More supply management foolishness

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It didn’t get a lot of attention, but New Zealand recently won a trade dispute with Canada over market access for dairy products under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade agreement. The dispute centered around Canada blocking market access to the New Zealand dairy industry. The New Zealand government estimates that their dairy industry lost out on $120 million of revenue from the Canadian market over the last three years. 

As a result of CPTPP negotiations, New Zealand secured additional dairy market access of about three per cent of the market in Canada. The dairy sector is very important to New Zealand as it represents its largest export revenue earning industry. This was the first dispute that had been taken to the relatively new CPTPP, and also the first time New Zealand had ever taken another trading partner to an adjudicative body. Despite this trade dispute, New Zealand Trade Minister Damien O’Connor said that New Zealand continued to value its strong friendship with Canada and characterized the countries’ connection as “one of our warmest and closest relationships in the world.”

It is worthwhile to note that one of the major contributions Canada made to the CPTPP was to add the words “Comprehensive and Progressive” to the name of the agreement in the interest of political correctness. While the agreement was being negotiated it was regularly referred to as the TPP, until Trudeau helpfully added the words Comprehensive and Progressive, which did nothing substantive to the terms of the agreement but may have given the Canadian government the illusion of having contributed. 

The recent G20 meeting in India, which was another diplomatic disaster for Trudeau, had some similarities with the CPTPP. When asked by a reporter what Canada’s main contribution to the G20 meeting was, Trudeau responded that Canada was a “strong voice for inclusion of gender language and indigenous reflections”. As Trudeau claimed early in his time as Prime Minister, “Canada is back”, indeed. But unfortunately, back with silly frivolities in international fora and making a fool of Canada on the world stage. 

Following the CPTPP Panel decision against Canada, Trade Minister Mary Ng inexplicably claimed that this was a great victory for Canada, when the facts indicate the exact opposite happened. The Trudeau government has a habit of claiming victory when outcomes actually are not favourable to Canada, hoping to fool Canadians into thinking they’ve achieved a win, and this seems to be another such example. The Canadian supply management system, which applies to dairy products, poultry and eggs, was created in 1972, supposedly to help avoid wide fluctuations in prices for these products and stabilize farmers’ incomes. The system restricts supply to keep prices high, and constrains import competition from other countries. 

From a political standpoint, supply management was introduced by the Pierre Trudeau Liberal government primarily as a benefit to Quebec with its large dairy and poultry sector. If the goal were truly to stabilize farmers’ incomes, which typically vary from year to year, why would other agricultural products such as beef and pork not be included? Likely because those industries are based more in Western Canada, where Liberal votes are scarce. 

Canadian consumers should hope for more of these types of decisions from international trade panels. Supply management means that some dairy and poultry products cost about twice what they do in other jurisdictions. At a time when food inflation is high and stretching Canadians’ budgets, doing away with supply management would be a sensible approach to more affordable basic food items. 

A fair transition plan would have to be put in place to ensure dairy farmers are treated properly, but other countries have gotten rid of similar policies and their dairy sectors have continued to thrive. The Canadian dairy lobby is very strong and well-financed because of the high incomes earned by dairy farmers as a result of this pricing regime. No political party in Canada has to date been courageous enough to take a position against supply management. That’s a shame for all Canadian consumers, especially at a time when a break in the prices of some basic healthy food items would be especially welcome. 

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