The policy effectively isolates Canadian dairy farmers from competition and from variation in the price they receive for the milk produced on their farms; in short it is government sanctioned cartel. This has resulted in continual increases in the prices their subsidized industry receives for their products.
Supply management limits the quantity of dairy products each farmer may produce and sell, the price is set by provincial governments and the domestic market is, by using extraordinarily high tariffs, protected from imports beyond a nominal amount.
The beleaguered consumer just sees inexorably rising prices at the grocery store.
The 9433 Canadian dairy farms thereby hold the 41 million Canadians for a ransom that has been estimated at between $300 and $440 millions dollars annually. But that just some of the costs.
The lack of competition between producers and the high cost of quota for each dairy cow (for example, more than $24,000 in Ontario) means there is little capital available for improving yields per cow or for reducing farm costs to achieve greater efficiency.
These dairy farmers are an extremely effective lobby, both at the national and provincial levels, and have consistently increased the financial return on their operations beyond what other sectors have been able to realize in the past four decades. But, in the coddled minds of the industry, above-market returns are not enough.
Bill C-282, now being considered in the Senate, would exempt the dairy sector’s supply management regime from any future trade negotiations. This may sound like a cost-free arrangement, but it’s not. When Canada enters into trade negotiations with other nations, our closed market for all but small amounts of imported dairy products makes any progress in increasing access to a wide range of potential trading markets virtually impossible.
The Bloc Quebecois is the sponsor of Bill C-282 and makes its approval in the House of Commons a condition for their continuing support for the Liberal minority government.
But, as long as politicians lack the courage to confront the dairy lobby, as long as dairy producers focus on defending a shrinking domestic market, Canadian consumers will continue to be held hostage by this outdated Soviet-style system. That is a rather harsh statement – but true.
Other nations (e.g. New Zealand and Australia) have abandoned supply management schemes and witnessed growth in their dairy sectors as well as reduced domestic prices.
The same could be achieved in Canada to the great benefit of consumers, especially the low-income households which have to spend a high percentage of their household budgets on food.
Australia took just over a decade to abolish their system and facilitate industry adjustment. They eliminated tariffs gradually. For those wanting to leave the industry, the government bought up quotas and financed the purchase with a sales tax on milk of 11 cents per litre until quotas (beyond those individual farmers held when the system began) were retired. The government also invested funds in research aimed at increasing output, economies of scale and market development.
Assuming that our federal government finds some backbone, it needs first to reject the proposed change in Bill C-282. Second, Ottawa should institute a ten-year plan, effective immediately, that will eventually phase out this extremely discriminatory regime which hurts lower-income Canadians and compromises our ability to obtain wide-ranging trade agreements.
Let’s stop this rip-off of Canadian consumers and allow the Canadian dairy industry to realize its competitive potential.
Source: Penticton Herald
