Supply management, a ball at the foot Canada

Archival Photo, QMI Agency

Alexandre Moreau

Thursday, 25 January 2018 17:05

UPDATE
Thursday, 25 January 2018 17:17

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An agreement just approved will resurrect the trans-pacific partnership Agreement. The famous PTP, which has been grafted the words “global” and “progressive” (PTPGP), will increase the market share of canadian farmers across the Asia-Pacific area. Once again, the system of supply management has been an irritant during the long negotiations. The concessions made on the units in the domestic market will hurt the producers of milk, eggs and poultry, but also to taxpayers, who will pay an invoice salt to compensate.

To understand why supply management is a cause of irritation during the trade negotiations, one must understand its general operation. Essentially, this system seeks to match production with domestic consumption using production quotas and tariffs at the border : it allows farmers to produce what we consume. The import tariffs, which are designed to prevent any foreign competition, oscillate between 150 % and 300 %, and are contested by other countries, since they block almost all imports of products such as milk, butter, cheese and eggs.

Although the management of the offer has survived the multiple challenges the international of which it was the object, however, it has lost feathers. The units of the internal market have in fact been constantly used as a currency of exchange with other countries to allow Canada to sign agreements. Last year, Canada has increased the amount of cheese which may be imported from Europe in order to conclude the Agreement comprehensive economic and trade (CETA), a free trade treaty with the european Union.

A portion of this amount has been subtracted to which had been assigned to the United States and New Zealand in a previous agreement. This broken promise, we received a new complaint to the world trade Organization. Canadian taxpayers have assumed an invoice of $ 350 million for the financial compensation which will be paid by the federal government to the dairy industry. We should also keep in mind that the market share ceded in the framework of the agreement with the Asia-Pacific area (between 3.25 % for the dairy products of Canada, and approximately 2 % for poultry) will be very expensive for all Canadians. When the first draft of the agreement under the conservative government, a compensation of $ 4.3 billion $ had been promised. The union of producers requires no less today.

Everyone loses

All of this illustrates the contortions of political and economic, to which we shall engage to conclude trade agreements while attempting to preserve a system that is costly, ineffective, and even harmful.

With a little hindsight, there is no doubt that everyone is losing in this context. Consumers will continue to pay too much for products under supply management, an annual cost estimated to be between 260 and 440 $ per household. The producers, them, still see their share of the market inside decrease without being able to compete abroad, thus limiting their opportunities for growth that are already weak. Not to mention the taxpayers, who will ultimately be billions given out in compensation. As for the canadian government, supply management will continue to expose it to complaints before the world trade Organization, limiting its ability to negotiate agreements that are essential to the growth of the canadian economy.

Instead of giving billions to keep the ball at our foot, we should use that money to compensate for the abolition of quotas, that the producers have purchased at extortionate prices. This would result in an annual expenditure of $ 1.6 billion of $ on a transition period of ten years. At first glance, this amount may seem significant, but it is substantially lower than the benefits to consumers, which could raise up to five billion per year.

In the framework of the renegotiation of the NAFTA, while the United States demanded the end of supply management over a period of ten years, it’s a safe bet that Canada will still have to make concessions to reach an agreement. It is therefore high time to drop supply management to not only ensure the long-term prosperity of the industries that are currently subjected to, but also to provide ammunition that will help us to calm the ardor of protectionists in the u.s. government.