Dairy Supply Management and the Trans Pacific Partnership – Cowsmo

Dairy Supply Management and the Trans Pacific Partnership

Barrie McKenna is at it again, declaiming on the benefits of getting rid of supply management in dairy. Source: Bruce Muirhead
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His rationale? Because that mechanism must mean that Canada has to sacrifice other possible trade gains in the Trans Pacific Partnership (TPP) negotiations. He maintains this without any evidence.

Moreover, every country in the world supports dairy and other agricultural commodities in some way. Supply management matches domestic demand with domestic supply and is a most sensible and rational way to organize milk production, where 40 per cent of it is consumed locally. Each dairy farmer must have quota to produce in this system, and beyond about five percent of the Canadian dairy market, it is closed to imports. And given that supply management matches supply and demand, Canadian farmers to not participate, generally, in the export trade.

Our dairy farmers are also not subsidized by the Canadian taxpayer in the way that European and American dairy farmers are subsidized, nor do they belong to a massive cooperative, Fonterra, as 92 per cent of New Zealand farmers do. Fonterra is the darling of supply management critics like McKenna, because it is mistakenly perceived to be untouched by regulation. It is, in fact, very heavily regulated.

Finally, what of the US? It subsidizes dairy production with taxpayer dollars, and keeps about 97 per cent of its dairy market off limits to all but US dairy producers. Remember, Canada only reserves 95 per cent of its market for its producers. When Canadian consumers “outshop” and pick up American milk in Niagara Falls, NY, they are not nearly paying the cost of its production.

Canada tried the subsidization route before supply management system was introduced, but found it too expensive and dislocating. As the then-minister of finance, Donald Fleming, told cabinet on 6 April 1960, “Payments [to dairy farmers] as high as $47 or $48 million would seriously upset the balance of the budget.” And in these days of budget balancing in Canada, how would subsidies to dairy farmers of $2-3 billion be perceived? Not well, I imagine.

Supply management is being unfairly pilloried again by ideologues who do not understand the world of dairy. Those who put all their faith in the perfectibility of the market as a sentient, rational and understanding being. The 2008 collapse doesn’t seem to have made an impact on them at all. Certain regulation and organization is a Good Thing. Supply management in dairy works very efficiently and is cost-effective. As we contemplate perhaps agreeing to a TPP, let’s not throw the baby out with the bathwater.

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