"In terms of overall farm subsidies, we just do it somewhat differently. Canadian agriculture is no more subsidized than agriculture in the U.S."
– Agricultural Policy Prof. Daniel A. Sumner, University of California
From a philosophical perspective, I’ve always had some difficulty with the concept of supply management, and have sided with Maxime Bernier who said it basically: “protects a small cartel of dairy, poultry and egg farmers at the expense of everyone else.” U.S. President Donald Trump has been on a tirade about Canada’s quota system on dairy, eggs and poultry since the start of the NAFTA negotiations.
With the current trade war between Canada and the U.S. president, however, a broader perspective on the subject is emerging. Dairy producers in the state of Wisconsin, which is the heartland of the American dairy industry, do not appear to be fundamentally opposed to supply management but actually are quite envious of our system.
The objection to supply management in Canada appears to be the fact that we pay double the price for milk as they do in the U.S. Compared to other countries however, like Australia and New Zealand, our milk is actually cheaper, even though New Zealand is a major exporter of milk products.
Despite the fact that there is an absolute tsunami of milk that is washing over the world, the Americans are still increasing production by 1.5 to two per cent a year. They are just exacerbating their problems to the extent that according to Wisconsin dairyman Kevin Krentz: “more than 100 million gallons of milk were dumped into American farm fields in 2016.” That exemplifies the basic problem – the American mentality for overproduction and trade on their terms has resulted in such a huge oversupply of dairy products that they have no market even to give it away at barn sale prices.
Supply management in Canada has created a very lucrative business for dairy farmers at the expense of the consumer, whereas the American dairy industry is subsidized by the taxpayer. That doesn’t necessarily make the Canadian system bad, it is just different. It governs production, and is based upon three pillars: producer pricing, production discipline (quotas) and import management. Canada’s quota system may be creating some market distortions but at least we are not dumping millions of gallons of milk in the fields. The same goes for eggs and poultry – waste in itself is not good public policy. Does it not make sense to match supply to demand?
Supply management protects a domestically focused commodity; eggs and dairy don't travel very well; milk is heavy, eggs are fragile. It prevents market gluts that would cause prices to dip (as has happened in Wisconsin) and at the same time protects farm incomes and sustains our family farms without government subsidy. Are those bad outcomes?
Perhaps the ultimate solution to the U.S. dairy dilemma is not to dump our rules-based global trading system but for the U.S. to adopt the Canadian supply management system.
Ken Allred is a former St. Albert alderman and MLA.
