OPINION: Well done, Canada

Oct 09, 2018

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The notion that supply management is an economically misguided scheme is simply not true
BY TIM CARROLL
 
GUEST OPINION
 
 
Once again Canada’s supply management system has remained intact after another trade agreement. Canada’s supply management has survived scrutiny under GATT rounds, then the WTO rounds, then the 1988 U.S.-Canada FTA, then NAFTA, then CETA, then TPP and now the just concluded USMCA. Canada’s supply management system has survived close examinations over the last 40+ years of trade negotiations because it has been found to be both fair and does not break trade rules.
 
Under Canadian law, farmers stabilize prices by getting together and sharing the market. If you are a dairy or poultry farmer this is good news. The system you have remains intact. Producers will continue to adjust quotas and maintain prices above costs. Consumers can be happy too. Because of our producer controlled supply management we are assured of fresh, safe, local products will come to us from local Canadian family farms.
 
Canada’s agreement in CETA, TPP, and USMCA to allow other countries access to a bigger share of the Canadian market is a challenge for industrial milk processors like ADL and Federated Co-op of Quebec. These processors are wholly owned by milk producers, which is why I think producers are concerned. The challenge for those businesses rests with hired management and I think there is room for optimism. For example, last year even though dairy imports from Europe increased, Canadian quota was able to be increased. Ice cream and fresh milk consumption are flat, but yogurt and cheeses are growing. I like recent developments that brought ADL into alliances with other Canadian processors to develop new products and markets. Europeans embrace dairy products much more than Canadians and we have access there. So, tell management to get to work.
 
Canada has always allowed some access to our market for dairy and poultry so it’s not new to have a bit more competition. Canada is a world class trader in agriculture being historically both the fifth largest exporter and the fifth largest importer of agricultural products worldwide. Also, agriculture is a star by consistently increasing productivity by four percent per year while the rest of the economy plods along at around two percent. So, are we traders or not?
 
Supply management is a standard business practice. Consider the logic. With supply management, a business is simply trying to limit production of something to closely satisfy the demand in the market. If your oversupply, then price drops dramatically. If you undersupply, then you lose customers. Finding the balance is difficult for any commodity but achieving a supply and demand balance in food is difficult.
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