like Nafta and the WTO, but Canada was at the table from the get-go. This time it's late to the game, and coming in a as a junior partner.  This means  Canada is negotiating from weakness and can be pushed around, and countries like New Zealand and the United States have been waiting a long time to put a stake through the heart of supply management.  The government and editorial writers at the Globe and Mail might just let them succeed.

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