Supply management in the dairy industry has passed its due date

Thoughts from a neither harmless nor useless character

To the Expositor:

This is a response to the editorial of March 1, ‘Don’t throw the baby out with the milk quota.’ The industry data quoted are principally from a series of articles written by Martha Hall Findlay, University of Calgary, School of Public Policy. She is a former Liberal MP. There are a number of important issues mentioned in the editorial and I would like to deal with them individually.

Supply management (SM) assures food supply quality: dairy, poultry, and eggs are the only segment of Canada’s food production that are controlled by supply management (SM). This segment is six percent of the food industry. Food quality is managed with regulation, food labelling and food inspection. it should be evident that these methods can be effective regardless of the food product.

Customers pay “slightly more” as a result of SM: SM costs the average family $300 per year. For a family with a modest income, this is significant. Canadian import tariffs for eggs, 168 percent; chicken, 238 percent; cheese, 246 percent; butter, and 300 percent. Without these tariffs, the costs for butter could be reduced by about half.

SM Protects the Dairy Industry: In 1971, there were 145,000 producers in Canada. There are now 12,000. This statistic should indicate clearly that SM has done very little to ensure that small famers will thrive. Not only has this not happened, but industries that rely on dairy for raw product are also negatively impacted. It is very difficult for cheese manufactures to be competitive when milk costs are prohibitive. Not only is the cost of milk high but cheese makers also have a very difficult time expanding due to restrictions in supply.

Ideology trumps sound economic sense? Not good when this happens as all would agree. It is SM that ought to be painted as Ideology, not sound economic analysis indicating that SM is not good for a nations’ economy.

In any discussion of this sort, it is always useful to look for examples in the world economy where some useful comparisons might help to support proposed policy. India has been an interesting story with the way it’s economy has improved following the removal of many tariffs but an even more salient example for comparison is New Zealand. Following WW2, NZ was a major supplier of dairy products to the UK. The NZ industry was then protected until the late ‘70s when a number of events placed the dairy producers under severe economic stress. Chief among these outside forces was the UK joining the EU. At that time trade restrictions for dairy products in NZ were removed and  as economic theory predicted, the industry in NZ thrived. Ninety-five percent of the industry product is exported and at the same time, butter in NZ sells for half of the price experienced in Canada. Producer Subsidy Equivalent (PSE) is an index used to gauge how much an industry is subsidized. A number that is certainly used during any trade negotiations. Not surprisingly, Canada is at 15 percent, NZ is one percent.

It is also interesting to note that the Dairy Farmers of Canada association spends about $80 to $100 million dollars trying to convince politicians and the general public that SM is a really good deal. It might have been 50 years ago, now, not so much.

Having said all this, there may well be a sound argument for subsidizing small family farms and I would certainly like to think that we could do this. However, it should be done by direct subsidy for two reasons. First, agri-business interests would not qualify for any subsidy, and secondly, the subsidy would be paid by taxpayers and not by families with modest incomes.

Finally, an aside for Lyle Dewar. Do not presume to assign hate as a motive for my criticism of the federal and provincial governments. You don’t know me, you know nothing about me. People across Ontario caught the attention of the government regarding out of control power rates. This is how a democratic government is supposed to work. I close with a quote from Pericles 461 BC to 429 BC. Among his many accomplishments, he was responsible for building the iconic Parthenon and he also transformed the character of Athenian democracy. He had this to say about participation, “Athenian citizens regard a man who takes no interest in public affairs not as a harmless, but a useless character.”

Shane Desjardins