A nation held hostage by dairy cows

Supply management is hurting Canada.

Last week, over a dinner of all-Canadian beef, Canadian International Trade Minister Ed Fast had an important chat. If the discussion went as planned, it could produce a deal that boosts the Canadian economy and produces the equivalent of $1,000 annually for every household in the country. The minister’s dining companions? European Union commissioners. The topic? Free trade. Reports say that Canada is close to hammering out a broad and important trade agreement with Europe (called the Comprehensive Economic and Trade Agreement, or CETA), that would result in lowering trade barriers on everything from cars to energy to beef (thus the meaty dinner). Some predict that such a deal could be NAFTA-like in scope and juice the Canadian economy to the tune of $12 billion a year. There’s just one thing standing in the way: cows, or to be more precise, about 12,700 dairy farms.

The dairy farmers are angry because the EU is asking that we consider abandoning our supply management system, a system that blocks foreign competition while allowing our dairy producers to charge extortionate prices to regular Canadians. Under this system, tariff s of 200% to 300% are imposed on foreign milk and milk products while here at home, prices are manipulated to the point where, according to a paper by former Liberal MP Martha Hall Findlay, a typical Canadian family is paying in excess of $300 a year more than they need to for milk alone. Many are surprised that such a system exists in Canada—imagine if the government allowed gas stations, for instance, to collude with each other and create artificial shortages to drive up the price of gas. Canada is the only country in the world with such a system, and the boards do nothing but protect the interests of a few wealthy farmers while holding the whole country hostage. The system punishes poor Canadians by tripling milk prices, while putting not only the European free trade agreement in jeopardy, but the ongoing Trans Pacific Partnership negotiations as well.

The big irony here is that if the marketing boards are successful and the European free trade deal is scuttled, it’s the farmers who will suffer the most. In order to protect the estimated 15,000 supply-managed farmers in Canada (including milk, poultry and egg farmers), Findlay estimates that the economic prospects of more than ten times that many farmers—who very much want to export beef, pork and grain to the world—could be quashed.

Study after study has found that the system is broken. A report issued by the Montreal Economic Institute last August concludes that “it is time for governments to put an end to the marketing monopolies held by the marketing boards.” A report called Making Milk, issued by the Conference Board of Canada in 2009 is even more damning, concluding that dairy supply management in particular “reduces living standards for all Canadians and opportunities for non-dairy farmers by compromising Canada’s ability to pursue its positive global trade ambitions.”

It’s clear that pretty much everyone but those who run boards themselves would benefit if they disappeared. So why do they still exist? Because no politician has yet had the courage to shut them down. The prospect of free trade with the EU offers the perfect opportunity. Stephen Harper can blame it on Europe if he must, but supply management has to go.