Supply management should offend left and right alike
Under the rules adopted by the World Trade Organization’s 1995 Agreement on Agriculture, a cartel system like that of Canada’s supply management – were it created today – would be illegal. The global community has decided that policies which artificially inflate domestic prices, and protect them with outrageous import tariffs, are a thing of the past. Ironically, public opinion in Canada still favours supply management, even though it perfectly embodies the protectionist policies that Canadians love to hate when they come from the White House.
Canadians roll their eyes at Donald Trump’s “America First” economic policies. Yet most Canadian politicians continue to support their own archaic system of supply management. Consumers are forced to pay nearly $600 more per year on groceries than their American counterparts. Import tariffs have made it nearly impossible for Canadians to buy foreign dairy products, forcing low-income families to pay a huge price to provide their children with a healthy diet.
Prior to supply management’s introduction in 1971, Canada had over 140,000 dairy farmers who were struggling to break even, due to price volatility in the dairy market. Fast forward 46 years, and we can see that the Canadian dairy industry has undergone a great change.
For starters, the number of dairy farmers in Canada has dropped by over 90 percent to less than 11,000 nationwide. More importantly though, over this 46-year period, the average wage and net worth of Canadian dairy farmers have increased dramatically. According to the 2008 OECD Economic Survey of Canada, the average Canadian dairy farmer had a gross income of over $250,000 and held over $2 million dollars in assets, in the form of dairy quota.
Today, the average Canadian dairy farmer is a millionaire, yet policy makers still believe we should be taking money from low income families to support them.
Clearly, supply management has accomplished its goal of reducing market volatility for Canadian farmers. However, it has stagnated the Canadian dairy market in the process. Inflated profit margins, massive barriers to entry, and a lack of foreign competition have left farmers with no incentive to increase efficiency. Additionally, inflated input prices have become a disincentive for dairy processors to invest in Canada.
If Canadian policy makers began a sustainable program to transition supply managed farmers to a market system, Canadian farmers would finally be rewarded for increasing their efficiency of operations, Canadian processors would gain greater access to international markets and foreign investment (employing thousands of Canadians in the process), and Canadian families would have more money in their pockets as the price of supply managed goods would drop to global market levels.
With the potential renegotiation of NAFTA on the horizon, Canadians should not be willing to make sacrifices in negotiations to maintain our agricultural cartels. The government needs to begin repurchasing quota from dairy farmers as soon as possible to ease their transition into a market system and ensure that the Canadian dairy industry succeeds in the global marketplace.
Finally, supply management should be viewed unfavourably by those on both sides of the political spectrum. For those on the left, it should be viewed as a regressive policy that takes money from poor Canadian families and gives it to affluent farmers. For those on the right, it should be viewed as a protectionist, anti-trade policy that contradicts free-market principles. Regardless of political leanings, it is clear that supply management has overstayed its welcome. Canadians should demand reform.
John Keays recently graduated from Saint Mary’s University, where he obtained a BA in Economics. This op-ed won first place in a student essay contest by the Atlantic Institute for Market Studies.
The Prince Arthur Herald
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