Moving Beyond Supply Management (January 2013)

In early January, I joined members of the Bruce Grey Owen Sound Federal Liberal Association for a townhall they hosted in Elmwood, Ontario. The topic was “Issues Facing the Farming Community,” and the purpose of the very interesting discussion, led by Jim Algie, was to learn about how the local farming community is impacted by federal policy, and what they would like the Liberal Party of Canada to do differently.

Among other things, the topic of supply management — the system of quotas, marketing boards, and tariffs that protects poultry, egg and dairy producers — was addressed. It was very encouraging to listen to the thoughtful discussion of the participants about how a system that some 50 years ago was established to ensure a competitive but stable marketing environment for Canadian poultry, egg and dairy producers, has regrettably evolved over time to one that restrains competition to the particular detriment of smaller farmers, limits the ability of our exporters to expand production, and increases regional tensions across Canada through the allocation of production quotas.

On my website I discuss supply management in the context of how it is an obstacle to the implementation of a true Canadian economic union. The distribution of production quotas across Canada benefits a select few and is widely regarded as inequitable and inefficient. Equally important, supply management significantly inflates the prices we pay for milk and other affected products. And the higher prices for dairy ingredients prevent Canadian foodmakers like McCain Foods Ltd. from expanding into the potentially lucrative Asian market.

The fact that many of our trading partners subsidize their own farmers is a matter to be addressed in international trade negotiations, not an excuse to maintain our own dysfunctional system.

My conversations with farmers and producers in supply-managed sectors across the country have made it clear to me that there would be complex issues associated with a phase-out of the federal role in supply management.

In the dairy sector, for example, some form of fair compensation recognizing the value of capital tied-up in quota purchased by farmers would be required. As well, provinces contemplating the retention of milk marketing boards within their own jurisdictions would need time to study whether or not this would be practical once the delegated regulatory authority in interprovincial and export trade reverts to the federal government.

Given the complexity of untangling decades of supply management structures, it makes sense to me that Canada should take steps to phase out supply management over a reasonable period of time, perhaps in the order of eight to 10 years.

The adjustment mechanism would have to allow for appropriate compensation and transitional support for Canada’s approximately 15,000 poultry, egg and dairy businesses which, we should remember, account for only slightly more than eight percent of all farms in Canada.  More than 90 percent of all farm businesses are not supply-managed.

The sooner we begin to address these transition issues, the better it will be for these farm businesses.  Failure to deal with the issue of supply management proactively could very well result in a period of transition imposed by others outside of Canada under terms less favourable than the industry would deem desirable.  Because, make no mistake about it, our trade partners will require us to cut back on our protectionist policies, just as we will demand that they reduce theirs.

It is important to note that supply management is not a good basis for rural prosperity. Instead, the federal government must vigorously promote sustainable rural prosperity by addressing the transportation and infrastructure challenges faced by our farmers and the huge investments that are needed to assist the agricultural sector, from internet/broadband penetration in rural areas to the technically-advanced complex equipment, as well as help farmers address environmental issues and sustainable resource use and better cope with risk.

In addition, vibrant rural economies can be encouraged through innovation and economic diversification, and activities such as tourism and cultural communities that bring new people, ideas and business to the regions. In this connection, Budget 2012’s dramatic downsizing of the Rural Cooperatives Secretariat has removed a valuable source of research and material support for civil society groups involved in rural development.

We need federal policies that serve the national interest in a vibrant and productive agricultural sector that ensures our smaller farmers have the opportunity, through hard work, perseverance and determination, to grow a successful business. And we must complete our economic union and guarantee fairness and efficiency across provincial boundaries, while ensuring all farmers have access to the highest quality infrastructure either for production or for transportation to bring their produce to market at home or abroad.